What the King’s Speech means for property

Every State Opening of Parliament – which normally takes place in May and September each year – begins with a formal address by the monarch. This speech is written by the government and outlines its plans for the upcoming parliamentary session.

Here is what we know so far about the key measures for the property market that were announced by King Charles on 13^th May.

While there was nothing particularly new for landlords, the speech confirmed that formal steps will be taken in two key areas that have been the subject of reform for some time. Both are positive moves for the Private Rented Sector (PRS) and will help ensure that it continues to thrive, both as an investment for landlords and a safe and comfortable housing option for those who choose or need to rent:

1. Energy Independence Bill. In January, the government announced that landlords in England and Wales will have to comply with new energy standards from 1st October 2030, which will include:

• Achieving a rating of C or above on the new-style energy performance certificate that is going to be introduced
• Meeting either a heating system or smart readiness standard.

This Bill will introduce the new energy efficiency requirements for rented homes into parliament as the first step to them becoming law.

Although many landlords will have to invest in property upgrades, these works should help protect and even improve capital values. If you do need to undertake work on your property’s heating system, check whether you are eligible for a grant through the government’s Boiler Upgrade Scheme, which offers £7,500 towards a ground or air source heat pump, £2,500 towards an air-to-air pump, and £5,000 towards a biomass boiler.

2. Commonhold and Leasehold Reform Bill. This marks the next stage of reforming the traditional leasehold system, with the intention of gradually removing it altogether. Under the Leasehold and Freehold Reform Act 2024, two key changes became law last year:

• The two-year ownership rule was removed, meaning leaseholders no longer have to wait for two years after purchasing a property to either extend the lease or buy the freehold.
• Leaseholders were given the right to set up their own management company and manage the property themselves, and although they don’t have to seek permission from the landlord/freeholder, they do still have to go through a legal process.

This new Bill will propose banning the use of leasehold for most new flats in England and Wales, making ‘commonhold’ the default ownership model, and capping ground rents at £250 per year, which will reduce to a ‘peppercorn’ rent (effectively zero) after 40 years.

Ground rents for new leases are already restricted to a peppercorn rent under The Leasehold Reform (Ground Rent) Act 2022, but this will ensure charges under existing leases cannot exceed £250, protecting both landlords and homeowners against the possibility of freeholders unreasonably increasing these ongoing costs.

The Bill will also amend the Leasehold and Freehold Reform Act to make it cheaper and easier for leaseholders to extend a lease or buy their freehold.

And there were two other Bills announced by The King that relate to the housing market:

• Remediation Bill. Since the Grenfell Tower tragedy, successive governments have worked to address the issue of unsafe building cladding. This proposed legislation would establish a new legal duty for building owners to identify and remediate unsafe buildings without delay and enable construction product manufacturers to be pursued for costs associated with remediation works.
  
  For landlords of properties in affected buildings, it is obviously good news that more legal changes are being made to speed up the process of making them safe. Improvements to safety will naturally reassure tenants, which should help boost the property’s value, attract more applicants and reduce turnover rates.

• Social Housing Renewal Bill. Among other measures, this will propose that new-build social homes in England are exempt from Right to Buy for 35 years. This is intended to ensure councils are incentivised to invest in building and maintaining social housing, which has been in serious undersupply for many years now.
  
  According to a report last year by Crisis, just 2.5% of properties in the Private Rented Sector (PRS) are affordable for tenants on benefits, down from 12% just a couple of years earlier. An increase in the provision of social housing would free up homes in the PRS for more tenants not reliant on housing benefit and should help reduce the risk of arrears for landlords overall.

If you have any questions about recent and proposed reforms to the Private Rented Sector (PRS) or the wider property market, we are here to help. Simply get in touch with your nearest Your Move branch and have a chat with one of our lettings or sales experts.