Levelling Up lettings – here’s why the rental stock shortage needs to be addressed now
The government’s much-discussed levelling up agenda must include the provision of more new rental homes in all parts of the country.
In certain parts of the country, the private rented sector is coming dangerously close to running out of homes completely, and as a result the Boris Johnson government must extend its flagship policy to the rental market as well.
There has been much-reduced social housing for the last 20 years, and at the same time the many restrictions on landlords have reduced the growth of the PRS as a compensatory mechanism to fill this shortfall.
It’s also important that the industry examines how unaffordable housing across the country has locked many first-time buyers out of getting on the property ladder, leading to the average first-time buyer age going up to the mid-30s.
What’s more, there is the larger demand for rental homes from the younger generations – who in many cases have to, or want to, rent for the long-term.
All of these things taken together means demand is very, very high – probably as high as it’s ever been for many decades – while supply just simply isn’t keeping pace. Such a gap between supply and demand can not be sustainable for the long-term.
While things such as Build to Rent are helping to plug this gap somewhat, BTR is mostly focused on central urban areas and prime postcodes to maximise ROI – and still only accounts for about 2-3% of the overall market.
On its own, BTR is nowhere near enough to address the chronic stock shortage, particularly in suburban and countryside locations where the stock shortage is most acute and where BTR schemes are much rarer.
Add to this a lack of brownfield and greenfield sites for development and you have a major problem when it comes to creating enough stock.”
Here at the AIIC, we believe that the long-term problem with such a dichotomy between supply and demand is that prices continue to soar. ‘Rocket-like’ rent rises will simply end up making rental properties similarly unaffordable to generation rent, and they may decide to stay living with their parents for longer.
The stock shortage, already severe, could be made even worse by further restrictions on landlords, including the removal of Section 21. This could serve to drive more landlords out of the market, worsening the stock-side crisis even further.
What is the solution?
The government needs to create policies to promote affordable housing development (with open space available) in non-urban areas.
It also needs, as the National Residential Landlords Association has pointed out, to encourage investment in the PRS rather than further legislation to remove landlords and reduce profitability.
Furthermore, there needs to be an uptick in social housing, to reduce the burden of pressure on private landlords, and incentives to landlords when it comes to improving the eco-friendliness of their homes – with many landlords fearing the improvements required will severely hamper them financially.
Landlords also need a major say in the rental reform outlined in the Levelling Up White Paper, which is expected to be fleshed out in the White Paper on Rental Reform this spring.
It’s vital that landlords aren’t completely disincentivised, because the PRS will start to crumble and more rogue landlords will be able to slip through the net.
New legislation and reforms can be welcome, but only if they bring everyone along and have long-term benefits for all parties – instead of merely being used to score political points.
Published on 22/03/2022