Excluding and penalising landlords will not solve the housing crisis

Originally published by Mortgage Solutions 

One of the arguments often aimed at landlords within the private rental sector (PRS) recently is that the increases we are seeing in rents is all down to ‘greedy’ participants who are simply upping their profits while, presumably, their costs stay the same.

To say this is nonsense is one thing, but to not look behind the reasons why rents have gone up is simply inexcusable, not least because of the increased costs placed upon landlords and the supply/demand imbalance that is driving these rental increases. 

Many critics often ask the sector to justify these facts.

Strained rental supply 

The supply/demand imbalance has been somewhat more difficult to prove, but recent research from the National Residential Landlords Association (NRLA) via Capital Economics highlights in great clarity what we are currently facing, and it is not pretty, particularly if you’re a tenant looking for an affordable property to rent. 

The research shows that “if owner occupation and social housing continue at their typical rate of growth, the PRS supply would have to increase by 227,000 homes per year to meet government targets”. That’s to house an anticipated 1.8 million new households over the next 10 years. 

The other key stat to come out of the research comes in the form of what might happen to PRS stock if there are no changes to the environment in which landlords currently find themselves. 

It has been easy to do this on the increased costs front – we could genuinely start with the recent increase in mortgage costs, but we can also highlight costs to improve the EPC levels of properties. Plus, many landlords need to be licensed, plus greater costs in terms of ongoing insurance, against a backdrop of phased-down mortgage interest relief, plus the increased costs of stamp duty if the landlord wants to buy a property in the first place. 

Capital Economics estimates PRS stock will reduce by about 500,000 properties over the next 10 years, and it argues that the sector needs changes in tax or other policies if it’s going to hold on to this stock. 

There needs to be change 

This will undoubtedly continue to hit tenants hard. It’s why many within, and around, our sector are calling for more focus on the PRS, particularly when you factor in the anticipated increase in the UK population we are going to see over the same period.

A 200,000-plus shortfall each and every year will only drive rents up further, taking properties out of the reach of many and making what are currently affordable dwellings, unaffordable for large numbers. 

So, what next? Well, as we know, we have a general election this year.

Whoever wins that needs to understand the importance of the PRS, how it fits together with the owner-occupier sector, and how both are reliant on each other to ensure we do not continue to have property falling out of the PRS, because this makes renting unaffordable, and the ability of tenants to afford to buy in the future even more difficult.

The rental market is vital 

A focus on housebuilding has to be not just build to own but build to rent, and in my view, there has to be an acceptance that landlords are not the devil incarnate and, given the right environment, can help bring more supply into the market, but that they can’t do this if their costs are going to dwarf their incomings, or it is simply not profitable to add to portfolios in the first place. 

From our experience, landlords want to invest, they want to be more active, they want to help service the supply/demand gap, but they can’t do this if they feel that more tax-related pain is coming over the horizon, or the control they have over their portfolios/properties may be taken away – for example, via rent controls. 

Joined-up thinking has been in short supply.

If there can be a meeting of PRS/owner-occupier minds and if, importantly, we can get to work on making social housing a ‘thing’ again, then we have a better chance of securing the number of properties we require, providing options to all, and keeping down the cost of renting a property to affordable levels.