Election manifestos: what should we expect for the housing market?

According to YouGov, housing currently sits as the fourth most important political issue facing the country after the big three: economy, health and immigration. 

That ranking reflects the scale and number of housing challenges facing the next government. The problems loom large, whether it is keeping the dream of home ownership alive or providing a fit for purpose rental alternative. 

Then there is the challenge of increasing housing delivery to meet underlying house need and address an affordability issue that has been magnified over the past two years as interest rates have risen.  

On the flip side, however, is the incentive that the delivery of more new homes presents a golden opportunity to give the economy a shot in the arm. 

It should be no surprise then that housing takes up quite a lot of space in the manifestos of the main parties. Nor should it come as a shock to find that when you take a deep breath and delve into them you will find a mix of solid commitments and political rhetoric.

Home ownership

Let’s start with home ownership. All parties have aspirations to be its champion. The problem, of course, is that if there were easy fixes they would have been actioned already. 

At the heart of the issue is the tension in reducing the deposit needed to get more people on the housing ladder in a way that doesn’t create undue risk for lenders, further inflate house prices or leave borrowers too financially exposed.

The extension of mortgage guarantees, designed to give the banks confidence to lend more at higher LTVs, is low risk. Consequently, it appears in both the Labour and Conservative manifestos. But recent history suggests it is hardly a game changer.

The Conservatives have gone further, with a reimagining of the effective, yet controversial, Help to Buy scheme. Housebuilders, who would be on the books to part fund it, would welcome it with open arms. And we know it has traction with would-be home owners, though protecting their interests is all about the implementation.

The manifesto policy cupboard is fairly bare when it comes to getting more people on the housing ladder.

The other main Conservative proposal is to offer landlords a capital gains tax break if they sell their investment to their sitting tenant. 

Arguably it couldn’t come at a better time for those landlords burnt by the recent increase in mortgage rates or put off by an increasing regulatory burden. But its effectiveness depends, of course, on the financial circumstances of the occupier, given the proposal is time-limited to two years. 

In other respects, the manifesto policy cupboard is fairly bare when it comes to getting more people on the housing ladder, though Labour have provided a commitment to give first-time buyers first dibs on new homes. 

Private renting

And that explains why all parties (with the exception of Reform UK) have coalesced around reform of the private rented sector. Proposals to bring to an end the assured shorthold tenancy agreement sit as common ground between the Conservatives, Labour and the Liberal Democrats. 

This has been on the cards for some time. But while the renters reform bill eventually got to its second reading in the House of Lords, it proved devilishly difficult to get through parliament before the general election was called.

That was a reflection of the practical difficulties in balancing the interests of landlord and tenant, in a way that would avoid unwelcome unintended consequences in an already undersupplied sector.

What differs between the parties is the nature and pace of implementation, with Labour suggesting it would be immediate and the Conservatives promising to strengthen processes for landlords to recover possession.

Most investors have known it was only a matter of time before so-called no-fault evictions bit the dust. For many, rent control would be a bigger issue. In this respect, it is more a case of what is not in the manifestos.  

As expected, nothing on it from the Conservatives or, more interestingly, the Lib Dems. From Labour the hint is that any form of control would be light touch, with nothing more than references to tenants being better empowered to challenge unreasonable rent increases.

Housebuilding

Arguably things start to get more interesting when it comes to housebuilding.  

In this respect, the commitments and aspirations for the number of new homes look like an manifesto arms race, not least because each additional 100,000 new homes could add 1 per cent to GDP.

Labour include a commitment to build an average of 300,000 homes a year over the next five years; the Conservatives 320,000; and the Lib Dems aim to get to 380,000.

This is an important recognition that to meet the current housing challenge we need to deliver a lot more homes. But these are all big, big numbers, especially against Savills' expectations that, without major policy intervention, housing completions will fall to 160,000 a year over the next three years, having peaked at 220,500 in 2019/20.

The Lib Dems want to see 150,000 social homes delivered each year and a total of 10 new garden cities, with proposals to allow councils to buy development land at existing use value. Radical, yes. Chances of delivering it with the benefit of past experience? Somewhat limited, shall we say.

For many, rent control would be a bigger issue. In this respect, it is more a case of what is not in the manifestos.

The Conservatives’ plans sit against a “cast iron commitment to protect the greenbelt for uncontrolled development” with aims “to develop a record number of homes on brownfield land in urban areas” through “gentle densification of urban areas” with a greater focus on design and placemaking. 

Marvellous aspirations all. But there is little difference here from the current government’s planning policy, under which planning consents have fallen. Without changes, it is hard to see where a significant boost to supply could come from. 

So where does that leave Labour? An immediate restoration of mandatory housing targets and strengthening of the presumption in favour of development. A brownfield first approach, but alongside a release of newly designated ‘grey belt’ land in the green belt. A new generation of new towns, together with urban extensions and regeneration. More planning officers funded by more stamp duty for overseas buyers. The promise of cross boundary strategic planning. 

It looks like they have been thinking about this for some time.  

The big question is how effective this can be, against a desire to deliver more affordable and social housing but without the promise of increased grant funding. Something has to give.

And it seems like Labour are looking to land values, especially given proposals to change compulsory purchase compensation rules for (unspecified) specific types of development.  

The balance here is in ensuring there remains sufficient financial incentive for landowners to play ball.  

All a salutary reminder that delivering the right homes of the right tenure in the right places is, to quote Jean-Baptiste Colbert, a case of “plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing”. We are going to need a lot of geese.

Lucian Cook is head of residential research at Savills UK