Housing crisis

Homeowners need the same support as buyers to solve the housing crisis – Cox

“People need places to live.” It’s a phrase I use a lot, and some might think it oversimplifies the problems of the UK property market, but in summary, that’s essentially what we’re providing.

It is for this fundamental reason that I believe the buy-to-let market will remain a central part of the environment for many years to come.

Naturally, and rightly so, the focus is on increasing the supply of properties for owner-occupiers. There is a big disconnect between demand and supply, a point that has proven conclusive during the pandemic as people seek to make their first forays on the property ladder or look to switch properties for properties more appropriate for a new work/life balance.

However, this lack of supply is just as important in the context of the private rental sector (PRS), because, whether some like it or not, there are a whole lot of people who either cannot climb the ladder via the purchase, or who do not currently wish to. Where do they live?

It is increasingly unlikely that they will live in social housing, for example. There has been little will at government level to increase this and future prospects seem unlikely to change this.

This means that people who historically would have taken the social housing route must now find homes in the PRS and where, as we know, the majority of available properties are offered by private landlords, not companies.

Focus on the owner occupant offer

However, this clearly presents significant problems, because while the focus is on increasing the number of homeowners, nothing similar exists in the PRS. Indeed, the gap between the supply of PRS housing and the demand and needs that we have in this country is widening.

A recent study by Capital Economics, commissioned by the National Residential Landlords Association (NRLA), looked at what was required in the PRS based on a number of factors, namely the annual growth rates of social housing and occupancy, the expected growth in the number of households in the UK, and what is likely to happen within the PRS.

The study came to the conclusion that the UK would need nearly 230,000 new private rental properties to meet demand each year. This is not a one-time supply surge, but a regular yearly need, which will effectively keep us standing still.

Policy changes deter landlords

This at a time when a range of factors have put pressure on the sector as a whole and landlords in particular. It seems somewhat ironic that when it comes to affordable housing, for example, which PRS should be able to provide in significant numbers, the focus has been on owner occupancy, and many measures taxation and regulations have actually driven some owners out of the sector, which means that the need is growing for more supply.

These demands on the owners also do not stop. We have seen them more recently in terms of EPC requirements. Others will not be so far – for example, decent housing standards to be met, licensing and landlord registration. Which of course does not mean that it is not mandatory, but it must be understood that owners must always make a profit on their investment.

The good news for the government is that owners want to increase their investment in the sector. They want to buy more properties to offer to the PRS. And they want to provide the necessary properties.

But it is necessary to foresee that the owners will perhaps need as much help as the first-time buyers.

Politically, this could be a difficult square to circle, as we saw given the criticism leveled at the government when it made the stamp duty holiday available to landlords. However, if we want people to have the places they need to live, some decisions will have to go in the direction of the PRS.

The UK housing market is a complex series of ‘bodies’ – you certainly don’t allow it to thrive by pitting one side against another.

If serviced, owners will respond and help close the gap that clearly exists.

Steve Cox, Commercial Director at Fleet Mortgages