Renters Reform Bill- further updates- Part 1
After the highlights of last week on the Renters Reform Bill, surprisingly there has been quite a bit of more information which apply to the private rental sector (PRS). There is a lot to take in so I have split the updates between this week and next week. Did you know we post a new blog every Wednesday?
Are those 300,000 houses per year ever going to be built?
In short…no!
The governments manifesto in 2019 pledged to build 300,000 new homes per year. In a recent blog I pointed out why these were required. Now the promise is being played down: last month housing secretary Michael Gove admitted the UK was unlikely to hit the target in the latest financial year.
He said: “We’re going to do everything we can in order to ensure that more of the right homes are built in the right way in the right places.”
But the magical 300,000 has never really been met. The highest build was in the 2019-2020 financial year, when the government oversaw the construction of 220,600 homes, 6,190 more than the year before.
What does this mean to the PRS ?
It is still the main supply for housing
Graph from https://www.ons.gov.uk/economy/inflationandpriceindices/articles/ukprivaterentedsector/2018
As you can see from the graph above, social housing has been reduced since the late 80s and housing associations have not been able to pick up the slack. If you are a landlord now, you will have seen above average rental increases. If you are new to the market, you can still achieve 4-5% return on your investment in Cambridgeshire.
Even the PM has been quoted as saying “I cannot give you a cast-iron guarantee that we will get to a number in a particular year, but what I can point you to is record of delivery under Conservative government.”
Right to buy – coming to the PRS?
Hugely doubtful
Two issues:
- Funding is in question
- Even housing associations do not really understand how it will work.
Only a week after announcing the new Right to Buy policy for two million housing association tenants it all seemed to unravel. Under the proposal, tenants would obtain a mortgage worth 60% of the value of their home – which would be paid off in payments that rise at the same rates as social rents do each year.
Like any other buyer, once this ends the property is owned outright however, effectively at a 40% discount, mirroring the Right to Buy discount but at a lower rate. In an emergency such as a loss of employment, the tenant would be able to access the equity they had built up, providing a cushion for them.
In other words, today’s proposal would provide housing association tenants greater security, with every rental payment increasing the tenant’s share of ownership – but still leaving them better protected in the event of financial shocks or unexpected costs.
The paper shows how the revenue from these sales, plus the sale of high-value council homes as they become vacant, could be used to fund the construction of a new wave of affordable social housing – expanding home ownership and the housing stock at the same time.
However, Michael Gove said that he didn’t know how the scheme would be funded and there would also be a cap on the number of people who could take advantage of the it.
Why is this important to landlords in the PRS?
There has been talk that the right to buy scheme would be extended to the PRS but given the outcome for housing associations, it is very unlikely that this will ever be extended to the 4.5m homes on the PRS.
What are your thoughts?
Have you got any thoughts or concerns? We would love to hear from you! Just send us a message or give us a call on 01480 494939.
