Campaigns Opinion

How the PRS can solve the Housing Crisis

Alan Ward
Written by Alan Ward

Research by The Resolution Foundation has shown the biggest falls in home ownership of over the last 10 years. The alternative is renting. Why do governments see this as a bad thing?

George Osborne – the previous Chancellor – put the blame for this trend on private landlords. His argument was that landlords are buying properties that would otherwise be available for aspiring home owners.

That has been denied by the LSE (London School of Economics) which says “only a minority of sales to landlords involved bids from both types of buyer.”

Landlords are more likely than owner-occupiers to buy properties which are often in a bad condition to do them up and are in areas not appealing to house buyers. Despite this, the last Government went on a cash-grab by increasing taxes on landlords to deter further growth of the buy to let market. Government needs to back down on its decision to tax landlord’s income and not profit. No other business is taxed on this basis

Now there is the prospect of landlords having to stump up as much as £5,000 for energy efficiency improvements to their properties. With one-in-three PRS properties already 100 years old, landlords are the owners most likely to face the cost of improvement with no incentives.

The big issue is not about more housing – but who funds it? Despite government targets for a million new homes by 2021, based on corporate investment, it is surely short-sighted to ignore the contribution we make as private landlords. In the face of this, the impact of the Government’s tax changes will be to deter investment by landlords in new homes to rent. With rising demand rents will rise as shortages increase and landlords seek to recoup the extra costs being imposed on them. Either way, it is tenants who will suffer.

As a start, this government could drop the new levy on stamp duty for the purchase of homes to rent where a landlord is adding to the overall net supply of housing. Landlords can and do build new homes – but we don’t get the 20% VAT reclaim. We bring empty properties back into use and convert large homes into smaller self-contained units. It cannot be right that the Government has a policy that actively discourages the development of new homes by individual landlords.

To help tenants to buy their rented home, government could cut landlords’ 28% Capital Gains Tax to 20% paid by all other businesses when a house is sold to a tenant.

Rather than mega corporate schemes which need infrastructure, and long planning processes, thousands of landlords are ready to develop a few properties each which would mean a huge boost to supply. These homes are likely to come on-stream far faster than those planned by large, clunky institutions.

Much of the Government’s focus has been on attracting big institutions to develop swathes of rented accommodation supported by a £1 billion build to rent fund and its £3.5 billion debt guarantee scheme for the sector. The evidence has shown these institutions have failed to step up to the plate.

The private rental market is good for Britain. It supports and enables a flexible labour market and provides much needed housing for those who have yet to buy or may not want to.

Changes to current policies are urgently needed to support tenants wanting somewhere to live that gives them with a chance of saving for a home of their own. Landlords have a good record of investing in homes to rent. We create new homes faster than any other housing tenure and there is an army of us waiting to invest.

About the author

Alan Ward

Alan Ward

Alan is the Chairman of the RLA. He has been a landlord and property developer in the PRS since 1993, became a founding director in 1998, and has been the RLA chairman since 2008.

He believes the PRS provides an essential service to the nation with little recognition for its economic contribution. He says regulation is pointless without effective enforcement, and that requires an intelligence-lead approach to target the criminals.

He has faith in the well-meaning majority of landlords to self-regulate. He despises the criminals and frauds who disproportionately concentrate the minds of those in Westminster and town halls.

1 Comment

  • Hello there Alan!
    I base my humble opinion on what practice and observations I have while meeting landlords and tenants, mostly for the private housing sector. For what I’ve seen both sides are under a lot of pressure – landlords and tenants. Personally, as an average Londoner, I think that taxes based upon income, rather than profit, obviously seems unfair. Almost on a daily basis I see how renters and landlords argue upon silly issues, especially when it comes housing end of tenancy cleaning and deposit refunds, not to mention repairs and other expenses.

    Government and councils should encourage and ease private buy to let, but my humble opinion is that Big Capital simply want’s to take over and that’s where the overall picture will eventually end up at. I.e. there’s been a lot of buzz about one of the most famous clubs in London and it turned out that private interests, particularly property interest are behind the Islington, which is not official, but independent research clearly points that way.Thank you.

    Kind regards
    Johnna JJ
    professional cleaner

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