REVIEW
MARKET
Private rented sector in need of support, not discouragement Steve Cox chief commercial officer, Fleet Mortgages
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here’s no doubt that in recent months there has been a sense of disquiet around the private rented sector (PRS), despite the fact that, in terms of buyto-let mortgage business, activity levels remain very strong and there is a buoyancy to lending. When it comes to portfolio ambition, those landlords who are investing for the long-term can see a strong future – hence the increase in remortgaging to release finance, and the continued quest to buy properties to offer up for rent. Let’s be honest: It does not take a genius to work out that there is an ongoing shortage of supply in this space, which has pushed rents up, and that if landlords are able to surmount some considerable existing (and forthcoming) obstacles, then profitability can be achieved. Propertymark’s latest figures reveal why rents are rising. It found that its members were registering 95 new applicants per branch in April, up from 78 in February; however, at the same time, they only had nine properties per branch empty and freely available to rent in the same month. And let’s be honest here – there is little sign that this is going to improve drastically anytime soon. The perhaps wider point to be made here is around boosting supply, of course. As mentioned, existing landlords – where possible – are looking to purchase, but again, this is not easy in a purchase market that is also suffering from low supply. Then there is also the issue of bringing new landlord blood into the market when the barriers to entry appear to be growing, and when the
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BUY-TO-LET INTRODUCER JULY 2022
rumour mill has continued to stoke fears that the government will make it more difficult to become a PRS landlord, not less. We already know there were plans to increase the additional home stamp duty surcharge from three per cent to four per cent, but this was pulled at the last minute. And there have been discussions about landlords having to replace kitchens and bathrooms within properties at a set interval – not forgetting the Renters’ Reform Bill, which is due to include the abolition of Section 21 evictions. However, just recently, there appears to have been more of a step-backand-consider approach to a range of measures, which, quite frankly, do not appear to have been clearly thought through in terms of their potential to stifle further investment in the PRS. In the buy-to-let and private rental sectors, sometimes you simply have to believe the evidence of your own eyes and ears – or in this case, your own research. The government recently published the results of its English private landlord survey, which revealed that 10 per cent of landlords plan to sell all of their properties and exit the market in the next two years, up from five per cent when the question was last asked back in 2018. And the reasons why they are inclined to do this? Fifty-five per cent said it was due to recent legislative changes, and 53 per cent said it was because of forthcoming changes. In other words, the greatest influence on an exit is the growing number of government measures, some of which were mentioned above. At some point, it was my hope that someone in power – or someone who had the ear of someone in power – would realise what this would actually mean. They would begin to get a grip on the sheer number of properties this would take out of the PRS, just at the time
when more, not fewer, were needed. Now, some might argue that it is likely that PRS properties put up for sale will go into the hands of other landlords, and of course some will. But not all. Because, of course, the government has followed a policy designed to move properties out of the PRS into owner-occupiers’ hands for pretty much the last decade. In other words, a lot of properties put up for sale do not return to the PRS – hence why we see the very low number of properties available to rent outlined in the Propertymark research. The good news is that we may well have reached a point where it is becoming evident that fewer PRS properties is a real problem for the housing market. The government’s own statistics have revealed that a tenant is 40 times more likely to become homeless because a landlord sells up than because the tenant is unable to afford rent. If that isn’t something that stops you in your tracks, I don’t know what would. And this is perhaps why we have had recent related announcements from the government. It has said it is not considering rental caps in England – good news, as, again, this would simply precipitate more landlords selling up. Second, it appears that the Renters’ Reform Bill has been pushed back, and I hope that when the white paper is published, it will have a fuller consideration of the potential consequences of the policies that have been put forward. As mentioned, we need policies that not only keep existing landlords (and their properties) in the sector, but encourage them to keep adding to portfolios, and that also bring in the new blood required to meet the overwhelming tenant demand that is not going away. For too long, landlords have had to put up with policies that work against this; there is now an opportunity to think again, and to understand the true importance of the PRS. BTL I www.mortgageintroducer.com
