After the election dust has settled - which will likely involve new brooms for Labour, Lib Dems and UKIP - what will be on the cards for the property industry over the next five years?
Mansion Tax
Labour’s proposed mansion tax on properties over £2 million is less likely. Instead, the family home will be taken out of Inheritance Tax for all but the richest by raising the threshold for married couples and civil partners to £1 million.
Buy-to-Let
Private landlords will be relieved to hear that Labour’s proposals to regulate the industry by introducing 3 year tenancies with rent control are not an immediate concern.
Right to Buy
The Conservatives propose to extend the scheme to:
- 500,000 housing association tenants who currently have no right to buy their home; and
- a further 800,000 who currently qualify (but only for less generous discounts of £16,000 or less).
The scheme will be funded by requiring councils to sell off their most valuable housing stock as it becomes vacant and replace it with cheaper property.
The proposals are somewhat controversial and have been criticized by housing associations and industry bodies alike. There are a number of major issues which will need to be surmounted if such proposals are to go ahead, including:
- Many housing associations are charitable bodies bound by rules not to dispose of assets for less than full value and to further their charitable objects - the principal one being to provide housing to those in poverty. Selling homes at an undervalue to promote home ownership likely falls outside even the widest interpretation of this object.
- Many schemes built by housing associations were funded with debt or equity finance and are reliant on a rental income stream.
Custom/Self-Build
Historically, a number of barriers have led to significantly fewer homes being self-built in the UK versus the rest of Europe. Such barriers have included:
- limited access to suitable plots of land;
- access to development finance; and
- regulatory hurdles.
The Conservatives have pledged to double the number of custom-built and self-built homes by 2020.
At the moment there is no obligation on local authorities to make plots available for custom/self-build homes. The Self-build and Custom Housebuilding Act 2015 (SCHA 2015) which came into effect in March 2015 requires local authorities to keep registers of those interested in custom building their homes. The aim is for local authorities to build up a picture of demand for custom/self-built homes in their area. Applicants will probably need to show a connection with the local area to be eligible (eg period of residence).
Further regulation and guidance can be expected setting out the detailed operation of the local registers early in this Parliament. Regulations will be informed by the consultation responses and the practical experience of the 11 test local councils see: Consultation response.
The Government’s ultimate aim - following such consultations and trials - is to reach a point where it can legislate for local authorities to be subject to a legal obligation to allocate land to local people for the purpose of building or commissioning their own homes under the Right to Build Scheme.
Custom/self-build homes are also exempt from the community infrastructure levy and the government is looking at a range of planning reforms for self-builders and reducing other costs through changes to s 106 affordable housing contributions.
The Homes and Communities Agency is supporting a number of developments providing plots for custom build in Middlesbrough, Milton Keynes, Basildon, Telford and Basingstoke. See further: HCA Custom Build.
Human Rights Act
The Human Rights Act is in the firing line with the Conservative pledge to scrap it and introduce a British Bill of Rights which they claim will:
“[restore] common sense to the application of human rights in the UK…. Which will protect…..the right to a fair trial…… But it will reverse the mission creep that has meant human rights law being used for more and more purposes…..”.
For followers of the development of Article 8 of the European Convention on Human Rights in the context of possession claims in Manchester City Council v Pinnock [2010] UKSC 45, [2010] All ER (D) 42 (Nov) and more recently Lawal and another v Circle 33 Housing Trust [2014] EWCA Civ 1514, [2014] All ER (D) 266 (Nov)…watch this space.
(LexisPSL subscribers can read more here:https://www.lexisnexis.com/uk/lexispsl/property/document/412012/5DRY-J241-DYW7-W49P-00000-00/Life%20after%20Pinnock%E2%80%94human%20rights%20and%20social%20landlords
Is there any immediate action practitioners should consider taking in light of the result?
If you advise Housing Associations:
- consider working with clients to identify those schemes likely to be affected if Right to Buy extension proceeds; and
- assess what mitigation measures may be put in place (particularly around structuring and financing).
If you advise local authorities / builders / developers:
Consider advising clients and developing package documentation for financial and legal agreements in:
- public private partnerships;
- custom build;
- marketing materials;
- online register template;
- training;
- help desk process; and
- direct bid mechanism for the Custom Build Serviced Plots Loan fund.
See further http://www.selfbuildportal.org.uk.
Source: LexisNexis Purpose Built
