Boris Johnson as Prime Minister?
As we all now know, Boris Johnson is the new Conservative Party leader and, more importantly than that, the UK’s new prime minister.
Johnson, formerly the Mayor of London and the Foreign Secretary, handsomely beat leadership rival Jeremy Hunt to take over the reins from predecessor Theresa May. He is a famously divisive figure, but what could his time in Downing Street mean for the rental market?
The Brexit effect
Theresa May’s premiership ended up being completely consumed by Brexit, and it was her failure to get her Withdrawal Agreement Bill through Parliament that eventually saw her depart.
Johnson has promised to succeed where May failed by getting a deal through the Commons before the October 31 deadline. Failing that, he has said he’s more than willing to withdraw from the European Union without a deal.
The prospect of no deal is now considerably higher, despite considerable opposition to this course of action from MPs, including many in the Tory Party itself.
As well as the prospect of a no-deal Brexit, there is also the chance of an early general election if no deal is blocked by Parliament and Johnson loses a vote of no confidence.
Until Brexit is sorted one way or another, of course, uncertainty will continue to reign, and that goes for the private rented sector as well. Landlords, already impacted by a sea of new regulation and legislation in recent years, may hold off on further investment until the Brexit situation is clearer.
A no deal Brexit could also have an impact on EU tenants living in the UK. EU nationals, who are particularly prevalent in London and other major cities, are far more likely to rent than own – as such, an end to free movement of people (which would likely be the case in a no-deal scenario) could have an impact on tenant demand, especially in the capital.
There has also been talk of a recession, the pound plunging to lower levels, and serious economic issues if Britain leaves without a deal on Halloween. Former chancellor Philip Hammond claimed during the Conservative leadership race that a no-deal Brexit could cause a £90 billion hit to the economy, while the Office for Budget Responsibility (OBR) has warned that a no-deal exit could plunge Britain into recession, shrink the economy by 2%, push unemployment above 5% and send house prices tumbling.
If the expected repercussions of a no-deal Brexit were to come true, this could affect the ability of tenants to pay their rent, dent the profits of letting agencies and make landlords nervous about investing in the rental sector.
Alternatively, there are some who believe that Brexit uncertainty and the prospect of a no deal have already been factored in, that the market is ready for anything and will cope with things as it did in the aftermath of the referendum result in June 2016. What’s more, in troubled times, people look for safe havens – and, at present, property is one of the most reliable, steady and lucrative asset classes.
What are Johnson’s views on renting?
In the past, the new PM’s proclamations on housing have suggested he favours home ownership over renting. Within the lettings sector itself, he prefers a non-interventionist approach – he voted against the ban on letting agent fees charged to tenants twice, for example, and has previously suggested he is against rent controls.
In 2012, while still London Mayor, he said: “It is clear that top-down regulation, including rent controls, will only serve to deter investors at a time when more, not less, investment is needed.”
His past remarks also suggest an aversion to over-regulation. In June 2014, during Mayor’s Question Time,
he said: “We need to expand the supply of private rented accommodation in London and we need to encourage investors to help us build hundreds of thousands more homes in London, many of them for private rent as well as for affordable rent.”
As Mayor, he introduced a blue badge ‘kitemark’ for landlords and rental homes, and the London Rental Standard – but neither delivered very much and were in part voluntary.
During his leadership campaign, he focused plenty on stamp duty – suggesting he could abolish stamp duty for all first-time time buyers and even switch the burden to the seller. But he hasn’t made any similar stamp duty pledges for the buy-to-let market as of yet.