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The housing white paper: it's a numbers game

14 February 2017 Anna White Read time: 2 min
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Anna White

Getting the keys for your first rental home, tossing a coin over room allocation and the inaugural household trip to Ikea are all milestones in the property journey.

But sky-high rents have tainted this rite of passage, hampered the spending power of tenants and, in some cases, kept our young workers and families trapped in sub-standard rental accommodation.

By 2025 just a quarter of under 30 year olds will own their own home - according to the Council of Mortgage Lenders. To put this into context: more than half the generation approaching retirement were homeowners by their 30th birthdays.

The average couple in private rented homes spend half their income on rent each month - meaning it now takes 24 years to save for a deposit on a house.

The plight of tenants was overlooked by David Cameron's Government in favour of homeownership schemes. His logic in the simplest terms was house prices go up, people will feel richer and spend more. But Teresa May's new team has performed an ideological u-turn and pledged to make renting fairer, as demonstrated (she hopes) in this week's housing white paper.

The Government stoked expectations by leaking plans to force councils to map out where new rented accommodation can be built ahead of the publication of the policy document. So did the white paper live up to the hype and will it make your rent cheaper?

Building more accommodation will redress the supply demand imbalance that has driven rental inflation. As well as enforcing local authorities to allocate more space for build-to-rent schemes, the white paper also pushes the construction of managed rental apartment blocks financed by institutional investors, and promotes the use of pre-fabricated or modular homes for lettings, which can be erected in 48 hours in factories.

If the Government can't directly reduce rents it can axe other costs for tenants such as (what it perceives to be) rip-off lettings fees. The paper made good on the promise that these fees will be transfered to the landlord.

The paper set out plans to make tenancies more 'family-friendly' by increasing their length to three years or more in new build homes which are privately rented. This does not, however, extend to homes owned by private landlords which have been bought as buy-to-let investments, meaning hundreds of thousands of tenants will not be eligible.

This is a continuation of the disregard of private landlords which could undermine the positive steps taken to benefit the tenant. George Osborne - the former chancellor - hiked stamp duty by three per cent on buy-to-let investment and this April interest rate relief on mortgages will be scrapped for landlords, hitting them in their pockets.

The impact of these two measures, combined with scrapping lettings fees, is two fold. Firstly it could deter private landlords from entering the market, reducing supply and putting more pressure on the construction of build-to-rent apartments. Secondly the extra costs could be passed on to the tenant by upping monthly rents.

This is a numbers game and the Government's new house building targets (sale and rent) still fall significantly short of what's needed. The paper acknowledged the need for 250,000 new homes to be built a year whereas most analysts agree it's closer to 350,000. And it does not break down volumes of new homes for sale versus the volumes needed for rent.

The white paper shows a fundamental misunderstanding of the rental sector. The fast delivery of units - via both new build blocks and existing hikes owned by small time landlords - is needed to flood the market and to control rents. Therefore Government must look after the private buy-to-let investor to ultimately look after the tenant.

By Anna White


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