Can any political party improve property supply?

Originally published by Financial Reporter

Steve Cox, chief commercial officer at Fleet Mortgages, explores why the housing market, and the policies required to move it forward, will play a significant part in the General Election campaign.

So, we are underway and the starting gun has been fired.

In a move which, I think it’s fair to say, surprised the vast majority of people in this country, Rishi Sunak decided to call the General Election and the future of the UK is going to be decided on the 4th July.

It means – at the time of writing – we have five weeks or so until polling day and one would suspect that, at some point, the housing market and the policies required to move it forward, are going to play a significant part in the campaign.

Issues around housing have already been raised, particularly in relation to the housing market younger people currently have access to, and perhaps in light of the Conservative Party’s recent policy on extending the triple lock to pensioners and the reintroduction of National Service.

However, what should be clear to all parties is the need for a greater supply of property within both the owner-occupied space and, of course, in the private rental sector (PRS).

Recent figures from Rightmove show where we currently are and while not overly negative, do reveal we are still a long way short of the supply required to cope with the increase in demand.

According to the property portal, there are now 11% more rental properties available now than there were last year. Any improvement should be welcomed however, at the same time, Rightmove’s data shows we are still 26% below where we were pre-pandemic in 2019.

They say letting agents now get 13 enquiries per rental property, down from 19 last year, but this is still well above the five they were getting in March 2019.

Now, let’s be clear, a lot has happened over the last five years, particularly in the housing space and the pandemic undoubtedly had a severe impact, but it’s also fair to say that since the end of lockdown, the gap between supply and demand in the PRS has not narrowed enough.

It means that, as shown above, many would-be tenants are chasing limited numbers of properties, and we must also highlight the taxation policies on landlords, plus the increase in the cost of mortgages, in order to get to a point where we might understand why rents have risen in order to counter this.

Overall, again according to Rightmove, we would need 50,000 more rental properties in order to get back to pre-pandemic levels, not forgetting the fact our population continues to grow and the requirements for PRS property supply of course grow with that population increase.

Are we likely to see any political party able to grasp the nettle on this, or will we continue to see a continuation of the policies we’ve had over the last decade which prioritise owner-occupation and seek to improve supply by diminishing it in the PRS?

It would seem obvious to all that such policies have not worked, and have effectively cut the number of PRS properties, while at the same time, not making it any easy for would-be first-time buyers to get on the ladder.

In fact, you could quite rightly argue, that new purchasers – particularly those without a Bank of Mum & Dad to lean on – have also suffered greatly from such policies, in that PRS supply (and all those other factors) have resulted in them having to find greater amounts of rent, which impacts on the ability to save for a deposit.

Ours, as we have repeatedly said, is a system of housing which is intertwined to the nth degree, and if you push and pull – in policy terms – in the PRS, then you not only impact it, but you also impact owner-occupation.

The big question, both over the next five weeks and well into the future, is whether any political party is able to sort this, and to identify tangible ways and means by which we can improve property supply for all.

We are constantly told we need 300,000 new homes to be built every year but that is just for owner-occupation. We also, according to Rightmove, need 50,000 new PRS homes, but that’s just to get us back to 2019. To say it’s going to require a huge push to achieve anywhere near this is an understatement, and you have to wonder whether any new Government has the firepower, or even the urge, to deliver it.

Somewhat perversely, I am actually looking forward to what the party’s policies are going to be in this area. It may well require some outside the box thinking, or a combination of this and hopefully a recognition that punishing PRS landlords, or trying to get them out of the property market, is probably not the best way to improve supply and make rents more affordable.

It sounds obvious to us, but has clearly not been obvious to politicians in power for a while. If this is a message which can get through then we might just have a chance to get the supply we need. I am ever optimistic but might think somewhat differently when the manifestos are actually published – we wait with interest to see what happens next.