UK: What’s in store for real estate and planning under new Prime Minister | | Hogan Lovells

economic background

There are many uncertainties facing the real estate sector in the coming months. How much will interest rates rise, what will happen to inflation, and whether corporate bankruptcies and restructuring will start to increase significantly.

The recent rise in interest rates has already had a major impact on the real estate sector, making debt financing deployments and property purchases less attractive. Rising inflation has also had a considerable impact, especially in relation to construction costs, which have risen sharply over the past year or so. The sector is currently bracing for a wave of bankruptcies and restructurings (through voluntary company arrangements, restructuring plans, and other similar processes) that could have a significant impact on landlords and other real estate stakeholders. I have.

Impact on real estate in general

Truss seems likely to offer support packages to individuals and businesses to help with rising energy costs. This aid is badly needed, especially in the hospitality, construction and life sciences sectors. A moratorium on the bill’s “green tax” is included. However, it is not clear whether the proposed package will be sufficient to avoid significant bankruptcies or restructuring, especially given that energy costs are only one of the issues affecting these sectors. Rapid inflation and rising borrowing costs are also having a major impact on the real estate industry.

The new prime minister has also indicated his intention to cut the VAT, which could exacerbate the UK’s current inflation problems in the medium term. Some predict that interest rates could rise to around 7% in the coming months due to the new prime minister’s near-term economic plans. While some savers without mortgages or other debt may be encouraged by the news, such rate hikes would have significant and costly implications for many stakeholders in the real estate sector. may give.

Aside from topical headlines, can you identify specific policies impacting your industry? Let’s start with a plan.

Planning: Abandoning ‘Stalinist’ Housing Goals with Simplified Planning Zones

Truss reportedly hopes to “get rid of the bureaucracy that hinders housing construction and give more power to the community.” This includes removing centralized housing targets in favor of “opportunity zones” to encourage development. The prime minister has proposed identifying areas “ripe for transformation across the country” that would benefit from tax cuts and less planning regulations, opening “the floodgates to a new wave of investment”.

Zoning should be familiar to those who remember our 2020 planning white paper. However, zoning (along with many of the other proposed planning reforms) has been heavily criticized. It has not been addressed in the scaled-back planning reforms proposed in the Upgrading and Rehabilitation Bill, which was issued in May 2022 and is currently going through the Commission stage. Many will be intrigued whether it will make a comeback – especially given how controversial it was with many in the Tory Heartland in the first round.

Development: A New Approach to Greenbelt Development?

Truss has long advocated a relaxation of Greenbelt policy, and as part of its 2019 leadership stated that “one million homes need to be built around London’s Greenbelt train stations and other growth cities. There is.” Although no such allegations were heard in the current contest, Jacob Reese Mogg, the current front-runner for Levellingup Secretary, is also a proponent of green belt development near the transportation hub.

This marks a firm move from the green belt protection position in the 2019 Conservative manifesto, with some attempt to dilute green belt protection as part of the new prime minister’s investment and growth agenda. It seems likely.

Energy: Reopening the door to fracking and other energy initiatives

Despite a clear commitment in its 2019 manifesto, Truss has indicated its willingness to lift the moratorium on fracking “if the community supports it.” Based on what we’ve seen about local views on fracking, this feels like a somewhat hollow proposition. Truss has made clear its opposition to solar power plants, but supports moves to accelerate the development of “all gas in the North Sea” and the supply of nuclear energy.

what next?

Once the ministerial appointments are confirmed, expect a flood of expanded proposals and commitments. Only time will tell how accurately these reflect the views expressed by Truss over the past few months. What is clear is that the current leveling-up bill will likely require significant changes, and the real estate industry will need to continue to monitor proposals impacting the sector in what promises to be a turbulent time. is that there is

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