The country’s biggest property developers and investors handed housing minister Caroline Flint a report called ‘The Future of Renting’ at the British Property Federation (BPF) annual conference.
The report is a response to a government review of rental and calls for a radical reshaping of the housing market that would ease the burden by ensuring renewed investment to see new properties come forward, saving thousands of jobs.
“We’re in a ridiculous position where we have increasing demand yet house builders are stepping out of the market because they have nobody to sell to,” explains Ian Fletcher, residential director at the BPF.
“If we had a corporate rental sector here as they do in Europe, it would not only mean continued investment and thousands of extra new homes, it would also ensure that the major house builders had someone to sell their stock to and that the public had the benefits of a branded rental sector.”
With buy to let expansion being hit hard by the current credit crunch, developers want a housing sector to mirror the commercial property market which could see long term lets and thousands of new family homes built by institutions, like pension funds.
The BPF says this would help the wider market by increasing supply and ensuring the same level of choice that consumers have in every service industry apart from housing.
The BPF wants the government to incentivise big investment by:
- widening the definition of affordable housing to allow developers to build market rentals
- give special planning treatment for rental-only developments
- cut unfair stamp duty rules that unfairly penalise large investors
- refine the REITs (real estate investment trust) structure to open it up to housing, as originally intended.
The government’s review of the private rented sector is being undertaken by Dr Julie Rugg, from York University. But with house prices freefalling and transactions having dropped by a third over the last year, the public needs action now.
Liz Peace, BPF chief executive, said:
“Caroline Flint has shown acute awareness of the situation and is clearly keen to work with the industry. The government has a great opportunity here, because councils already have the powers to do what is needed.
“The expansion of buy to let is dead for the time being and the only place we will find the kind of cash we need to build new homes is with the large, long term investors. Rental is up to 40 percent cheaper than ownership, but if ministers don’t take action, we could see rents rise by a third and cost the same as mortgages.
The focus here has to be on the big issue, ensuring that tens of thousands of households of people are able to have a home, without any need for public spending.
Fletcher added: “Councils have it within their power to offer planning treatment to encourage corporate rental development. Over the past decade, the extra number of students, migrants and young professionals seeking housing has far outstripped demand and since 2000, private rental has housed more people than ownership and social housing combined. A corporate rental sector, offering branded confidence and the kind of quantity of new homes we need, makes perfect sense for all sides.”
One key points from the report stated that part of the reason that rents have remained so affordable is that investment in the sector has expanded significantly over the past decade to meet demand. The half-a-million additional people accommodated in the sector has been achieved with only a modest rise in rents. In many parts of the country demand for private rented sector accommodation remains insatiable and that in these areas to meet housing need the sector must continue to expand.
A consumer law approach was advocated in the Rented Homes Bill, drafted by the Law Commission, and while the BPF did not agree with all of its content, its supports its principle that housing law should be akin to consumer law.
In summary the BPF says the private rented sector should:
• be market-based
• continue to expand to meet housing need
• tackle those pursuing bad standards, whilst leaving those pursuing good standards unencumbered
• have costs that are transparent and terms that are jargon-free; an
• pursue a consumer law-led approach, as recommended by the Law Commission.
