Election 2024: What would Labour do?

With Keir Starmer seemingly poised for victory on July 4, has Labour got the answers to the housing question? Will the party deliver the radical changes needed?

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A chance for change

In the 100 years since Labour first won power in 1924, it has lost far more elections than it has won. Three things flow from this.

First, it can’t be said strongly enough that the sort of result forecast by the opinion polls does not happen very often. Keir Starmer would become just the fifth Labour leader in history to win an election and only the fourth to do so with a workable majority.

Second, because Labour loses so often, all the incentives for the party are to play it safe, occupy the centre ground and jettison anything that presents a target for a hostile media.

Third, Conservative-led governments have been in power for two-thirds of the last 100 years, meaning that they set the parameters for policy in areas like housing. Change can only happen if Labour wins decisively and if it makes housing a priority.

The first looks likely, the second is the strategy for winning, but what about the third? This looks like a rare opportunity to change housing for the better. Will Labour take it?

Labour governments and housing

The history of Labour governments and housing is mixed. Ramsay MacDonald’s first Labour administration in 1924 had no majority and only lasted for 10 months but its most significant legacy was legislation that led to the building of 500,000 council homes.

Clement Attlee formed Labour’s first majority government in 1945 after an election in which housing rather than health or social security was arguably the top issue for voters. The party delivered radical change as Aneurin Bevan broke with pre-war thinking and oversaw the construction of 800,000 council houses despite post-war austerity. This in the time he had to spare from founding the NHS. The first wave of new towns was designated but the housing shortage continued to be a key issue long after the party lost power in 1951.

Given the Butskellite consensus, and cross-party competition on housebuilding in the 50s and 60s, Harold Wilson only needed to tweak the tiller rather than change course when he won in 1964. Local authorities built almost a million of the 2.3 million homes completed in England in the six years to 1970. The one exception to that consensus was the private rented sector, which Labour and the Tories competed to regulate and deregulate.

The situation that confronted Tony Blair in 1997 was very different. Margaret Thatcher had broken with that post-war consensus across government. In housing, council housing was neutered by the Right to Buy and strict controls on local authority borrowing, housing associations were boosted by private finance and stock transfer, the private rented sector was transformed by the end of fair rents and security of tenure and mortgage finance was liberalised by the Big Bang and building society demutualisation.

New Labour could boast of an overall record that included the Decent Homes Programme, vital investment in existing social homes funded by the release of capital receipts, and significant progress in reducing homelessness, rough sleeping and social exclusion.

But the party challenged few of the parameters for policy set by the Tories. Labour went out of its way to tell investors there would be no change in regulation of the private rented sector, enthusiastically embraced stock transfer and strongly resisted attempts by the wider party to allow councils to build homes again.

The big departure in wider economic policy - and the major surprise after the 1997 election - was Bank of England independence. Amplified by global economic trends, this helped to usher in the era of cheap money. The credit and house price booms unleashed were generally seen at the time as signs of economic success rather than as the triggers for the affordability crisis that followed

Loose monetary policy was matched (and arguably enabled) by strict fiscal policy. A key part of Labour’s electoral strategy in 1997 was to demonstrate that it could be trusted on the economy, including a pledge to stick to Conservative spending plans in its first two years. Investment in new social housing duly fell by 47 per cent in real terms and did not recover until the end of Blair’s second term. Only under Gordon Brown, in the wake of the global financial crisis, did Labour match the peak of investment seen under the Conservatives in the early 1990s.

Starmer’s grim inheritance

Keir Starmer and Rachel Reeves are following the same playbook on fiscal responsibility as New Labour. But where Tony Blair and Gordon Brown were taking over an improving economy, the economic inheritance this time looks grim. Decisions on the next spending review, housing benefit rates from 2025 and the Affordable Homes Programme beyond 2026 will have to be made quickly with real-terms cuts for unprotected departments and programmes already baked into spending plans draw up by the Conservatives.

The housing inheritance is arguably even bleaker: multiple crises of affordability, access to home ownership, insecurity, building safety and homelessness that will require transformative solutions. Can a Labour government with little money to spend begin to tackle them, let alone set a new direction for policy?

First steps, missions and policies to change Britain

The good news is that shadow ministers from Keir Starmer down appear to get the need for more social housing, a process that took 10 years after 1997. Deputy leader Angela Rayner seems set to lead the housing department, reprising the role of John Prescott under Tony Blair, and Matthew Pennycook looks like a highly capable housing minister in waiting.

There are parallels here with the way that Eric Pickles and Grant Shapps took charge of housing for the Conservatives in 2010. Shapps took office after two and a half years as shadow housing minister and arrived with a policy agenda developed in two Conservative ‘green papers’. That meant he could hit the ground running – even if it was often in the wrong direction. In contrast to the recent churn of ministers, Pennycook would come to office knowing where the problems lie and how to start fixing them.

The promised agenda includes the completion of the leasehold and renter reforms that were watered down or dropped by the Conservatives and planning and land reform to deliver a target of 1.5 million new homes in the five years of the next parliament. Backing that up, work will begin immediately to identify sites for a new generation of new towns and Rayner has pledged ‘the biggest boost to affordable housing in a generation’.

The less good news is the broader policy context. Housing is not one of Labour’s stated priorities in its six first steps for campaigning, its five missions for government or its 10 policies to change Britain. There is no real sense of the party breaking with a politics and a political economy based on home ownership. Perhaps this is too much to expect from  a party pursuing a play-it-safe electoral strategy but, ahead of the manifesto to be launched next week, that is the message so far.

The 10 Labour policies to change Britain launched at the start of the campaign do not include anything on housing - and it gets only a walk-on part in Labour’s six first steps for change launched last month. The one mention is in the first: ‘Deliver economic stability with tough spending rules, so we can grow our economy and keep taxes, inflation and mortgages as low as possible’. The detail says that: ‘Labour will deliver stability with iron discipline, guided by strong fiscal rules, robust economic institutions, and a new “fiscal lock” to ensure we never repeat the mini budget that sent mortgage rates soaring.’

Note the importance of keeping mortgages low but not rents. Home owners have always counted for more than renters in conventional political messaging – and the mortgage hikes triggered by Liz Truss are an irresistible target - but this is badly out of date as there are now more voters who are renters than are buying with a mortgage. The underlying logic that tight control of public spending is needed to permit looser monetary policy is not fundamentally different to that employed by the Conservatives under austerity.

Housing has only a minor role in Labour’s five missions for government too. Mission 1 on the economy puts housing in the context of ‘giving working people the skills and opportunities to get on’ and talks of ‘helping first-time buyers onto the housing ladder and building more affordable homes by reforming planning rules and arcane compulsory purchase rules, with new protections for renters’. Labour is determined to ‘get Britain building again’ via planning reform to deliver transport, clean energy and new industries as well as those 1.5 million new homes. 

Mission 5 on breaking down barriers rightly says that ‘housing and job insecurity are barriers for too many people from disadvantaged backgrounds’ and adds that ‘Labour will turn this tide, delivering the opportunities everyone deserves’. This is about ‘spreading opportunities beyond education’:

‘The high cost of housing in Britain restricts access to career opportunities, as a shortage of housing around successful economic clusters prices out many workers looking to live and work near them. Many people avoid taking the choice to start a career in a sector where, through progression, they may eventually earn higher salaries, because they face years or even decades in expensive and poor-quality housing that leaves them with little left over at the end of the month. Meanwhile, young people with family who already own property near these job opportunities can take career risks, grasp opportunities and set themselves on a path to success.’

That’s a much more promising analysis that also puts housing at the heart of economic growth. The party sees the solutions in the details of its housing offer: supply side reforms on planning, compulsory purchase and development corporations to deliver more homes; more affordable homes; a mortgage guarantee scheme to support first-time buyers; and making renting more secure via a Private Renters Charter.

Labour’s Policy Forum –the consultative process feeding into the election manifesto – drew on work by Gordon Brown’s Commission on the UK’s Future calling for a package of basic rights, including one that ‘every person should be entitled to decent accommodation’. In the draft version of A Future Where Families Come First, it argued that:

‘Labour agrees that housing is a fundamental human right and that homes should be safe, secure and genuinely affordable. That’s why the next Labour government will be the first in a generation to restore social housing to the second largest form of tenure, bringing homes back into the ownership of local councils and communities. ‘

However, this pledge to make social housing the second biggest tenure was dropped from the final version circulated at the last Labour conference, as was an ‘ambition to re-establish the link between genuinely affordable housing and average earnings, bringing affordable rents and the dream of home ownership closer for those locked out today’. The final document pledges to ‘reprioritise government grant by reforming the underperforming Affordable Homes Programme’ as well as support for ‘councils to start building homes where they do not currently have housing stock’.

There is explicit support for ‘the principle that people who have lived in their social home for years should have the opportunity to own it, if they wish’. However, Labour would ‘seek to decrease the number of social homes being rapidly sold off through right to buy without like-for-like new social housing being built to replace them’ by reviewing increased discounts introduced by the coalition in 2012 and strengthening covenants ‘to protect new social homes from being quickly sold off’.

Note that making housing ‘a fundamental human right’ sounds like rhetoric rather than a policy commitment, although the later document includes the ‘aim to ensure housing adequacy in the long-term, exploring ways to meet housing need across government’. Despite the language, this does not look like a pledge to incorporate the UN Right to Adequate Housing into domestic law, something that would allow national and local policies to be challenged in the courts in the same way as policies on net zero can be challenged via the binding commitments in the Climate Change Act

The document includes a target of 70 per cent home ownership,  with ‘first dibs’ for local first-time buyers and a comprehensive mortgage guarantee scheme under which ‘the state will act as guarantor for prospective homeowners who can afford mortgage repayments but struggle to save for a large deposit’.

Significantly, the latter was the subject of the first Labour announcement on housing during the election campaign: a Freedom to Buy scheme to support 80,000 young people into home ownership over the next five years, seemingly by extending the Conservative mortgage guarantee scheme that runs out in 2025.

But to put that in context, increasing home ownership from the current level of 64 per cent in England would mean 1.5 million extra owner-occupier households. Even in a benign economy, even if Labour succeeds in building 1.5 million new homes in five years and even if more of them go to first-time buyers,  that sounds like a stretch without measures to encourage a shift from other tenures.

The draft and final versions of the Policy Forum reports have a lot to say about improving social security and tackling child poverty. However, in line with backtracking by shadow ministers, they say nothing about previous Labour pledges to abolish the two-child limit, the benefit cap and the bedroom tax. You will also look in vain for any commitment to uprate Local Housing Allowance each year in line with rents. These omissions are obviously dictated by the party’s caution on spending commitments but they risk perpetuating a housing support system that is guaranteed to generate poverty and homelessness and impose crippling costs on local authorities.  

Labour’s housing agenda

Even before the manifesto is published next week, we know from public statements by and interviews with shadow ministers that their agenda will include reforms of leasehold, private renting and planning that the Tories either watered down or abandoned.

The end of leasehold for all new homes, not just houses, and stronger steps towards its abolition for existing homes are both on the cards even if Labour has retreated from a pledge to do so in its first 100 days. Legislation finally scrapping Section 21 could be a platform for the introduction of more renter rights. The restoration of planning targets would be a step towards Labour’s target of 1.5 million new homes.

This is a significant programme of reform that would complete the agenda that Michael Gove tried and failed to deliver for the Conservatives. Labour is not as beholden to entrenched property interests as the Tories but it would still face obstacles to progress.

On renter reform, the party has promised ‘to abolish Section 21 immediately – no ifs no buts’ and to apply Awaab’s Law to the private rented sector. The failure of Gove’s Renters (Reform) Bill will increase pressure for action in its first Queen’s Speech. However, the promise of legislation ‘that levels decisively the playing field between landlords and tenants’ implies that Labour could go further. Chancellor Rachel Reeves has hinted in interviews that there might be a case for controlling rents in some local areas while ruling out a ‘blanket approach’. That could imply something like the Rent Pressure Zones introduced in Ireland and Scotland but their record is at best mixed.

On leasehold, the party has promised to enact the full package of Law Commission recommendations on enfranchisement, right to manage and commonhold, to take further steps to make commonhold the default tenure and to act to address unregulated and unaffordable ground rents. Some of the work on this will already have been done by the civil service but expectations from leaseholders will be high and it will be another complex piece of legislation that will face the same opposition and threats of legal action from freeholders as Gove did. There will also be calls for more help for shared owners.

The leasehold scandal is of course closely connected to the building safety crisis, where the legislation passed by Gove has helped some leaseholders while leaving gaps that many others have fallen through. The need for action will be underlined during the campaign by the seventh anniversary of the Grenfell Tower fire next week and again early in the next government by publication of the Phase 2 report of the inquiry in September.

The final National Policy Forum document says that: ‘Leaseholders should be protected from the costs of remediating cladding and non-cladding defects in all buildings irrespective of circumstance. We will support social landlords with remediation and we will take steps to accelerate the pace of remediation across the country.’ That creates expectations that will not be easy to meet. The campaign group End Our Cladding Scandal says that: ‘It is now down to Sir Keir to decide whether his party is willing and able to ensure the support we have received from Labour while in opposition is turned into firm commitments and commensurate action on the ground.’

On planning and housebuilding, the pledge of 1.5 million new homes over five years parliament is consistent with the missed Conservative target of 300,000 new homes a year by the mid-2020s. The party’s wider agenda on planning reform is attracting support from the right  – Thatcher’s biographer Charles Moore  is the latest fan – and from those who draw a straight line between loosening supply, increasing supply and fixing housing.

Restoration of the planning targets abandoned by Gove will help but Labour is likely to inherit a subdued market with housebuilding numbers closer to 200,000 a year than 300,000. That’s where more radical reforms of the land and housebuilding markets will come into play. Changes to Section 106 will face resistance and the imbalance in expertise between housebuilders and local authorities will be a challenge. However, success could redirect the profits of development from the pockets of landowners and shareholders into more cross-subsidy for affordable housing.

Labour could become the first government in more than 50 years to build more new towns rather than just talk about building them. A new towns taskforce is promised for day one of the new government to report within six months.  Whether they are entirely new communities or extensions of existing ones, a new towns programme could help to consolidate initial progress on new homes and challenge the model of private sector-led development. However, it remains to be seen how many homes new towns could deliver within the next five years.

Bolder still, changes to compulsory purchase, plus the release of low-quality ‘grey belt’ land within the green belt have the potential to change the terms of the current development game. A year ago, reports were suggesting that local development authorities would be able to buy land at existing use value without having to factor in the ‘hope value’ that comes with planning permission for housing. This radical move could dramatically reduce the cost of land, make homes more affordable and fund community infrastructure. Effectively, it would restore the model used for the original new towns before ‘hope value’ was restored to landowners by the 1961 Land Compensation Act.  

However, Angela Rayner’s speech on new towns last month did not mention compulsory purchase. And the summary of pledges on housing in the Labour press release on Freedom to Buy implies more modest changes to: ‘Reform compulsory purchase rules to get homes built: reform compulsory purchase rules to stop speculators frustrating housebuilding and squeezing value from infrastructure and affordable housing. Where necessary we will not hesitate to use reformed compulsory purchase orders to support housebuilding and infrastructure delivery.’

Matthew Pennycook explains the policy in more detail in an interview in The i this week. Labour hopes that the CPO powers - available to councils, Homes England and new development corporations - ‘are only used in limited instances where development is required in an area but individual landowners refuse to sell land at a fair price’. A clear public interest test would have to be used for the powers to be invoked and ‘the market price of land will be based on fair compensation rather than inflated prices which are linked to the prospect of planning permission in the future’.

The party has yet to spell out how it will fund that ‘biggest boost to affordable housing in a generation’ and there has been nothing to suggest that a Labour Treasury would change the rules on public borrowing that hold back investment. However, as I blogged elsewhere recently, Glen Bramley argues in the latest UK Housing Review that transformative investment in social housing could be achieved within existing budgets by making Section 106 work more effectively and by redirecting Tory grants and loans for private housebuilding.

Labour has also made the right noises about prioritising social rent within the Affordable Homes Programme and hinted that social landlords would be given more flexibility to buy existing homes for conversion to social housing.

Change must be more than an election slogan

There is much to be commended in this policy agenda but little yet to suggest that the ‘change’ that dominates Labour’s messaging will be transformative for housing. It would also have to be delivered in grim economic times under a government with bigger priorities.

Labour’s cautious approach, even with a big lead in the polls, is quite natural from a party that loses elections so often. That means demonstrating that the party can be trusted with the public finances, making few spending commitments and showing how they will be funded. In stark contrast to previous manifestos, the chances of increased housing investment look slim and the party is not making any commitments to reverse Conservative benefit cuts. That will probably have to wait for the second half of Labour’s decade of national renewal – and that would require a second term.

Housebuilding will clearly be at the heart of Labour’s approach, as signalled when Keir Starmer declared himself a ‘yimby’ in last year’s party conference speech and by Angela Rayner’s work on new towns. This is just part of a wider commitment to planning reform and the party’s thinking seems to be driven as much by housebuilding’s role in delivering economic growth as by its contribution to fixing housing’s multiple crises.

Dubious claims on taxes have dominated the election campaign so far, even though voters know that they will increase under either main party. It is noticeable that Labour has resisted Tory pressure to rule out increasing the main taxes on property – council tax, capital gains tax and stamp duty – and they could become desperately needed sources of revenue for local government and public services. There are no signs of tax reform yet but if it does happen it’s vital that it supports a fairer and more sustainable housing market.

If Labour wins, and if it can deliver what it is promising, significant improvements to the housing system are on the way. If it is to deliver the fundamental change that housing so badly needs, and shift parameters for policy that were mostly set in the 1980s, it needs to raise its ambitions.