Andy Burnham's Property Reforms: Opportunity or Further Pressure on the Housing Market?

Following Andy Burnham's appointment as Prime Minister, a number of proposed housing and property tax reforms are attracting significant attention. While aimed at improving affordability, modernising property taxation and increasing housing supply, the proposals arrive at a time when many landlords are already leaving the private rented sector due to increasing regulation and taxation.

Landlords Already Under Pressure

The private rental sector has experienced substantial change in recent years. Higher borrowing costs, additional Stamp Duty on second homes, restrictions on mortgage interest relief, increased compliance obligations and the forthcoming Renters' Rights Act have all increased costs for landlords.

Many councils have also introduced substantial council tax premiums on second homes and empty properties. As a result, a growing number of landlords are choosing to sell rather than continue operating rental properties.

While this may increase housing stock available for owner-occupiers, it also risks reducing the supply of rental accommodation and placing further upward pressure on rents.

Proposed Property Tax Reforms

One of Burnham's most significant proposals is replacing Council Tax and potentially Stamp Duty with a property tax based on a percentage of a property's value.

Potential Advantages

• A fairer system based on current property values rather than 1991 valuations.
• Abolition of Stamp Duty could reduce the cost of moving.
• Greater housing mobility for families looking to upsize or downsize.
• More consistent funding for local authorities.

Potential Disadvantages

• Homeowners in higher-value areas, particularly London and the South East, could face significantly higher annual tax bills.
• Retired homeowners may be asset-rich but income-poor.
• Property owners would face an annual charge rather than a one-off tax on purchase.

Mansion Tax and Capital Gains Tax Concerns

Reports suggest the threshold for the High Value Council Tax Surcharge ("Mansion Tax") could be reduced from £2 million to £1.5 million.

Supporters argue this would create a more progressive tax system. Critics argue it would capture many ordinary family homes in London and discourage investment in higher-value property.

There is also speculation that Capital Gains Tax on investment properties could be aligned with income tax rates. This would increase the tax burden on many landlords and second-home owners when they sell, potentially making property investment even less attractive.

The Impact of the Renters' Rights Act

The Renters' Rights Act seeks to provide greater security and protection for tenants through measures such as stronger tenant rights and restrictions on no-fault evictions.

The benefits for tenants are clear. However, many landlords have expressed concerns regarding increased regulation, longer possession processes and reduced flexibility in managing their properties.

Combined with higher taxes and financing costs, these changes are encouraging some landlords to leave the sector altogether.

What Could This Mean for the Market?

If these proposals proceed alongside existing reforms, the likely consequences include:

Positive Impacts

• More homes becoming available for purchase.
• Increased opportunities for first-time buyers.
• Larger investment in social and council housing.
• Potentially fairer property taxation.

Negative Impacts

• Further reduction in private rental stock.
• Higher rents due to shortage of available properties.
• Increased tax burden on homeowners and investors.
• Reduced confidence among property investors.
• Slower activity in higher-value property markets.

Are Policymakers Risking Unintended Consequences?

• One of the biggest concerns being raised across the property sector is whether too many significant reforms are being introduced within a relatively short period, without fully considering their cumulative impact on housing supply. The combination of the Renters' Rights Act, increased taxation of landlords, higher council tax charges on second homes, potential Capital Gains Tax changes, and proposals for further property taxation has already contributed to many landlords reassessing whether residential property remains a viable long-term investment.
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• Industry commentators continue to report substantial numbers of landlords exiting the market, particularly smaller individual landlords. Contrary to popular perception, many landlords are not large institutional investors but ordinary individuals who acquired one or two properties as an alternative to traditional pension provision, often because workplace pensions were unavailable or insufficient. Faced with rising compliance costs, increasing regulation, higher interest rates and growing tax burdens, many are choosing to sell.
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• While increasing tenant protections is a legitimate policy objective, there is a growing debate as to whether some reforms may ultimately have unintended consequences for the very people they are designed to help. A reduction in the number of rental properties inevitably reduces supply. Where tenant demand remains strong, this can place upward pressure on rents, increase competition for available homes and make it harder for prospective tenants to secure accommodation.

• Similarly, proposals for rent controls or rent caps, whilst attractive in principle, remain controversial amongst economists and housing professionals. Critics argue that restricting rental growth without addressing the underlying shortage of housing supply may discourage further investment in the private rented sector and accelerate the departure of existing landlords. If fewer landlords are willing to purchase or retain rental properties, the overall stock of available homes may continue to shrink, reducing choice for tenants and increasing competition for available accommodation.

• Opponents of rent controls also point to examples from other jurisdictions where similar measures were introduced with the intention of improving affordability, but ultimately contributed to reduced investment, lower housing supply and lengthy waiting lists for rental properties. In some cases, governments were later forced to amend or reverse such policies as market pressures intensified. Critics therefore argue that sustainable affordability is more likely to be achieved through increasing housing supply rather than restricting rents alone, particularly in areas where demand significantly exceeds the number of homes available.

• The challenge for Government will therefore be striking the right balance between improving tenant protections and preserving the confidence of those who provide a significant proportion of the UK's housing stock. Without that balance, there is a risk that well-intentioned reforms could inadvertently worsen affordability and availability issues across the rental market.

Conclusion

Andy Burnham's proposals are likely to divide opinion. Supporters view them as a long-overdue reform of an outdated tax system and a means of delivering more affordable housing. Critics argue that, when combined with the Renters' Rights Act, rent control proposals and increased taxation of second homes and investment properties, they risk accelerating the ongoing exodus of private landlords from the market.

Whether these reforms succeed will depend on achieving a careful balance between protecting tenants, funding public services and ensuring that sufficient incentives remain for investment in housing. If that balance is not achieved, the long-term consequence could be a shrinking rental sector, reduced housing choice and higher rents for tenants despite the best intentions of policymakers.

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