However, one of the ways this could be achieved is to help increase the supply of homes to the private rental sector (PRS) because with levels of supply so low and demand so high, tenants have little choice.
You’ll have all heard the horror stories over the last year in terms of tenants having to queue outside properties, shortages of properties in university towns and cities, letting agents renting out homes before they’ve even been advertised, tenants having to pay rent upfront – sometimes a year ahead. Plus, tenants accepting less than satisfactory homes because there are no alternatives.
Lack of supply the root issue
This all comes back to a lack of supply, and it might well surprise those who are on the outside looking in, that it is a direct result of government policy introduced over the last decade.
As advisers will know, the government in that time has followed what can only be described as a first-time buyer versus landlord policy. One which has been wholly effective and resulted in huge swathes of supply being taken out of the PRS, at a time when demand has continued to increase.
It was decided by David Cameron and George Osborne’s government that buy-to-let had been allowed to run too far, too fast. That landlords were hoovering up all the available property, and first-time buyers had little to no chance of securing the properties that were coming to market.
Therefore, cuts to mortgage interest tax relief were phased in and stamp duty for landlords sharply increased, all in a series of policies designed to disincentivise landlords.
However, what it failed to do was understand how reliant the PRS was on the housing stock provided by small or accidental landlords, and how making it more difficult to make a profit would impact their ability to keep invested, and how important the PRS was in servicing the UK’s housing needs.
The housing gap was about to get a whole lot bigger.
First-time buyer handover
You might say, if landlords have left the sector, then these properties have been bought by first-time buyers and therefore it’s been a roaring success.
Yes, this has happened, but there will always be those who can’t buy or don’t want to. Where do they live in a market with falling supply?
Plus, we have seen a huge increase in the number of individual households as well. For example, according to the Office for National Statistics (ONS), the number of people living alone in the UK has increased by 8.3 per cent over the last decade, and there are now an estimated 28.1 million households in the UK, an increase of 6.3 per cent over the last 10 years.
So, effectively what has happened is that demand for PRS property has grown – due to these demographic factors and the ongoing nature of UK living and housing – just at the time when government policy took much-needed supply out of the market.
Zoopla suggests the stock of homes to rent is now down 46 per cent versus the five-year average.
Hence why we have seen rents going up, by a lot, plus, of course, with the cost of mortgages for landlords rising as well, this is a double-whammy for tenants.
Where do conveyancers come in?
So, why is this of interest to conveyancers? Well, like advisers and other property stakeholders we live by the transactions we work on, and it’s been clear that landlord purchase activity has been going down just when the need for a greater level of supply is becoming more acute.
It will not be universally popular, but there is surely now an argument for the government to relook at those policies which have resulted in landlords selling up or not investing? The policy worked too well, and it needs to be pulled back to give tenants more choice.
Just recently, a petition was launched asking the government to reinstate tax relief allowing mortgage interest to be set against rental income – you can view it here. At the next Budget, there are likely to be further calls for the government to stop the additional stamp duty charge for landlords.
Both have done what they intended, and we now need to up the number of rental homes.
The government would like corporate entities to do this via large-scale developments, but as in those for homeownership, they are not being built in large enough numbers and therefore the market needs private landlords to be purchasing again and bringing in the supply required.
If this can’t be achieved, then the situation for tenants is only going to get worse.
