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Richie Clapson, co-founder, Real Estate CEO
For many, that sunny weekend in May marked the start of summer – but the miserable, grey, rainy week that followed was a harbinger of what might come next. That was itThen somehow we fast forwarded to the autumn and we all expected a general election to be held, and then, to reinforce that feeling, the Prime Minister told us there would be a vote within a few weeks.
The Rain had as little respect for Rishi Sunak as the Tide had for King Cnut, and it was bound to happen this way.Moist Social media was flooded with memes, including a hands-over-face emoji as the Conservative campaign suffered one gaffe after another. Required (Unless you’re Lee Anderson, of course.) Finish off (Sorry, Lee.) Perhaps that has already been addressed through the 80th anniversary commemorations of D-Day.
Could there be a change of government? Probably. People are understandably unhappy with the Conservative government’s lackluster performance. But to borrow an entertainment metaphor, booing one comedy show doesn’t guarantee the next batch of jokers will be any funnier. So what would a Labour government do in the property industry?
rental
The first thing I noticed is that I don’t see any big changes in the way property investors are treated. The current government has belatedly realised that encouraging landlords to sell by increasing taxes and regulations doesn’t actually help anyone. That means more properties are on the market, but unfortunately tenants can’t afford them. The result is fewer rental properties on the market, rents are rising and tenants are finding it harder to rent somewhere. I wish someone had told the government this was coming (if there’s a “sarcasm” emoji, I’ll put it here). And then there’s the Rental (Reform) Bill, which is currently shelved, but the threat of this bill was enough to make thousands of landlords flee the industry. Unfortunately, under a Labour government, I think this bill will be tougher for landlords, even if it’s newly formulated. Labour has also started to talk about rent caps, which is another policy that is sure to scare the horses.
Landlord
Are all landlords wealthy? Of course, some are wealthy (such as Hugh Grosvenor, the 7th Duke of Westminster, who has a net worth of around £10 billion). But according to the government’s 2021 UK Private Landlord Survey (updated March 2024), 45% of private landlords own only one rental property, and a further 40% own between two and four properties. The report found that the average income (excluding rental income) of all landlords is just £24,000 per year, and the average age is 58. So, we’re not talking about the super rich here. What happens if we add in the rental income? The average gross rental income is £17,200, from which you need to deduct mortgage repayments, agent fees and running costs to get a pre-tax profit. Of course, every landlord has different costs, but it’s clear that they’re not going to get a lot of money. So how much regulation and taxation are these landlords willing to accept before they give up? Many of these landlords are the product of chance. Maybe you owned an apartment when you got married, or inherited a house when your parents died. The ultra-rich? No, just regular people. Policies aimed at “taxing the wealthy” may result in regular people selling off real estate that they might have hoped would help them survive in retirement.
Land Development
As more and more landlords find their rental property portfolios under strain, many are turning to small-scale property development to ease the pain. For many landlords, the types of projects they are taking on are just a step beyond what they have undertaken before, such as creating or renovating HMOs. With six-figure profits to be made simply by building apartments over shopfronts or refurbishing small commercial buildings, it is no wonder that demand is strong. Rental property profits have certainly been eclipsed for the average landlord. So is Labour’s approach to property development different to that of the Conservatives, who have actively promoted the creation of many new development permits in England?
In my opinion, not much is likely to change. The reason is that the housing crisis is a fact of life, it’s getting worse, not better, and it’s impossible to solve unless the current administration ignores the cries of NIMBYs across the country and starts building a ton of new housing, which no government will do because most homeowners are NIMBYs (to know if you’re a NIMBY, ask yourself if you want a new affordable housing estate built at the edge of your garden).
A new home
We need to build around four million new homes – an area about 15 times the size of Oxfordshire – and we can’t realistically avoid the green belt or build it all somewhere where no one will notice.
Labour estimates that around 1.5 million homes could be built using the so-called “grey belt”. This is green belt land that already has something built on it, such as a car park or a petrol station. They stipulate that 50% of grey belt development must be affordable housing, but it’s not clear how economically lucrative this will be for developers who obviously have to make a profit. This focus on the grey belt has not been well received by the countryside charity CPRE, who argue that this grey belt should be returned to the green belt instead. You might think this ignores the housing crisis, until you realise that 1.2 million new homes could be built using existing unused brownfield land. These are existing commercial properties and land. do not have There is a lot of land in the Green Belt that could be converted to housing, and CPRE understandably believes we should start with unused brownfield land rather than targeting the Grey Belt.
These brownfield sites are a rare political win-win. They have a positive impact on housebuilding numbers, voters generally welcome the conversion of such land, and they bring more people to town centres, which benefits local economies. So it’s hard to see Labour deciding that converting brownfield sites is a bad idea. They should also be good news for landowners and investors, as large housebuilders tend not to get involved in smaller commercial conversion projects, as most lack the skills or appetite to do so. This creates opportunities for first-time property developers.
So overall, if Labour wins the environment may be slightly worse for landlords, but there won’t be any major changes in terms of property investment and it’s likely to continue as business as usual.