Politics, as it seems to do in recent times, has moved at remarkable speed over the last couple of weeks. In what feels like the blink of an eye, Andy Burnham has gone from being Mayor of Greater Manchester to on the verge of becoming both Labour leader and the country’s likely next Prime Minister.
That alone represents a significant political shift, but perhaps more importantly for our sector, housing already appears to be emerging as one of the defining priorities of his prospective Government.
Former Prime Minister, Rishi Sunak, recently made an interesting observation about leadership, suggesting that the day a new Prime Minister walks through the door of Number 10 is likely to be the point at which they are most politically powerful. He also made an important caveat, namely that political capital is only valuable if you have a clear plan for how you intend to use it.
This week’s speech by Burnham perhaps gave us the clearest indication yet of what his new housing plan could look like. His ambitions around regional growth, planning reform, devolving greater powers away from Westminster and delivering the biggest council housebuilding programme since the post-war period suggest housing is likely to sit at the heart of his agenda.
Add to that continued speculation around fundamental reform of property taxation, including the possible replacement of Stamp Duty and Council Tax with an annual property tax, and it looks unlikely he will be satisfied with simply tweaking housing policy around the edges.
Whether every proposal ultimately turns into legislation remains to be seen, but for the first time in many years there appears to be an opportunity to look at the housing market as one connected system rather than a collection of separate challenges.
CHANCE TO CATCH UP
What makes this particularly encouraging is that there is a lot of other groundwork which is already being laid elsewhere.
The FCA’s Mortgage Rule Review consultation is examining how more consumers can access mortgage finance throughout their lives, particularly those who have traditionally found borrowing more difficult. Consumer Duty has fundamentally changed the way advisers support clients, encouraging broader conversations around long-term outcomes rather than simply arranging a mortgage.
Government has already begun work on the various ways in which it can support the improvement of the homebuying and selling process,.
Viewed individually, these are all positive developments. Viewed together, they begin to resemble something much more significant, namely a coordinated effort to improve how the housing market functions from beginning to end. The opportunity now is for Government to build upon that momentum and create a housing strategy where regulation, taxation, planning, lending and transactions all pull in the same direction.
HOUSING MOBILITY: THE GUIDING PRINCIPLE
If there is one theme that should underpin every housing policy decision, it is mobility. We want first-time buyers to access the market more easily.
We want growing families to move when they need more space. We want older homeowners to feel able to downsize without facing unnecessary financial barriers. We want housing stock to be used more efficiently, particularly when so many larger family homes remain occupied simply because moving no longer makes financial sense.
That is why the continuing debate around Stamp Duty is so important. For some time I have argued Stamp Duty has become less of a tax on property purchases and increasingly a tax on moving home.
Recent research from Coventry Building Society demonstrates just how distorted the current system has become.
The nil-rate threshold has remained at £125,000 since 2006 despite average house prices in England increasing by 84% over the same period, from around £159,000 to £291,000. As a consequence, the average property now sits £166,000 above the nil-rate threshold compared with just £34,000 when it was introduced.
Perhaps most striking of all, the average Stamp Duty bill has risen from £340 to £4,570 over that period, representing an increase of 1,260%.
Those figures should give every policymaker pause for thought. They also explain why reform has become such an important discussion.
OUTCOMES, NOT HEADLINES
Whether the answer is reforming Stamp Duty, replacing it with an annual property tax or pursuing another solution altogether is ultimately a matter for Government. The important point is any reform should improve housing mobility rather than simply replace one form of taxation with another.
It should encourage downsizing where appropriate, help first-time buyers onto the ladder, improve social mobility, release family homes back into the market and support the wider economic growth that successive Governments have sought to achieve.
If that becomes the guiding principle, then property tax reform has the potential to become one of the most significant housing policy changes in a generation.
MOMENTUM, NOT UNCERTAINTY
There is, however, one important note of caution. Markets, of all kinds, tend not to respond well to uncertainty. If major reforms to Stamp Duty or wider property taxation are genuinely under consideration, then clarity will be every bit as important as ambition.
Buyers and sellers should not be left waiting months, or even years, wondering whether they should proceed today or hold back until a new system eventually arrives.
We saw the impact of such hype and gossip last summer in the pre-Budget period, when the Government appeared to want to throw as many potential policy ideas out into the ether as possible. The impasse it created should be a warning for all those who will be active in this space, politically.
We do not want the potential for future change to encourage the market to sit on its hands, delaying transactions at precisely the moment a Government should be seeking to stimulate activity.
“Political events have moved incredibly quickly.”
Political events have moved incredibly quickly and that momentum now needs to be matched by policymaking.
The foundations for meaningful reform are already being laid across the mortgage and housing sectors.
A new Prime Minister has the opportunity to bring those individual strands together into a coherent long-term strategy that improves access to finance, increases housing mobility and supports economic growth.
If housing is genuinely going to be one of Andy Burnham’s defining priorities, then there is every reason to be cautiously optimistic.
Now comes the difficult part. Turning that ambition into action before the opportunity begins to drift away.
