Addressing the Under Supply of UK Rental Housing

Addressing the Under Supply of UK Rental Housing

15:46 PM, 24th May 2022, About 3 months ago 11

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There is absolutely no doubt in my mind that additional regulation and taxes are having the opposite effect of what the Government is trying to achieve. Red tape, bureaucracy and tax are all proven methods to reduce investment.

If the real objective of the Government is for every person to be able to live in a safe home there is a very simple solution – INCREASE SUPPLY!

Imagine a scenario where every renter had a wide variety of options that fit their budget. Naturally, they would choose the best available property, which in turn would mean that the grottiest properties remain empty. The owners of those properties would then be left with three options: –

  1. Do nothing and leave the property to deteriorate and depreciate even further, or
  2. Improve the property so that people choose to live in it, or
  3. Sell the property

For those of us who book hotels (or own them), we have exactly the same options as described above. Likewise, if hotels fall into disrepair, the chances of us booking into them and not checking out sooner than expected are enhanced. This is no different to rental homes. If a property falls into disrepair, people will move out to a better property, but they can only do this if supply is greater than demand.

To incentivise investment into UK rental property, in order to increase supply, Government needs to level the playing field. Examples are as follows: –

  1. Make CGT the same for owner-occupied and rental property
  2. Provide roll-over reliefs for CGT
  3. Make Stamp Duty the same regardless of whether a person is buying one or multiple properties
  4. Allow landlords to offset finance costs against income in the same way as all other business owners do
  5. Give landlords and tenants equal rights to end a tenancy
  6. Apply Health and Safety standards equally to all homeowners, especially those with children. Alternatively, make the occupiers of property responsible for the same health and safety regulations, e.g. Gas Safety, Fire Safety, Electrical Safety etc. Why should a child living with parents in a rented property be safer than if they are living in a property owned by their parents?

Sadly, there are people who pay and are paid to portray private housing providers in the UK rental sector as parasitic capitalists of the worst kind. The reality is that landlords are simply people who have done well enough for themselves to buy more properties. If there were a lot more of us, then supply would outstrip demand, rents would not keep increasing and only those of us offering the nicest properties to live in would receive rental income and make profits.

What’s actually happening though is that landlords are being discouraged, there are not as many entering the market and there are many more selling up. This is reducing supply, leaving those who want or need to rent with a reducing pool of rental properties to choose from. This is a slippery slope, because the Government’s response is to increase regulation further. If it continues, the only rental properties still available will be owned by a small criminal element who will always continue to break the law. Is that really what the Government wants?

Please share this article and also share your own thoughts in the comments section below.



Comments

sam

22:18 PM, 28th May 2022, About 3 months ago

Mark - another point of view

Our government’s policy has caused a significant no of LLs to leave the market resulting in a reduction in supply.
The result for the renters: renters hv less choices n have to pay higher rent. Ie In their desire to protect the tenants, our government have made life more difficult for them.
The result for the LLs: For those who r able to stay the distance, rental yield have gone up ie better return. With better return, more investors come back into the market. Ie supply will increase.
So we end up in a classical market cycle: Demand outstrips supply causing yield to go up which leads to more supply which leads to lower yield which leads to lower supply.
That makes government policy quite irrelevant in the overall scheme of things. Ie markets will always go in a cycle. Thanks to government policy, I currently enjoy a greater rental yield than I otherwise would n if I choose to liquidate, a greater ROI.
I might have to pay a higher CGT on my gain relative to other sectors, but thanks to government policy biased against PRS, I m probably making a better return than I otherwise would have in another sector even after paying unfair tax - until government policy causes the market to crash n the cycle begins again. Ie investors time to buy n the market recovers.

To my mind, there will always be factors that cause the the market to go up or down - if it is not this, it will be that. If it’s not now, it will be later - for every action has a reaction. It is only important to understand how market will react to government policies. Ie government policies might ostensibly make life difficult for LLs but lets not look a gift horse in the mouth - if we know how to react to government policies.

With the above in the background, the 6 points u made are really no more than factors that cause the market to go up or down. They are more a matter of fairness - which influence the market. I would have thought, in US at least, they would b cause for class action for discrimination. But then that would only be another factor to influence the market should it comes to pass. If my objective is solely to make money, should I care whether it does or not?

Comments/debates invited.

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