Government urged to dramatically increase the availability of social housing
Dorian Gonsalves, Director of Commercial and Franchising at Belvoir! is urging the Government to protect the 'forgotten sector' of rental market social housing for rent to relieve pressure on the Private Rental Sector (PRS) and provide security for thousands of tenants.
Dorian says: “Throughout 2015 the Government and Bank of England made it very clear that they were determined to curb large, bubble like house price rises. This was done by restricting the amount of lending to people to 4.5 times their income and limiting growth in Buy to Let (BTL) purchases through tax rises and stamp duty hikes. However, there is already a housing shortage, and if landlords continue to have second thoughts about buying properties in 2016 this will further reduce the number of rental properties that are desperately needed. Increased Government interference in the Buy to Let (BTL) market will put a real squeeze on the supply of property in the rental market in 2016 and beyond.
During 2015 there was a complete move in emphasis away from renting, and a drive towards raising the number of properties available for home ownership. Increased pressure may drive up rents in some areas, although Belvoir's rental analysis to date has shown that even in areas where supply is lower than demand, rents can only rise in line with wage increases and what people can afford. We are forecasting modest average rental increases of 3%, but should the shortage of property available to rent reach crisis point rents are likely to rise further.
Dorian continued: “Belvoir's rental index analysis leads us to predict that 2016 is likely to be a similar year economically to 2015. The British Chambers of Commerce has forecast total earnings growth to be 4.0% in 2016 and 4.5% in 2017. The Centre of Economics and Business Research (CEBR) predict that inflation will stay below 2% through to 2017.
I am concerned that Government schemes such as Help to Buy are very useful for those tenants who want to buy a property but will not help the thousands of tenants across the country who choose not to buy or are not in a position to buy. Reasons for this may include poor credit ratings, employment, divorce or a simple lack confidence in the property sales market. These thousands of tenants now seem to be a forgotten sector of the housing market.
The Government seems purely focused on driving home ownership; which in turn will fuel house price growth. However, details have not been released of how many new homes will be built specifically for rent in the social housing sector. The sales market seems to be almost 'frozen' with fewer and fewer new instructions coming to market. An influx of new properties and new buyers, many of which could be subsidised, will probably free up the market and increase the number of transactions.
We predict a rise in house prices of at least 5% in 2016 and this acceleration is likely to continue for the next four to five years. Some analysts are predicting a 50% rise in house prices over the next decade. In my view, whipping the public up into a home-buying frenzy is not very sensible, as prices rise when the population feels they need to acquire a 'must have' commodity. If the opposite happens and prices stagnate, builders will not build.
With net immigration currently at over 300k, over 1.5m people on council waiting lists, population forecasts as high as 85 million by 2050 and 10 million people already renting it is clear that much more social housing is required. The Government has pledged 400,000 new builds in the next five years, but it is likely that 200,000 of these will be in and around London and locations won't be ideal due to lack of building land at sensible prices. The remaining 200k will be spread across the other 1000 or so towns and cities across the UK, so there will probably be just 200 new affordable properties in each town or city.
As an investment landlord myself, I have done some number crunching and am convinced that BTL is still profitable. This may not be the case for very highly geared landlords in low yield areas, but it certainly is for most of the areas that Belvoir operates in, which are usually landlords with one to three properties, and accidental landlords.
The private rental sector has always existed to provide a choice for those people who need flexibility and is a good solution for people who do not wish to commit to purchasing a property. Providing social housing for rent has never been the responsibility of the private landlord, but clearly in the past 12 months this distinction has been blurred. Successive governments have failed to build sufficient social housing for rent and Belvoir is calling for this shortfall to be redressed. We hope that during 2016 the Government will focus on providing increased social housing for rent and that private landlords will no longer be expected to bridge this immense gap.”