The government’s initiatives to try to increase house building and owner occupation will not stop demand for rented homes rising by over one million households by 2021 says high-end agency Savills.
The company says the government target of building 400,000 new affordable homes for sale over the course of this parliament will mean the country would still require an additional 220,000 homes for rent a year.
It says the growth of house price inflation ahead of wage growth has served to push home ownership further out of reach for many, at a time when stock in the social rented sector has shrunk by 2.8% in the past five years.
This has pushed more households into private renting, it says.
According to the English Housing Survey, private renting has been growing by 17,500 households per month on average over the 10 years to 2014.
Government housing policy, including Starter Homes, more Shared Ownership homes and access to larger equity loans through Help to Buy London, seeks to reverse this trend by helping people access the property ladder.
“But demand for rented homes could still rise more sharply than we have forecast,” said Susan Emmett of Savills residential research.
“We would question whether policies can accelerate housebuilding enough to see the government’s target of 400,000 affordable homes for sale reached in the timescale set. Given the overlap between different schemes, each focused at similar parts of the market, it is possible that one scheme could simply replace the other rather than providing additional homes,” she claimed.
“This analysis demonstrates that we still need to provide a substantial number of homes for rent. Government policy should focus on supporting the development of new homes to rent as well as to buy.”
Instead, Emmett claimed recent policy announcements are likely to constrain the supply of rental homes.
The introduction of a 3% stamp duty surcharge on buy-to-let properties and the restriction on tax relief on mortgage interest payments are likely to limit the ability of private investors to expand their portfolios.
This presents a major opportunity for large scale institutional investors to step into the gap through Build To Rent, she claimed, with expectations that they will remain exempt from the tax changes.