Conservative’s home ownership drive likely to bring pain for renters

Home ownership:

It has long been Conservative Party policy to encourage home ownership, as exemplified by the 1980s Thatcher government’s council house sell-off.

For those with a real stake in society, a financial commitment made by providing their own roof over their heads, and with mortgage payments to meet every month, it means that on balance, not only will people resist going on strike, they will likely vote Conservative.

The problem is – and this is the government’s conundrum – that in today’s society, where asset (house) prices have hit the roof due to Quantitative Easing (QE) and ultra-low interest rates, and where young people in particular have come to value the flexibility of renting, discouraging landlords has consequences.

An anti-landlord policy – extolled by successive governments since George Osborne, and now possibly being accelerated by this new government – has consequences not just for landlords but for those millions of tenants who for various reasons have come to expect to rent, in some cases for the rest of their lives.

Like any product in today’s society, people expect to have it (Housing) at a competitive price. If prices become distorted through lack of supply due to legislative measures (landlord taxation and regulations), or through rent controls, as Labour is advocating, then expect trouble ahead.  

According to the RICS, landlord instructions are continuing to fall across the national lettings market, worryingly at a time when short term expectations for renting are on the rise. The result, as in any market when supply falls, rising rents, a situation which will inevitably mean calls for rent regulation.

The RICS headline tenant demand indicator (quarterly seasonally adjusted data) has picked-up further, posting its highest level since late 2016. Landlord instructions to letting agents at the same time have fallen once again, extending a run of continuous decline going back over thirteen quarters.

So, in the short-term, at a time when house sales are stagnant at best, rent price growth expectations are being driven up. The government, it would appear, is betting on the growth in institutional investment through build-to-rent, expecting this to plug the gap in housing supply, thus stabilising housing and renting prices.

RICS has said:

“…the lettings market data continues to send a very strong message that institutions need to upscale their build to rent pipeline to address the shortfall resulting from the decline in appetite from buy to let investors. It is significant that the near-term rental expectations indicator has climbed to a three-year high.”

David Smith, Policy Director the Residential Landlords Association, has said:

“These figures demonstrate yet again that hitting the private rented sector to boost homeownership serves only to hurt tenants. Demand from tenants and new buyers is increasing at the same time. It is vital that the needs of both groups are met.

“The Government needs to stop making landlords the scapegoat for the housing crisis and embark on a raft of pro-growth measures to boost the supply of homes for the private rented sector. If they do not, supply will continue to fall, meaning higher rents, less choice, and a reduction in quality for tenants.”

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