MPs call for 'build to let' investors to be encouraged
Tuesday 8th May 2012
A committee of cross-party MPs has added its weight to the growing pressure for a new breed of property owners – ‘build to let’ developers.
The Communities and Local Government select committee says big investors are needed to tackle the UK’s housing crisis, while acknowledging the part that smaller landlords play.
The committee, headed by Clive Betts MP, has published its Financing of New Housing Supply report.
It argues that institutions and pension funds ‘could make a significant contribution to the building of new homes in both the private and social rented sectors’, while real estate investment trust (REITS) ‘should be revamped to encourage investment in housing’.
The committee has also called for a simplification of the way that landlords are regulated and taxed.
The report says: “While it is right to consider the potential for large institutions to invest in the private rented sector, it is also important to remember that the sector is, and will continue to be, dominated by small companies and individual landlords.”
It continues: “There are a number of issues facing those in the sector: the financial crisis had a significant effect on the availability of buy-to-let mortgages; many landlords no longer have the benefit of capital gains; and there is some concern about the levels of return.
“We have heard that the burden of regulation and taxation has deterred landlords from expanding their businesses.
“While constraints on mortgage finance will continue to affect investment in the sector, the Government could provide some support by taking steps to address this burden.”
The British Property Federation has been campaigning for the Government to remove barriers so that institutions such as pension funds can invest in housing, and liberalise the REIT regime so that its advantages are used by residential investors.
Ian Fletcher, director of policy at the BPF, said: “We welcome the findings of the report and particularly the support for several of our proposals. With current finance models struggling, we must look at the broadest range of options for funding the UK’s housing supply and institutions and REITs, as well as smaller investors, can all play a part.
“Institutions have for some time expressed an interest in investing in residential property.
“While many of the conditions are already in place, such as rental demand and political support, the lack of scale to deliver an acceptable return remains a barrier.
“We underplay the important contribution individual investors make to housing investment, and I would rather see them investing in housing than classic cars or fine wine, but if we want to see institutions deliver on a large scale we’ll need to see specific ‘build to let’ schemes.
“The Select Committee correctly highlights that whilst there is no silver bullet, we need to encourage and support a broad range of different investors in housing supply if we are to meet the nation’s housing needs.”
The Residential Landlords Association also welcomed the report.
Alan Ward, RLA chairman, said: “The crisis in the private rented sector shows no signs of abating. Faced with a chronic shortage of accommodation, many tenants are faced with too high rents and are left to simply accept whatever housing they can find.
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