What do the Labour and Conservative election manifestos say on mortgages, housing and property?

With general election 2024 in almost touching distance, it’s high time to see what the UK’s main political parties are pledging for the housing and mortgage markets, with potential implications for contractors, writes John Yerou, CEO of Freelancer Financials.

First though, some key background. For the last three elections, the Bank of England base rate and mortgage interest rates have been ultra-low. As such, they've scarcely dented the electorate's psyche. ‘If it ain't broke, don't fix it’ comes to mind!

Housing and mortgage-related pledges will win and lose votes on July 4th

But then along came Liz Truss, breaks everything as prime minister, causing interest rates to spiral upwards – and that’s broadly why housing and mortgage rates are now such a BIG THING that pledges affecting either could win or lose your vote.

But it's not just interest rates that mortgage brokers like us want action on.

Top 5 things mortgage brokers want General Election’s winner to announce

Here's a list of UK brokers' wants, in no particular order:

1. Concrete housebuilding plans.
2. Planning and development (including red tape) reform.
3. Stamp Duty reform.
4. Revived Energy PC legislation.
5. A Buy-To-Let tax review.

But are we going to get any of it? Now that all parties have announced their manifestos, let's see what, if anything, we're likely to get on mortgages and housing, starting in this first installment with the Conservatives and Labour.

The Labour Party’s national homebuilding plan: some pledges are more equal than others

Let's start with the biggie.

Labour's plan is to build 1,500,000 new homes. For sure, their plans for affordable and social housing are ambitious. And, I hear you in the blue corner saying, "Yes, but the Conservatives plan to build 1.6 million!"

True enough. But be aware, the last Conservative manifesto promised 300,000 new homes a year over the term of the outgoing government.

So far away from that target were they last year, that they scrapped the policy in November.

Moreover, the London housing 'pipeline' is at its lowest since records began, with just 2,472 sites granted planning permission year-to-date.

To us, it begs the question – ‘Should Labour update the National Policy Planning Framework (as their 2024 manifesto promises), and increase the current rate of construction by 50%*, then who's going to build those properties?’

(*By the Conservatives' own tally, they've built 1,001,000 homes in England since the start of Parliament on December 17th 2019 up to May 19th 2024).

From what we can see at this stage, the absolute majority of the required workforce to build Labour’s envisaged properties will come from the Construction Industry Scheme. That could potentially be a huge, work-boosting opportunity for contractors!

How Labour plans to increase UK home-building

By putting in a framework that keeps planning authorities up-to-date with Local Plans, Labour looks to be putting housing higher on their agenda than the outgoing government.

Labour's plans affecting bricks and mortar include:

• installing 300 new planning officers,
• more mayoral power over planning and housing investment,
• a framework to magnify local voices to help direct planning needs.

Along with building on brownfield sites and reforming compulsory purchase orders, Labour is also planning more developments and more ‘new towns.’

This could be good news for first-time buyers, who'll have first offers to buy new-builds, as well as a new government-backed 'Freedom to Buy' mortgage product to help them.

Let's hope there's enough emphasis on affordable housing to make that a reality.

Housing schemes/affordable housing, according to the Conservatives:

The Conservative Party’s 2024 election manifesto promises to improve one of their flagship housing schemes, Help to Buy.

The scheme has seen many iterations since the Conservatives launched it, and has had its share of criticism. But it has had a modicum of success for younger borrowers who'd have otherwise struggled to access the property ladder.

The iteration that the Conservatives look like extending is the Help-to-Buy Equity Loan.

Under Help-to-Buy EL, the borrower has to find a 5% deposit themselves, plus seek a government-funded 20% equity loan. In effect, this means the lender receives a 25% deposit. The higher a deposit; the more favourable an initial interest rate the lender will offer.

Housing schemes/affordable housing, according to Labour

We've already mentioned Labour's 'Freedom to Buy' policy, which would help first-time buyers access housing with just a 5% deposit.

But their manifesto has been widely criticised for NOT including its target of 40% of the homes it plans to build as 'affordable'. In its place was the oft-quoted "biggest increase in social and affordable housebuilding in a generation."

That's not to say that their 'new towns code', announced in Leeds last month by Labour deputy-leader Angela Rayner, won't incorporate their commitment to 40% of new homes being 'affordable'.

Alongside this (non)commitment, Labour has promised to review the increased Right to Buy discounts made by the outgoing government.

The expectation is that Labour will reduce the discount to dissuade current social housing tenants from buying their homes.

Building more efficient social housing should help tenants, who are long-frustrated by being unable to save deposits under their existing private tenancies.

However, that's all down to how Labour interprets 'affordable', and how that relates to other elements of the cost-of-living aligning.

Stamp Duty manifesto pledges by the Conservatives

The Conservatives' manifesto offers more for domestic Stamp Duty payers than Labour.

It promises to freeze the current tax-exempt 'holiday' rate at £425,000 for first-time buyers, which, based on this year's figures to date, would exempt 94% of people buying their first home from paying any tax.

It's unclear whether the Conservatives' plan to reduce the exempt band for people who own/have owned property in the past back down to £125,000 (from the 'holiday' rate of £250,000). But the 'Family Home Tax Guarantee' does intend to lock in the other Stamp Duty bands.

Stamp Duty manifesto pledges by Labour

Labour has announced no plans to curtail the current Stamp Duty holiday, which is stated to last until March next year. However, they've pencilled in no plans to change the current domestic rates, either.

Instead, they've chosen to raise additional income by charging overseas buyers an additional 1% on top of the current surcharge. Foreign buyers would therefore face +3% on top of current rates for a first home, or +6% for a second home or investment property.

While Labour plans to use the projected £40 million this will raise to pay for new planning officers, it will hardly trouble the ultra-rich buyers looking to invest in UK property, especially in London.

Capital Gains Tax in the Conservative election manifesto…

The Conservatives' 'Family Home Tax Guarantee' would also lock in current capital gains tax rates. But there is a twist -- one aimed at getting more people onto the property ladder.

The Guarantee offers to exempt landlords from CGT if they sell their rental investment to a sitting tenant within the next two years.

Contractors who've invested in property as a second income/pension, as many have, will see the irony, here. CGT personal allowance has been eroded in the 2020s, currently standing at £3,000 per year from a heady £12,300.

So, even though the government dropped the higher rate of CGT to 24% from 28% at Spring Budget 2024, not all landlords would be better off if they sold their rental property to anyone other than their tenant.

It's important to make this distinction. Some contractors may see the headline off “100% CGT profit” relief and think it applies carte blanche to any landlord who sells their property. It doesn't. It only applies if you sell your property to your current tenant within two years of the date of the announcement, which was June 10th 2024.

Capital Gains Tax in Labour’s election manifesto…

Labour's manifesto is devoid of plans for CGT.

Despite claiming that they were “the party for business,” which Labour leader Sir Keir Starmer has promoted at every opportunity, the consensus before the launch of their manifesto was that Labour would increase CGT. We'll just have to wait and see how this pans out, should Labour get in.

Second homes and holiday lets: what are the Tories pledging?

As it stands, legislation has been passed that gives councils purview to charge a council tax premium of up to 300% on second homes.

If you own a holiday in your own name, you'll also lose your higher-rate mortgage tax relief.

Also on the table is a register for short lets and holiday lets. In addition, if you live in a holiday let hotspot, you may have to seek permission to turn a home into a holiday let.

And, lest we forget, chancellor Jeremy Hunt has already abolished multiple dwellings relief (as of June 1st, 2024) because of "incorrect and abusive claims".

Second homes and holiday lets: what are Labour pledging?

There was little in the Labour manifesto about second homes and holiday lets.

But, two years ago, Labour did table a short-let licensing scheme.

There's also the possibility that they'll redefine what a short-let is. This could cull how many second homeowners currently qualify for second home council tax exemption.

Whichever party gets in on July 4th, contractors will have to familiarise themselves with potential changes in the landscape for investment property landlords – changes which those trying desperately to buy a home will invariably welcome, much to the chagrin of those using property as a means to top up their income or save for retirement.

What about the Tories and the Renters' Reform Bill?

Talking of renting, while there's no direct mention of the Renters' Reform Bill, the Conservatives ought to follow the guidelines outset therein. This would include:

• creating a Decent Homes' Standard (for private tenants)
• creating a National Landlord Register
• making 'no-fault' evictions illegal
• reducing current barriers for renting with pets
• making fixed-term tenancies a thing of the past

What about Labour and the Renters’ Reform Bill?

Labour would push the boundaries of the Renters' Reform Bill even further. Plus, they intend to bring some of the elements into law more quickly:

• The banning of no-fault evictions would be brought in with immediate effect.
• They claim they’d pick up the gauntlet of energy performance (which the Conservatives have abandoned).
• Tenants would be able to query objectional rises in their rent.
• Tenants would also see their landlords forced to investigate non-compliance and hazards within two weeks of them making a complaint.

Stil interested in interest rates? Yup, us too

As I said right at the beginning, housing is a BIG THING in this election campaign.

So, is there anything separating the parties enough on bricks and mortar to tempt you to put the tick in their box?

I know. Like everyone else, you want to know what rates you'll be paying for your mortgage before committing to any party!

But -- directly, at least -- inflation will be what it will be, regardless of who's resident in Number 10 on the morning of July 5th.

And currently the Tories, notably party leader Rishi Sunak, are being understandably vocal that inflation has now returned back to the target of two per cent.

Too little too late? Or just enough to make you vote Conservative?

Our belief is that growing the UK economy is the only creditable long-term solution to high inflation, so maybe it’s policies beyond mortgages, housing, and property you should be canvassing to decide who deserves your ‘tick’ next month?

What's the biggest pain point for you, the humble contractor?

Or maybe not. While housing comprises only a portion of our lives, it's a BIG portion. This is especially true of contractors who've invested in, or are considering, rental properties as a financial tool.

The biggest win for the self-employed contractor community is the pledges by all parties to build homes, especially affordable housing. Those houses will need to be built by someone, and CIS contractors immediately come to mind as the labour force for the job.

Do our mortgage advisers and us have an inkling as to which of the main parties will appeal most to contractors? That depends on which side of the fence you're sitting, and what your goals are for the next five years. Good luck working all that out before polling day in just 15 days’ time!