Sir Keir Starmer has proposed that under a Labour government, landlords and estate agents may be banned from accepting offers on rental properties to stop bidding wars, a practice which inflates rents.
The proposal would require landlords to state a proposed rent based on market rates, prohibiting bids above this amount.
This comes amid soaring rents in Britain, with average rents rising by 8.7% in the past year.
The National Residential Landlords Association supports the proposal, which is part of Labour’s broader rental reforms, however, critics have outlined how this could backfire and increase rents.
David Hannah, Group Chairman of Cornerstone Tax – the UK’s leading experts on stamp duty – has urged the next government to prioritise and support the ambitions of prospective homeowners, with the following five viable solutions able to help the next government support Britain’s ailing housing market.
Reintroducing MDR
The abolition of Multiple Dwellings Relief (MDR) has generated yet another block for the UK’s property market to overcome, particularly for those purchasing multiple dwellings in a single transaction.
The change will incur higher stamp duty costs for buyers, calculated on the combined property value rather than the average, adding thousands to their expenses. Homes with annexes will now attract double the stamp duty, with property investors now having to purchase six or more units to reap the benefits of SDLT relief.
By abolishing MDR, the Chancellor has, therefore, restored a historical injustice in Stamp Duty Land Tax. Furthermore, the already struggling construction industry will take another hit with the tax on developers increasing from 1-2% to 5%, leading to project abandonment and further increases in asking prices, as supply continues to lag behind an overwhelming demand for affordable housing.
Reforming of Stamp Duty
Whilst the promise from the Conservatives to raise the SDLT threshold for first-time buyers marks a positive step in the right direction, a radical overhaul is necessary to get the bottom end of the housing market moving in the long term.
SDLT payment bands have never been index-linked to house price inflation so an increase to these thresholds for all homebuyers would stimulate activity at the lower end of the property market.
Raising the threshold would have the benefit of taking more properties outside the scope of stamp duty, cutting the cost of acquisition for people looking to climb up the property ladder.
Those looking to purchase properties on the mid-to-high end of the property market would also have a chance to sell their low-end properties as a result of the increase in demand from prospective buyers, contributing to further momentum within the housing market.
Interest Rates cut
As the UK’s inflation continues to fall, the Bank of England’s Monetary Policy Committee must prioritise first-time buyers by further reducing interest rates to 4.75%.
Economies have momentum and with the rate of inflation continuing its downward trajectory towards the BoE’s threshold of 2%, this move would allow for the UK’s housing market to recover faster whilst also delivering far greater opportunities for those looking to escape an overheated rental market.
The UK’s private rental sector is crying out for reform with Cornerstone Tax finding that 42% of Brits fear that they may never own a home, perpetuating feelings of disillusionment and frustration.
With 17% of tenants having lost out on rental properties due to these bidding wars, whilst a further 19% have been forced to change rental accommodations multiple times in a short span, significant affordability issues persist, with tenants typically paying £1,291 a month outside London and £2,633 in the capital. A cut in rates will help reduce the supply-demand imbalance of the rental market, allowing Brits to get onto the property ladder.
Stimulating the UK’s construction sector
The UK urgently needs to increase the production of new homes to help cool down record-high rental market prices, as well as reduce the affordability issues that persist in the UK not having enough homes.
Since the Barker Review in 2004, CBRE’s analysis reveals that the UK housing market has a staggering shortage of 1.5 to 2.5 million homes.
This is coupled with the UK government having not met its annual target of 300,000 new homes a year in England, with only 686,613 being built since the start of the current Parliament in December 2019. Furthermore, planning decision speed has slowed drastically over the past decade, with only 20% of major planning applications decided within 13 weeks in 2023, exacerbating the housing crisis.
The next UK government must, therefore, reform the private rental sector with measures including the abolition of the second home surcharge from rental sector investors, as well as reinstating full relief on mortgage interest payments which will reduce the costs of purchase.
The Bank of England must also cut interest rates so to reduce the costs associated with homebuilding, creating an environment where construction firms can confidently invest.
Reducing local sales restrictions
Reducing local sales restrictions will significantly bolster the UK’s housing sector by facilitating a more fluid and efficient property market.
One key issue has been the rigidity and complexity of local planning systems, which often stymies the pace of new developments.
By easing these restrictions, local councils could accelerate the approval process thereby increasing the supply of homes. This would help address the chronic undersupply that has plagued the market, with annual completions falling short of the government’s 300,000 target.
An increased supply would stabilise house prices, making homes more affordable for first-time buyers and those on lower incomes, ultimately contributing to a more balanced and equitable housing market.
Moreover, developers would be incentivised to invest in areas previously considered unattractive due to bureaucratic hurdles. This would not only increase the overall housing stock but also stimulate economic growth in these regions.
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