Property News

Boris Johnson New Prime Minister – will he ‘Boost Supply of Homes to Rent’?

Em Morley - July 23, 2019

Boris Johnson has now been announced as the new UK Prime Minister, replacing Theresa May.

Responding to this news, John Stewart, Policy Manager for the Residential Landlords Association (RLA) says: As Mayor of London, Boris Johnson spoke of not over-regulating the rental market, and for the need to boost the supply of homes to rent.

“As Prime Minister, it is vital that his Government makes good on this sentiment, ensuring policy boosts the supply of homes to rent and supports the vast majority of landlords doing a good job whilst focussing resources on finding and rooting out the crooks.”

Private Finance has also commented on the news, with Director Shaun Church saying: “Brexit will be top of Boris Johnson’s to-do list, but other crucial issues facing the domestic agenda must not be overlooked – one of which is the UK property market. Activity in the housing market is falling and in desperate need of a stimulus. Rumours of a stamp duty overhaul have been circulating for some time now and we urge Johnson to make these rumours a reality and re-galvanise the property market, which is after all a crucial asset of the UK economy.

“For too long stamp duty has stagnated the UK housing market. Last-time buyers, in particular, remain stuck in homes too large for their needs that are too costly to give up. We’re calling for a last-time buyer exemption to be included as part of Johnson’s stamp duty overhaul, encouraging empty nesters to downsize to homes more suited for their future needs, freeing up crucial housing stock for the wider property ladder.

“With Stamp Duty receipts down 20% annually, the government is fast becoming a victim of its own policy. Minimising tax liabilities would encourage more people to move, sparking a chain reaction of property transactions, which in turn would lead to a surge in receipts for the government. With both the Treasury and UK homeowners likely to benefit from this policy, it could be a quick political win for Johnson.”

Neil Cobbold, Chief Operating Officer of PayProp, comments: “The buy-to-let market has stalled due to tax changes like the stamp duty surcharge and cuts to mortgage tax relief under Section 24. If Boris Johnson is able to remove all stamp duty and land tax surcharges for buy-to-let landlords, he could reinvigorate the sector – especially in areas with high-value homes where we’re not seeing a lot of movement at the moment.

“Although this could help the market, a pledge to cut stamp duty alone won’t be enough to counteract losses from Section 24 and bring the leveraged buyer back into the market. However, the emotional impact of some good news from a new government would have a positive impact on the sector.

“By now, the cost of Brexit has been priced into the market. We’ve already gone through enough periods of thinking we were going to leave, so the industry will be indifferent to the October deadline, adopting the attitude that either something will happen or it won’t – it’s out of their control. The only parts of the country that could be affected are London and other immigration hotspots, especially if the government wins its Right to Rent appeal in the High Court.

“Boris can be a divisive figure, so I don’t think he will have an overwhelming influence, one way or the other. More important will be any positive changes in the economy, who he appoints as the Secretary of State for Housing, Communities and Local Government, and how actively the person engages with the industry.

“Something that would help the industry would be if he overturned Section 24, but it’s doubtful that will happen. As we now have such a large private rented sector, it’s too much money for the Treasury to give up.  

“If there was one the new Prime Minister could do to change the industry for the better it would be to regulate it properly. The current patchwork of piecemeal legislation burdens professional agents without any real enforcement to deter the small rogue element.

“A new government could, in consultation with the industry, replace it with well thought-out rules and regulations together with a central enforcement body. It would at a stroke help improve the consumer’s view of the industry, weed out the few lettings businesses that give the sector a bad reputation, help cut fraud, and bring about a higher level of professionalism. The changes we’d expect to see would be similar to what happened with financial services years ago.”

Joe Pepper, Chief Executive Officer at tmgroup, parent company of sales progression and communication tool mio, comments: “There are several major challenges facing the UK housing market. Brexit is the one that gets the most attention, but it is also the one that is furthest from the reaches of the housing industry to influence. 

“The nation is split in its opinion on the way forward, although there’s a large majority that want the issue dealt with quickly. The challenge is that the easiest answer to that question and the one Boris Johnson has championed, is to leave with no deal on October 31, but it sadly does not necessarily achieve the wished-for outcome.

“A no deal Brexit would undoubtedly cause short-term challenges to the economy and it does not deal with the issue that we will then seek to negotiate ‘a deal’ from outside the European Union, and this may prolong the agony for years to come.

“Away from Brexit, the new Prime Minister must address the planning laws, which were implemented in the 1980s at a time when we expected the population to reduce rather than grow, if we want to deal with the supply and demand dynamic which has had such a massive impact on affordability.

“Looking forward, all that’s certain about delivering on either Brexit or the changes required to the UK housing market is that it will require exceptionally strong personal leadership. Let’s hope Mr Johnson is up to the challenge.”

Guy Gittins, Managing Director of Chestertons, commented:  “The wait may be over in terms of who is picking up the keys to Number 10, but the implications for the housing market remain to be seen.  

“Boris Johnson was more vocal on housing issues during the campaign trail than his opponent, and all eyes will now be on what policy initiatives are taken forward and who Johnson assembles in his cabinet. 

“During his Tory leadership campaign, Johnson hinted that one of his priorities as Prime Minister will be supporting homeownership and that his housing policy is likely to be shaped around shake ups to Stamp Duty.  His proposed Stamp Duty exemption for all property sales under £500,000 is intended to boost market activity and would certainly be a significant win for buyers of properties under this threshold. 

“However, the degree to which this would stimulate the market is debatable as affordability is the greatest obstacle, especially for first-time buyers, who are already exempt from Stamp Duty on purchases below £300,000. Any significant increase in activity might fuel house price inflation, especially if – as is likely – supply of properties on the market remains low. 

“Johnson’s proposals to reduce Stamp Duty on homes worth more than £925,000 would be particularly significant for London, and would be very likely to encourage downsizing, freeing up more family-sized homes, which are currently in high demand.  

“His other idea of switching Stamp Duty so that it is paid by the seller rather than the buyer is likely to be counter-productive and would encourage sellers to factor this into their asking price, potentially escalating house price inflation. It could also trap some downsizers, which would add to the issue many people already have.”

“Johnson also threw his weight behind the recommendations of the Policy Exchange around increasing the number of purpose-built homes for older people. Encouraging downsizing among retirees in this way would certainly free up some under-utilised large properties for families and help prevent ‘house-blocking’. 

“Given the crippling housing shortage we face, encouraging housebuilders to cater to the retirement market and increase the provision of purpose-built later living accommodation is the right approach.

“Johnson has previously endorsed the prioritisation of brownfield redevelopment, which will likely be welcomed in urban areas where pressure for homes is strongest.  But the associated costs of remediation and the time this takes can make this prohibitive so it would be a more attractive proposition alongside financial or planning incentives. 

“It is also slightly counter to his plans to create 15 new ‘millennial towns’ along major transport routes out of London, which would inevitably need to be built on greenfield land.”