The latest announcement from Labour is that first-time buyers will be given a ‘holiday’ on stamp duty for homes purchased under £300,000. With the average house price in London standing at over £460,000 it is clear this policy will only be applicable outside of the capital.
This ‘holiday’ will only last for the first 3 years of a Labour government and the party believes it will cost £225 million. However, the Conservatives have estimated it will be like double that, around £500million. The money for this policy would be funded by a cut in tax relief for landlords who fail to maintain properties, increased taxes for foreign property investors and a clampdown on landlords who avoid tax. However, clamping down on landlords who avoid tax also costs money, as does investigating those landlords who fail to maintain properties and cutting their tax relief. We’ve already written why there should simply be a Robin Hood tax for renters here.
As we wrote before, these policies to cut stamp duty do nothing for affordability. They merely stimulate demand and drive house prices even further out of reach of ordinary first-time buyers. Limiting this policy to the first 3 years of Government is a gimmick that will only further drive up prices as people scramble to buy before the ‘holiday’ is over. The money that would have gone to the Treasury in stamp duty, and could have been invested in housing building, will just go straight into the pockets of the person selling the house through increased house prices. Instead of stimulating demand for housing with these giveaways, the money from extra tax revenues on landlords should be spent on building more affordable homes. The 1 million homes that Labour has now promised to build over the next Parliament if elected still falls short of the 1.2 million homes that their own housing review stated are needed to keep up with increased demand (nor does it address the backlog!).
Labour have also proposed to give first-time buyers that have lived in an area for more than three years first refusal on up to half of homes built there, while ensuring that new properties are advertised locally. It will allow two months for local residents to register their interest in new build properties, thus striking what they believe is a ‘fair balance’ between helping people buy their first home and not damaging the mobility of the market. There is a serious lack of detail on this but it seems unworkable. Unless this policy only applies to homes that are built with Government grant and are already restricted for housing products such as shared ownership, it is not clear how the Government will force property developers to accept the offer from local first-time buyers over ‘investors from overseas’. There are issues around its legality – who will qualify as a first-time buyer that has lived locally for 3 years? Definitions of who qualifies as a FTB are often unclear and can exclude couples where one has owned a home at some point, years ago (even if inherited or repossessed). Will the ‘local’ definition be borough-specific? Say you moved out of Manchester just over the boundary to Salford for a couple of months, will you be excluded?
These proposals are ill-thought out; instead of stimulating demand, Labour needs to address the shortage of affordable homes. More importantly, Labour still needs to properly regulate the private rented sector for those who are trapped renting, rather than announce policies that are full of loopholes.