What could the new Government mean for portfolio landlords?

By Emma Cox, Managing Director of Real Estate

After 14 years of Conservative governments, Labour’s victory in July’s general election could bring about significant changes not seen in well over a decade, many of which could have an impact on professional landlords and the property market as a whole. Ahead of the Autumn Budget in late October, Labour has already outlined some plans for the housing market, but what could this mean for property landlords and their investments? 

As part of its manifesto, Labour has laid out an ambitious target of building 1.5 million new homes over the next five years. It will be introducing a number of reforms to assist with delivery to meet that target, such as comprehensive planning reforms and streamlined processes to reduce red tape and remove barriers. Should housebuilding ramp up at the scale required to meet these targets, portfolio landlords could be looking at this as a good opportunity. The rental market is still starved of quality stock which is far outweighed by demand, and an influx of new housing may present landlords with a chance to add to their portfolios. 

Labour has overseen the first cut to interest rates since March 2020, which in turn brought reductions to mortgage rates. Some landlords will likely have capitalised on this already, but more may be holding off for further cuts expected later this year. According to our recent research, interest rates rank as the biggest concern for residential landlords. Given the instability, volatility and potential impact of global geopolitical events, many landlords will be keeping a close eye in order to take whatever steps they can to mitigate their businesses against any future headwinds.

For portfolio landlords who own their Buy-to-Let properties personally, rather than through a Limited Company, Labour's potential changes to Capital Gains Tax (CGT) could be a significant concern as higher CGT rates would reduce the profitability of selling investment properties. This could discourage landlords from exiting the market or rebalancing their portfolios, particularly at a time when they may need to adapt to new regulations or tenant demands. With property values typically rising over time, landlords could face substantial tax bills, making it harder to realise gains or reinvest in the sector, potentially reducing the supply of rental homes and impacting the broader housing market.

Energy Performance Certificates (EPCs) are firmly back on the agenda. After plans which required rental properties to be rated C or above by 2030 were scrapped by the previous Prime Minister, Labour is bringing them back to the table. This will be a serious consideration for portfolio landlords, as many will need to make upgrades to their properties to meet the targets. This, of course, will come at a cost. 

According to our recent research, only 29% of landlords currently believe this target is actually achievable - and that’s providing the government offer some financial support. This will be a serious consideration for landlords over the coming months, and will be particularly pertinent for those who own period properties which are harder to upgrade. Landlords will be hoping that the upcoming budget will provide some clarity and, hopefully, incentives to hit EPC targets.

Labour’s Renters’ Rights Bill - their version of the previous Renters’ Reform Bill - is likely to bring in a number of changes which could impact landlords. One significant proposal is the ban on mid-tenancy rent increases. Under the new laws, landlords would only be able to increase rent rates once per year, which must be at the market rate. Given the potential implications of any rising costs or tough economic conditions, landlords may increasingly turn to higher-yield options such as HMOs.

Section 21 evictions will also be banned, meaning landlords will only be able to evict tenants with strong legal reason, such as the tenant being months into arrears. This links into wider planned tenancy reforms, which will remove fixed-term assured tenancies, and will require landlords to give four months’ notice instead of two, should they wish to sell the property. 

Though it is of course positive that the new Government is taking steps to improve conditions and the market for renters, landlords must also be supported too. Some of these changes could have considerable implications for landlords, who are a key part in ensuring the UK has the stock it needs to serve rental demand.

The first change in government in over a decade looks set to shake up the property market. Some reforms will be positive for landlords, while some will have to be taken under consideration. Many will be turning their attention to the upcoming budget in late October, with a close eye on what it could mean for their strategies moving forward. 

However, our experience tells us that seasoned portfolio landlords are well-equipped to weather market turbulence, leveraging their experience to navigate challenges like rising interest rates and regulatory changes. At Shawbrook, we’re seeing strong demand for finance, which signals optimism and a clear focus on growth among portfolio landlords. These investors understand the long-term value of property investment and are seeking opportunities to expand or optimise their portfolios despite short-term uncertainties. This resilience, coupled with a strategic approach to financing, is keeping the momentum in the buy-to-let sector robust.

Methodology
Research conducted by Censuswide on behalf of Shawbrook amongst 501 UK Residential Landlords. Fieldwork took place between 5th and 10th September 2024.