Campaigns Finance and Taxation Reform

The RLA’s Manifesto: Boosting Housing Supply

Boost housing supply

Recent government policy has undermined the confidence of private landlords.

To date, the Government has focused on encouraging institutional investors to develop new rental properties using mechanisms such as loan guarantees and the Build to Rent Fund. Whilst we welcome all efforts to boost housing supply, institutional investors are simply not providing the homes at the pace and scale that the Government had hoped. In a report last year, the London School of Economics noted that “even if institutional investors enthusiastically enter the market, individual landlords will remain dominant – as they are across Europe.”

Institutional investment, where it happens, is also largely focused on major cities, neglecting the need for more homes to rent in small towns and rural areas.

The private rented sector has a proven record at meeting the expanding demand for housing. According to the English Housing Survey, it accounted for 83% of the new dwellings created between 1996 and 2013. We call on the next government to work with individual landlords to develop a clear strategy to boosting the supply of new homes.

A series of tax changes have targeted landlords, in an attempt to boost home ownership and help first time buyers.  Instead, the measures have stalled the whole housing market, with ARLA, RICS and CML all reporting a lack of homes for sale and to rent.

Nor have these tax changes made things easier for tenants, with landlords seeking to recover losses through a combination of increased rents, reducing maintenance spend, selling properties and switching to short-term letting.

The RLA has long raised concerns about the likely impact of these changes, with our research last year finding:

  • 66% of landlords do not plan on purchasing any additional properties for their portfolio.
  • 58% of landlords have considered reducing investment in their portfolio because of finance and tax changes.
  • 66% of landlords plan to increase rents to offset the impact of taxation changes.

A number of other studies have since found supporting results. This includes a paper by Davis Miles, Professor of Financial Economics at Imperial College London and a former member of the Bank of England’s Monetary Policy Committee, that warns that rents would need to rise between 20% and 30% for landlords to cope with the tax rises they are about to face.

The new government needs to support independent private landlords investing in housing by revisiting these damaging tax policies.

The introduction of a 3% surcharge on SDLT rates on the purchase of second properties looks set to deliver a huge cash windfall for the government – an additional £1 billion in 2016/17 alone and £3.1 billion more than expected by 2021. Combined with MIR restrictions, there is a danger that private landlords become a cash cow for the Government, rather than key suppliers of badly needed homes to rent.

The RLA believes that the restrictions on tax relief for finance costs introduced in April this year are wrong and should be reversed. At the very least they should be applied only to new borrowing for new purchases, using the SDLT windfall.

The Government could use the tax system to go further to promote investment by independent private landlords, boosting overall supply:

  • Use of rollover relief for capital gains when re-invested in new build property, or when sold to the occupying tenant or first time buyer.
  • An exemption from the additional SDLT charge for investment in new housing supply.
  • VAT relief for build-to-rent

Private landlords have a good record of investing in new homes and bringing buildings back into residential use.  This includes building homes to rent on small plots that are of little interest to corporate developers, but can blight communities. These plots are too small to be of interest to corporate developers and they are often left empty, becoming unsightly and magnets for anti-social behaviour in community. Smaller developments can often be more appropriate and accepted by local residents, while large developments are more likely to receive greater objections.

The need to focus on small plots of land in this way was highlighted most clearly in the recent joint report on the subject by the Local Government Information Unit and the Federation of Master Builders, which noted that “we will not build the homes we need in the UK on large sites alone”.

The Housing White Paper only refers to plots being made available for self-builders to build a single home for their own use. The RLA believes that this scheme should be extended to allow landlords to access plots to self-build houses to rent.

Our own research has identified:

  • 46% of landlords would be interested in developing on small brownfield sites.
  • Of which 52% would be interested in developing up to 10 homes on a site.

The RLA proposes that public bodies such as councils, the NHS and central government departments should be encouraged to identify small plots of surplus public sector land for development for up to 10 units of rented housing.

Such a policy would increase would increase the availability of rented homes, support small, local builders and generate revenue for public bodies.

For more information:

Landlords and members of the public are now able to contact their local candidates through the RLA’s contact your candidate page here.

Contact your candidates General Election 2017

About the author

Dr Tom Simcock

Dr Tom Simcock

Tom is the Senior Researcher for the RLA and leads the RLA’s research lab; the Private renting Evidence, Analysis and Research Lab (PEARL). His expertise lies in researching change in society, public policy and quantitative and qualitative research methodologies. Tom’s research on housing has received national media coverage, featuring on the front page of The Times, has influenced government policy making, and has been cited in debates in the House of Commons, House of Lords and by the London Mayor.

1 Comment

  • I have created two new apartments from a semi-derelict building inLiverpool. No large developer would take the time and effort to get all the permissions to develop the property.

    The investment I have made would not be worth while without the interest mortgage relief, which will soon be removed.

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