The Labour manifesto: What’s in it (and what’s not) for real estate?

The Labour manifesto is set around five missions. Within these missions there is much which will be of interest to the real estate sector. Some points of note are below.

Private rented sector reform:

Under the Labour mission of ‘breaking down barriers to opportunity’, Labour sets out its plans in relation to reform of the private rented sector.

Labour confirms its intention to:

‘immediately abolish Section 21 ‘no fault’ evictions, prevent private renters being exploited and discriminated against, empower them to challenge unreasonable rent increases, and take steps to decisively raise standards, including extending ‘Awaab’s Law’ to the private sector.’

The intention to ‘immediately’ abolish section 21 no fault evictions is aligned with previous comments made by Angela Rayner. The above manifesto commitments are also aligned with several of the amendments tabled by Labour to the Renters (Reform) Bill (RRB) to strengthen tenants’ rights.

In relation to the RRB, Matthew Pennycook who was the Shadow Minister for Levelling Up, Housing, Communities and Local Government, previously noted that the RRB ‘as introduced was a good starting point for the reform that is necessary’ and has also stated Labour would have passed the RRB during the wash-up period had it been put forward.

Labour also pushed for and welcomed later amendments to the RRB, which would have made it illegal to have blanket bans on renting to tenants in receipt of benefits or with children and applied a Decent Homes Standard (DHS) to the private rented sector, although these measures along with other policies such as the right to keep a pet are not specifically referenced in the manifesto. Labour also sought to strengthen tenant’s rights in relation to possession grounds. Labour has recently noted as part of its proposals in this area it would ‘end rental bidding wars’ and cap the amount of rent which can be requested at the start of a tenancy (again points made by Labour during the passage of the RRB). Angela Rayer has also previously made it clear that mechanisms for tenants to contest ‘excessive’ rent hikes did not in her view go far enough to protect tenants against ‘economic evictions’.

Previously Labour had talked of a Renters Charter – although this terminology is not in the manifesto.

Timing on the abolition of s.21 is likely to be a significant difference under any Labour government. The Conservatives proposed significant Court reforms before s.21 was abolished. Labour made it clear unless there was a clear timeline on Court reforms - they would amend the RRB so abolishing s.21 evictions was not dependent on this. It is perhaps also worth noting that during the passage of the RRB Labour did acknowledge the need for a two-stage transition process for abolishing s.21 to allow new and existing tenancies to transition.

However, as the RRB did not make it through the wash up, any Labour government would need to introduce a new Bill to progress these measures. What a new Bill would look like under a Labour government, when it would be introduced and how much (if at all) it would take from the RRB is not yet clear. Speaking on 20 June 2024, Matthew Pennycook indicated rental reform is a Labour ‘priority’.

Labour has stated rent controls are not official party policy although it perhaps remains to be seen how the tension between official labour policy and local requirements/pressures will play out.

Freehold and long residential leasehold reform:

Also under the Labour mission of breaking down barriers to opportunity the Labour party look to continue with residential reform.

The manifesto states that Labour will:

“finally bring the feudal leasehold system to an end. We will enact the package of Law Commission proposals on leasehold enfranchisement, right to manage and commonhold. We will take further steps to ban new leasehold flats and ensure commonhold is the default tenure. We will tackle unregulated and unaffordable ground rent charges. We will act to bring the injustice of ‘fleecehold’ private housing estates and unfair maintenance costs to an end.”

With the Leasehold and Freehold Reform Act 2024 having received Royal Assent during the wash-up period, whoever forms the next government will be responsible for bringing the majority of its provisions into force. However, the Act does not make commonhold the default tenure and significant further work and reforms would be required for this to be the case. As any reform of existing ground rents in long leases was not covered by the Leasehold and Freehold Reform Act 2024, Labour’s position as to how they will ‘tackle’ this will also be eagerly anticipated.

Warm homes plan:

Under its mission to ‘Make Britain a clean energy superpower’ Labour states it will introduce and invest in a ‘warm homes plan’ and invest ‘extra £6.6 billion over the next parliament’. It also commits to ensuring that homes in the private rented sector meet minimum energy efficiency standards by 2030. Although the manifesto does not set out a minimum energy efficiency standard it has been reported that private rented sector homes would be required to have a minimum of an EPC C by this date. The manifesto also states that Labour will work with the ‘private sector, including banks and building societies, to provide further private finance to accelerate home upgrades and low carbon heating’.

Planning and housing:

The manifesto focusses on planning reform and commits Labour to reintroducing mandatory housing targets. Labour commits to delivering 1.5 million new homes. When it comes to development the manifesto states Labour will take a ‘brownfield first approach’ but also notes it will prioritise the release of ‘lower quality ‘grey belt’ land’ and ‘introduce ‘golden rules’ to ensure development benefits communities and nature’. It commits to building new towns and reform of compulsory purchase compensation rules. The manifesto also has measures to support first time buyers.

On the matter of the funding for 1.5 million new homes both the manifesto (with one exception) and all other publications are silent. It may be that Labour hopes that the planning reforms they propose will be sufficient to unlock the necessary funding entirely from the private sector. But that would imply a huge – possibly 75% - increase on the recent 170, 000 annual private sector build rate. Alternatively it may be that they intend to resurrect local authority housebuilding; they say they want to devolve more powers over planning to metro mayors and others. In that case the ambition to achieve the 300,000 total new homes annually would imply a big jump in the social housing sector and likely require increased central government funding – whether from borrowing or tax increases.

The exception to the absence of funding detail noted above refers to the Warm Homes Plan which the Labour Party manifesto costs at £1.1bn a year funded in part by the £1.2bn a year from the Oil & Gas windfall tax and by additional borrowing of £3.5bn a year ie the Warm Homes Plan is costed to the extent of requiring 23% of the windfall tax and additional borrowing.

Elsewhere, it proposes to fund More planning officers by increasing stamp duty on purchases of residential property by non-UK residents by 1%.

Replacing the business rates system:

The Labour manifesto states Labour will ‘replace the business rates system, so we can raise the same revenue but in a fairer way. This new system will level the playing field between the high street and online giants, better incentivise investment, tackle empty properties and support entrepreneurship.’

Other policies:

Several other policies will impact the real estate sector. There is a focus on decarbonisation and investment in clean energy. The challenge with grid connections is acknowledged and there is a commitment to upgrade transmission infrastructure.

The manifesto states Labour supports the introduction of a carbon border adjustment mechanism.

Commercial property:

The manifesto makes little mention of commercial property. There have been industry calls for some time for clarity in relation to the trajectory for commercial MEES. Labour’s position on how it will approach the challenge of embodied carbon will be of interest as will the challenge of retrofitting commercial properties.