Conservative Housing Pledges: Non-Doms SDLT Rise, Lifetime Rental Deposits And Mortgages
The Conservative Party has announced a raft of plans to solve the housing crisis with non-domestic stamp duty hikes, lifetime rental deposits and lifetime mortgage solutions promised as appropriate measures appealing to a wide demographic.
Where the Liberal Democrats pledged to help young renters to gain a foothold onto the rental market by offering a rental deposit loan for those under 30. The Conservatives, however, have aimed to appeal to a wider tenant base by offering a lifetime rental deposit scheme whereby the deposit will seamlessly follow the tenant through their rental property journey.
The Conservatives hope this will reduce the barrier of moving between rental properties as the rental deposit would be automatically transferred in advance, saving the tenant any unnecessary upfront costs.
However, like many manifesto pledges, the promise is vague and lacks the detail needed to persuade stakeholders in the private rented sector of the initiatives value. Landlords may fear how the deposit can transfer when rental deposit fees remain variable.
Boris Johnson has also pledged a fixed rate mortgage solution for buyers with a minimum 5% deposit which promises homebuyers a guaranteed mortgage payment throughout the lifetime of the mortgage, providing homeowners with certainty over the cost of their repayments.
First-time buyers have also been promised a 30% discount on new homes in their local area.
Foreign investors will be hit again with a 3% surcharge in stamp duty land tax (SDLT). Having already announced a 1% increase, the new policy will offer a more aggressive approach to second home investment which the Conservatives claim will add an additional £120 million to be spent on policies to reduce homelessness.
The new surcharge is set to impact 70,000 residential purchases per year with the majority taking place in London.
The Conservatives claim that 13% of all London property was bought by foreign investment between 2013 and 2016; a number flooding the market, increasing competition and driving property prices above affordability levels.
Boris Johnson commented:
“At the moment, renting a property can also be an uncertain and unsettling business, and the costs of deposits make it harder to move. We are going to fix that.
“We will end no fault evictions, so that landlords can’t remove tenants without good reason, and introduce Lifetime Rental Deposits so renters don’t have to save up for a new deposit while their money is tied up in an old one.”
Neil Cobbold, Chief Operating Officer of PayProp, comments:
“As with all new policies announced without significant detail, the government’s pledge to introduce Lifetime Rental Deposits raises more questions than answers.”
“The major questions revolve around whether landlords will be offered the same level of protection as with the traditional deposit system, how deductions for damage would work and what would happen to a tenant’s Lifetime Rental Deposit if they chose to rent a property with a higher or lower value of deposit.”
“With the recent growth of the no-deposit sector in mind, it must be considered whether a complete overhaul of the deposit system is necessary as tenants already have a low-cost alternative to upfront security deposits.”
“Moreover, the rental sector is still adapting to the deposit cap introduced as part of the Tenant Fees Act earlier this year, so further deposit reform could cause confusion among letting agents, landlords and tenants.”
“It will also be interesting to see if the plans to introduce Lifetime Rental Deposits will tie in with the government’s plans for digital transformation of the property sector through an expert advisory council.”
Vadim Toader, founder and CEO at Proportunity, commented:
“Homeownership remains the aspiration of the majority of Brits and it is right the Conservatives are looking at new ways of getting people on the housing ladder but it’s vital any new proposals are in fact workable.
“It is difficult especially to see how either a lifetime fixed rate mortgage or 30% discount for first time buyers – effectively a right to buy on private property – would work in practice and it is telling the Tories are promising only a million homes when their target is 300,000 new homes a year.”
Chief Secretary to the Treasury Rishi Sunak, said:
“Evidence shows that by adding significant amounts of demand to limited housing supply, purchases by non-residents inflate house prices.
“The UK is always open to people coming to live, work, and build a life in this great country.
“The steps we are taking will ensure that more people have the opportunity of a great place to live and build a family.”
Polly Neate, Chief Executive of housing charity Shelter, believes the investment is desperately needed to stem the problem of homelessness:
“Rough sleeping has been rising for the last decade and frontline services need all the support they can get to help tackle this mounting issue,” she said.
“At the same time, however, we can’t solve homelessness without tackling the root of the housing crisis, and that means an investment in the social homes we so desperately need.
“We want the next government to deliver at least 90,000 new social homes a year over the next parliament to help end this emergency.”
Milton Rodosthenous, Build to Rent expert and director of online auction service LetsBid Property, which has partnered with over 150 estate agents to list over £30 million of property for sale, comments:
“The Conservatives’ plans to levy a 3% stamp duty surcharge for non-UK tax residents will receive a mixed response from the property industry. However, most people will agree that it is a surprise to see the additional stamp duty increased to 3% from the initial 1% proposed over a year ago.”
“Additional stamp duty for overseas investors will represent a positive change for domestic buyers as there may be less competition for homes and price growth for certain types of properties could plateau.”
“That said, a policy like this could have implications for the high-end of the housing market, particularly in London.”
“Any market problems caused by additional stamp duty for overseas buyers could be alleviated by wider stamp duty reform, details of which are currently lacking in depth.”
“Meanwhile, Boris Johnson’s plans to introduce lifetime fixed mortgages for first-time buyers could represent a more all-encompassing and effective strategy of helping people to take their first steps on the property ladder compared to existing policies such as Help to Buy and Shared Ownership.”
“It seems the Conservatives have placed further focus on helping those not yet on the housing ladder with their Lifetime Rental Deposit policy, which could help tenants to save more cash towards buying a home thanks to lower upfront moving costs.”
“If Boris Johnson is elected, his focus will be on resolving the Brexit impasse which could help to re-energise the property market. A continued focus on reforming the homebuying and selling process with policies such as Reservation Agreements and regulating property agents could also help to speed up transactions and build long-term confidence in the market.”
Will these measures help to improve the property market? Are conveyancers concerned by the lack of detail in the pledges?