Lord Flight is Chairman of Flight & Partners Recovery Fund, and is a former Shadow Chief Secretary to the Treasury. This article was first published on Conservative Home here.
In the Party’s manifesto for the next five years the future of the important private rental market got scant attention. But if we are to deliver on the ambitious target of 1.5 million new homes by 2022, we need a vibrant and growing private rental market.
A fifth of all households are in the private rented sector, with PwC expecting that this figure will need to rise to a quarter by 2025.
Demand is set only to increase as a result of continuing difficulties for many in accessing home ownership, lengthy social housing waiting lists, and a genuine preference by a growing number for the flexibility which private renting provides.
In its housing white paper the Government has committed to encouraging institutional developers to build the rental homes we need. But it fails though to provide the support needed to the individuals and small businesses who make up the vast majority of the country’s landlords.
These include those natural Conservative supporters who, having seen their pensions hit by Gordon Brown, decided to invest instead in residential property for their retirement income.
Arguments that private renting is too expensive, insecure for tenants, and insufficiently regulated to sustain good standards do not stand up.
The English Housing Survey shows that the average length a tenant has been in their private rented home has now increased to over four years. The Office for National Statistics has shown that in the year to April 2017, private sector rents in Great Britain rose by an average of 1.8 per cent, below the rate of inflation at 2.7 per cent over the same period.
In respect of regulatory enforcement, the Residential Landlords Association has calculated that there are over 400 regulations affecting the sector. The issue is not about the sector not being regulated, but about those regulations being too many and so not being properly enforced.
The most effective way to ensure rents are affordable, and that tenants are able to exercise genuine choice over their housing needs, is to boost the supply of homes to rent.
To achieve this, the Conservative Party in Government after 8th June needs to ditch the ill-conceived tax hikes on private rented homes which are stifling investment – as anyone could have predicted.
The decisions to impose a stamp duty levy on the purchase of homes to rent out, coupled with restricting mortgage interest relief to the basic rate of income tax and the decision to tax a landlord’s turnover rather than profits, are causing many landlords simply not to invest further in much needed new homes to rent; or even to consider leaving the sector altogether.
The latest figures from the Council of Mortgage lenders shows that buy-to-let purchases fell by 80 per cent in March compared with the same month last year.
Why does this matter? First of all, for the foreseeable future, the private buy to let market needs to be the main provider of the additional housing units needed.
At the same time that Conservatives are committed to helping tenants to afford a home of their own, the tax changes will, when landlords begin to meet with their accountants next year, see rents rise making saving for a deposit even harder. David Miles, a former member of the Bank of England’s Monetary Policy Committee, has warned that landlords would need to increase rents by between 20 per cent and 30 per cent per cent to offset the impact of the tax increases.
The mortgage interest restrictions need to be scrapped, and the stamp duty levy needs also to be cancelled where a landlord invests in a new property, brings an empty home back into use, or converts disused office or retail space into homes. It is perverse that this tax actively discourages investments in the much-needed new homes that add to the net supply of housing.
A programme that brings small plots of unused public sector land into use for homes to rent needs also to begin, alongside the sale of larger sites. Local landlords developing on such sites are more likely to use the local SME builders whom we rightly seek to champion. As a report by the Local Government Information Unit and the Federation of Master Builders has previously noted: “we will not build the homes we need in the UK on large sites alone.”
To tackle the housing crisis we need more homes of every tenure. That is why the next Conservative Government must recognise and perceive the private rental market not as a problem to be attacked but as an opportunity to secure the homes we need.