Theresa May’s legacy - how has housing fared under her government?

Theresa May arrived in Downing Street some three years ago - but her premiership has not been a smooth ride.

As she prepares to leave office this month, we look back at her time at Number 10, and in particular the impact her government has had on the UK housing market.

The former Home Secretary arrived in Downing Street on July 13, 2016 with a difficult task ahead, not just with the challenge of Brexit, but among others things a ‘personal’ pledge to ‘fix’ Britain’s broken housing market.

Political and economic uncertainty has contributed to what has also been a rather difficult three-year period for the housing market, underpinned by a lack of stock, leaving many agents struggling to find homes to sell, while property prices have stayed broadly static - although there has been a divergence between values in different parts of the UK.

There have been pockets of resilience, particularly in northern regions, the Midlands, Wales and Scotland, while the number of first-time buyers continues to grow, but Brexit mayhem is having an adverse impact on the housing market overall, particularly in London and the south, as it does on most sectors.

Higher stamp duty costs have negatively affected the upper end of the market, most notably in London, the phasing out of mortgage interest relief has made buy-to-let a less attractive proposition for landlords, while the introduction of the Tenant Fees Bill looks set to hit some agents hard.

“Simply, Theresa May has not fullfilled the pledge she made,” said Marc Schneiderman, director, Arlington Residential. “The single biggest factor affecting the property market is the level of Stamp Duty Land Tax buyers must pay.”

Schneiderman firmly believes that May’s government has done “extensive damage to the wellbeing of the property market” with the introduction of “successive tax hikes” on housing.

He added: “When the  number of transactions is low this has an  effect on a whole myriad of people, including businesses and the entire building trade from electricians and builders to large constructions firms as well as surveyors, architects, mortgage brokers, designers and alike.”

Transactions

Stretched affordability and uncertainty over the Brexit negotiations has hit the housing market over the past 12 months, resulting in a slowdown in the number of property sales.

The provisional seasonally adjusted UK residential property transaction count for May 2019 was 89,810, according to the latest data from HMRC.

The figures reveal that the provisional seasonally adjusted count of residential property transactions decreased by 6.4% between April 2019 and May 2019, and is 11.3% lower than May 2018.

Jeremy Leaf, principal of Jeremy Leaf & Co., said: “There is an importance to the wider economy of increasing the number of transactions.”

“We understand the political expediency of playing to the tenant vote; that is because not enough has been done to maintain supply for rented accommodation which has pushed up rents and made owning a home an even more remote possibility for so many.”

Year-on-year, transactions have now returned to levels similar to May 2016, which is just before May took over as PM. But that is simply not sufficient, according to Terry Mason of Housing Hand.

He commented: “Theresa May has not only failed to fix the broken housing market but has dealt it repeated blows during her time as Prime Minister. And it’s easy to see why.”

“Despite her rhetoric around encouraging home ownership, the government is unlikely to turn down the near 50% tax that it receives from rents in the UK.”

“Tax changes that have pushed the majority of landlords into paying 40% tax on their rental income – plus VAT – means that the government is profiting hugely from Generation Rent.”

Buy-to-let

Tax, legislative and regulatory changes introduced since 2016 have deterred many buy-to-let investors, and largely explains why the number of landlords has now fallen by an estimated 120,000 during Theresa May’s time in Number 10.

Director of Benham and Reeves, Marc von Grundherr, commented: “The government has really gone to war with buy-to-let investors of late and a consistent string of detrimental changes to the sector through stamp duty increases, tax relief changes and a ban on tenant fees has had the desired impact of denting industry sentiment and dampening appetite for future investment due to a reduction in profitability.”

It is now three years since the then Conservative Chancellor George Osborne introduced a series of measures aimed, principally, at cooling the overheating London housing market.

Yet, despite research showing that the changes are having an adverse impact on tenants, as many landlords are left with little choice but to pass increased costs on or exit the market,

May has failed to offer a change of fiscal direction and take the opportunity to reverse the punitive tax policies introduced by Osborne.

“Since George Osborne’s second home stamp duty reforms were introduced in 2016, Theresa May’s government has only continued to introduce legislation that has consequently squeezed landlords and investors,” said Lisa Simon, head of residential division, Carter Jonas.

First-time buyers

While demand for new buy-to-let purchases continues to be damped by recent tax and regulatory changes, first-time buyer activity has increased significantly.

The number of first-time buyers in the UK recently reached its highest level in 12 years, underlining the impact of government incentives such as Help to Buy on an otherwise sluggish property market.

Simon added: “The government’s efforts to inject positive change in the housing market has been predominantly spearheaded by initiatives to enable first-time buyers.”

“The introduction of Right to Buy in 2016, stamp duty land tax relief in 2017 and the extension of Help to Buy in 2018 all demonstrate the level of commitment that the government has made in helping people take their first step onto the property ladder.”

Aside from increased uptake of the government’s Help to Buy scheme, competitive mortgage market and historically low mortgage rates have also enabled more people to get on the property ladder.

According to UK Finance, mortgage providers advanced £62bn to first-time buyers last year, enabling 370,000 newcomer mortgages to complete - the highest number since 2006.

Barry Tansey, CEO of The Mizen Group Plc, said: “Despite some recent negative press in relation to the Help to Buy scheme I do genuinely believe that this has been a good thing – it has helped tens of thousands to get a foot on the housing ladder where it just wouldn’t have been possible otherwise – not everyone has a ‘Bank of Mum & Dad’!”

“The stamp duty relief for first-time buyers was a very progressive policy and welcomed by those most in need of the support.”

Housebuilding

When May became Prime Minister she quickly identified housing as being central to creating a fairer society.

“Unless we deal with the housing deficit, we will see house prices keep on rising,” she said.

“Young people will find it even harder to afford their own home. The divide between those who inherit wealth and those who don’t will become more pronounced.”

May promised to make it a personal mission to oversee an increase in housebuilding to help curb house price growth, which, incidentally, has increased by an average of £11,547, from £204,968 to £216,515, since she came into power three years ago, according to data from Nationwide Building Society.

Her government announced an ambitious plan to build 300,000 new homes a year by the middle of the next decade.

But land availability, planning system and skills shortages have so far scuppered May’s plan, and without sweeping changes to the way the sector operates, the government is unlikely to meet its target.

Tansey said: “In fairness, I do think she has tried to introduce several strategic initiatives to improve this broken market. The harsh reality however is that there is a continued disconnect in relation to the planning system between central government policy measures, designed to stimulate the growth in housing supply and local authority policy in order to provide more and more obstacles in bringing new housing led schemes forward.”

Research by consultancy McBains reported that fewer than half of the 400-plus housebuilders it polled believed ministers’ target for housebuilding by the mid-2020s can be met.

Bruce Burkitt, founder and managing director at Property Experts, commented: “The government has fallen way short in delivering its yearly target of 300,000 new homes and with Teresa May now calling for new design standards that would look to increase the minimum size new homes this will undoubtedly increase the shortfall.

“To hit new housing targets, the next PM will need to overhaul the current planning system to encourage the creation of new homes and reduce the eight weeks that it currently takes to determine an application.”

May’s government is not the first to promise a building spree, and it certainly will not be the last. But will the next PM join the long list of missed housing targets?

Russell Quirk at PropergandaPR said: “I’m afraid that I am pretty down on politicians and their housebuilding records.”

“Successive PM’s, Chancellors and Housing Ministers have enthusiastically pledged all sorts of money, action and outcomes however we have not seen anything in the way of actual delivery above the norm since the 1950’s.”

Quirk believes that “mealy mouthed words and headlines” are simply not enough. He wants to see politicians start to put “substance to their press statements” as people are now realising that words and actions are not the same thing.

He added: “All politicians of all flavours and for decades have therefore failed us in providing adequate housing - above all ensuring the right tenures in the right places.”

“I yearn for a political figurehead that instead formulates a plan that is actually delivered upon and can be judged on outcome rather than just spun announcements.”

Housing Minister

The existing Housing Minister, Kit Malthouse, was appointed in July last year after Dominic Raab, who spent just six months in the role, became Brexit Secretary.

Many property professionals are growing increasingly frustrated with the merry-go-round of housing ministers, with Malthouse, becoming the 16th MP to hold this role in 18 years when he took office.

Raab’s predecessor, Alok Sharma, also held the housing ministerial post for just six months, which is clearly not enough time to fix the broken housing market, especially as the Prime Minister has identified it as a key priority of her government.

If Malthouse is replaced as Minister of State for Housing as part of the new PM’s cabinet reshuffle, there is already a strong candidate for the job as far as Trevor Abrahmsohn, director at Glentree Estates, is concerned.

He commented: “We need a Michel Gove-like character as the Housing Minister to drive a coach and horses through these archaic and Neanderthal processes and, before you know it, the number of new homes will increase.

“It is pitiful to think that in Mrs. Thatcher’s era we built 300,000 homes and today, with much larger housing requirements, we struggle to build two thirds of this.”

“The successive changes of Housing Ministers and the distractions of the Brexit debacle, have in combination, not assisted this vital social requirement and let us hope that the new Tory administration will do a better job.”

Jeremy Hunt and Boris Johnson, the two men competing to become the next Conservative Party leader, have both pledged to resolve the broken housing market by introducing a range of measures to boost activity. Let’s just hope the next PM is true to his word.

Contacts: 

- Arlington Residential
- Jeremy Leaf & Co.
- Housing Hand 
- Benham and Reeves 
- Carter Jonas 
- The Mizen Group Plc 
- Property Experts 
- PropergandaPR 
- Glentree Estates  

*Marc Da Silva is Estate Agent Today and Letting Agent Today Features Editor and Editor of Landlord Today. You can follow him on Twitter @propertyjourno