REVIEW
BUY-TO-LET
Taking aim at BTL is short-sighted Richard Rowntree MD, mortgages, Paragon Bank
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n previous Mortgage Introducer columns I have talked about the challenges posed by a volatile economy, but couldn’t have predicted upheaval of the magnitude experienced by the industry following the mini budget. At the time of writing, intervention by the Bank of England and a U-turn on the planned scrapping of 45 per cent income tax has stabilised the economy somewhat, but we are in a period of uncertainty. Recent announcements suggest that politicians sitting on both sides of the House of Commons see a thriving housing market as an essential component of national prosperity, so, while I can’t predict the fate of the economy with any level of certainty, one thing that I can say with confidence is that anti-landlord sentiment will continue. Never too far away from political posturing and promises, housing policy was a notable focus of this year’s Conservative and Labour party conferences, giving us a clue to the direction of future policy. Conservative MPs were more open in their criticism of the private rented sector (PRS) than we’ve seen previously, spearheaded by former housing secretary Michael Gove, who spoke of rogue landlords and poor housing stock. Labour Party leader Sir Kier Starmer said that if elected he would set a new target for 70 per cent of homes to be owner-occupied, up from the current 63 per cent, achievable through a new set of political choices that would see “no more buy-to-let landlords or second homeowners getting in first.” Similar to the Tories’ “Fairer
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private rented sector” white paper, many of the measures outlined by Labour seem sensible – long-term tenancies and a national landlords register, for example. It is also encouraging to hear the party say it would consult with lenders and landlord groups as well as tenants on various aspects of the sweeping reforms. But, for all the listening, there is also a lot of talking that I feel is unhelpful. Shadow levelling up secretary Lisa Nandy told private renters that they have “the right to live in a home that isn’t cold, mouldy, damp, and unfit for human habitation.” This goes without saying, but is unfortunately an all-toocommon picture painted by politicians, suggesting that such conditions are the norm and not a minority of extreme cases. With both Labour and the Conservatives outlining plans for a new decent homes standard, I think the role of buyto-let lending in improving standards in the PRS should be acknowledged. Industry figures show a drop from 46.7 per cent to 23.3 per cent in the proportion of privately rented homes classed as non-decent between 2006 and 2019. During this time, the number of outstanding buy-to-let mortgages increased from 835,000 to 1.9 million. Paragon doesn’t lend on poor-quality homes, and I’m pretty sure many of our competitors don’t either. Put simply, it’s bad for the customers we have a duty to protect, it’s bad for tenants, and it’s bad for business. Research carried out for the Social Market Foundation’s Where next for the private rented sector report found that 81 per cent of renters are happy with their current property, and 85 per cent say they are satisfied with their landlord. Such stats highlight how the notion of uninhabitable homes let by conscienceless landlords is a misconception in many cases. Unfortunately, this narrative plays on our national view of homeownership as a hallmark of aspira-
MORTGAGE INTRODUCER NOVEMBER 2022
[W]hile it may be popular with voters, policy that removes the incentive to invest in the PRS will lead to a contraction of the sector, which, in turn, will limit supply already failing to meet demand tion and success, one that isn’t seen in some other countries like Germany. Instead, championing first-time buyers trying to provide homes for their families and pitting them against tycoon-like landlords is more effective in garnering voter support than admission of the uncomfortable truth that PRS investors contribute a valuable societal role in filling the gap left by the undersupply of affordable homes under successive governments. Supplying the numbers of new homes promised by politicians will require significant investment and infrastructure at a time when interest on national debt is at a record high, so this is unlikely to be achieved in the short term. In the meantime, those who cannot afford to buy their own homes – likely to be a growing number due to rising interest rates and the cost-of-living crisis more broadly – will continue to rely on rented accommodation. So will those, such as young professionals or essential migrant workers, who choose PRS properties due to their flexibility or close proximity to busy city centres or places of work; the sector is home to people from all walks of life, so its health has broader implications for our economy. This means that while it may be popular with voters, policy that removes the incentive to invest in the PRS will lead to a contraction of the sector, which, in turn, will limit supply already failing to meet demand – and ultimately harm the very people it is trying to protect: tenants. M I www.mortgageintroducer.com