Dear Prime Minister
The Private Rented Sector provides accommodation for nearly a fifth of all households in the UK. As house prices continue to rise, working patterns become more fluid, and social housing stock supply continues to fail to meet demand, this sector is only going to become more crucial to meet the needs of a growing population.
According to the latest Rental Price Tracker by Rightmove, private rents are growing at their fastest annual rate in 16 years, with the cost of renting increasing by nearly 12% outside of London and 15% in London in just 12 months.
The driving force behind these rental increases is, of course, supply and demand. The number of people requiring housing and looking to the Private Rented Sector to bridge that gap exceeds the number of available properties. At the same time, government policy in recent years has layered additional tax burdens and regulation on top of landlords, leading many to sell property to reduce their portfolio, and some to leave the market altogether, whilst also discouraging new landlords from entering the market. Reports recently identified that there were half as many rental properties available through letting agents in March 2002 compared to March 2019. In the meantime, the Government’s annual target for housebuilding has been missed again, with only 180,000 houses being built against the target of 300,000 in 2021.
The result is that, while demand for rental property is growing, the supply of available properties has been strangled. Not only does a market of demand exceeding supply create price inflation, but it can also reduce the standard of property available to rent. With so much demand for every property, there is little incentive for landlords to invest in renovations and improvements.
We think it’s time for government policy to acknowledge the important role those private landlords play in meeting the housing needs of this country’s growing population, and to strip back some of the barriers that have been placed upon them in recent years. Encouraging new landlords into the market, and existing landlords to grow their property portfolios may potentially take some properties out of the first-time buyer market – but it will instead place them into the Private Rented Sector; these properties often offer the most affordable rents and can help first time buyers have their first home whilst saving a deposit for their first property purchase. A stripping back of some of the current disincentives will help to increase the supply of rental property and, as with any market, greater competition helps to raise standards and put downward pressure on pricing.
This is absolutely vital if this important source of housing stock is to continue to help meet the increasing accommodation needs of the country.
How do we encourage greater investment into the Private Rented Sector?
Any such strategies need to align with wider economic strategy, and shouldn’t be considered in isolation; a package of changes and improvements should be part of a full, coherent strategy. However, a good place to start will be to put a freeze on implementing any new burdens for landlords. In recent years, property investors have had to absorb a string of tax changes and additional regulation. A period of calm, where this is not the case, will help to give those investors greater confidence to buy new property and should encourage increased availability of stock in this sector. New policies to encourage property investment, will expediate this growth, of course, but at the least a period of calm will settle landlords, which will also benefit renters.
Yours sincerely,
Barry Searle, managing director of property at Castle Trust Bank