Our Living team advises clients from across the general housing, affordable housing, build-to-rent (BTR), student housing, senior living and co-living sectors. The various living asset classes have much in common but key differences in their markets and models mean that "one size does not fit all" when considering the effect of recent and emerging law and regulation across the sectors.

In this article, we consider some of the key policy reforms and case law decisions for the living sector and provide a series of links to some of the content our Living team has produced this year.

The living sector in England in 2024 has continued to be impacted by the cost of living, buying, borrowing, and building. Economic conditions appear generally to be stabilising and slowly improving in the UK and, against an ever more unpredictable global geo-political backdrop, perhaps the relative stability of the UK living sector will be an increasingly attractive market for investors in 2025.

The new Government appears to have set housing and planning reform at the heart of its policy agenda as a means to drive economic growth. In last year's living sector review article, we said that going into 2024 there "is an opportunity to refocus housing policy to better enable the residential property and living sectors to drive a substantial change in the delivery of new, high-quality housing that better meets the diverse needs of customers across England. Conversely, there is a risk that emerging housing reform legislation may be rushed through Parliament, potentially bringing adverse collateral impacts across individual living asset classes". As we move into 2025, we would repeat this message even louder. With the Government setting itself an extremely ambitious target to deliver 1.5 million new homes in this Parliament, it remains critical that the role of the living asset classes in meeting the diverse housing needs of our population nationally is fully recognised and properly facilitated as new legislation is introduced.

What are they planning?

The new Government's 1.5 million new homes target will, if the necessary planning and infrastructure changes are delivered to make it a reality, mark out 2024 as a hugely significant year for the living sector. Within a month of the general election, a new draft of the National Planning Policy Framework (NPPF) was published proposing sweeping changes intended to make the ambitious new homes target a reality.

The key changes for the living sector are the reinstatement of mandatory local housing land supply targets, a definition of and presumption in favour of housing development in the grey belt, and the expansion of the "exceptional circumstances" that may justify alteration of green belt boundaries to include an inability of local planning authorities to meet requirements for housing, commercial or other development by other means. The establishment of the New Towns Taskforce, which issued a call for sites in November, also has potential to accelerate growth in the sector, with new town and urban extension development affording exciting opportunities for the sector to showcase the delivery of sustainable communities.

Consultation on the draft NPPF closed on 24 September, with the revised NPPF promised by the end of the year. The New Towns Taskforce's call for sites closes on 13 December 2024. The Government has acted relatively quickly in terms of delivering the promised manifesto reforms, but it will only be in 2025 that we may begin to see the impacts they are promising.

2024 has not all been a story of reform by the new Government. Back in February 2024, the long- heralded compulsory 10% biodiversity net gain (BNG) requirement for developments finally came into force. Many local planning authorities had adopted equivalent biodiversity requirements prior to it becoming mandatory, and the slippage on implementation targets meant that the sector was generally well prepared. Practice around off-site provision and the development of a credit market will be developing in 2025 and beyond.

In terms of the previous Government's legacy, various sections of the Levelling-up and Regeneration Act 2023 remain on the statute book but are not yet in force. These unimplemented sections include the new section 73B into the Town and Country Planning Act 1990 and address some of the ongoing uncertainties flowing from the 2023 Supreme Court decision in Hillside Parks Ltd v Snowdonia National Parks Authority. It remains to be seen whether the new administration will implement this existing legislation as a "quick fix" while promised wholesale reform (in the shape of the Planning and Infrastructure Bill) works its way through Parliament.

Building safety – where are we now?

Those operating in the UK living sector will by now be well aware of the Building Safety Act 2022 (BSA) and its impact on all stakeholders in the sector, from government to developers, freeholders, leaseholders, housing associations, property managers, occupiers and others.

Although the BSA received Royal Assent over two years ago, on 28 April 2022, its provisions have been (and continue to be) brought into force incrementally. Headline developments in 2024 include:

  • Publication of the long-awaited Grenfell Inquiry Phase 2 Report on 4 September 2024. The Report made 58 recommendations aimed at addressing some of the regulatory deficiencies that led to the Grenfell tragedy. Many of the recommendations, if implemented, would have significant implications for the construction industry as well as the living sector.
  • While the Government's response to the Grenfell Phase 2 Report is expected in Spring 2025, on 2 December 2024 it published its "Remediation Acceleration Plan". This articulates the Government's intention that by the end of 2029:
    • all 18m+ buildings with unsafe cladding in a government funded scheme will have been remediated; and
    • every 11m+ building with unsafe cladding will either have been remediated, have a date for completion, or the landlords will be liable for severe penalties.

    It also confirms that the Building Safety Levy is intended to come into effect in Autumn 2025, and will be charged on "all new residential buildings in England (subject to exemptions) which require building control approval".

  • From 1 October 2023, it has been mandatory for occupied "higher-risk buildings" (HRBs) in England to be registered with the Building Safety Regulator (BSR) – with potentially onerous penalties for failure to comply. Further duties for those responsible for HRBs came into force in January 2024, including the requirement to prepare building safety case reports – we explored this in detail in our insight on building safety "information requirements". The BSR had announced that it would start "calling in" occupied HRBs for review from April 2024 onwards, although it is unclear to what extent this has started in earnest due to capacity shortages.
  • The new Building Control regime for HRBs came into force in full – with the end of all transitional arrangements – on 6 April 2024, as we reported previously in our Building Safety Update. Although still evolving, the market position has started to become clearer as to how building contracts for HRBs falling within the new regime will allocate risk and responsibility for various elements of that regime, including Gateways 2 and 3, the 'Golden Thread', the new change control process, etc.

As we move into 2025, we expect to see the BSR driving forward with its oversight of the new regimes, and we continue to monitor all potential changes in law and regulation that may flow from the Grenfell Phase 2 Report and the forthcoming Government response.

Renters' Rights

In our article of 13 September 2024, we highlighted the Renters' Rights Bill – one of the first pieces of legislation introduced by the new Government. While it is mostly a copy and paste of the previous Government's Renters (Reform) Bill, its proposed reforms go much further and faster in an attempt to revolutionise the residential sector in England and Wales. At the time of writing, the Bill is still making its way through Parliament and continues to be amended – investors in the rented sector will need to keep an eye on developments and be ready to respond accordingly as the Bill approaches royal assent. Timing is not clear, but the Government has indicated it wants the new law to be in effect by Summer 2025.

The Bill is aimed at protecting tenants, who are sometimes asked to pay substantial sums for unfit accommodation, against threats of retaliatory evictions and extortionate rent increases. However, its proposals remove the ability of landlords to control the length of the lease term and the right to indexed rent reviews, giving some pause for thought for living investors. At the same time the drive to deliver improved standards of rental accommodation should create an opportunity for institutional landlords delivering professional management standards across their portfolios.

One of the main problems facing the private rented sector (PRS) market is the lack of stock – there are 21 potential tenants chasing every letting in some parts of the country. The Bill will do nothing to address this.

There will need to be more money and resource given to local authorities to enforce the reforms and to maximise the benefits of a new landlord database and ombudsman.

We will continue to review the passage of this important Bill and will provide further updates in 2025.

Terrorism (protection of premises) Bill

The purpose of this Bill is to improve security and operational preparedness across public venues in the event of a terror attack by imposing new duties on those responsible for certain premises and/or events. The types of premises likely to be affected include not only retail, nightclubs, sports grounds, education and public authority venues but also living assets such as hotels and health care facilities.

The Bill distinguishes between standard duty premises and enhanced duty premises. Those responsible for standard duty premises will have to take steps to reduce the risk of physical harm to individuals; those responsible for enhanced duty premises and events will need to take extra preventative steps to reduce vulnerability to terrorist attacks.

Those responsible for standard duty premises will be required to implement public protection procedures (including evacuation, invacuation, lockdown and communication) to reduce the risk of physical harm to people if there is an act of terrorism either at the premises or in the immediate vicinity. The duties for enhanced duty premises and events goes further and includes the implementation of mitigation measures to reduce vulnerability to an attack – this will include monitoring the premises and the movement of people which could range from circulating awareness raising material to establishing control rooms, setting up barriers and installing CCTV.

The regulator will be the Security Industry Authority which will be given investigative and enforcement powers. Penalties for non-compliance may be severe – for standard premises the maximum penalty is £10,000; for enhanced premises and events the maximum penalty is the greater of £18 million or 5% of worldwide revenue. In addition, a daily penalty may be applied – up to £500 a day for standard premises and £50,000 a day for enhanced duty premises and event.

The Bill is still on its journey through Parliament and may be amended before getting royal assent.

Leasehold and Freehold reform Act 2024 – what next?

Just before the July 2024 general election we wrote about the Leasehold and Freehold Reform Act 2024, which was rushed through Parliament in the dying days of the last Government. While the Act didn't go as far as was originally anticipated, it does include reforms which will have an impact on the living sector. The majority of the Act's provisions are not yet in force, including the ban on the sale of most leasehold houses. A limited number of the Act's provisions, specifically amendments to the Building Safety Act 2022, did come into force on 31 October 2023 – we examine these in detail in our recent insight - Building Safety Act 2022 – Key amendments coming into force in October 2024.

The new Government has announced that they have identified significant flaws in the Act, including in relation to the reforms around valuations when leaseholders exercise rights to enfranchise. Extensive secondary legislation is therefore needed to fully implement and remedy some parts of the Act. In the meantime, the Government intends to remove the requirement for leaseholders to wait two years after purchasing their property in order to buy their freehold or extend their lease in January 2025. The right to manage reforms will be brought into force in spring 2025 and there will be consultations on a number of other provisions such as service charges and legal costs as well as valuation rates used to calculate the cost of enfranchisement premiums.

The Act doesn't replace existing statutes – it brings in reforms by amending them. The result is that many of the inherent complexities of those existing laws are retained, and the extra layers of reform may complicate matters further with many traps for the unwary.

Commonhold is coming

Residential leasehold has been in the headlines for a number of years and there is growing political consensus that leasehold tenure is not a satisfactory way for most people to own residential property. In the King's Speech, soon after the new Government took office, we were promised a draft Leasehold and Commonhold Reform Bill to reinvigorate commonhold through a comprehensive new legal framework.

On 21 November 2024, Matthew Pennycook, the Minister of State for Housing and Planning, outlined the Government's plans. He confirmed that the Government is committed to addressing the outstanding Law Commission recommendations. To this end, a White Paper on commonhold reforms will be published in the second half of 2025. It will consult in 2025 on the best approach to banning new leasehold flats and converting existing flats to commonhold with the aim of making commonhold the default tenure for flats by the end of this Parliament.

We strongly hope that the Government recognises that commonhold is unsuited as a form of tenure for Senior Living Integrated Retirement Community schemes, where many residents are moving in precisely because they want to relieve themselves of some of the responsibilities of home ownership and to have the benefit of hospitality and wellbeing amenities provided by their professional operators.

Various other plans were outlined in his statement. The Government is determined to tackle existing ground rents and remove the threat of forfeiture as a means of ensuring residential lease compliance. In 2025 it will consult on reforming the section 20 major works procedure, regulating managing agents and tackling what have been unhelpfully labelled by some as "fleecehold" private management arrangements.

The devil really will be in the detail. The fact that the Government has promised a draft bill is welcome – introducing a draft will allow extra scrutiny and consultation ahead of the formal introduction of a Bill into Parliament. Developers, operators and investors in the living sector are strongly encouraged to engage with the upcoming consultations.

Right to buy reforms

The Government has published proposals and a consultation on reforming the right to buy scheme in England. It also announced that it would not be extending the right to buy to tenants of housing associations. The reforms are aimed at protecting social housing stock and follow regulations which reduce right to buy discounts.

The consultation seeks view on various proposals including whether:

  • The eligibility requirement for the right to buy should be increased from three years as a secure tenant to five years, ten years or more than ten years.
  • The current exemptions should be retained or changed.
  • The time period during which the council may ask for repayment of all, or part of the discount should be increased and whether other restrictions should apply after sale.

Views are also sought on what level the percentage discount for an eligible tenant should start and what the maximum percentage discount should be. It asks for views on requirements around the replacement of homes sold under the right to buy and how the current receipts regime can be simplified and strengthened to support replacement of homes.

Energy efficiency

The Government has been saying it intends to reintroduce a higher minimum standard for private rented domestic property. A consultation on implementing the proposal to increase the minimum rating to EPC C seems imminent – with a target date of 2030 set out in Labour's pre-election manifesto.

Since 2020, a domestic property with an energy performance certificate (EPC) rating below the minimum standard (currently EPC E) could not be let without carrying out relevant energy efficiency improvements or claiming an exemption. The previous Government's proposal (which was scrapped) was to increase a higher minimum (of EPC C) for new leases in 2025 and all leases in 2028. It now seems as if the new minimum will be introduced in one go – but the consultation will likely give an indication of current Government thinking.

Although the timescale will be the major talking point, the living sector will be particularly interested in any other proposed changes – including the enforcement regime, any indication that the minimum will be pushed up again in the future and any proposals to change the types of dwelling that fall within the domestic property regime.

On 4 December 2024, the Government launched a consultation on energy performance certificates – specifically the usage, metrics and methodology. It seems logical that they intend to settle these issues before changing minimum standards – but there will likely be more political capital in raising minimum standards so it is likely that will follow soon. The consultation does pose the question of reducing the validity period of EPCs to less than the current 10-year period and requiring landlords to obtain a new EPC immediately if one expires when a property is occupied. HMOs will also require an EPC for the whole property even though only a single room is being let and short-term holiday lets will also require EPCs.

Implementation of CMA housebuilding recommendations

In October, the Government responded to the Competition and Markets Authority (CMA) market study into housebuilding. CMA had originally reported in February 2024, but it was left to the new Government to respond.

As expected, the Government was keen to highlight some of the previously announced law reforms and policy announcements that seek to address some of the CMA's recommendations but also agreed to carry out further work on some other recommendations including mandatory adoption of private estates.

The Government will also publish a long-term housing strategy on which it intends to collaborate with the sector. We anticipate some sort of consultation (or at least some engagement with industry bodies) on this in 2025.

The Welsh Government also responded to the CMA's recommendation separately.

Budget implications for the living sector

The 2024 Autumn Budget introduced several changes to real estate taxation relevant to the living sector. These changes are part of a broader strategy to increase government revenue and fund substantial infrastructure investments, and the impact will be felt immediately, and particularly as further measures come in next year.

Many of the measures included in the Budget were widely pre-announced (including a substantial increase in employer's national insurance contributions).

The key property tax changes relevant to the living sector were:

  • Stamp Duty Land Tax (SDLT) increases - two surprise SDLT increases took effect from 31 October 2024. These changes are aimed at generating additional revenue from the real estate sector, particularly from higher-value residential transactions and second home purchases. The SDLT surcharge for the purchase of second homes and properties by corporate entities has been increased from 3% to 5% - taking the maximum SDLT rate to 17% for the part of the consideration over £1.5 million. This change will make acquisitions more costly for companies and individual investors purchasing additional residential properties and will inevitably lead to lower purchase prices or higher rents on these properties. The flat rate of SDLT charged on the purchase of residential properties (valued over £500,000) by corporates has been increased from 15% to 17%. BTR investors will be disappointed that multiple dwellings relief from SDLT has not been reinstated despite extensive lobbying from industry. Frustration over that will continue to be a talking point into 2025 in advance of future fiscal events.
  • Capital Gains Tax (CGT) adjustments – changes to CGT rates from 20% to 24% (and on carried interest from 28% to 32%) which will affect real estate investors and property sellers are less severe than had been expected. Capital gains continue to be far more lightly taxed than "earned income" and a tempting target for future changes. We expect that to continue to be a talking point and concern ahead of fiscal events in 2025.
  • Business Rates reform – significant reform to business rates, aimed at providing relief to certain sectors and transforming the business rating system were announced including (relevant to some hotels):
    • An intention to introduce permanently lower multipliers for retail, hospitality and leisure (RHL) properties with a rateable value (RV) under £500,000 from April 2026-27.
    • Support for RHL properties in the interim period leading up to the new permanent multiplier by providing 40% relief to RHL businesses on their business rates in 2025-26, up to a cash cap of £110,000 per business.
  • Changes to employer national insurance contributions (NIC) and increase to national minimum wage – the widely reported and discussed increase in employer NIC, although not a real estate tax, could have significant implications for parts of the living sector with significant employee costs (including senior living operators and some affordable housing, BTR and co-living providers). Where possible, these costs will get passed on to end users but where charges have been fixed in advance for a period, the higher employment costs will be a pure cost to the operators in the short term.

Senior housing

The long-awaited report from the Government appointed Older People's Housing Taskforce was finally published in November. The report was produced by a team of experts from across the senior living sector and sets out the following 10 key recommendations to help to tackle the housing needs of our rapidly growing, ageing population:

  • Standardise definitions of Older People’s Housing/Later Living Homes (OPH/LLH)
  • Incentivise a wide range of OPH/LLH options
  • Ensure more housing is designed for later life
  • Create age-friendly, dementia-inclusive, faith and culture sensitive communities and neighbourhoods
  • Expand OPH/LLH at scale and ensure it is affordable to live in, and viable to finance, build and operate
  • Strengthen planning policies
  • Establish a national information platform and local hubs
  • Build consumer confidence
  • Enhance innovation, research and professional development
  • Overarching recommendation - Create collective leadership to drive change with the establishment of a new "Office for an Ageing Population" to deliver a long-term National Housing Strategy.

The report is essential reading for anyone currently operating or looking to invest in the UK senior living sector. We hope that the momentum built in the production of this report can continue to grow in 2025. With the Government's current focus on housing delivery and planning reform there is arguably an unrivalled opportunity to push forward with this agenda, but there is a real risk that the needs of the seniors housing market are sidelined by the Government in the pursuit of general market and affordable housing targets.

Court decisions

The environmental impact of planning decisions has been the focus of the most significant planning judgements of the year. While the oil extraction infrastructure project that was the subject of the Supreme Court's decision in R (on the application of Finch on behalf of the Weald Action Group) (Appellant) v Surrey County Council and others may seem materially distinct from living sector development, Finch, together with that of CG Fry & Son Ltd v Secretary of State for Levelling Up, Housing and Communities and another [2024], raises important questions that will have implications for the Sector about the downstream environmental impacts of development and the extent to which, even following issue of a permission, development should continue to be assessed against dynamic environmental baselines. With Fry now set to be finally determined by the Supreme Court, these will be issues to watch as we move into 2025.

A couple of other notable court decisions affecting the living sector or living assets in 2024 are worth a mention. Firstly a December 2023 case from after our annual update last year in which a developer's "build first, apply later" approach to a restrictive covenant against building resulted in the Upper Tribunal declining to exercise its discretion to extinguish the covenants – reinforcing that courts do not look favourably on developers who ignore third party rights. Following an older supreme court decision, the Upper Tribunal considered that the developers' approach was "cynical" and outweighed any arguments in favour of extinguishing the covenant. The decision left the covenant in place and the developer open to a separate claim for breach of covenant – with damages potentially assessed at the value the covenant would have been "bought off" for.

A student accommodation block was the subject of a Supreme Court ruling that failure to serve a statutory claim notice on a landlord did not invalidate a right to manage claim. A1 Properties (Sunderland) Ltd v Tudor Studios RTM Company Ltd considered the consequences of failing to comply with a statutory framework where Parliament has failed to expressly specify the consequence – did Parliament intend the breach to result in total invalidity? The Supreme Court ruled that the focus is on the consequences of non-compliance: the person affected by the procedural omission, and whether their overall position in relation to the claim has been prejudiced. In this case, it did not render the transfer of the right to manage void (i.e. automatically invalid from the outset). Instead, the transfer was voidable: valid, but liable to be set aside at the instance of the relevant landlord or other stakeholder who was entitled to, but not given, a claim notice. Although situations like this will be fact specific, it is useful to see how the courts will approach compliance with statutory requirements given that there are so many (with more as the law develops) impacting the living sector.

The judgment in Triathlon Homes LLP -v- (1) SVDP (2) Get Living plc (3) EVML[2024] - one of the first high profile building safety cases (on which Gowling WLG acted) was given in January 2024. The First Tier Tribunal clarified developer responsibility for funding building safety remediation works under the Building Safety Act 2022.

Our disputes experts have been seeing an increased number of living asset service charge disputes most likely driven by pressure on the cost of services and high-profile media coverage. This trend is likely to continue into 2025.

Prepare for key changes in the living sector in 2025

We have discussed just some of the important emerging legal issues that our clients have been facing across the living asset classes in the last year. 2025 promises to be another year of regulatory change for the sector. To prepare for the upcoming changes in the living sector, subscribe to our mailing list to see further updates and commentary from our Living team.

If you would like to explore any of the issues in this update or discuss with our living sector experts, please contact Dominic Morris or Daniel Leather.