The Labour Party’s proposed ‘right to buy’ policy would have a devasting impact on the private rented sector and lead to a surge in homelessness, according to a major property management firm.
Apropos by DJ Alexander fears that Labour’s proposed scheme, under plans unveiled by the shadow chancellor John McDonnell, could drive many landlords out of the market.
In an interview with the Financial Times, McDonnell stated: “You’d want to establish what is a reasonable price, you can establish that and then that becomes the right to buy.
“You (the government) set the criteria. I don’t think it’s complicated.”
McDonnell said the plan would be a way of redressing problems such as landlords refusing to invest in their properties while making a “fast buck” at the cost of their tenants and the community.
“We’ve got a large number of landlords who are not maintaining these properties and are causing overcrowding and [other] problems,” he added.
Apropos by DJ Alexander believes that Labour’s suggestion that private landlords should be selling their properties to their tenants at a below market rate arbitrarily set by politicians would have an adverse impact on the housing market.
David Alexander, joint managing director of Apropos by DJ Alexander, commented: “This is effectively a cash grab from the PRS. The state valuing private property and effectively compulsorily purchasing it would cause the PRS market to collapse and have an enormously negative impact on the housing market as a whole as individuals and investors would lose faith in the viability of property.”
“Lenders would be unlikely to provide loans to fund the purchase of these properties as values would be in freefall. Why would anyone invest in property either as a landlord or as an individual if the value of the sale price could be anything the government wished to pay and, in the case of individual homeowners, if any gains above £125,000 are to be taxed at the highest rate of income tax.”
With the UK population forecast to increase by 360,000 a year for the next decade there is already a shortage of homes and destroying the PRS because of “ill-considered ideology” would only increase the numbers of those without a home, according to Alexander.
He added: “The PRS already provides 4.5 million households in the UK accounting for 20% of the total housing market The Labour party would need to commit to building millions of social housing homes in the first couple of years to replace this market and keep up with the increasing demand.
“Mr McDonnell also said that the PRS has a greater problem with overcrowding when, in fact, the social housing sector recorded its highest ever figure of 7.8% of all stock experienced overcrowding in 2017-18.”
Alexander continued: “This proposal hits at one of the fundamental tenets of society in the UK that people want to own property and be sure that the value of their investment and hard work is not going to undermine at the whim of government policy.
“This right to buy scheme would permanently undermine the confidence of individuals and investors in property and cause serious and substantial financial losses for millions of homeowners across the UK.”