Conservative’s home ownership drive likely to bring pain for renters

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Home ownership:

It has long been Conservative Party policy to encourage home
ownership, as exemplified by the 1980s Thatcher government’s council house
sell-off.

For those with a real stake in society, a financial
commitment made by providing their own roof over their heads, and with mortgage
payments to meet every month, it means that on balance, not only will people
resist going on strike, they will likely vote Conservative.

The problem is – and this is the government’s conundrum – that
in today’s society, where asset (house) prices have hit the roof due to Quantitative
Easing (QE) and ultra-low interest rates, and where young people in particular
have come to value the flexibility of renting, discouraging landlords has
consequences.

An anti-landlord policy – extolled by successive governments
since George Osborne, and now possibly being accelerated by this new government
– has consequences not just for landlords but for those millions of tenants who
for various reasons have come to expect to rent, in some cases for the rest of
their lives.

Like any product in today’s society, people expect to have
it (Housing) at a competitive price. If prices become distorted through lack of
supply due to legislative measures (landlord taxation and regulations), or through
rent controls, as Labour is advocating, then expect trouble ahead.  

According to the RICS, landlord instructions are continuing
to fall across the national lettings market, worryingly at a time when short
term expectations for renting are on the rise. The result, as in any market
when supply falls, rising rents, a situation which will inevitably mean calls
for rent regulation.

The RICS headline tenant demand indicator (quarterly
seasonally adjusted data) has picked-up further, posting its highest level
since late 2016. Landlord instructions to letting agents at the same time have
fallen once again, extending a run of continuous decline going back over thirteen
quarters.

So, in the short-term, at a time when house sales are stagnant
at best, rent price growth expectations are being driven up. The government, it
would appear, is betting on the growth in institutional investment through
build-to-rent, expecting this to plug the gap in housing supply, thus stabilising
housing and renting prices.

RICS has said:

“…the lettings market data continues to send a very strong
message that institutions need to upscale their build to rent pipeline to
address the shortfall resulting from the decline in appetite from buy to let
investors. It is significant that the near-term rental expectations indicator
has climbed to a three-year high.”

David Smith, Policy Director the Residential Landlords
Association, has said:

“These figures demonstrate yet again that hitting the
private rented sector to boost homeownership serves only to hurt tenants.
Demand from tenants and new buyers is increasing at the same time. It is vital
that the needs of both groups are met.

“The Government needs to stop making landlords the scapegoat
for the housing crisis and embark on a raft of pro-growth measures to boost the
supply of homes for the private rented sector. If they do not, supply will
continue to fall, meaning higher rents, less choice, and a reduction in quality
for tenants.�

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