With Labour gaining a majority in the House of Commons following the general election on 4th July, what early changes could we expect in the property market under the Labour government?
In this article, we look at some of these changes and potential impacts.
Property stock – signs of change
The market has already priced in a Labour government, suggesting that the London commercial market has bottomed out in terms of values. Prime Hammersmith offices are selling for £300 per sq ft, while the Home Counties are seeing values from £75 to £150 per sq ft for 20-year-old stock.
Most of this stock is being bought for repurposing, primarily through Permitted Development (PD) from commercial to residential. The PD market is seeing a flurry of deals, but when Labour takes power, we can expect seismic changes.
Labour is likely to change the definition and reposition the industry by introducing a social housing tariff that could be as high as 50%, mirroring Labour boroughs’ requirements for subject-to-planning residential schemes. This will immediately cause a mass recalculation of values, making it an unviable exercise. They may also introduce an emergency accommodation requirement for each borough or local authority.
Planning – removing the red tape
Labour’s pledge is to ‘get Britain building again’. The intention is to reduce the amount of red tape within the planning system, speeding it up and strengthening the presumption in favour of development. This will be achieved through amendments to the National Planning Policy Framework, along with the devolution of powers back to regional level.
In particular, there has been talk about reducing the strength of Green Belt policy and allowing development on designated land that does not meet its functional policy requirement, increasing housing numbers to 300,000 per annum over the next 5 years with a particular focus on increasing delivery of affordable housing and first-time homes (50% on ‘grey belt’ land) and provision of a new round of new towns, and strong support for green energy proposals. A drive to strengthen the economy is also outlined, along with an emphasis on mixed-use development including flexible zoning laws.
Labour has also pledged to remove permitted development rights and infrastructure levies. These changes generally seek to simplify the system and collectively could be seen positively towards addressing current issues with the planning system.
Shake up in Business Rates
Labour’s manifesto pledges to replace the business rates system with a fairer one, but still raise the same revenue of £30bn per year.
Labour have stated the new system would “level the playing field between the high street and online giants, better incentivise investment, tackle empty properties and support entrepreneurship”.
Time will tell what this will look like, but for now there are some options they could introduce which would have a positive impact on rate payers, including:
- Scrapping the Duty to Notify regulations due to come into effect in 2026 and reforming the Universal Business Rates (UBR) by reducing this below the current 55% level for larger properties. This requirement for ratepayers to self-assess their properties will add administrative and financial strain, as they will likely need to hire experts to avoid potential penalties for misinformation.
- Reform of the UBR. This has increased significantly over the past decade, and the higher rate multiplier sits at close to 55%. This needs to be reconsidered and rebased to historic levels.
Who it might impact most
The changes Labour proposes will impact many of our clients, for example:
Commercial Property Owners: With the introduction of a social housing tariff, commercial property values may drop, and the viability of Permitted Development schemes could be challenged.
Developers: Increased red tape reduction might initially benefit developers and with Labour’s push for affordable housing might lead to increased funding and support for developers focusing on such projects, providing new avenues for investment, but the removal of Permitted Development rights could hinder simpler redevelopment projects.
Retail and Commercial Business Owners: As detailed above, a new business rates system could positively impact on all businesses rate payers.
Local Authorities: New requirements for emergency accommodation might strain resources but could lead to better housing solutions for vulnerable populations.
Considerations for Commercial Property Owners
Understanding these potential changes can help clients navigate the evolving landscape. Key benefits include:
- Be prepared: Clients will be better prepared to adjust their strategies in response to new policies.
- Be open to new opportunities: Potential opportunities in affordable housing and green energy projects.
- Be aware of risks: Early awareness of regulatory changes can help in mitigating financial and operational risks.
Get advice
Our expertise can support clients in navigating these changes effectively:
- Strategic Planning: Assisting in strategic planning to adapt to new regulations and seize emerging opportunities.
- Regulatory Guidance: Expert support on navigating the planning system and understanding the implications of any changes.
- Market Insights: Providing expert advice on the local market analysis to help clients make informed choices for their business.
Contact Information
For further information, please contact the relevant member of the team, for
Planning and Development: planning@argroup.co.uk
Commercial Property and Investments: gerard.barry@argroup.co.uk
Business Rates: business.rates@argroup.co.uk