Well this will be interesting! Here we have a new man in charge of housing in London, but will his Labour orientated local policies end up clashing or matching Conservative housing policies?
The answer to this very much depends on who you are, so I’ve looked at the Labour and Conservative policies and how they will impact on people individually.
For more on Sadiq Khan’s housing policies, visit ‘Homes for London’ and you can sign up for updates if this is important to you.
Biggest winners and losers of London’s Mayor elections
Mixing different policies isn’t likely to work for everyone. For example landlords may end up with a double whammy of Conservative tax rises and Labour rent restrictions on income. Developers may be being asked to do more work, but at a cost that they can’t make money from!
International investors in London’s UK property market
Already considered the ‘bad boys’ of the market, these buyers are critiqued for:-
Buying off plan
Beating London buyers to properties
Leaving them empty if they don’t rent them out and taking the capital growth
So what will happen now? Well according to Saddiq Khan’s election promises, he will:-
Putting Londoners first
Sadiq will set a target for 50 per cent of all new homes in London to be genuinely affordable, and use mayoral powers and land to stop 'buy-to-leave' and to give 'first dibs' to first-time buyers and local tenants. He will end the scandal of thousands of homes in new developments being sold off-plan to overseas investors each year.
Well lets take a look if this will work. Have a look at Battersea:-
Nothing happened on the site for decades
Now it’s being built out, most of the properties will be sold for in excess of £1mn
‘That’s outrageous’ many will cry as even if these homes have to be sold to Londoners – how many ‘ordinary’ Londoners can afford this? And with all the attempts to build out the area before, they all failed.
So we now have a site which is being built out and it’s being sold to millionaires, surely if it was possible to have built the site out beforehand and make the properties viable for ordinary Londoners, the government and planners would have found a way to do so.
But no-one did, so the choice for the City was ‘do nothing’ and leave a massive derelict site or build it out with foreign money…….if it was possible to do it any other way, then it’s the powers that be that should be being blamed, not the foreigners who’s investment have made the current build possible.
Read - First Time Buyer Quick Guide
Anyone trying to build in London has two massive issues. Firstly the cost of land is at a premium and is difficult to secure and secondly because it’s also a very costly place to build – getting materials in and out of the city isn’t an easy task!
So if the housing policies make it impossible for developers to make money, then building in the city will grind to a halt and everyone will lose.
Buy to let investors
These guys are going to end up with a double whammy and it’s one of the areas where differing housing policies could clash to cause the unintended consequence of hurting the very people they were created to help – in this case the tenants as well as investors.
Currently landlords and property investors are being hit with a raft of additional expenses, including:-
Extra 3% stamp duty on second homes
Loss of wear and tear 10% allowance
Reduction in mortgage interest relief
Read - Financing a Buy to Let
In addition to this triple whammy on landlord’s profits, Sadiq Khan and Labour’s policy on the rental sector will be:-
Action on Landlords
Sadiq will work with boroughs to set up landlord licensing schemes – naming and shaming bad landlords and promoting good ones so you know what you’re getting yourself into.
This can only be a good thing and much more promotion of good landlords is required – for no other reason than to show tenants good landlords do exist and are worth waiting for, rather than just believe they are ‘all bad’ and accept bad landlording and especially properties in conditions which are ‘below par’.
Action for private renters
Sadiq will establish a London-wide not-for-profit lettings agency to promote longer-term, stable tenancies for responsible tenants and good landlords across London.
This is an interesting idea – and it’s been tried in other councils too, such as Swansea although no-one I can find is claiming it’s been a great success.
However, is it right to use taxpayers money to fund not for profit letting agents at a time when most letting agents are struggling to get enough stock to support their own offices. And you’ve got to look at why landlords would use them. The only reason a landlord would be happy to use a not for profit agency is if it was cheaper. But the problem with ‘cheaper’ is that normally leads to poor service – running a lettings business legally costs a lot of money!
Read - How to Rent a Property
Also as a landlord, would you want to give your property to a Labour run lettings service?
The real danger is these agencies attract landlords who cut corners and want to save as much money as possible when renting, then this is going to cause a massive issue for the agency as they will have to spend an awful lot of time and effort getting the landlord to spend money – but the reason they are using the agency in the first place is because they don’t like spending money!
So imagine the scenario when a not for profit, Labour run letting agent accidentally (and they will) ends up renting properties in poor condition that end up not being let legally.
The theory sounds great, but sadly any letting agent, not for profit or otherwise, is going to end up in a situation where they live and die financially by the stock they get and I don’t know that many landlords out there will be keen to work with them.
In theory with ‘not for profit’ agents and with the introduction of a ‘true’ London living rent, tenants should win outright from Labour’s policies – more so than they have so far from Conservative policies which are increasingly geared towards home ownership. But the combination of policies may harm the level of stock in London, leaving tenants struggling to find properties to let in the first place – and that’s when rents because an ‘auction’ to the highest bidder, when they come up for re-let.
London Living Rent
Sadiq will create a new form of affordable housing, with rent based on a third of average local income, not market rates. A new form of tenure, more affordable, and giving you the chance to save for a deposit.
This is a good thing to aim for and I’m all for it, but the question that has to be asked is how is Sadiq Khan going to make this level of ‘affordability’ on rents stack up?
Currently housing associations can’t build and make money at 80% of market rent, their properties are typically coming in at rents of £1,000 or more how on earth is he going to be able to fund a tenure that meets a ‘third’ of people’s income via private developers?
According to some estimates to achieve his aim he will need to provide properties with a monthly rent of just over £900 a month.
Most landlords are already having to put down a 50% plus deposit on a property to make it cash flow positive every month. That means that London rents are difficult to fund at anything less than £1,200 a month. And with the Conservative increases in taxation, this average is likely to have to increase, making Sadiq’s dream of making more affordable rented properties available, pretty impossible!
London buyers and homeowners
As far as Conservative versus Labour policies for homeowners in London, to be fair they both have very similar policies – it’s just that so far the Conservatives while in power have struggled to deliver against the 50,000 a year new homes that are required for London’s rapidly growing population.
Here are Sadiq and the Labour party’s policies to try and tackle the housing problems:-
More investment in housing
The Tory Mayor has failed to invest £400 million of his affordable homes budget. Sadiq will use this and support housing associations in their plans to ensure a minimum of 80,000 new homes a year.
Land for homes
Sadiq will bring forward more land owned by public bodies like TfL and use the Mayor's new homes team to develop that land. This will enable more homes to be built where they are needed, rather than where developers think they can make the most money.
If Sadiq can pull this off, it would be fantastic and we need genuine positive thinking and passion to get London out of the worst of UK’s housing crises.
However, I know that huge amounts of effort have been made by the existing administration and especially the hard working GLA housing teams to deliver more affordable homes. Lately they have built far more than they did under Ken Livingstone (see the analysis by Barton Willmore).
If they couldn’t deliver against existing targets, it is going to be tough to raise them from 50,000 to 80,000.
Having said that, if you don’t aim high, you won’t achieve, so it may well be that the new task force – if it has people who are determined to deliver whatever the many barriers are put in their way, then it could be possible and this will be down to his final housing policy:-
Homes for Londoners
Sadiq will set up a new team at City Hall dedicated to fast-tracking the building of genuinely affordable homes to rent and buy.
Whatever happens, hopefully the housing situation will improve dramatically in London as for the first time it really is on the political agenda, so let us keep our fingers crossed and wish the new London Mayor luck and hope he can deliver on his promises.