The General Election campaign is well underway ahead of the vote on Thursday 12th December and even the experts are divided on who will lead the country the following day. Could Boris Johnson claw back a majority for the Conservatives or will Labour end nine years of Tory rule? If the latter happens, many letting agents and landlords will be wondering how could Jeremy Corbyn affect the rental market.
We have already explored some of the potential repercussions of a Boris Johnson government for the lettings market, as well as the possible results of a no deal Brexit on the rental sector, so let’s explore what might happen if Labour come to power and Jeremy Corbyn takes his place in Downing Street as Prime Minister.
Labour’s Right to Buy Policy
One reason that landlords and letting agents might be breathing a sigh of relief is that it finally seems like the party has dropped its controversial ‘right to buy’ policy for tenants of private landlords. The scheme could have given those renting properties from landlords with multiple properties the chance to buy out the homeowner at a “reasonable price” regardless of whether they wanted to sell. Understandably, many were cautious about this approach and some letting agents suggested it could destroy the private rental market altogether, as property owners looked for safer havens for their investments.
Sources in the party claim the idea was dropped as it had become too complicated to implement and was “unworkable”.
Progressive Property Tax and Capital Gains Tax
Another change to the UK rental market could be the introduction of a “progressive property tax,'' which would shift the onus from the tenant (as is often the case with Council Tax, which would potentially be scrapped), and onto the property owner. In cases where landlords are struggling with cash flow, there is a suggestion that they could pay a portion of this new tax, capped by the government, out of the capital gains when they eventually sell the property on.
Another way Jeremy Corbyn could affect the rental market also comes down to capital gains tax. There is a theory that Corbyn and his chancellor John McDonnell might raise the level of capital gains tax on investment properties to the same level as the landlord’s current income tax bracket.
New Rent Controls and Regulations for Let Properties
A new Labour government could also implement a series of new regulations on rental properties. The party is known to be in favour of imposing rent controls to keep the costs down for tenants. This would tackle the problems of spiralling rental costs in some parts of the country, but it would also mean that landlords facing increased costs may not be able to recoup those expenses.
However, it is not planned to be as restrictive as in some countries where rent controls are in place. It is thought a Labour government would broadly let landlords and letting agents set the rent as they wish at the start of the tenancy, but might restrict any rises to the rate of wage inflation or consumer price inflation, whichever is the lower.
The party has also floated the idea of replacing fixed term lettings with indefinite contracts, as well as suggestions of creating a new, tougher set of regulations to mark the minimum standards for rental properties. In addition, the rules regarding buy to let mortgages may be tightened up and more heavily regulated.
How Jeremy Corbyn Could Affect the Rental Market - Conclusion
It is worth mentioning that all of the above are merely suggestions as to what future Labour housing policy may look like. As with the policy regarding the right to buy privately rented homes, the party could still go back on these ideas or even develop new concepts for tackling what it sees as the problem of young people renting for longer periods of time because they cannot afford to buy.
It does, however, certainly seem that a future Labour government would be very much on the side of the renters in any debate on the lettings industry. This could affect the profits of landlords over the course of the next parliament.
If Labour wins the election, but does not command a majority in the House of Commons, that could further change policy back towards landlords and letting agents. Any coalition they enter into with other parties might soften the stance towards buy to let landlords and letting agents. Only time will tell what will actually happen, but we may have a clearer idea on the 13th December.