According to figures from the Royal Institute of Chartered Surveyors (RICS), the number of available rental properties available to UK families has nosedived since the increase of the Stamp Duty surcharge on Buy-to-Let premises in April.
A surge in property transactions before the duty increase was swiftly followed by a rapid drop off in market activity.
And, with landlords due to take another blow next year, when tax relief on mortgage interest is discontinued, 86% of them say they have no plans to expand their rental portfolios in 2016.
RICS believes that this trend is set to continue for the next five years.
In 2001, 2.3 million UK households rented their home – a figure that had more than doubled to 5.4 million by 2014.
With the current climate of rising property prices making ownership an unattainable goal for many, it is estimated that 1.8 million new rental homes will be needed by 2025 – less than a decade away.
Support for build-to-rent sector
RICS advocates the creation of a build-to-rent housing sector, with the Government encouraging the private sector to build homes specifically for residential letting.
It would like to see pension funds receiving tax breaks to build large scale rental properties with affordable elements. Also, it believes local authorities holding brownfield sites should be encouraged to release land for such properties.
Meanwhile, in order to address the short term undersupply of rental accommodation, RICS are urging the government to reverse April’s Stamp Duty measures.
Of course, such a backtrack would be to the dismay of first-time buyers.
“It does give first-time buyers a much-needed advantage against people who are simply betting that house prices will keep going up. In the first three months of the surcharge, the tax on second homes raised £424m – that cash could help build new homes for people on low incomes.”
– Dan Wilson Craw, Policy Manager, Generation Rent
This view is backed up by RICS, who in a press release stressed the long-term consequences of continuing down this road.
“It’s time for Theresa May to get out her hard hat. We are facing a critical rental shortage and need to get Britain building in a way that benefits a cross section of society, not just the fortunate few.
Our latest figures show that there has been a 15% decline in house sales to first time buyers over recent months. That tells us that for all the rhetoric, David Cameron and George Osborne’s Starter Homes Strategy failed to get off the ground.
The Private Rented Sector became a scapegoat under the previous Prime Minister, and because of that it suffered. Yet with increasingly unaffordable house prices, the majority of British households will be relying on the rental sector in the future.”
– Jeremy Blackburn, RICS Head of UK Policy
The implications for Student Property
For a while now, we’ve been well aware of a predicted housing shortfall of one million by 2022; to have this figure increase by a staggering 80% over the following three years is a sobering thought.
Even if central government were to relax legislation in the Buy-to-Let sector, it is unlikely that landlords will be offered incentives to provide accommodation for a transient student population.
The focus will, quite understandably, be on housing UK families.
Local authorities too will be keen to ease this added pressure on their housing lists; it’s hard to see them looking too favourably on HMO applications designed to accommodate council tax-exempt students when they have local families struggling to find a home.
More than ever, we can expect UK and overseas students to be funnelled towards Purpose Built Student Accommodation.
We believe available capacity will continue to be taken up to the benefit of students, universities, authorities, investors and local communities alike.
View our UK Student Properties.