Labour’s controversial proposal to oblige landlords to sell their buy to let properties to tenants who wished to purchase them, unveiled in September, is being toned down.
Two months ago Shadow Chancellor John McDonnell told the Financial Times that under a future Labour government discounts could be made available to tenants - just like the old Thatcher Right To Buy policy for council house renters.
That would allow purchases by private tenants to be made at below market value; the policy, at that time, was proposed to apply to all private tenants and landlords.
However, now McDonnell has told another paper - The Times - that he has re-thought the original proposal and it should apply only to the wealthiest landlords and not those who only own “one or two” rental properties.
“There’s a large number of individuals or families who have bought another property as their asset for the future and we wouldn’t want to endanger that” he told The Times.
However, even this slightly watered down version presents dangers to the private rental sector and the country’s overall stock according to David Alexander, joint managing director of Apropos by DJ Alexander, a lettings platform.
He says: “The Labour Party appears to have shifted its original idea to allow all tenants the right to buy from their landlords to apply only to those with more than two properties. The shift appears to be aimed at placating individuals and families with smaller property investments and focusing on large scale investors.
“However, the policy of buying anyone’s property at a price decided by government rather than market value would instantly destabilise the whole housing market. Equally it is unclear how the government could guarantee that any tenant would be able to gain a mortgage on a property whose value has been decided arbitrarily. What would the real value of any property be if the government can intervene and price it on a whim?”
And he continues: “The target now is institutional and large-scale investors who will undoubtedly leave the marketplace in their droves if their investments can be undermined so easily. The property market requires long term confidence and certainty and these policies would immediately challenge this.
“Equally the policy of offering discounted homes for first-time buyers with mortgage payments kept to no more than a third of average local incomes is also difficult to apply. How much discount would be required in London or Edinburgh compared to Burnley or Middlesbrough? The variations would potentially create a two-tier housing market with enormous discounts (and consequent long-term gains) for those in the most expensive areas.”