The Labour Party has won a landslide victory in the 2024 general election, securing more than half of the votes and 400 seats in parliament. After 14 years of Conservative rule, the Labour Party will take control of the country with their largest majority in 200 years and it surely begs the question, “What does this mean for property HMO investment and the UK rental market?”.
Over the past decade, the UK property market has demonstrated resilience in the face of political and economic challenges. A perfect example of that was the COVID-19 pandemic when coliving and HMO investors and managers had to adapt overnight to the furlough scheme and many other regulatory changes to contain the pandemic, and as the economy recovered they were again well placed to leverage the opportunities of a rising rental market.
Yet, political party shifts have always proven to significantly influence the property investment landscape and coliving and HMO investors and managers are right to be cautious as each and every new government brings new challenges and opportunities through new political developments, economic policies, and regulatory changes. So, the critical question every property investor is gripping with right now is – will this Labour government be beneficial for HMO investment or will it hamper the coliving rental market?
Looking ahead, while it’s too early to understand what the new Labour government will actually do in practice till they unveil their first set of policy decisions and budget, we’ve done our utmost to look at what has been said and the Labour’s party’s manifesto to give you 5 key areas the new Labour government will most likely impact the HMO investment and the rental market in Oxfordshire going forward.
More houses, More opportunities
The new Labour government pledges to build 1.5 million houses within the next parliament to address the current housing shortage issue. While this may sound ambitious, it’s nothing more than the same 300,000 new homes a year target relabelled. Previous governments have all miserably failed to achieve this target, yet Labour have a pretty comprehensive set of new policies including – setting local housing targets, fast tracking brownfield projects and allowing development on disused green belt areas such as wasteland or obsolete car parks, which may give them a chance to succeed.
Our Opinion: Property investors should welcome this drive to build more homes as this will certainly unlock more opportunities within the current and the new housing stock and make the UK property market even more attractive to both UK and overseas investors. A recent survey conducted by a company specialising in real estate investment have already revealed that 3 in 5 Hight Net Worth (HNW) investors plan to increase their property HMO investment in the UK market within the next 12 months and mature and stable buy-to-let markets with a demand/supply imbalance such as Oxford will be a key target.
Planning 2.0 is coming
To achieve their 1.5 million new homes pledge, Labour will have to deliver 50% more than the previous government managed over the same period so Labour has already made clear that a reform of the planning system will be essential to make planning decisions faster. Labour also plans to hire 300 new planning officers to expedite the approval process to such effect.
Our Opinion: A comprehensive review of the National Planning Framework is long overdue and extra capacity to help to streamline planning decisions is surely a positive step forward for property HMO investment. Whether 300 officers will be enough and Labour can source and train those professionals within this tight timeframe is to be seen.
At the moment, coliving lacks its own use-class.
Green belt review
Labour plans to ask councils to review green belt land and seek to identify low-quality green belt land that could be used for potential development. For those unfamiliar with the term, Green belts are large stretches of land set aside to protect the countryside from urban sprawl. Oxford is the only major urban area in Oxfordshire that has a designated Green Belt, which has a 50 mile (80 km) circular walk and 591 km of public rights of way in total.
Our Opinion: Oxford is a highly dense town with a fair amount of the land with potential for development owned by the colleges, making it very difficult to secure land for institutional grade build-to-rent projects like the ones found in other major regional centres like Bristol. While it’s important to protect our beautiful Oxfordshire countryside balance, Oxford has no large scale coliving or build-to-rent project being built or undergoing planning able to ease the large demand/ supply imbalance that makes renting in the city so expensive for working families and professionals so such a review may open up a historic opportunity to balance new housing needs with environmental concerns.
Section 21 will become history
Section 21 allows a landlord to evict a tenant without providing a specific reason – hence being dubbed “no-fault” evictions. According to the Labour Party’s manifesto, they will “immediately abolish Section 21 ‘no fault’ evictions, prevent private renters being exploited and discriminated against”. The Party’s manifesto stated its commitment to raise standards within private rented homes by extending the Awaab’s Law to the private rental sector.
Our Opinion: The need to use specific legal grounds for eviction will certainly drive more professionalism in the rental sector, encouraging landlords to maintain higher property standards and addressing issues promptly. Over the years, Oxford has seen some landlords giving a bad name to the industry by maintaining their properties poorly taking advantage of limited supply available to tenants. While the reduced flexibility to manage your property will be a challenge, the hope is that this triggers a new era of better relationships between tenants and landlords where tenants who feel more secure will likely become more cooperative, leading to longer tenancies and reduced turnover, ensuring a steady rental income and reducing the costs and efforts associated with finding new tenants.
Interest Rates & Stamp Duty
Labour has vowed to reduce inflation and cut interest rates, which will naturally affect mortgage rates even if there is no detail on this will work in practice. They also pledged to stamp Duty exemption to £300,000 at the start of the next fiscal year in April 2025 to help first time buyers.
Our opinion: While mortgage rates have been slightly reduced in the past few months, overall they have been on a standstill. Specialist HMO mortgage products are around 6% on the 2-year fixed rate and about 6.5% for 5-year fixed rate on top of 3-5% product fees that lenders have become used to charge. As Labour plans are set in motion we expect further drops. But, we still recommend investors to apply 6% on their appraisals and use figures as high as 9% to stress test their numbers. Stamp Duty relief for first time buyers is welcomed but what will make a real difference to the UK property investment is what rules will be applicable to foreign investors looking to purchase property in the UK. Let’s wait and see.
Conclusion
All of the above means two things – uncertainty and opportunity. This means investors will need to stay informed and adaptable to navigate this evolving landscape. Compared to recent political instability, Labour policies to boost housing supply underpinned by its various reforms will certainly make the UK property market more dynamic and attractive to both UK and overseas investors, and encourage the professionalisation of the rental sector which is much needed and welcomed.
Yet, the focus on supporting first-time home buyers to be balanced with support for those renting is a more attractive choice and lifestyle. Millennials and Gen Z are now the largest consumers of rental housing in the UK and those new generations prefer access to a product than ownership and this is no different for them in relation to housing. Today single household renting is the largest segment of the rental market with more than 8 million people renting alone in the UK and the new Labour government must create incentives and policies that unlock the type of housing supply that matches the lifestyle and housing aspirations of this generation.
As usual, it will take a few months for coliving and HMO investments and managers to fully grasp the impact of this Labour government in real terms as the new government will certainly look for quick wins elsewhere. Before any permanent changes are made, we encourage property investors to cash in and secure some deals. At B-hive Living, we support both private and institutional investors to take advantage of the growth of the UK rental market through our multi award winning coliving model.
Meet The Writer:
Williams Johnson is the co-founder and CEO of B-Hive Living – a multi-award winning coliving brand, operator and asset manager of coliving properties with a strong track record of best-in-class design, investment and management practices. Our mission is to empower professional renters to lead a more connected, healthy and fulfilling lifestyle through co-living. This relentless focus on our residents’ well-being ensures a sustained demand wherever we operate.
