The private rented sector in the UK has seen massive growth over the last 20 odd years, overtaking social housing as the main UK housing provision after home ownership. Yet, rental demand still outstrips supply, with some in the industry claiming there are five tenants chasing every rental.
More worrying for landlords is the growing anti-buy-to-let sentiment in some quarters and moves afoot to change tenure laws which have been the main driving force behind this success for the last 26 years: in particular the 1988 Housing Act and the s21 procedures.
A new study from the Office of National Statistics (ONS) shows that in 2001, the UK had 2.51 million private rented buy to let homes – with 2.13 million in England, 181,000 in Scotland, 90,445 in Wales and 47,000 in Northern Ireland.
In 2011-12, which is the last year for which figures are available, the balance had changed to 4.96 million private rented buy to let homes in the UK – with 4.28 million in England, 366,00 in Scotland, 190,534 in Wales and 121,000 in Northern Ireland.
The proportion of private rented buy to let homes climbed from 9.79% in 2001 to 17.87% in 2012.
However, as the house sales market has picked up there has been a decline in the number of homes offered to rent as many of the so called “accidental landlords” have been dropping out. The supply of buy to let properties managed by ARLA Licensed members is down 6 per cent from 143 to 135 per branch, Landlords selling property has exceeded landlords buying property for the first time in 4 years
ARLA has said: “Consumers looking to rent will face fierce competition for privately rented residential property as demand among tenants increases and supply contracts.”
So surprisingly, in the face of this, Coalition Government Ministers now are threatening changes which could drive thousands more landlords out of the business of buy-to-let.
What at first glance may seem an innocuous change to the no-quibble eviction process afforded to landlords since its introduction in the 1988 Housing Act, the section 21 procedure, in my opinion has very serious and far reaching consequences for the future of the private rented sector (PRS).
The plan is to “…extend the existing restrictions on a landlord’s power to evict, where they don’t protect a deposit or have a licence they are required to hold, to situations where a health and safety hazard has been identified by environmental health officers.”
Quite apart from the opposition’s threats to bring in a form of rent control, compulsory long-term tenancies and further eviction restrictions, this current proposal in a Private Members Bill to be presented by Sarah Teather in November, and supported by the Coalition Housing Minister, Brandon Lewis, is a more immediate threat and should be opposed. See the lead article: Revenge Evictions will Hamstring Landlords
On a brighter note, the decisive vote in the Scottish election has settled the markets somewhat and we can all go ahead without the major disruption which might have been the case had the vote gone the other way.
Buy-to-let could potentially receive another investment boost next year as the new pensions regulations come in to force from April 2015. According to a recent survey conducted by Barings Asset Management the highest number of respondents’ replies ever received (16%) are saying that they are planning to rent out a property or sell their property to fund retirement. See the news article: More People Planning to Use Property to Fund Retirement
What’s more, an interest rates rise still seems a long way off. The main reason is inflation is well below the Bank of England’s target of 2%, as figures released last week shows consumer price inflation fell to 1.5% last month. If university tuition fees and utility bills are excluded, the figure is 1.1%, and manufacturers have even seen price reductions over 12 months.
Barclays’ economists have predicted inflation will stay below target throughout 2015, a view supported by an expected slowdown in economic growth by the end of 2014 and weakness in the Eurozone economies. Figures released this week also confirm that wage growth inflation was just 0.7%, down from 1.7% in the previous 12 months to December.
With a general election now 8 months away and major constitutional power devolving changes on the way for England as well as Scotland, any good news must be tempered by possible major changes to housing tenure laws. We are in for some interesting, but also worrying times ahead.
Tom Entwistle, September 2014