GE2015: Labour’s housing manifesto draws widespread criticism

David Orr
David Orr

Labour’s latest housing plans will only make the housing crisis worse, an array of sector bodies have warned.

In a speech in Stockton yesterday, Labour leader Ed Miliband announced proposals to reduce stamp duty to zero on properties of up to £300,000 for first-time buyers, gave them priority access to new build homes in their area, and offered private renters three-year tenancies and rent caps, among others. He also raised the prospect of building one million new homes by 2020.

The stamp duty changes would not apply to Scotland, where stamp duty has been devolved to the Scottish Parliament and there are different rates. But it would take effect in Wales, where stamp duty is not due to be devolved until 2018, and Northern Ireland as well as England.

However the plans have not been widely welcomed south of the border.

David Orr, chief executive at the National Housing Federation, said: “With just 10 days to go, it’s encouraging that all political parties now see housing as a key election issue. But in order to end the housing crisis within a generation we need a strategic long term plan that addresses all parts of the housing market.

“We have concerns that slashing stamp duty could lead to even higher demand on homes for first time buyers, pushing up prices even further out of reach, while not addressing the supply of homes we so desperately need.

“We welcome Labour’s commitment to government investment in housing, and to delivering one million new homes by 2020, but given that we need 245,000 homes every year to meet demand, this doesn’t go far enough. We are calling on all the political parties to take bold action to end the housing crisis which is crippling this country.”

Alex Hilton, director of Generation Rent, said: “Stopping landlords from making inflation-busting rent increases would make private renters more secure than they are in today’s Wild West lettings market. But the proposals are still riddled with loopholes. Landlords can still kick out tenants after six months, they can still evict tenants by claiming they need to sell, and because there are no controls on rents between tenancies, that gives them an incentive to use those loopholes. Good landlords already treat their tenants fairly, but without better protections, bad landlords will still be able to exploit theirs.

“We’re pleased to see Labour proposing to withdraw tax breaks from landlords, but their plan to penalise negligent landlords is wide of the mark. Landlords letting out unsafe and unhealthy housing should simply be banned from doing so. In order to level the playing field, all landlords should pay a fairer share of tax – a levy of 22 per cent on all rental income would recoup the £9bn housing benefit that goes to landlords and could fund 100,000 social homes a year.”

Labour’s proposals to build up to one million new homes by 2020, and to abolish stamp duty on homes of up to £300,000 for first-time buyers, prompted Hilton to add: “Any cut to stamp duty just stimulates demand for housing. The extra cash a first time buyer would have just goes straight to the person selling the house at a higher price. More giveaways won’t fix the housing crisis - the government should spend any extra tax revenues from landlords on expanding supply.

“According to Labour’s own housing review, we need to build 243,000 new homes a year to keep up with demand – that’s at least 1.2 million over the next five years. The one million Labour is planning is not enough and will see the housing crisis get even worse.”

The Residential Landlords Association (RLA) warned that Labour’s plans for rent controls will make it more difficult for young people to find decent homes to rent, taking the country back to the dark days of the seventies’ and eighties’.

Alan Ward, chairman of the RLA, said: “Whilst they talk the talk on boosting supply, they continue to want to clobber landlords to secure cheap political points rather than pursuing serious economics.

“It speaks volumes that no Labour spokesperson has so far denied that their rent control plans would choke off investment in much needed new homes to rent.”

The Association of Residential Letting Agents (ARLA) said the proposals will see landlords exit the market and reduce rental housing supply.

A monthly Private Rental Sector (PRS) report by the organisation found that almost three quarters (72 per cent) of ARLA letting agents believe that Labour’s proposed three-year tenancies, with a cap on rents will see landlords pull out the market, and lead to a decrease in the supply of rental property.

David Cox, managing director of ARLA, said: “If you put a cap on rent increases above inflation, tenants are likely to experience automatic annual hikes. Whereas, in reality, landlords appreciate good tenants and would avoid raising rents to retain them.”

He added: “It will be interesting to see what happens on May 7th. We need more homes and while house prices are still sky high with no signs of these dropping any time soon; getting onto the property ladder is a difficult feat. Therefore, renting a property is the only option for many. However, we are concerned that current government policy on housing cannot deliver what is required.”

On the issue of rent controls, Jeremy Blackburn, RICS head of policy, said: “A welcome move away from the arbitrary rent caps announced last May, but Labour’s rent control proposals risk undermining the PRS by failing to take a holistic look at inflation, market value and the living wage across the whole of the UK.

“Capping rent inflation through three-year fixed tenancies is likely to impact investment into the existing quality of homes in the PRS and could force smaller landlords to exit the market – limiting supply at a time when the UK faces a chronic shortage of homes across all tenures.

“The PRS has a vital role to play in the supply-side equation of the housing crisis and transparent landlord fees and fairness for tenants are already at the heart of the existing voluntary Private Rented Sector Code of Practice.

“However, this code lacks the ‘statutory teeth’ to be enforced across the whole of the rented sector and the next government needs to address this if we are to fulfil our commitment to more and better quality homes.”

Commenting on Labour’s proposals to help first time buyers, Mr Blackburn added: “While this proposed Stamp Duty reform could help some first-time buyers in the market, it’s another measure that tinkers with demand-side stimulus. Prices are already predicted to rise in the next Parliament and this is only likely to make matters worse. The promise of 1m homes by 2020 is an ambitious target, but Labour has not fully explained how they expect to remove obstacles to such a supply-side revolution.

“The details on First Call and Local First will be key, as on the face of it, these both look difficult to legislate for, and their efficacy could be undermined if they are only voluntary measures.

“Balancing these with much-increased house building and supply-side reforms is key. None of the three main party leaders have shown themselves ready to grapple with the thorny issues that block a solution to our housing crisis.

“What we need is a drastic increase in supply across all tenures. Building 1m homes by 2020 is an ambitious target towards that end but does however require a joined up, coherent housing strategy, based on the kind of analysis we’ve said only a Housing Observatory can provide.

“This ‘OBR for housing’ will draw on the expertise and knowledge across the sector to assess the underlying economic and social drivers of housing and provide the impetus for solutions.”

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