Election update – the morning after the night before
Friday the 13th – unlucky for some, but how does this Friday 13th December look for the private rented sector?
After months of political stalemate, party political musical chairs, and an unpredictable election campaign, the results are in – and as had been tentatively predicted, Boris Johnson remains in 10 Downing Street, but this time with the biggest Conservative majority since the 1980s.
What will a confident Conservative government mean for the private rented sector?
Priority 1: Get Brexit done
The Conservatives were clear throughout the campaign – their ‘oven-ready’ Brexit deal is the first thing on the agenda. The Johnson administration is now all-but guaranteed that they will be able to pass their deal in the House of Commons, which should mean the UK will be leaving the EU as early as the end of January next year.
That’s not the last of it, though. The UK will then enter a transition period, which Johnson claims will be complete by the end of 2020, but could run for two years, while negotiations on trade deals continue.
So, the uncertainty continues – somewhat. But there appears to be a light at the end of the tunnel, which should have an increasingly positive effect as it comes more clearly into view.
Regulation in the PRS
With a manifesto most notable for its lack of detail, the Conservatives did commit to two policies which had originated with the Theresa May administration: the abolition of Section 21 (so-called ‘no-fault’ evictions) and the introduction of ‘Lifetime Deposits’ (more commonly referred to as ‘deposit passporting’).
While some had anticipated that Section 21 would fall off the agenda, having been absent from the Queen’s Speech back in October, it appears that the Conservatives are determined to address security of tenure.
The NLA has strongly advocated that Section 21 cannot be removed unless, and until, there is wholesale reform of the courts. Without this, the government would risk reducing supply in the private rented section by one-fifth – almost 1 million dwellings – and supply for tenants in receipt of benefits by 59 percent.
While the Conservative manifesto calls for ‘strengthen[ing]… rights of possession’, again the detail is lacking. The previous government’s call for evidence on the case for a housing court closed in January, and we are still awaiting a response. Much will depend on how much funding is available from the Ministry of Justice (and the Treasury) for any reform, and nothing was included in the manifesto costings document.
Unsurprisingly, the Conservatives were the most restrained in their changes to taxation of the three main parties. Income tax is frozen, and the threshold for National Insurance contributions will be increased to £9500, making everyone around £105 better off each year. They have rolled back on a previous promise to cut corporation tax by 1 percentage point, but it will remain static at 19 percent. And they’ve also committed to maintaining rates of National Insurance and VAT.
For non-UK resident landlords, there will be a further stamp duty surcharge on properties – but there’s no sign of any changes to either Section 24 or the existing 3 percent surcharge on stamp duty for additional properties.
What is the NLA’s view?
On the confirmation of the election result, Richard Lambert, the NLA’s chief executive, said: “We congratulate Boris Johnson on his return to No. 10 Downing Street as prime minister of a new Conservative government. We now stand ready to work with him and his team on the reform of housing regulations in a way that does not do long term damage to the supply of private rented housing.
“No-one should be in any doubt about the dire consequences for the supply of private rented housing in this country if the government abolishes Section 21 without any effort to reform the law courts and strengthen landlords’ rights of possession. There would be nearly 1 million fewer houses available for rent and the people who would be hardest hit would be some of the most vulnerable in our society: those in receipt of state benefits.”
You can see our full press release, outlining the risks of removing Section 21 without wholesale court reform, here.
The Queen’s Speech is expected on Thursday 19th December – an early Christmas present for those eager to know the new government’s policy agenda. We will post an update on our website with the key legislative commitments affecting the private rented sector.
The NLA will be writing to the new ministers to seek meetings to discuss the future of the private rented sector. These early months of the administration are a key opportunity to make the case for evidence-based policy, backed with sufficient funding, which provides landlords with the certainty needed to invest in their businesses.