Election Reflections: How Will the Labour Government Affect the Property Market?

The political climate in the United Kingdom has undergone a significant shift after 14 years under Conservative leadership. The Labour Party emerged victorious with a landslide majority in the recent National Election. This change marks the beginning of a new era, with significant implications for various sectors across the country, including the housing market. 

The Labour manifesto and campaign made it clear that addressing the nation’s shortfall in affordable housing is a priority. With encouraging plans to increase housing supply, improve affordability, and enhance tenant protections, Labour’s policies aim to evolve the housing landscape in the UK. This blog looks at the proposed policy changes in housing and property tax in more detail. 

Prime Minister Sir Keir Starmer has assembled a dynamic and diverse Cabinet, challenged to drive substantial changes across various sectors. Of particular relevance to the housing market are two significant appointments: Rachel Reeves as Chancellor and Matthew Pennycook as Housing Minister.

Rachel Reeves, known for her past inclusion in the Treasury and the Business and Trade Committees, will play a crucial role in allocating the necessary resources and shaping the financial policies that will support the Government’s housing strategy. With his experience and key role in Labour’s scrutiny of the Renters Reform Bill, Matthew Pennycook will be the ‘second in command’ in implementing Labour’s housing plans. Together, Reeves and Pennycook will be instrumental in driving change.

Stamp duty and inheritance tax

Stamp duty remains important for those looking to purchase property in the UK. Currently, it only applies to properties over £250,000 unless you are eligible for relief or exemption. Labour’s manifesto made little mention of altering the current stamp duty structure for non-first-time buyers, meaning a continuation of the existing policies for now.

First-time buyers can claim an exemption, meaning no tax is paid on properties up to £425,000 — an increase from the previous value of £300,000. However, Starmer said in the lead-up to the election that Labour will drop this back to £300,000 in March 2025. Currently, 5% stamp duty is applied to the portion from £425,001 to £625,000. 

Similarly, Labour suggested minimal changes to inheritance tax, focusing primarily on tackling tax avoidance rather than reforming the system. The notable proposal in their manifesto is to end the use of offshore accounts to bypass inheritance tax. By targeting tax avoidance, Labour intends to uphold equality without making notable changes to the inheritance tax itself. We’ll likely have to wait until the Autumn budget for any further changes to property tax to be announced. 

First-time buyers: new homes and mortgage schemes

Ahead of the election, Labour’s manifesto outlined an ambitious vision for the housing market, with a target of building 1.5 million new homes within the first five-year term. This commitment promises to deliver the most significant boost to affordable housing in a generation, including the creation of new towns and prioritising first-time buyers. 

Our Director at King West, Tom Wilson, commented: “Labour’s commitment to building so many new homes within the next five years is a visionary approach that could significantly aid the housing shortage that we have been experiencing in the UK. 

“This initiative not only addresses the demand for more property but also presents exciting opportunities for developers and investors. Chartered surveyors such as ourselves are looking to supporting and contributing to the growth of the property market.”

To facilitate these developments, there are plans to review and update the National Policy Planning Framework, streamlining the process to encourage quicker construction. The focus on first-time buyers is a central part of Labour’s housing strategy, with policies specifically designed to help them get onto the property ladder. The Freedom to Buy Scheme is proposed to build on the existing mortgage guarantee scheme. This initiative will incentivise lenders to offer high loan-to-value (LTV) mortgages by acting as a guarantor for prospective first-time buyers who are struggling with a deposit. Starmer and his government aim to support 80,000 young people in securing their own homes over the next five years.

Reforming the rental market: change for renters and landlords

Throughout their campaign, Labour was vocal about changing the rental market in the UK for both renters and landlords. By pledging to dissolve the Renters (Reform) Bill, Labour reaffirmed its commitment to abolish Section 21, the “no-fault” eviction rule. Section 21 gives landlords the power to evict tenants without providing a specific reason, leading to instability and uncertainty for many renters.

Labour’s commitment extends beyond eviction practices; they are also focused on improving living standards within private rented homes. Awaab’s Law, introduced in July 2023 after the tragic death of two-year-old Awaab Ishak due to prolonged exposure to mould in social housing, is to be extended to private rentals under Labour. This law requires landlords to:

• Investigate health and safety hazards within two weeks and provide a written report
• Ensure repairs commence within 7 days if the hazard poses a significant risk to tenants and the issue is to be sorted out within a reasonable period.
• Emergency repairs to be carried out within 24 hours
• Maintain a clear record of correspondence with residents and contractors

Through these reforms, Labour has committed to creating a fairer, safer, and more stable rental market with tenants living in a healthy and suitable property, while balancing the responsibilities of landlords.

With regards to the buy-to-let market, it remains to be seen if the government will do anything to amend capital gains tax or energy performance certificate rules – although they did pledge to ensure rented properties ‘meet minimum energy efficiency standards by 2030’, which could mean millions of homes requiring energy upgrades.  

“Labour’s comprehensive housing policies present a transformative vision for the UK property market as these initiatives promise a fairer, more accessible housing landscape,” says our Director Stephen King.

“We anticipate these changes to not only stimulate market activity but also enhance stability, offering a promising outlook for both our clients and the broader community.” 

Labour’s return to government after 14 years of Conservative rule marks an important moment for the UK housing market. Their ambitious plans to build 1.5 new homes, encourage first-time buyers onto the property ladder with mortgage schemes, and reform rental practices signify a transformative approach to addressing the nation’s housing challenges.

As Starmer inherits a country grappling with significant issues, it will be interesting to observe what is achieved through Labour’s reformation of the housing market. Labour’s housing policies are set to dramatically enhance affordability, stability, safety and fairness in the UK housing market, offering a hopeful future for renters and first-time buyers. 

We will continue to update you as soon as further policies are announced that could affect the housing market.