HOW do we meet the demand for new homes at a time when nobody wants to buy them? As housebuilders warn that starts in England this year could fall as low as 100,000, it's a question that requires an urgent answer if we are to avoid the housing market bust being followed by yet another boom...and bust.

The obvious solution is to build more homes for rent. Momentum is growing behind the idea of giving major incentives for institutional investment in the private rented sector. The latest call for action comes today from the independent think-tank Centre for Cities. It argues that the UK could have over three million private renters by 2021 - 1.2m more than now. At current rates of building that would mean 20% of starts would have to be for rent to meet demand. 

In a series of essays by people ranging from Adam Sampson of Shelter to Liz Peace of the British Property Federation (BPF), the report covers policy prescriptions ranging from the creation of a new use class for rented homes to reform of stamp duty and improved rights for tenants. Much of this is the same ground as the BPF's own submission to the government's review of private renting last week. 

There are also some useful notes of caution. Mark Long, head of research and strategy at Invista, makes a compelling case for reform and highlights the huge differences between insitutional investment in housing in the UK and in the rest of Europe. However, he also warns about the dangers of doing too much too quickly and creating an oversupply of rented accommodation that leads to falls in values and rents and sets back institutional investment another 20 years.

And Lord Best, a prominent backer of private renting when he was head of  the Joseph Rowntree Foundation, highlights the other side of the coin: that private renting is always likely to be an unsatisfactory solution to the housing problems of low-income families; and the astonishing fact that 'a multi-million-pound industry that profoundly affects the lives of millions of consumers – has no regulator, no ombudsman and no redress scheme'.

Whatever the problems, an expansion of private renting looks inevitable. And, as this week's Inside Housing reveals, the Housing Corporation is working on a new package of measures to help social landlords join in. The next round of development funding will include products to encourage intermediate renting and 'rent first, buy later' homes to help counter the housing market crisis. 

Posted by Jules Birch, June 16

Posted in Private renting

WITH the housing marketing plummeting and pressure growing on the public finances, today's call by the British Property Federation for new incentives for professional investment in the private rented sector could hardly be better timed.

House prices are falling at their fastest rate since the 1970s, housing transactions are at their lowest since 1978 (according to the RICS today), housebuilders' share prices are falling through the floor and the chances of meeting the government's 3m homes target look on the unlikely side of slim. And yet demand for housing is still growing: cue the next boom when this bust eventually plays out.

In a submission to the government's review of private renting, the BPF wants a package of incentives including widening the definition of affordable housing to include market rentals, special planning treatment for rentail-only developments, changes in stamp duty rules and reform of the structure of real estate investment trusts (REITs) to open them up to residential property.

And it wants a new concentration on what it calls build to let. Its research suggests a need for £100bn of investment over the next 15 years, and with the buy-to-let model dead in the water, it argues that can only come from pension funds and life companies. Giving planning permission for new homes restricting them to rental for a period of years would enable investors to buy property on a big enough scale and at a price linked to its rental rather than owner-occupation value.

It sounds like an idea whose time has come and one that will be attractive to all the political parties. However, there are two big obstacles to achieving it. First, is the growing pressure for increased consumer rights from bodies like Citizens Advice and the Law Commission. Institutions have long regarded calls for reform on issues like retaliatory eviction and length of tenancies with something close to apoplexy. The BPF report shows some signs of movement but it may need to go further.

Second is Treasury suspicion that calls for 'fiscal incentives' are really just a way for sharp-suited property developers to line their pockets at the government's expense - one explanation for the restrictive drafting of the rules on REITs in the first place. The Treasury may still need some convincing before it gives incentives for an expansion on a big enough scale to make a difference. 

Posted by Jules Birch, June 10

Posted in Finance, Planning, Private renting

A survey by the Royal Institution of Chartered Surveyors (RICS) this morning reveals a surge in residential lettings - but it sounds less like a recovery in buy to let than a return of can't sell to let.

Reluctant landlords renting out homes they were unable to sell were a feature of the last housing market recession and this one looks no different.  The RICS said the balance of surveyors reporting a rise in new landlord instructions increased to 29% in the first quarter of the year. That compared to -2% in the last three months of 2007, which it put down to the supply of buy-to-let mortgages drying up.  

It said they were also taking advantage of rising rents, with gross rental yields now at the highest level in its survey's history, and rising demand from both families and single people.

Significantly too, the survey showed the percentage of landlords selling at the expiry of leases fell from 4.6% to 4.2%. Capital gains tax was cut from the beginning of April and, although the survey only goes up to the end of March, this suggests that forecasts of a flood of sales by landlords taking advantage of the cut could be wide of the mark.

The Council of Mortgage Lenders [download PDF here] yesterday forecasted a 35% fall in house sales and 7% fall in prices this year, factors that should both boost the supply of reluctant landlords and improve yields.

The trend should add extra urgency to the deliberations of the independent review of the private rented sector that is due to report back to the government by October. In particular, as the communities and local government committee argued in its report [PDF here] yesterday, it's time to implement the Law Commission's receommendations on tenancy reform and tighten regulation to address the 'yawning gap between the rights of consumers who are purchasing a property through estate agents, and tenants of private landlords'.

Posted by Jules Birch, May 22 

Posted in Private renting

'WE have throughout our inquiry continually returned to the same fixed point: the supply of homes is insufficient.' That is perhaps the most significant sentence in today's report on the supply of rented housing from the communities and local government committee.

In a report [download PDF here] that reads like a manifesto of unfinished business, the committee calls for a range of measures including more mixed communities, stronger regulation and tenancy reform in the private rented sector, measures to tackle buy to leave, reform of the single room rate, an increase in family-sized accommodation,  a commitment to 50,000 social rented homes a year, more rigorous management of section 106, reform of the right to buy including reinvestment of capital receipts and local restrictions where needed, more help for mobility schemes, borrowing freedoms for almos and local authorities.

That's a heavily edited version of a report with something to say about virtually aspect of rented housing - and which makes the important and often neglected link between the social and private rented sectors.

The stark message from this all-party committee is this: 'The government therefore faces a stark choice: does it retrench, leaving social housing as the sector of last resort; or is it prepared to make the investment and policy commitment necessary for social rented housing to play a full role in the creation of truly sustainable communities?'

And it warns: 'There is no short-term fix to the current situation: sustained and substantial increases in spending, together with a firm policy commitment to the creation of mixed communities, will be needed over the medium to long term if social rented housing is to fulfil the aims envisaged for it.'

However, are the people that really matter - the party leaderships - really listening? Housing minister Caroline Flint responded by pointing out that last year was the first since 1983 that more social rented homes have been built than lost to the right to buy and that the government is investing £8bn to provide 45,000 social homes a year.

Both true, but the committee casts doubt on whether that will really be achieved - and says it's not enough. It wants the 50,000 homes a year that is still only an aspirational target for the next spending review in 2011.

Will that ever come to pass - or will another select committee be saying exactly the same thing in three years' time? 

Posted by Jules Birch, May 21

Posted in Politics , Private renting, Social housing

TWENTY years on from the watershed 1988 Housing Act a head of steam is building up behind calls for reform of the private rented sector to level the playing field between landlords and tenants.

Two academics from York University are already at work on an independent review of the sector and are due to report back to the government in October. And the urgency of their deliberations was underlined in a report authored by one of them and published by Shelter this week. The report by Julie Rugg examines the experiences of tenants at the bottom end of the sector - and in particular those who were among the almost 10,000 people who became homeless when their assured shorthold tenancies ended. 

Six-month assured shortholds were of course the centrepiece of the 1988 Act as ministers concluded that previous attempts to give private tenants security of tenure were to blame for the decline of the sector since the war. And security of tenure is at the heart of attempts by campaigners for reform 20 years on.

The campaign is finding an increasing audience with MPs who are all too familiar with the issues from their constituency casework. For example, an early day motion against retaliatory eviction moved by Labour MP Karen Buck in January has been signed by 86 MPs from all parties.

The reform agenda was set out by Labour MP Sally Keeble in a Westminister Hall debate on Wednesday. Security of tenure topped her list of concerns: 'There was a time when security of tenure acted as a deterrent to owners renting their properties, but I believe that the pendulum has swung too far the other way and that changes are need to redress the balance in favour of tenants.'

That was followed by costs, with 19% of private tenants on housing benefit and 30% of them facing shortfalls on their rent, repairs and maintenance, including landlords' use of retaliatory eviction against tenants who complain, and the anti-social behaviour and the problems tenants have getting landlords to take action.

But Keeble also called for action to boost supply through encouraging greater institutional investment alongside improvements to quality and a reduction in insecurity.

The response from junior housing minister Iain Wright was initially encouraging, making the right noises that 'the private rented sector should not be a tenure of last resort for people in housing need' and pointing out the reforms the government has introduced on things like tenancy deposits and HMO licensing.

But on the crucial point of security of tenure, he appeared to signal that the government is aware of concerns but content with the status quo: 'Because I hear about it in my constituency surgeries, I understand the point about security of tenure, six-month leases and shorthold tenants. The average tenancy in this country lasts between a year and 18 months. That seems to suggest that many landlords are happy to allow their tenants to continue their tenancy after the initial six-month or fixed-term agreement has ended. I suggest that that is a contractual matter, and that it is up to the tenant and the landlord to come to a mutually beneficial agreement on what can be achieved.'

It sounds like campaigners will have to work hard to keep the pressure up over the next six months.

Posted by Jules Birch, Apr 25

Posted in Private renting