The Government must urgently deliver 1.8 million new rental homes for UK families, as new figures show a sharp drop in the number of available properties. New figures show an ailing rental sector that cannot keep up with predicted demand.
With rising house prices making home ownership increasingly unaffordable, it is predicted that by 2025, 1.8 million more households will be looking to rent, rather than buy. However, new RICS figures show that 86% of landlords have no plans to increase their rental portfolio this year – with that trend set to remain for the next five years. Additionally, a net balance of 58 per cent of RICS estate agents have reported a drop in buy-to-let sales since May.
The number of UK households renting property doubled from 2.3 million in 2001 to 5.4 million in 2014. However, earlier this year, the Government took measures to dampen the demand for buy-to-let investments by making changes to the Stamp Duty threshold. This has further reduced supply, arguably making a 2025 rental supply crisis more likely. The problem is expected to be exasperated next year when landlords’ right to deduct their mortgage interest from their income tax bill is removed.
We need more houses
RICS urge the Prime Minister to abandon David Cameron’s previous home ownership focus and reverse April’s Stamp Duty measures in order to address short term rental supply issues. However, they are recommending that Government takes a much bolder long-term approach and pioneers a new build-to-rent sector, with the private sector encouraged to build properties specifically for residential letting. It would like to see pension funds incentivised with tax breaks to build large scale rental properties with affordable elements. Additionally, local authorities holding brownfields sites should be encouraged to release land for such properties.
What do the experts think?
Grainger PLC is the UK’s largest residential property owner and manager listed on the London Stock Exchange. With a portfolio of circa. 9,000 existing rental homes across the UK, earlier this year, Grainger set out a plans to invest a further £1 billion into the rental housing market through build-to-rent. So far, the company has secured £268 million investment in the sector, which will deliver some 1,200 new homes to rent.
Build-to-rent can help the Government in five simple ways: (1) by increasing housing supply; (2) by delivering more quickly than other traditional house-building models; (3) through creating new jobs and contributing to town centre regeneration; (4) by providing a better deal to customers including more stability; and (5) by supporting greater flexibility in the labour market.
We have an ambitious plan to invest over £1 billion by 2020 in high quality, long term rental housing. In order to support us in this ambition and many others with similar plans, the Government should recognise the important role we have to play and explicitly support build-to-rent in its policies. Importantly, the Government could ensure the planning system and regulatory red-tape does not hold back investment, and it should ensure that it does not inadvertently penalise large scale investors through tax measures such as the SDLT 3% surcharge on second homes, which discourages large scale, institutional support for new rental homes in the UK.
Helen Gordon, Chief Executive of Grainger plc said “We call for the Housing Minister to adopt the existing voluntary Private Rented Sector (PRS) Code, which would regulate both the build-to-rent and buy-to-let sectors and protect the most vulnerable renters.”
Jeremy Blackburn, RICS Head of UK Policy added “It’s time for Theresa May to get out her hard hat. We are facing a critical rental shortage and need to get Britain building in a way that benefits a cross section of society, not just the fortunate few.
“Our latest figures show that there has been a 15% decline in house sales to first time buyers over recent months. That tells us that for all the rhetoric, David Cameron and George Osbourne’s Starter Homes Strategy failed to get off the ground.
“The Private Rented Sector became a scapegoat under the previous Prime Minister, and because of that it suffered. Yet with increasingly unaffordable house prices, the majority of British households will be relying on the rental sector in the future. We must ensure that it is fit for purpose, and the Government must put in place the measures that will allow the rental sector to thrive. Any restrictions on supply will push up rents, marginalising those members of society who are already struggling.”