Last year Landlords sold 35,000 more properties than they bought, according to data from Countrywide. Soaring mortgage costs, tax changes and greater regulation within the sector have made buy to let a progressively unattractive proposition.
A Propertymark report found the number of properties available to rent through lettings agents in March halved between 2019 and 2022. And of those rental properties sold in March of last year, over half failed to return to the private rental market. It’s little wonder therefore why the available rental stock has fallen by 33 per cent since the pandemic, with London worst hit, suffering a 41 per cent decline.
The drop in stock has inevitably pushed up prices for prospective tenants. A report by Savills and the LSE has found asking prices on lettings are now 20 per cent above their pre-Covid level. At the start of this year, there were still four postcodes in London with average room rent below £700pcm — now there are none.
Unfortunately, no silver bullet will instantaneously reverse the shortage in rental listings – even the government seems out of ammunition altogether. As the data above reveals, the heavy hand of government is spooking landlords, and rightly so. Proposals in the new Renters Reform Bill would allow tenants to give notice very soon after beginning a new tenancy. Landlords would lose hundreds, perhaps thousands of pounds, spent on marketing, inventories, letting fees and other costs, having to start the whole process again for a new tenancy.
The Government is also planning to scrap Section 21 eviction notices, providing indefinite security of tenure for the tenant. In essence, the government’s proposal would allow the tenant to quit the tenancy at any time, but the landlord would only be allowed to quit the tenant to sell the property. Surely this isn’t fair? Landlords dealing with anti-social tenants would be forced to rely on Section 8 Discretionary Grounds for possession which could hit landlords with additional legal and court costs to determine the outcome.
If mortgage lenders see no quick and certain method through which landlords can regain control of their properties, then they will quit the sector and investment will dry up. For a country that desperately needs growth, these rental reforms are certain to be a recipe for chaos and further decline.
Moreover, as landlords abscond, tenants will be saddled with higher rents and fewer choices to relocate. The government faces a difficult balancing act between offering additional security to tenants and preventing landlords from fleeing the sector. At the moment the scales are firmly tipped in one direction and tenants will pay the price.
But solutions don’t just lie in the private sector. The UK needs more social housing and most voters from across the political spectrum agree. Among people who voted Conservative in 2019, 71 per cent say they concur the UK needs more social housing, with 82 per cent of those who voted Labour thinking the same. But the simple truth is enough isn’t being done. The Government have earmarked £11.5bn over the next four years for its new Affordable Homes Programme, which it says will “deliver tens of thousands of homes for rent and sale right across the country.” But the government will spend nearly five times more on housing benefit (£58.2bn), paid directly to landlords in rent subsidies.
While homeownership should always remain a primary aspiration, the simple truth is more social housing will reduce costs for tenants and dramatically cut the nation’s housing benefit bill, which is higher than the budget enjoyed by most government departments. This cannot continue.
Like most areas of housing policy, it is the young who will suffer most. In February a poll by Blue Beyond, a young conservative initiative, found 72 per cent of young people believed government housing policies had not served the interests of young people. While 2 in 3 who responded to their survey, said they spent up to half of their income on rent. For the government, housing is central to repairing its fractured relationship with younger voters and it’s doing little to capitalise on that opportunity.
The Government have successfully manufactured a perfect storm: a chronic shortage of social homes and an overregulated private sector. And things are worse still in the residential sector with the Government abandoning building targets and soaring mortgage costs pricing a generation out of home ownership. Despite all this chaos, things are expected to get worse, long before they get better.
