The article ‘Investors seek private rented sector tax breaks’ on www.insidehousing.co.uk reported that the Property Industry Alliance - which represents surveyors and mortgage lenders among other property bodies - is seeking tax breaks to encourage institutional investment in the private rented sector.

The big institutional guns in the City of London and large property firms would love to have a bigger presence in the private rented residential sector where, to date, just pesky small-scale private landlords have mostly been making fairly decent profits.

The trouble is that the big boys, being that much more inefficient than the small private landlords, just cannot make it work for them financially, unless the government doles special tax breaks their way.

Of course, to government, big business is attractive because it can get things done fast - in this case, build lots of houses. Small, private landlords - while they have grown the private rented sector from 8 per cent of all housing stock in 1988 to more than 14 per cent now - will take too long to achieve the growth rate desired by the government and that’s no good to a when facing a housing crisis.

So getting the big boys in is seen by the government as a good bet. Like Tesco in big food retailing, big property companies can deliver.

But leaving aside the issue of whether tax breaks for big firms are fair to small, private landlords, one could ask how well the big firms will really do and what will they build? And what will be the mortgage firms’ contribution to all this?

These questions are hard to answer but it’s worth saying that not all private landlords have done well. Many followed seminar programmes promoted by the many sharks that infest the yawning information gap in the unregulated buy-to-let advice arena and they bought oversupplied identikit new build flats in inner cities.

Private rented sector experts like me warned these flats were being hugely overvalued by valuers. But the banks and building societies carried on regardless and issued buy-to-let mortgages on them.

Fast forward five years or so and we can see lots of this type of housing stock being sold at prices far below what they were sold for when first built. The rents predicted were rarely attained either and lots of have-a-go landlords lost their shirts (as did a few mortgage lenders).

So it is interesting to see that the Property Industry Alliance includes the Royal Institution of Chartered Surveyors and the Council of Mortgage Lenders among its members.

I just hope the valuations they make and their lending decisions are better this time round for their new-found City pals than they were for many a misled private landlord who, for the most part, got (and usually still gets) no advice at all from their lender beyond ‘here is a mortgage, now off you go son’.

David Lawrenson is a consultant at www.LettingFocus.com

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