These have tended to focus on the cost of renting, with examples of tenants paying two years’ rent upfront in order to secure a property, or tenants being asked to write down what would be the maximum rent they would pay, with the ‘winner’ being who will pay the most.
Clearly, this is not ideal and in some ways feeds a ‘greedy landlord’ narrative that portrays them as ‘bad’ and tenants ‘good’, with all that this entails.
What I believe it does clearly show however is that if you disincentivise investment in the PRS, if you vastly increase the taxation and economic burden upon landlord investors, if you make it highly unprofitable to own one or two rental properties so that those landlords simply sell up and exit, then you have a sizeable impact on supply.
Add in the considerable demand for property against this falling supply, and you reach a logical economic point where rents rise, and where in highly popular and with highly sought-after areas/properties, you are going to have these types of practices which I’m afraid are not going to favour the ‘average tenant’.
This, of course, hasn’t happened overnight. The policies I talk about above have been with us for years, and while there is clearly a cohort of existing landlords who want to add to portfolios, and are for the most part, still able to do this, there are those investors who can’t get a foothold on the ladder to be able to add to supply.
And ‘amateur landlords’ were effectively shown the door by the introduction of these measures, which I suspect has taken a vast amount of supply out of the PRS. Let’s be honest, is going to take a long time to backfill these lost homes, let alone what we will need going forward.
PRS needs more supply
Which brings me to this. Back in February, Capital Economics suggested that the UK would need 230,000 new rental homes to meet demand; I would suggest that three months on, that number has increased considerably.
Oh, and by the way, the 230,000 figure is every year, not over a five or 10-year period, so you can see why rents are on the rise, why rental yields are rising, and why both purchase and remortgage finance is in demand in order that landlords might begin to start meeting the demand that is out there.
Housing supply is of course an issue right across the board. The fact we have nowhere near the number of properties we require, gives rise unfortunately to an owner-occupier versus landlord ‘battle’ that continues to be waged. With no winner ever likely to be found; indeed, everyone is a loser.
So, as house prices continue to rise, there has to be a recognition that not only do first-timers, for example, need support to get onto the ladder, but that the PRS needs to be thought of again as a highly-important sector for those people who can’t, or don’t want to, buy.
Incentivise and unshackle landlords
People need places to live, and like it or not, with social and council housing being pretty much non-existent, the PRS is going to need to do a lot of the heavy lifting. Releasing some of the shackles on landlords, particularly on stamp duty but potentially around the cost of running a property, would undoubtedly act as an incentive to existing landlords to invest further, and might bring in some badly needed new blood and increase supply.
But, if we do continue on the same path, then expect more tenant ‘horror stories’ and more chance that unscrupulous operators will thrive as they seek to take advantage of tenant desperation.
