Whilst the government has been promoting new house building, the Royal Institution of Chartered Surveyors (RICS) has forecast that the UK is heading for a severe shortage in rental properties. It says the UK needs a building programme specifically for tenants. RICS figures show at least 1.8 million more households will be renting rather than buying by 2025. Although the Conservatives are focusing on home ownership and getting first-time buyers onto the property ladder, RICS feels there should be tax breaks to encourage more building and investment in the rental sector.
The number of households living in rental properties more than doubled from 2.3 million in 2001 to 5.4 million in 2014, according to RICS. This clearly shows a need for investment in this sector, but with increased taxes and stamp duty charges, landlords may feel less inclined to buy more properties because of those increased charges. RICS figures show 86 per cent of buy-to-let landlords are not planning to increase their portfolio following tax and stamp duty changes. It also says that 58 per cent of estate agents have noticed a reduction in buy-to-let sales since May, which tends to point towards a decline in investment in rental properties, because of these additional financial costs. RICS is urging the prime minister to abandon the focus on home ownership and reverse the stamp duty changes so that short-term rental supply problems can be eased.
With demand for rental properties outstripping supply and increased costs to landlords, there will be a negative knock-on effect for tenants. Association of Residential Letting Agents managing director, David Cox, says this will hurt tenants because landlords will pass on the increased costs to them by putting up rents. He said the simple answer is that more homes need to be built.
His sentiments are echoed by landlords, whilst RICS says even more should be done to ease the looming crisis. It wants to see builders encouraged to build homes specifically for rent, councils releasing brownfield sites to build rental properties, and pension funds being given tax breaks to fund large-scale rental property developments.
RICS head of policy Jeremy Blackburn said that most British households will be relying on the rental sector in the future, because they simply cannot afford to buy. He said Britain needs to concentrate on building for the benefit of a cross section of society and not just the fortunate few who can afford to buy.
A specific programme of building homes to rent would benefit both buy-to-let investors and tenants, as properties could be built specifically for their needs. This could include purpose-built flats with a lobby, bar, restaurant, gym, parking and concierge for city workers, sheltered accommodation blocks for retirees, and family homes near public amenities, such as schools and transport links in commutable areas for work. With more people being unable to afford to get a mortgage, building the right kind of rental properties rather than converting older homes could be a sensible move forward.