Predictions vs Reality: Labor's First 100Days and the "Working People "Controversy

A spectre is haunting the UK property market – the spectre of a new Labor government. In the run-up to the 2024 general election, predictions about what a Labor government would mean for landlords flew thick and fast. Now, with Keir Starmer in Number 10 and the Autumn Budget on the horizon, it's time to separate the predictions from the reality.

In this special analysis, we revisit the predictions made in Episode 43 of the Essential Property Podcast and assess their accuracy. We also dissect the most significant – and controversial – statement to come out of the new government: Keir Starmer's definition of "working people."

For landlords and property investors, this is more than just a political debate. It's a fundamental question of who the government is for, and who it is against. And the answer to that question will have profound implications for your portfolio, your strategy, and your future in the property market.

The Predictions: A Reckoning

Before the election, we identified six key areas where a Labor government was likely to make its mark. Let's see how our predictions have held up in the cold light of day.

1. The End of Section 21: A New Era for Tenancies

   Prediction: Labor would abolish "no-fault" evictions under Section 21, forcing landlords to rely on a strengthened Section 8.

   Reality: Confirmed. The Renters' Rights Act is now law, and as predicted, Section 21 is no more. Landlords must now use the specific grounds for possession laid out in Section 8. This is a seismic shift in the private rented sector, and one that many landlords are still struggling to come to terms with. Under current legislation, landlords must now follow strict procedural requirements and provide proper notice periods before any possession order can be obtained.

   The Twist: The new legislation includes a provision that allows landlords to evict tenants with just four weeks' notice if the property is to be re-let for supported accommodation. This is a clear signal that the government is looking to the private sector to solve the social housing crisis – a trend we have been highlighting for some time. For landlords willing to engage with this market, this represents a genuine opportunity to contribute to a critical social need whilst maintaining portfolio viability.

2. The Courts: Still Broken, Still a Bottleneck

   Prediction: The court system would remain a major obstacle to landlords seeking to regain possession of their properties.

   Reality: Confirmed. The government has made vague promises about a "specialist housing court," but there is no timeline, no budget, and no concrete plan. In the meantime, landlords are still facing waits of 6-12 months to enforce a possession order, even with a mandatory ground. This is a major operational challenge, and one that requires careful management. Subject to updates in the Renters' Rights Bill, the court backlog remains a significant constraint on landlord remedies.

3. Tenant Referencing: The Rise of the Professional Landlord

   Prediction: With the removal of Section 21, landlords would become increasingly selective in their tenant referencing.

   Reality: Already Happening. We are already seeing landlords demanding higher income multiples (typically 3x rent, up from 2.5x), more detailed financial histories, and even interviews with prospective tenants. This is a natural response to the increased risk of a tenancy going wrong, but it is also making it harder for vulnerable tenants to find a home. This is the law of unintended consequences in action – and it underscores the importance of professional, ethical referencing practices that balance landlord protection with tenant accessibility.

4. Short-Term Lets: A Regulatory Clampdown

   Prediction: Labor would introduce a mandatory registration scheme and a new planning use class for short-term lets.

   Reality: In Progress. The consultation on this has now closed, and the regulations are being drafted. We expect to see a mandatory registration scheme for all short-term lets, as well as a new planning use class that will make it much harder to convert residential properties into holiday lets. For professional operators, this is a welcome development that will level the playing field and drive out the amateurs. Compliance will be non-negotiable, and those who invest in robust systems now will be well-positioned for the new landscape.

5. Furnished Holiday Lettings: The End of a Tax Haven

   Prediction: The tax advantages of Furnished Holiday Lettings (FHLs) would be scrapped.

   Reality: Confirmed. From April 2025, FHLs will be treated in the same way as standard buy to-lets for tax purposes. This means the end of mortgage interest relief and capital allowances. This is a significant blow to FHL landlords, and one that will force many to reconsider their business model. Based on existing guidance, the impact on net profit margins will be substantial – typically reducing returns by 30-40% for many operators. Professional landlords should seek independent tax advice to understand the full implications for their specific circumstances.

6. Permitted Development: A Glimmer of Hope?

   Prediction: Labor would relax permitted development rules to encourage the creation of new housing.

   Reality: Partially Confirmed. The government has announced plans to relax permitted development rights for extensions and conversions. This is a positive development for HMO landlords, who will be able to add rooms to their properties without the need for full planning permission. However, the extent to which this will be limited by local Article 4 directives remains to be seen. Landlords should check with their local authority before proceeding with any development plans.

   
   

   This article provides general guidance only. Always seek independent legal, tax, or financial advice before making decisions affecting your property or business.

The "Working People" Controversy: A New Front in the War on Wealth?

Perhaps the most revealing moment of Labor's first 100 days was not a policy announcement, but a single, unguarded comment from the Prime Minister. Asked to define "working people," Keir Starmer offered a definition that has sent a chill down the spine of every landlord and investor in the country:

"Working people are those who go out to work, who earn their income primarily from their labor, and who do not have significant income from assets such as property or shares."

The Implication: If you derive a significant portion of your income from your property portfolio, you are not a "working person" in the eyes of this government. You are, it would seem, something else entirely. And that something else is a target for future tax policy.

The Backlash: The response from the financial and investment community has been one of predictable concern. Questions about the future direction of capital gains tax, inheritance tax, and rental income taxation have been raised. But for landlords, the implications are far more concrete. This is a clear signal that the government is drawing a distinction between those who earn their income from labor and those who earn it from assets – a distinction that will likely inform future fiscal policy.

The Ethical Question: Is it fair to exclude landlords from the definition of "working people"? Many landlords have built their portfolios through decades of hard work, taking on significant risk and sacrificing their own time and money. They are not simply passive recipients of unearned income. They are active participants in the economy, providing a vital service and creating wealth. To deny them the status of "working people" is a fundamental misunderstanding of the role they play in the housing market.

This is where the distinction between the amateur and the professional landlord becomes critical. The amateur, who may have stumbled into property investment, may well be a passive recipient of rental income. But the professional landlord, who actively manages their portfolio, who seeks to add value, and who treats their property investment as a business, is a world away from this caricature.

At Essential Management Ltd, we work with professional landlords who are committed to providing high-quality homes and delivering a first-class service to their tenants. They are not the enemy. They are part of the solution. And we will continue to champion their cause.

The Economic Consequences: A Strategic Minefield

These policy shifts are not just political talking points; they are creating a new economic reality for property investors. Navigating this new landscape requires a strategic mindset and a clear understanding of the risks and opportunities.

1. The Great Landlord Exodus: Opportunity for the Professional

   The headlines are full of talk of a "landlord exodus." And it's true that many amateur landlords, spooked by the end of Section 21 and the prospect of higher taxes, are selling up. But for the professional landlord, this is not a threat, but an opportunity.

   
   

   As the amateurs flee the market, competition will decrease, and yields will rise. For those who have the expertise and the resources to navigate the new regulatory environment, this is a chance to consolidate their position and build a stronger, more profitable portfolio. The market is consolidating, and consolidation favours the professional.

2. The Supported Accommodation Gold Rush

   The government's reliance on the private sector to provide supported accommodation is creating a new and potentially lucrative market for landlords. With the right property, the right location, and the right management, supported accommodation can deliver higher yields and greater security than traditional buy-to-let.

   
   

   But this is not a market for the faint-hearted. It requires a deep understanding of the regulatory framework, a commitment to providing high-quality care, and a willingness to work in partnership with local authorities and care providers. Our advisory team can help you assess the opportunities in your area and develop a strategy for success. This is where professional property management becomes not just a competitive advantage, but a necessity.

3. Short-Term Lets: The Professional Takeover

   The new regulations for short-term lets will undoubtedly drive many amateur operators out of the market. But for professional landlords who are already operating to high standards, this is a chance to shine.

   
   

   With less competition and a growing demand for high-quality short-term lets, professional operators are well-placed to increase their market share and command higher prices. The key is to have a robust compliance system in place and to deliver a guest experience that is second to none. Regulation is not the enemy of the professional – it is the enemy of the amateur.

4. HMOs: The Unsung Hero of the Property Market

   In this new world of increased regulation and economic uncertainty, the humble HMO has emerged as the unsung hero of the property market. With their ability to spread risk across multiple tenants and their resilience to market fluctuations, HMOs are the perfect investment for the modern landlord.

   
   

   And with the relaxation of permitted development rules, there has never been a better time to invest in HMOs. Our team has extensive experience in the HMO market and can help you identify the best opportunities and maximize your returns. HMOs offer a unique combination of yield, resilience, and strategic flexibility that few other property types can match.

   
   

   This article provides general guidance only. Always seek independent legal, tax, or financial advice before making decisions affecting your property or business.

The Human Element: Beyond the Balance Sheet

In the world of property investment, it's easy to get lost in the numbers. Yields, capital growth, return on investment – these are the metrics that dominate the conversation. But behind every spreadsheet and every balance sheet, there are real people, with real lives and real stories.

The Tenant: For tenants, the new legislation offers the promise of greater security and stability. But it also brings the risk of a shrinking rental market and landlords who are increasingly reluctant to take a chance on anyone who doesn't fit the mould of the "perfect tenant." The irony is that the legislation designed to protect vulnerable tenants may inadvertently make it harder for them to find a home.

The Landlord: For landlords, the new landscape is a minefield of regulatory tripwires and financial uncertainty. Many are questioning their future in the market, and some are choosing to exit altogether. But for those who remain, there is a sense of resilience and a determination to adapt and thrive. The professional landlord sees this as a challenge to be overcome, not a reason to retreat.

The Vulnerable: And then there are the vulnerable – the people who rely on the private rented sector for a roof over their heads. For them, the stakes are higher than for anyone else. They are the ones who will be hit hardest by a shrinking rental market and the ones who will benefit most from a professional, well-managed supported accommodation sector.

At Essential Management Ltd, we understand that property is about people. It's about providing safe, comfortable homes for tenants. It's about helping landlords build sustainable, profitable businesses. And it's about working in partnership with local authorities and care providers to deliver high-quality supported accommodation for those who need it most.

This is the human element of property investment. And it's at the heart of everything we do

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Frequently Asked Questions (FAQs)

1. Will the Labor government introduce rent controls?

   While the government has ruled out a hard rent cap, the direction of travel is clear. We expect to see the introduction of measures to limit the frequency and scale of rent increases. This is a complex area of policy, and the devil will be in the detail. Our team is monitoring the situation closely and can provide expert guidance on how to navigate any new regulations. Subject to updates in the Renters' Rights Bill, rent controls remain a possibility, albeit in a more limited form than some feared.

2.  Should I sell my buy-to-let properties?

   This is the question on every landlord's lips. And the answer is: it depends. For amateur landlords with just one or two properties, the increased regulation and tax burden may well make the market unattractive. But for professional landlords with a well-managed portfolio, the current climate presents a unique opportunity to consolidate and grow. Before making any decisions, it's essential to conduct a thorough review of your portfolio and your personal financial situation. Our advisory service can help you make an informed decision based on your specific circumstances.

3. What is a "specialist housing court" and will it ever happen?

   A specialist housing court is a proposed new court that would deal exclusively with housing related matters, with the aim of speeding up the eviction process. While the government has expressed its support for the idea, there is currently no timeline or budget for its creation. In the meantime, landlords must continue to navigate the existing court system, with all its delays and frustrations. This remains one of the most pressing issues facing the private rented sector.

4. Am I still a "working person" if I have a full-time job and a rental property?

   According to the Prime Minister's definition, if you have "significant income from assets," you may not be considered a "working person." The problem is that "significant" is a subjective term. Until the government provides a clear definition, landlords are left in a state of uncertainty. What is clear, however, is that the government is drawing a distinction between those who earn their income from labor and those who earn it from assets. And that is a distinction that should concern every landlord. We recommend seeking independent tax and financial advice to understand how this may affect your personal circumstances.

5. What are the three most important things I should do before the Autumn Budget?

   1. Review your portfolio structure. Are you operating as a sole trader, or have you incorporated? With the tax landscape shifting, now is the time to ensure you have the most tax-efficient structure in place. This is not a decision to be taken lightly, and professional advice is essential.

   2. Get your compliance in order. In a tougher regulatory environment, there is no room for error. Ensure all your properties are fully compliant with all relevant legislation, from deposit protection to gas safety to electrical safety. Non-compliance is not just a legal risk – it's a reputational risk.

   3. Seek professional advice. The property market is more complex than ever before. Now is not the time to go it alone. Whether you need advice on tax, finance, or strategy, our team of experts is here to help. A strategic review of your portfolio could save you thousands in tax and help you identify new opportunities.

This article provides general guidance only. Always seek independent legal, tax, or financial advice before making decisions affecting your property or business.

A Call to Arms for the Professional Landlord

The first 100 days of the new Labor government have confirmed what many of us have long suspected: the property market is in for a period of profound change. The old certainties are gone, and a new, more challenging landscape is emerging.

For the amateur landlord, this is a time of fear and uncertainty. But for the professional landlord, this is a call to arms. This is a time to embrace the challenges, to seize the opportunities, and to demonstrate the value that professional, well-managed property investment can bring to the housing market and to society.

The predictions we made in Episode 43 have proven to be remarkably prescient. But the future is not yet written. The Autumn Budget will be a critical moment for the property market. And in the months and years to come, the professional landlord will have a vital role to play in shaping the future of the private rented sector.

At Essential Management Ltd, we are here to support you on that journey. Whether you are looking to grow your portfolio, to move into new markets, or simply to navigate the complexities of the new regulatory environment, our team of experts is here to help. We have the knowledge, the experience, and the commitment to help you succeed.

If you'd like to explore how this applies to your portfolio, our team can guide you. Get in touch today for a strategic review of your options.