At first it might appear that the mortgage industry and the housing sector as a whole should be cross with the Labour government.
After all, when Sir Keir Starmer swept to power in the 2024 general election, the issue of housing was at the centre of his plans with pledges to ramp up housebuilding.
On this measure, it is difficult to argue that the government has succeeded.
The number of new housing starts in London slumped to 2,040 in the first half of this year – 56% lower than a year ago, according to the MHCLG.
That number falls well short of the 88,000 new homes per year the government says are needed in the capital.
“The jobs market is slumping.”
The jobs market is also slumping which will begin to hit arrears soon, too (lenders, be warned).
While I’m not party political, on reflection, I think the sector may well owe Labour’s Front Bench a debt of gratitude.
Since the election, housing – specifically how ministers have managed their own bricks and mortar – has become a toxic issue for the government.
SCANDAL ONE
First, there was the case of Rushanara Ali.
The homelessness minister was forced to resign after it was revealed she had kicked out tenants and then re-listed her house for rent at a higher price – a practice which the Government was in the process of trying to outlaw.
SCANDAL TWO
Next came the downfall of Angela Rayner who was forced to resign for failing to pay enough tax on a flat in Hove.
SCANDAL THREE
Now, the second most important person in the Government, Rachel Reeves, has landed in hot water after it emerged that she did not obtain the necessary licence to rent out her South London home when her family moved to No. 11.
These embarrassing unforced errors from the government might only be cock-ups – but the timing of the latest might be a boon for the sector.
With Reeves preparing for a difficult Budget, she may have been tempted by some drastic changes to property taxes.
SEISMIC SHAKE-UP
With Labour’s manifesto promising to avoid increases in income tax, national insurance and VAT – though that pledge is now in question – and businesses struggling with an increased tax burden, major changes to the taxation of people’s homes could well have been used to make the sums add up.
A seismic shake-up of council tax could have been in the firing line.
Council tax was introduced in 1991 and the property valuations used to determine how much each household in England pays have not been updated since.
That means that when new homes are built, local councils must decide how much it would have been worth 34 years ago and tax it accordingly.
It also means those whose homes have grown in value faster than average enjoy relatively lower bills.
POLITICALLY UNWISE
A full revaluation of council tax would have updated the system and provided a handy way for the state to rake in some extra revenue with rises in how much tax is charged on each of the new bands.
Now it looks as if such a shake-up may be too politically unwise.
We might also have seen an annual property tax.
There have been proposals for sweeping new solutions to property taxation: replacing council tax with an annual levy based on a proportion of the value of each home, for instance.
This would be paid by the owner of the property, not necessarily the person who lives there, and would go to fund both local and national public services.
REVOLUTIONARY OVERHAUL
A tax of about 0.5% a year on most homes has been suggested, with a higher rate of 0.8% on the value of any property above £1m.
This could cover the entire £50 billion council tax take.
However, there is now little sign the Government is currently looking for such a revolutionary overhaul of the way property is taxed.
An even more extreme proposal – a land value tax applied equally to all land whether or not a house has been built on it – is loved by many economists but would open a political can of worms, too.
DEBT OF GRATITUDE
Given Reeves’s blushes over her own housing affairs, all these radical solutions are now a much more difficult political sell.
Indeed, Rayner, Reeves and Rushanara Ali may have saved the sector from a wholesale revolution which would have distracted lenders from their push towards digital transformation and retooling collections teams in preparation for the arrears tsunami that is coming.
And for that we owe the front bench a debt of gratitude.
