Much of the UK government’s focus on housing creation falls on homeownership. But the true picture shows a growing demand for rental homes, too.
Getting people onto the housing ladder has been a major focus for the government in recent years. Tax changes including stamp duty cuts as well as favourable borrowing rates have certainly got buyers moving.
But the average age people now purchase a property is higher than ever, as more people rent into their 30s. And the country’s so-called housing shortage doesn’t just apply to homes to buy.
According to a consultation response from Propertymark, looking at meeting the UK’s housing demand, housing need is equally high across all areas of the property sector. This includes private ownership, private rented sector homes and social housing. While the report acknowledges that there are significant regional variations when it comes to the supply-demand gap, all aspects of the market are facing the same undersupply.
The firm’s most recent Private Rented Sector Report (July 2021) demonstrated how the average number of prospective tenants is growing. Meanwhile, stock levels are in decline. Propertymark adds: “Our insight is corroborated by other industry commentators pointing to a decline in the number of homes available to rent against a backdrop of strong demand.”
Radical action
The solution to this is not straightforward. Increasing social housing levels would go some way towards alleviating affordability issues in the PRS, says the report.
Propertymark also suggests that the government should scrap its second property stamp duty surcharge. At present, buyers and investors of additional homes must pay an extra 3% tax on their purchase. This has certainly worked to deter property investment, which arguably has led to some of the shortage in the PRS.
Dealing with the country’s hundreds of thousands of empty homes is another suggestion. Propertymark believes empty properties can lower land values and make it harder to sell nearby properties.
It adds: “Bringing empty homes back into use can also ease the pressure on existing housing stock and help improve local communities. The latest UK government data shows that vacant dwellings account for almost 3 per cent of the total dwelling stock in England.
“Over 250,000 homes in have been empty for over six months and in total, there were 665,600 vacant homes more than double the UK Government’s annual housebuilding target.”
Keeping landlords in the sector
As Propertymark points out, the buy-to-let industry is a crucial part of the housing market. Sadly, landlords are often demonised in the media. In reality, they provide much-needed accommodation for millions of people who aren’t in a position – or do not want to – buy a home.
The government should do more to help meet the demand in the private rented sector, Propertymark believes. It states that the government should review “all relevant buy-to-let taxes and the impact of recent legislation, such as the changes to mortgage interest relief, on the sector”.
This refers to Section 24 tax changes which came into play over the past few years. While landlords used to be able to claim their mortgage interest payments against their income tax bill, this has slowly been phased out. Now, landlords must pay tax on all rental income, and can only claim back mortgage interest costs of 20%. The legislation undoubtedly makes the buy-to-let market less attractive to many investors. However, some have found ways around it that work for them, such as forming a limited company.
Whether the government will take heed of Propertymark‘s suggestions remains to be seen. But high demand for rental homes continues to gather pace, fuelling the need for landlords to remain in the market.
