2024 Conservative and Labour Manifestos on New Homes
Written on 18 June 2024 by
First, a general comment on manifesto presentation: Labour’s manifesto is far more impressive than the Conservatives, with much better use of technology and many more photos, making it an easier read. The Conservatives need to learn lessons from this for the next general election.
Some offers on housing are very similar from both parties, others are designed to achieve the same result, but with a different focus on achieving it and of course some policies are unique to one party.
On the supply side, Labour has a more comprehensive policy, with plans to update the National Planning Policy Framework, including a “presumption in favour of sustainable development”, whatever that means.
A major cause of planning delays is a shortage of staff in planning departments and so Labour’s plan to fund additional planning officers is welcome, but this should be paid for by planning fees which cover the cost of provision rather than the manifesto’s promise of hypothecating the extra 1% SDLT Labour plans to charge foreign buyers.
Labour has also provided better detail of where new development will take place, with a more realistic approach to using poor quality land in the green belt and better sharing of planning gain with local communities.
Labour is promising 1.5m new homes over the next 5 years and the Conservative 1.6m. This is an increase of around 50% on the current build rate and much as it would be great to see these figures achieved, I fear they are pie in the sky. To achieve this level of growth we would need to see a reemergence of SME builders, who used to provide a much higher proportion of new homes, but now often struggle with raising development finance.
More encouragement for custom build and self-build would also help to increase the total build numbers.
Developers take their foot off the pedal very quickly when demand drops, as was evidenced in Q4 2022 after the Liz Truss debacle. Therefore, facilitating good demand for new homes is just as important as the ability to build them.
One policy offered by both parties is a Government Mortgage Guarantee Scheme, with the Conservatives simply saying they will continue with the current scheme and Labour saying it will introduce a permanent, comprehensive scheme.
When this scheme was introduced in 2014 it was a very welcome catalyst to kick start 95% LTV mortgages, which virtually disappeared following the 2008 financial crisis. Since then, the private sector has developed new 95% LTV guarantee schemes, including Own New and Deposit Unlock for new build properties. Several lenders prefer to self-insure or use private sector mortgage insurance because of the cost and restrictions in the current scheme.
Mortgage defaults and repossessions have been historically very low since the Government Guarantee Scheme was introduced and so on a purely financial basis it is likely to have been profitable for the Government, even before considering the other economic benefits of reinvigorating the 95% LTV market. However, I think it is a mistake for Labour to say the scheme will be permanent; the Government should aim to stimulate the mortgage market when necessary rather than plan to be a permanent player.
Of more interest is the Conservative proposal to reintroduce a version of the Help to Buy scheme, which addresses the affordability problem while the Guarantee Scheme does not. Conservatives have learned from the private sector and, unlike the previous scheme, the new scheme will be part funded, reported to be at 5%, by developers. This should also stop fair minded criticism that the scheme benefits developers more than FTBs.
Assuming it would work in a similar way to the previous scheme, the developers’ contribution could be used to improve the terms, perhaps by extending the interest free period of the 20% equity second charge. Because the 4.49x maximum income multiple is based only on the 75% first charge, this scheme has far more impact on improving affordability than the Guarantee Scheme. Furthermore, the negative equity risk is reduced because in the event of the property value falling further than 5% plus the capital repayments made on the mortgage, 20% of any loss would be suffered by the Government.
Both parties are promising to restrict new ground rents and it is disappointing the bill to do this was lost in Wash Up. However, neither party has promised to abolish Estate Charges on new developments but the new bill should abolish this charge (and any similar charge invented with a different name) and local authorities forced to take onboard these obligations by adopting the roads, etc. The longer these charges continue the longer occupiers of some new estates will be paying twice for the same thing – Council Tax and Estate Charge.
Finally, something which was regrettably missing from both manifestos was any commitment to amend LISA rules to make them fit for 2024. The most important change needed is an increase in the maximum purchase price allowed from the current £450,000, to avoid anyone buying above that price being fined an effective 6.25% by the Government if they use their LISA savings as part of their deposit.
Categories:Property Market, Bank of England, Ray Boulger
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