It’s for this fundamental reason I believe the buy-to-let market will remain a pivotal part of the environment for many, many years to come.
Understandably, and quite rightly, there is a lot of focus on upping property supply for owner-occupation. There is a wide disconnect between demand and supply, a point proved conclusively over the course of the pandemic as people either looked to make their first forays onto the property ladder or sought to change properties to ones more appropriate for a new work/life balance.
However, that lack of supply is just as important within the context of the private rental sector (PRS), because – whether some like it or not – there is a whole host of people who either can’t get on the ladder via purchasing, or who currently don’t wish to. Where do they live?
It’s increasingly unlikely that they live in social housing, for example. There has been little inclination at government level to increase this and the outlook for the future looks unlikely to change this.
Which means that people who historically would have gone down the social housing route now need to find homes within the PRS and where – as we know – the majority of properties available are offered by private, not corporate, landlords.
Focus on owner-occupier supply
However, this clearly presents some significant problems, because while there is a major focus on increasing owner-occupier numbers, nothing similar exists in the PRS. Indeed, the gap between the supply of PRS homes and the demand and need that we have in this country is growing.
A recent study by Capital Economics, commissioned by the the National Residential Landlords Association (NRLA), looked at what was required within the PRS based on a number of factors, namely the annual growth rates of social housing and owner-occupation, the anticipated growth in UK household numbers, and what is likely to take place within the PRS.
The study came to the conclusion that the UK would need close to 230,000 new private-rented homes to meet the demand each and every year. It’s not a one-off supply push but a regular yearly requirement, which will effectively allow us to stand still.
Policy changes deterring landlords
This at a time when a series 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 the PRS should be able to supply in significant numbers, the focus has been on owner-occupation, and many of the taxation and regulatory measures have actually driven some landlords out of the sector, meaning the requirement grows for greater supply.
Those requirements on landlords are also not stopping. We’ve seen them most recently in terms of EPC requirements. Others will be not so far away – for example, the decent home standards to be met, landlord licensing and registration. Which of course is not to say that this isn’t required, but there has to be an understanding that landlords still need to make a profit on their investment.
The good news for the government is that landlords want to up their investments in the sector. They want to purchase more properties to offer to the PRS. And they want to provide the properties needed.
But there has to be an anticipation that landlords may need supporting just as much as first-time buyers.
Politically this might be a difficult square to circle, as we saw given the criticism aimed at the government when it made the stamp duty holiday available to landlords. However, if we are to see people having the places they need to live, then certain decisions will need to go the way of the PRS.
The housing market in the UK is a complex series of “organisms” – you certainly don’t allow it to thrive by pitting one part against another.
If it is nurtured, landlords will respond and will help meet the gap that clearly exists.
