Rather than bashing buy-to-let landlords, we should help them to flourish
Comment: Landlords should be encouraged to buy – and build – more properties to ease the shortage of housing
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12:26PM BST 06 Jun 2014
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The private rented sector is a great British success story. It’s the fastest-growing part of the housing market, doubling in size over the past 20 years and expected to more than double again over the next two decades. This growth is desperately needed to keep up with the demand for new homes as house prices rise and public investment for social housing is squeezed.
But it’s not just about the housing shortage: renting is a genuinely popular choice. The vast majority of private renters are happy with their home, with tenant satisfaction levels outpacing those in the social sector. And rents are increasing by less than inflation, according to the latest official figures – even in London, where properties are in the greatest demand.
Yet instead of celebrating these successes, there are increasing calls from some for more regulation of the rented sector. Read some of the proposals for compulsory licensing schemes, or for rent controls, and you could be forgiven for thinking that war had been declared on the British landlord.
These populist messages, calling for a crackdown on the private sector and ranging landlords against tenants, are divisive and unhelpful at a time when landlords need more encouragement and support, not less, to provide the new homes the nation so badly needs.
Of course, that’s not to say we don’t need rigorous enforcement for the small number of poor landlords who bring the sector into disrepute. But for the vast majority, already facing layers of regulation built up over years, a more flexible approach, coupled with a level financial playing field, would encourage them to invest in new property and so increase the choice on offer for tenants.
The Government has already recognised the importance of expanding the rented sector. Encouraging more institutional investment, as it wants to do with its £1bn build-to-rent fund and £10bn debt guarantee scheme, is one route.
But it will be just as important to support the 89pc of individual private landlords who control almost three quarters of our private rented stock. Most are only part-time landlords and most have just one property that they rent out – but we know that many of them would like to grow their rental businesses if they could.
If we could encourage just a tiny percentage of this army of small landlords to invest in another home or two, we could provide thousands more homes for tenants who need them.
So what will help them to do that? First, we need a more flexible tax regime, which addresses some of the inequities that mean private landlords are treated less favourably than owner-occupiers and the social housing sector. Measures such as rolling over capital gains tax when sale proceeds are reinvested in a rental home, a fairer treatment of capital expenditure on repairs and improvements and VAT relief on substantial work would all help landlords to invest to improve standards.
They would create a more dynamic market, boost the economy through spending on construction and refurbishment – and bring in more revenue for the Treasury through increased turnover of properties.
We’d also like to see more help for smaller landlords who want to develop newbuild schemes for rent. They could make good use of small plots of public-sector land or empty buildings that wouldn’t appeal to bigger developers, perhaps with the public owner retaining an interest in the land and a covenant ensuring that the new buildings remained as rental properties for at least 10 years.
Councils would not only gain a new-homes bonus but also council tax revenue, and new homes transform eyesores of derelict land. All at no public expense.
And we’d like more flexibility over turning houses into small shared homes. It’s argued that the rules in this area are needed to prevent areas becoming student “ghettos”. Yet in many locations shared houses, ideal for younger professionals and key workers, make an effective use of our housing stock.
We’d urge politicians to turn their back on the calls for rent control and more regulation, both of which would discourage rather than encourage the investment we need. Instead of a populist stampede towards more red tape, we need a streamlined regulatory system that enables effective enforcement where it is really needed.
In that way we will see a sector that increases at a healthy rate, the best way of driving up quality and choice for tenants.
A growing private sector has a key role to play in tackling the housing shortage. Rather than bashing private landlords, we should help them to flourish. That will be good news for tenants and landlords alike.
Alan Ward is chairman of the Residential Landlords’ Association
Alan Ward is chairman of the Residential Landlords’ Associationhttp://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/10878209/Rather-than-bashing-buy-to-let-landlords-we-should-help-them-to-flourish.html
