Over the last few weeks each of the main parties have had their party conferences, and as usual, they are promising the earth!
However, there is a distinct change in the air in that all of the politicians have realised that housing is riding high on many people’s agenda. For some, it’s the fear of lots of new builds, but for others, such as our younger generation, being able to rent a nice property at a fair price or getting themselves into a position where they can buy, is all they are asking for.
So out of the main parties, which are offering the best for our younger generation?
Well on the surface, it’s a toss-up between Labour and the Conservatives. From a first time buyer or renter's perspective, what you want is to be able to afford the property you live in and in some cases, the chance to buy it.
To do this, you need to be able to see policies which are delivering more new build homes and most importantly, ones which are affordable as well as schemes which are targeted directly at you.
Who is offering what?
Labour, on the surface, do seem to offer the best package so far. They promise to gear up to build 200,000 homes a year, increasing stock, hopefully reducing pressure on house prices overall. They are also promising to double the number of first time buyers, which on current levels would be from 30,000 to 60,000 a month (CML). Unfortunately this is a lot lower than the 80,000 or so a month who were buying before the credit crunch, so it’s a number which is likely to occur naturally without any government intervention. Their idea is when building, councils can insist on a proportion going to first time buyers only.
In addition, Labour are looking at a registration system for landlords and letting agents – which is likely to be very similar to that introduced in Wales. The plan is to ban letting agent fees for tenants and to introduce what they refer to as ‘rent controls’.
So all this looks good, until you dig down a little further. We are already short, following the recession of 1 million homes. To be building 200,000 by 2020 (six years away) just means planning to fail. The average number of new households being formed each year is around 250,000, so this target just means guaranteeing too few homes, so price pressure on homes will not go away.
Of course it’s a popular idea too to ban any fees (and lower taxes!) but this, coupled with the idea that rent controls are introduced could be a disaster for tenants. Rent controls exist in the social sector and increase by inflation +1 or 2% each year. In the private rental sector (PRS), rents seem to move only in-line with wages. As such, rents have gone up by 22% in the rent controlled social sector since 2008 but only by 7% in the PRS. If the average PRS tenancy had increased in line with the social sector, tenants would be paying £120 more a month or nearly £1,500 a year!
In addition, getting rid of tenancy fees will just mean the tenant is hit with ‘hidden’ charges which then can’t be managed and are difficult to complain about, taking away the existing transparency that exists with each letting agent, by law, having to declare their fees upfront.
So are the Conservatives plans any better? Well this very much depends on whether you are on benefits or not. If you aren’t and are looking to buy, then the current government is looking to extend the Help to Buy Scheme for first time buyers, so 100,000 FTBs (about three months’ worth at the current rate) can buy a new build with a 20% discount. In addition, they are trialling a new scheme which allows you to rent for up to seven years at a discount and use the saved money as a deposit to buy.
Over and above this, they are doing a lot to court institutional investors to build new properties to rent out at market rent, or in some cases at 80% of this level.
However, there is a real sting in the tail for anyone who is on benefits. Anyone who is on benefits now has their earnings capped at £23,000, which will make it difficult to rent in high priced areas if you are on no or a low income. And anyone aged between 18-21 will be barred from being eligible for housing benefit.
Is it a case of swings and roundabouts?
To me, if you are in the private sector to rent or buy, you are as well going with the incumbent Government who seem to listen to the industry, appreciate the importance of building both rental and new homes and providing a real choice through partnership between public and private funds.
However, if you are on benefits, then clearly Labour will be (at the moment) a better choice as young people on benefits will be hit hard with the cuts. Unfortunately, although trying to do the ‘right thing’ by tenants, I think the Labour plans will backfire – as early evidence suggests in Scotland – in that tenant rents could end up rising every year, irrespective of what happens to wages and the sheer cost and legislative burden of providing accommodation becomes prohibitive, causing many landlords to exit, reducing supply and driving up rents further.
The reality is, whichever you choose will depend on which MP at a local level is most likely to implement plans made.
My advice to first time buyers, renters and anyone wanting a decent roof over your head: now is the time to write to your local MP, tell them what you want and what you can afford and ensure you get a response!
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