Rents will continue to rise unless more properties are built
This month it was revealed that almost 40% of former homes sold at a discounted rate under the Government’s Right to Buy scheme are now being let out on the private rental market. The rents for these properties can also be up to seven times the cost of the average social rents, thus potentially netting their owners some tidy profits. With the Government looking to extend the current Right to Buy scheme but not taking the appropriate measures to replace these properties that are sold, this will only compound the current housing situation of a lack of affordable homes and as some have argued will only add to the benefit bill rather than reducing it.
Housing Minister Brandon Lewis, has defended the extension of the Right to Buy scheme claiming that “More council housing has been built since 2010 than in the previous 13 years. However, it is important that councils make the best use of their assets and manage their housing stock as efficiently as possible. So it is right that as high value council homes become empty they should be sold to fund new affordable housebuilding in the same area.” As sound a policy as this may seem on paper it has been suggested this month that Housing Associations may turn their attentions towards the Private Rented Sector (PRS) to make up for the financial loss of selling their stock. They even have the option of the government’s Private Rented Sector Housing Guarantee Scheme that requires developments to be of a minimum value of £10m and to deliver residential developments only. With the PRS in desperate need of more purpose-built stock, coupled with the need to improve the standard of housing, Housing associations delivering PRS schemes could not only raise the standard of housing but also help to alleviate some of the strain on the fastest-growing tenure type in the UK.
Building more properties needs to be a priority for the government moving forward. This month it was revealed that the average rent has hit over £800 in England and Wales, landlords hold onto a rental property for an average of 17 years, and with a growing number of private landlords along with the growing number of UK households these price increases of rent are only set to continue unless more houses are built.
With such demand for housing it was surprising to many landlords and letting agents that the Government in its Summer Budget included an announcement that mortgage tax relief for buy-to-let home buyers was to be restricted to the basic rate of income tax. Many have argued that this will only lead to further rent rises to cover the financial hit of the new tax rules. However this month, the Residential Landlords Association (RLA) did meet with the Treasury and though it was clear the Government will not be doing a U-Turn on this, the RLA have however, been asked to propose other ‘tax solutions’ to the Treasury. As such, the RLA is now asking landlords and letting agents to put forward their own proposals for a new tax relief system. The RLA intend to take received proposals back to the Treasury next month.