The government must start to provide financial incentives for buy-to-let landlords prepared to offer longer tenancies or risk seeing rents soar, according to the CEO of haart estate agents.
Paul Smith wants to see the government do more to address the demand for longer tenancies from a number of people renting in the private rented market by doing more to address the growing housing crisis.
The government’s decision to restrict mortgage interest relief to the basic rate of income tax and add a 3% levy on stamp duty for the purchase of additional homes is have a detrimental impact on the private rented sector.
An exodus of landlords from the buy-to-let market has caused a sharp decline in rental property listings in recent month with a further net loss anticipated, according to a recent study by the Residential Landlords Association’s (RLA) research facility, PEARL.
The trade body estimates that on top of the 46,000 privately rented homes that have already been lost, there will be a further net loss of 133,000 homes to rent, as small-scale private landlords continue to offload properties largely as a result of recent tax and legislative changes, which are making it unviable for many investors to operate in the sector.
With demand from tenants gathering pace, at a time when there has been a “striking” reduction in the number of new properties for renting, rents are forecast to see strong growth over the next five years, according to the latest residential property forecast from the Royal Instituted of Chartered Surveyors (RICS).
To help address the growing housing crisis, the former foreign secretary, Boris Johnson, has called for stamp duty to be slashed across the housing market, and it is a view shared by various senior property experts.
Paul Smith, CEO of haart estate agents, said: “I welcome calls from Boris Johnson to cut stamp duty across the housing market. You cannot doubt the impact the government’s stamp duty cut last autumn has had on the first-time buyer market.
“In July we saw 22% more first-time buyers registering to buy than the same time the year before – the highest number registering to buy since August 2016.
“Surely it is a no-brainer for the government to look to how they can replicate this success across other areas of the market.
“Perhaps most damaging for young people is the government’s policy of a 3% stamp duty surcharge for buy to let investors.
“The surcharge for investors has reduced the number of rental properties available as landlords have stopped buying in the same volumes. This, in turn, has led to increased rents, which means young people are spending more on rent than ever before, a further stumbling block for first-time buyers looking to get on the ladder.”
Smith firmly believes that a cut in stamp duty for investors “would incentivise landlords to come back to the market and stop rents from spiralling out of control”.
“The government has got this badly wrong and must change course,” he added.
Alexandra Morris, managing director of MakeUrMove, has also hailed Boris Johnson for acknowledging that the housing market is in crisis.
Morris commented: “His [Johnson’s] announcement appears timed to coincide with the housing minister James Brokenshire announcing a plan to reduce homelessness which he disappointingly suggests is in part due to "instability in the private rental market.
“The truth is that we’re facing a huge problem of lack of supply and the dire homelessness situation we find ourselves in now is also symptomatic of the lack of a joined-up housing policy from successive governments.”
Morris believes that the government’s existing housing policies are just tinkering around the edges of the issue.
She continued: “We need to deal with the cause of the problem, not the symptoms.
“The lack of supply is driving up the percentage of income required for a deposit. This is only one impact. The lack of supply is also creating problems in the private rental sector with rental prices being pushed up.
“The danger of just tinkering with the symptoms of the housing crisis are also evident in the private rental sector, where successive governments have introduced a wide range of measures, including the phasing out of mortgage interest tax relief, the impending introduction of the tenant fees ban, as well as proposals to ban no fault evictions and introduce three year tenancies.
“Whilst we welcome regulation which further professionalises the private rental sector - and we would welcome initiatives such as increasing empty property taxes and incentives to encourage landlords to offer longer tenancies or maintain rent levels for longer - by implementing piecemeal changes with little regard for the ultimate impact, the Government is simply compounding the problem.
“What is needed here is a comprehensive strategy to increase supply across the housing market, from properties for those looking to buy, to a greater availability of properties in the rental market.
“If the government could get to grips with this fundamental issue, then the problems of lack of security for tenants and an inability to save for a deposit would all be dealt with as a consequence.
“It’s time the government stopped implementing sticking plasters and pursued a wholesale transformation of the housing market.”