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As the UK gears up for the 2024 General Election, housing has emerged as a focal point in the campaigns of the major political parties. Both Labour and the Conservatives have unveiled significant housing policies aimed at addressing the country’s ongoing housing crisis. Here, we break down the key aspects of Labour’s “Freedom to Buy” scheme and the Conservative’s “Family Home Tax Guarantee,” weighing the pros and cons of each proposal.
Labour’s “Freedom to Buy” Scheme
Labour’s new housing initiative, the “Freedom to Buy” scheme, promises to support over 80,000 young people in buying their first homes within the next five years. This mortgage guarantee scheme is designed to help first-time buyers secure a mortgage without a large deposit. Unlike the current Tory mortgage guarantee initiative, which is set to expire in June 2025, Labour’s scheme would be permanent.
Key Features:
- Mortgage Guarantee: Compensates lenders for a portion of net losses in case of repossession, covering 95% of losses down to 80% of the property’s purchase value.
- Permanent Scheme: Aims to provide long-term support to first-time buyers.
- Planning Reform: Pledges to build 1.5 million homes and give local residents priority on new developments.
- Tax on Foreign Buyers: Introduces higher taxes for foreign property purchasers to curb investment-driven housing price inflation.
Pros:
- Increased Accessibility: Helps young people enter the housing market without needing a large deposit.
- Stability: A permanent scheme offers long-term support compared to temporary measures.
- Local Prioritisation: Ensures local residents have better access to new housing developments.
Cons:
- Regional Limitations: May be less effective in high-value areas like southern England where affordability is a larger issue.
- Market Impact: Potentially drives up demand, which could increase property prices if supply doesn’t keep pace.
Conservative’s “Family Home Tax Guarantee”
The Conservatives have countered with the “Family Home Tax Guarantee,” announced by Chancellor Jeremy Hunt. This policy promises to freeze stamp duty, capital gains tax, and council tax bands, aiming to provide financial stability and certainty for homeowners.
Key Features:
- Stamp Duty Freeze: Ensures no increase in stamp duty, potentially lowering the cost of moving homes.
- Capital Gains Tax Freeze: Provides certainty for property investors and homeowners looking to sell.
- Council Tax Bands Freeze: Keeps council tax bands stable, preventing increases in local property taxes.
Pros:
- Financial Stability: Helps homeowners and buyers plan their finances with greater certainty.
- Encourages Transactions: Freezing stamp duty could stimulate the property market by making buying and selling more attractive.
- Investor Confidence: Freezing capital gains tax may encourage investment in the housing market.
Cons:
- Revenue Impact: Potentially reduces government revenue from property transactions.
- Short-Term Focus: Unlike Labour’s permanent scheme, these measures may only provide short-term relief.
Market Reactions and Expert Insights
Richard Donnell, Executive Director at Zoopla, welcomed Labour’s plan, highlighting the need for support in securing mortgages with small deposits. However, he pointed out the regional disparities in housing markets, noting that high-value areas like southern England might still face significant affordability challenges despite the scheme’s benefits.
Overall, the inclusion of housing in the election campaigns is a positive development. It brings much-needed attention to one of the UK’s most pressing issues. Both parties offer distinct approaches, reflecting their broader economic philosophies. Labour focuses on direct support for buyers and long-term reforms, while the Conservatives emphasise tax stability and financial incentives.
As the election approaches, voters will weigh these proposals’ potential impacts on their financial futures and the broader housing market. Regardless of the outcome, the emphasis on housing in these campaigns underscores its critical importance to the nation’s wellbeing.