Chris Town: Time to build policies to house Generation Rent

Homes are increasingly unaffordable for young couples, according to new research.
Homes are increasingly unaffordable for young couples, according to new research.
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NEW research by the Resolution Foundation has shown that South and West Yorkshire have seen some of the biggest falls in home ownership of anywhere in the country over the last 10 years or so.

From a high of 70.8 per cent in 2003, the percentage of homes owner-occupied in West Yorkshire fell by 10.6 percentage points to 60.2 per cent by February this year whilst in South Yorkshire it dropped by 9.8 percentage points to 58.4 per cent.

The previous Chancellor sought to pin a great deal of the blame for this trend on to private landlords. His argument was that landlords were occupying properties that would otherwise be available for aspiring home owners.

No evidence was produced to support this assertion and it has subsequently been refuted by the London School of Economics which has concluded that “the (very limited) research into direct competition between investors and private owner-occupiers has found that nationwide only a minority of sales to landlords involved bids from both types of buyer”.

The Resolution Foundation’s report found that buy-to-let housing has grown from 2.5 per cent to just five per cent of all households over 10 years and has little impact on the overall available of homes to own.

All the experience of landlords is that they are more likely than owner-occupiers to buy properties which are often in a bad condition to do them up, and are in areas unappealing to house buyers.

Despite this, the last Government nevertheless went on a cash grab by increasing taxes on landlords in the belief that this would deter those entering the buy-to-let market and deter those within from expanding.

Landlords are now the only business sector to be taxed on the interest on borrowings and not just profit; there is a three per cent extra stamp duty levy for the purchase of properties to let and the prospect of landlords having to stump up anything up to £5,000 for energy efficiency improvements to their properties instead being able to access Government schemes as in the past.

It is all very well for the Government to be taking measures which seek to boost housebuilding, but it is going to be a long time, if ever, before the shortage of housing is corrected. In the meantime, people need somewhere to live, which means they need access to rented housing.

In the face of this, the impact of the Government’s tax changes will be to deter investment by landlords in new homes for rent at a time of rising demand and for rents to rise as shortages increase and landlords seek to recoup the extra costs being imposed on them. Either way, it is tenants who will suffer. They will find it increasingly difficult to find somewhere to rent that is affordable.

And the main point of the new report is that buying a house is unaffordable for many families. People are having to pay more in rent than they would on a mortgage and as a result they are unable to save for a deposit, given that the average amount required has almost doubled since 2007, rising from £16,400 then to £33,960 today, according to the Halifax.

Instead of taking actions to address this problem, the Government is actually making it worse. The advent of a new administration brings with it an opportunity to do something different.

As a start, Ministers could drop the new levy on stamp duty for the purchase of homes to rent where a landlord is adding to the overall net supply of housing. This could be new build, bringing empty properties back into use or converting large homes into smaller self-contained units. It cannot be right that the Government has a policy which actively discourages the development of new homes.

To help tenants to buy their rented home, Ministers could cut the Capital Gains Tax payable by the landlord to the new 20 per cent rate instead of the 28 per cent rate which currently applies.

Thousands of landlords are ready to develop a few properties each which would mean a huge boost to supply. These homes are likely to come on-stream far faster than those planned by large, clunky institutions.

To help encourage this, councils and large, landowning public sector bodies like the NHS and MoD should identify small plots of land, too small for large developers, that could be sold to landlords for new build.

It is also time to end the anomaly that means VAT cannot be reclaimed where a property is being built to rent, unlike where one is being built for sale.

The private rental market is good for Yorkshire. It supports and enables a flexible labour market and provides much needed housing for those for whom home ownership is either still some way off, or simply not realistic.

Changes to current policies are urgently needed to support tenants wanting somewhere to live that leaves them with a chance of saving for a home of their own.

Chris Town is vice chairman of the Residential Landlords Association and a landlord in Yorkshire. The RLA tweets via @RLA_News.