What Impact Could Labour Have on the Housing Market?

Following Keir Starmer’s landslide election victory on 4 July 2024, we now have a Labour Government in the UK for the first time in 14 years. With plenty of promises made during the election campaign and an ever-increasing list of priorities to focus on, we consider the party’s manifesto pledges when it comes to the hot topic of housing, and the impact the Labour party could have on the housing market going forward.

Labour’s Housing Ambitions: A Transformative Agenda

Keir Starmer’s government has put housing at the forefront of its domestic agenda, with the promise to build 1.5 million new homes over the next five years. This ambitious plan is designed to address the chronic housing shortage that has plagued the UK for decades, particularly in high-demand areas like London and the South East, pushing both property prices and rental costs out of reach for so many. The party’s aim therefore, is not just to increase housing supply, but also to ensure that homes are affordable and accessible to a broader segment of the population.

Central to Labour’s housing policy is the idea of “transformative change,” which includes significant investments in public housing. Starmer has pledged to increase the construction of council homes, reversing decades of decline in public sector housebuilding. This move is expected to provide relief to those on housing waiting lists and reduce the reliance on the private rental sector, where rents have soared in recent years.

Freeing Up Land and Protecting Natural Spaces

Labour’s housing strategy also involves innovative land use. The party has vowed to protect green belt land, which has long been a contentious issue in UK planning policy. Instead, they plan to free up what they refer to as “grey belt” land — previously developed but underutilised spaces — for new housing developments. This approach is designed to strike a balance between the need for more homes and the preservation of the UK’s natural landscapes, appealing to both environmentalists and those desperate for new housing.

The focus on grey belt development could lead to the revitalisation of many urban areas, potentially transforming derelict sites into thriving communities. This could also help reduce the pressure on green belt areas, which are often seen as vital green lungs in and around urban centres.

Impact on House Prices and the Rental Market

One of the most immediate concerns for current homeowners and prospective buyers is how Labour’s housing policies might impact house prices. Increasing the supply of homes, particularly affordable ones, could help to stabilise or even reduce house prices in some areas, particularly those where demand has outstripped supply for years. However, this impact will likely vary by region. In high-demand areas, particularly in the South East, prices may see only modest changes unless the supply significantly outpaces demand.

For the rental market, Labour’s plans could bring substantial changes. Starmer’s government has proposed extending tenants’ rights and potentially introducing rent controls in areas where rents have spiralled. While this could offer much-needed relief for renters, particularly in cities like London, it could also have the unintended consequence of discouraging landlords from entering or remaining in the market, potentially leading to a reduction in the availability of rental properties.

Challenges Ahead: Infrastructure and Planning

Delivering 1.5 million new homes is a monumental task that will require significant investment in infrastructure, including transport, schools, and healthcare facilities. Labour has acknowledged this and promised to coordinate housing developments with improvements in local infrastructure. However, the success of this approach will depend on effective collaboration between central government, local authorities, and private developers, something that has historically been challenging.

Planning reform is another critical area that Labour will need to address. The current planning system has often been criticised as slow and cumbersome, hindering the rapid development of new housing. Labour has suggested reforms to streamline the planning process, making it easier and quicker to get new developments off the ground. This could be crucial in meeting their ambitious housing targets.

A Bold Vision with Potentially Far-Reaching Impacts

The Labour Government’s housing policies represent a bold attempt to tackle one of the UK’s most pressing issues. If successfully implemented, these policies could lead to a more balanced housing market, with increased availability of affordable homes and a stabilisation of house prices. However, the road ahead is fraught with challenges, particularly in terms of planning and infrastructure development.

As with any major policy shift, the full impact of Labour’s housing agenda will take time to become clear. However, one thing is certain: Keir Starmer’s government has made housing a priority, and the decisions made in the coming years will have long-lasting effects on the UK housing market and the millions of people who depend on it.