The PRS landlord crisis isn’t about us selling – it’s about us not buying!

Hear me out, but the most important landlord who left the market this year may be the one who never entered it in the first place.

We spend a huge amount of time arguing about how many landlords are selling and creating an ‘exodus’.

Perhaps we should start asking a different question: Who is buying the homes that tenants will need tomorrow?

Let’s face it, the answer is becoming uncomfortable.

Buy to let purchase activity falls

Several stories this week made me sit up and take notice.

Firstly, buy to let purchase mortgage searches fell by 22% year on year in August, according to Twenty7tec.

It recorded 70,452 purchase searches during the month, with activity also down 14% compared with July.

OK, one month’s mortgage searches do not prove the collapse of landlord investment.

But put that figure beside everything else happening in the private rented sector and a pattern begins to emerge.

Zoopla says landlord investment remains muted because of higher costs and increased regulation.

The number of homes available to rent is already 3% lower than a year ago and was 6% lower in August.

It expects rents to rise by another 4% to 5% by the end of the year.

There is a fairly obvious connection here.

Landlord investment is the missing piece

I’ve explained before that if an existing landlord sells to another landlord, the private rented sector has lost nothing.

If a landlord sells to an owner-occupier, a home has disappeared from the available stock.

To replace it, somebody somewhere needs to buy another property and put it into the sector.

That requires investors willing to invest.

And that’s why endless arguments over whether there has technically been a ‘landlord exodus’ risk missing the bigger problem.

The danger is not only landlords leaving today.

It is the potential landlords we keep hearing about.

Apparently, they are younger investors looking for long-term gains. (Remember them?)

They will look at the tax, borrowing costs, regulation and risk and decide there are easier places to put their money.

That decision makes no headlines.

There is no For Sale board, there’s no landlord handing back the keys and no dramatic statistic showing another investor has quit.

The landlord purchase never happens.

Fewer homes mean higher rents

Meanwhile, the Office for National Statistics says annual private rent growth reached a nine-month high in August.

The average monthly rent in England is now £1,459, £56 more than a year earlier.

That should surprise nobody, except perhaps politicians and tenant activist groups.

It is difficult to increase regulation, increase costs, make possession more complicated and then expect investors to queue up to provide more homes.

Of course, more social housing would help and so would a housebuilding boom.

I’d like to look like Henry Cavill too, but none of these things will be happening.

Housebuilding will not fill the gap

Even Angela Rayner’s much-lauded aim of building 1.5 million homes has run into trouble.

She now acknowledges there is only a ‘slim chance’ of meeting the target by the next Parliament.

Ange, there was never, ever going to be a realistic chance of hitting it.

Which brings us back to the private rented sector.

There is no magic warehouse full of homes waiting to be released if landlords disappear.

Not while tenants still need somewhere to live.

First-time buyers struggling with mortgage affordability will remain tenants for longer.

Families still need houses to rent, and students need rooms.

Workers moving for jobs need somewhere they can rent without buying a property every time they change postcode.

Someone has to provide those homes.

Tomorrow’s landlords are disappearing

For years, politicians and campaigners have concentrated on controlling landlords already in the market.

Far less attention has been paid to creating conditions in which somebody would actually want to become one.

And that may prove to be the bigger mistake.

Because today’s landlord selling up is visible, but tomorrow’s landlord deciding never to buy is not.

We will only notice that landlord when the home is missing and the tenant is competing with 10 or more other people to rent the one that remains.

Until next time,

The Landlord Crusader