This month, Shadow Chancellor John McDonnell said that a Labour government would give private tenants the right to buy the homes they rent. Landlords who have buy-to-let properties could be compelled to sell their properties to their tenants at a ‘reasonable’ price.
This has drawn much attention from landlords, as the country seems only months away from a general election. But what did McDonnell actually say and will it actually happen?
What has been promised so far?
The policy idea was first brought up by Labour leader Jeremy Corbyn in 2015. It was brought back to the fore this month when McDonnell discussed it; first with the Financial Times and then again on the Andrew Marr show.
“We’re exploring the idea of a Right to Buy for private tenants which is there available to council tenants and others,” McDonnell said. “The discussion would be about what would be a fair price.
“If you remember in the past, there have been fair rent assessments in this country, so some people have put forward the idea that you could have a fair price assessment, but that’s part of the consultation that we’ll be having.”
Would landlords be forced to sell at a discount?
This is the thing landlords want to know most of all. At first, in the FT interview, McDonnnell implied that a Labour government would set the rules of the sale.
“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 that complicated.”
But then on Andrew Marr, the Shadow Chancellor appeared to row back, saying:
“I wouldn’t expect anyone to lose out, of course not. People would be protected. If people have invested in that way, you’d want them protected. But this is giving people who have rented over a period of years the opportunity to purchase if they could, because it gives their families stability.”
It’s impossible to predict politics and policy. But the Labour Party do seem to have been moving away from McDonnell’s first outline of the policy, which left readers to make up their own minds of what a ‘reasonable’ price is and what a ‘fair prices assessment’ would involve.
OpenRent understands from conversations with Labour policymakers that there is some discussion within the party on whether a strong right to buy for tenants is the right policy at all.
In any case, the idea of expanding the right to buy into the private sector has been around for a while, but has never been formally adopted as Labour policy. We think landlords should pay more attention to this if it ends up in the Labour manifesto and not worry too much until then.
The Labour Party would need to win a large majority at the next election in order to pass these kind of powers to tenants. Giving compulsory purchase-style powers to tenants to buy their landlord’s property would be a dramatic change in how the UK conceives of property rights.
Giving tenants the power to expropriate landlords’ property would be controversial if actually attempted. Housing is the UK’s biggest use of land measured in terms of total value. A huge amount of bank lending relies on housing as collateral. Changing the rules on property rights really would change the background assumptions that have underpinned the private rented sector for decades.
But given the obstacles we mention above, and the fact that it would probably take years to finalise and implement a policy in practice, we think there’s no need for landlords to be concerned just yet.
If nothing else, this month is evidence that the private rented sector remains in the spotlight. It feels like big changes are on the horizon. As always, OpenRent will keep all our services and guidance up to date, making it easy to stay compliant and be a great landlord.