At the last general election in 2017, the Labour Party were written off by the political commentariat as having no hope of winning at the polls. Their manifesto was radical, with proposals such as the cancelling of tuition fee debt, nationalising of rail companies and increasing taxes on the rich representing a fundamental break with what was then considered the centre ground of British politics. Although the party’s pledges were scrutinised, few considered them likely to be implemented.
A weary electorate now faces its fourth national poll in five years, with all suggestions being that Labour’s 2019 manifesto will be even more transformative and with a greater emphasis on delivering ‘for the many, not the few’.
Proposals on housing policy are likely to reheat a number of pledges made two years ago. Labour have been consistently critical of the Conservative’s lack of action in fixing the broken housing market, with housebuilding at its lowest point since the 1920s and more than 200,000 fewer homeowners since the Tories came into office in 2010. The round number of one million new homes, brought about by Labour’s new Department for Housing, would surely still be the top priority of a National Transformation Fund established by a Labour government.
Despite being bold, these promises appear bourgeois in contrast to the direction the Shadow Chancellor John McDonnell is now taking the party. In his speech to Labour Conference last week, the Shadow Chancellor announced policies for a four day working week within a decade, ending in-work poverty, collective bargaining for workers and capping rent rises.
The final proposal bans landlords from increasing rent at an above-inflation rate, and forms part of the report ‘Land for the Many’ that also commits to open-ended tenancies. Despite this, it is the omission of a previously floated policy that was a truly notable take away from McDonnell’s speech, given that it could fundamentally transform British society.
“Change is coming, simple as that” McDonnell declared in a recent interview with the Financial Times, alluding to Labour’s newest policy on housing. Without proving much detail, the Shadow Chancellor outlined plans to empower tenants in the private rented sector with the right to buy their homes at a discounted price set by central government.
The idea was first touted by Jeremy Corbyn during his successful leadership election in 2015, but never pursued as a Labour policy. With all indications being we are heading for a general election before the year is out, Labour have seemingly been testing the water for what would be a radical departure from successive government’s policy on housing.
Although this policy will find popularity among today’s renters, the long term consequences could reflect the legacy of Margaret Thatcher’s introduction of the ‘right to buy’ for council tenants in the 1980s. Vast swathes of council housing stock has been lost in the mass selloff, limiting affordable accommodation that has not been replaced.
Labour’s version could well reflect this model, though how the shortfall in price in the purchase of property would be made up is not yet clear. Times Money has suggested that the landlords could lose £50bn, or £18,400 each if the policy was enacted, with the policy set to be paid for by reducing the tax breaks landlord’s currently enjoy.
Labour’s new policy has been received criticism from industry actors invested in the current market, who suggest the shift in government direction would cripple the nascent build-to-rent market. Without reactive measures from an incoming Labour government, capital investment in BTR would surely dry up. In turn, this would have implications beyond the market for the likes of investment and pension funds, for which the PRS had previously been a steady income stream with the potential to keep flowing – today worth around £35bn, estimated to grow to around £75bn by 2025.
In anticipation of Labour’s right-to-buy policy becoming law, it has been suggested that there would be a large-scale sell off of property in the PRS, which could crash the property market. A reduction in rental stock would cause rents to rise, hitting tenants without the savings to purchase their property whilst those with the cash to buy would benefit – essentially going against the essence of the policy to help those lacking financial means to own a property in an inflated market.
Labour is approaching the housing crisis from outside the current narrative on solutions. As we have seen with the ongoing Brexit saga, change hurts. A right-to-buy policy for the private rented sector would represent one of the most radical proposals by any party since the establishment of the National Health Service.
A right-to-buy for private tenants would not only be a flagship housing policy for Labour, but also a defining manifesto pledge. The absence of any mention in McDonnell’s speech would suggest that the policy was built on unstable, if not totally absent foundations.
It remains to be seen whether in the face of a hostile response from the market, Labour’s new-found radicalism carries this pledge through to a manifesto. In a nod to this agenda when floating the idea of right-to-buy at the start of September, the Shadow Chancellor bullishly stated; “we all admire what Atlee did… but I think we will go beyond it.”