The new Labour government has had a bumpy few months as it grapples with scrutiny of political donations, personnel issues, and disquiet from its own MPs on its first major public spending decisions. Much more significantly, the Government’s Budget and tax rises have left business leaders raising more than an eyebrow at Labour’s ‘pro-business’ approach.

Fortunately, the Chancellor and Prime Minister have both sought to shift the narrative back towards capital investment. Labour may not always be instinctively pro-business, but they are pro-investment and pro-housebuilding, because that is fundamental to growing the economy before the next election. The Labour Growth Group – a movement of mostly newly elected Labour MPs – is also championing the Government’s planning and investment agenda from the backbenches.

The Government has pushed the planning and housebuilding agenda as a key priority. Yesterday’s announcement on the National Planning Policy Framework (NPPF) unveils mandatory housing targets to build 370,000 homes a year, identifies ‘grey belt’ sites for development and promotes tri-tenure development on large sites, combining market rental, for sale and social housing. Such diversification encourages competitive, attainable rents, pushing schemes to become fully occupied faster, which is attractive to investors. The new Government is also setting out significant planning reform in the medium term with a Planning & Infrastructure Bill.

“Such diversification encourages competitive, attainable rents, pushing schemes to become fully occupied faster, which is attractive to investors”

These are meaningful changes. Streamlining the planning process and making improvements at local level, including the modernisation of planning committees and increasing local authorities’ capacity to deliver an improved service, will reduce the time, risk and ultimately the cost of the planning phase of development.

The UK also desperately needs institutional investment in build-to-rent as an asset class. Its benefits are huge – from increasing supply, to ensuring that more high-quality homes are built quickly, including assisting with build-out rates, as well as the inclusion of new types of affordable housing in its Discount Market Rent (DMR) model. However, for the Government to meet its own objectives, it should continue to embrace the proposals outlined by the British Property Federation which include:

1. The need for reform that clarifies renters’ rights but does not add unnecessary costs or complications that will deter investment or increase rents.  
2. The extension of the PRS Housing Guarantee scheme to offer BTR developers a debt funding option has been welcomed by the sector. However, we need to ensure that this is fit for purpose. The PRS debt guarantee scheme was first introduced with a view to provide much needed liquidity to the market. Today’s problem is not liquidity but rather the cost of financing and how it can continue to support development and SMEs. A workable solution will instil confidence in the market during international headwinds and market cycles, as well as support SME developers to unlock sites.
3. Grant funding to support DMR that doesn’t require a Registered Provider or can reflect liquidity challenges that exist in the current model.
4. Rebates for Stamp Duty Land Tax (SDLT) that reward delivery of housing. Measured on the amount of discount to market rent, speed of delivery and quality of ESG credentials, it could attract more institutional capital in the market, increase housing delivery and increase the quality of housing stock.

One of the most significant reforms, which will ultimately lead to a better rental sector, is the Renters’ Rights Bill. However, a key concern for the BPF is the ability of the UK’s courts to cope with an influx of cases by banning Section 21 no-fault evictions. Without court reform, the new system won’t work, won’t deliver fair access to justice, and tenants are no better served with delays.

The government must make court improvements a priority before the legislation is passed and ensure that the sector is set up for the introduction of the Bill in order that renters don’t see increased costs and that institutional capital doesn’t see the bill as a regulatory barrier to entry to the market.

“Other new levers can avoid aggravating the UK’s housing crisis further and pushing investors further away from where their investment is needed most”

Another major sticking point for the BPF, which continues to slow the development of BTR, is the abolition of multiple dwellings relief, announced by former chancellor Jeremy Hunt. This tax relief, which came to an end in June, reduced the cost of a buyer’s stamp duty if they purchased several properties at the same time and was commonly used by developers who would buy many properties before converting them into purpose-built flats.

However, Hunt’s decision has led to a reduction in the construction of new homes and a decline in both domestic and international investment in UK housing development. Whilst MDR will not be reversed, other new levers can avoid aggravating the UK’s housing crisis further and pushing investors further away from where their investment is needed most.

Whilst Labour’s ambitions are encouraging, their realisation is impossible without institutional investors and the Renters’ Rights Bill requires more work to be effective. The Government has the right strategy and a long-term plan. But they can achieve what they want more quickly if they embrace the delivery partners who know how to get things done and, crucially, how to meet institutional investors’ requirements.

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