Last month The Joseph Rowntree Foundation (JRF) called for fundamental reforms to the private rented sector (PRS) to open the market to those locked out of home ownership and social housing.
Successive governments have promised to solve the housing crisis by building more houses, but the JRF report suggests that who owns the 25 million homes available now, and who they are available to, is as important as new construction.
Landlords are likely considering their future in the sector due to planned reforms to the PRS to improve tenants’ rights alongside existing tax changes and obligations on landlords to meet higher energy efficiency standards and the report says the government should see this as an opportunity to implement policies which see homes change hands from landlords to tenants.
JRF says this would help budding homeowners previously unable to access the market find affordable, secure homes and give them the chance to build wealth.
The Foundation put forward ambitious but, they say, practical measures to achieve this:
- Setting a strategy for reducing the size of the PRS by rebalancing the position of first-time buyers and landlords in the mortgage market and discouraging property speculation.
- Supporting any reduction in the size of the PRS with policies that expand the supply of social housing and support households into homeownership.
- Supporting renters to buy the home they live in, including through a Right to Buy for private renters.
- Creating mechanisms to allow landlords to receive funding to retrofit their home to high environmental standards, in return for leasing it to a housing provider to provide to tenants at lower than market rents.
- Expanding the routes available to renters to build sustainable wealth by addressing the barriers to part-rent part-buy models such as Shared Ownership.
- Ensuring that the transition to a smaller PRS is managed equitably, with a particular regard for renters on lower incomes.
“The housing market is not working. In recent decades we have seen the rapid growth of the private rented sector alongside the decline in the proportion of households in social housing or owner occupation. Consequently, millions of people are stuck paying unaffordable rents, worried about being evicted by their landlord and have little opportunity to save.
“Right to Buy and the expansion of the private rented sector following the global financial crisis have already shown that rapid shifts in the distribution of homes are possible. Reforming the private rented sector by shifting the distribution of homes within it should be the gateway to further, fundamental reform of the housing market. Reforms of this type would ensure the housing market supports those looking for somewhere to call home over those seeking assets to invest in.”
But not everyone agrees with the Foundation.
DJ Alexander Ltd, the largest estate and letting agents in Scotland says suggesting that Government should intervene to provide private renters with a right to buy the property they live in is an example of pie in the sky economics.
They believe that proposals such as this do nothing to help people get on the property ladder and are more likely to exacerbate housing shortages rather than relieve them.
David Alexander, chief executive of DJ Alexander Ltd, explained:
“This Joseph Rowntree Foundation report suggests the government should be “supporting renters to buy the home they live in, including through a Right to Buy for private renters”. The report also calls for the Government to intervene in the mortgage market and discourage lenders from providing funds to landlords and property investors.”
“This makes no sense at all.
“Why would Government subsidise renters to purchase the property they live in? If you did this, then everyone who wasn’t a renter should also be supported to buy their home. You can’t subsidise one part of the market and not the rest.”
“Aside from being hugely inflationary it also fails to understand that a lot of people are happy to be in the private rented sector. The private rented sector is an essential element of the housing market and any proposals to reduce its scale should be looked at with caution.
“It is estimated that around 40% of private sector tenants are from outside the UK. They are here to work for a few years and then return to their home countries and the private rented sector provides suitable homes for them to live in while they are here.
“These people cannot access social housing and they have no desire to buy a property so removing the option of private renting from this group makes no sense if we are to create an expanding, thriving economy.”
“The other key mistake in the logic of this JRF report is that they misunderstand the role of landlords. These are people who own properties which they rent to tenants. They are not obliged to provide this service but do so as an investment. They can just as easily withdraw from the market and invest their money elsewhere.”
“A tenant buying a property from a landlord doesn’t need government intervention as it can already happen, it just requires a willing landlord and for the tenant to pay the market value.
“The JRF seem to be assuming that market conditions don’t exist in property but exist in all other aspects of life.
“The solution is relatively simple. If more social and private housing is built and supply exceeds demand, then prices will fall, and property will become more affordable. If this doesn’t happen, then we will continue to experience rising prices and housing shortages.
“Artificial interventions such as the one suggested in this report will do nothing to alleviate current housing difficulties.”
Comments (4)
I haven’t laughed so much. Nuts and if the PRS every get to know this could become reality ……. bye bye PRS before you get chance to implement some of their goals. No incentive for investors, nuts and more nuts.
Are these people off their trolly? It seems the left wing communists seek power through so called charites because they can’t succeed in normal politics. It is the interference in the markets that always results in disaster as it always triggers circumstances they then try to control, but can’t. Anyone old enough to remember Nigel Lawson and the conservative government of the late 1980’s (circa 1988) when he tinkered with mortages resulting in a major recession with housing values plumeting (with the USA sub prime market making it even worse). It turned the housing market off over-night. prices fell significantly and people had negative equity where property was only saleable for less than the mortgage held on it. The proposals by JRF seem to be driving in that same direction. Strangely, the 1988 Housing Act which introduced an open market (getting rid of the toxic Rent Act 1977) meant that when the next property recession came it did not have the massive rises and falls as the investment market took up the slack that private buyers did not want, thus reducing the wildly fluctuating property prices. Where has the demand for renting come from? Some are people who want to live in better areas and better housings than they could afford to buy. Those who prefer to live for today. Some rent what can’t afford to buy at all, some rent to help with mobility of labour ie people from up north wanting to work in the south east (totally prevented when the 1977 Rent Act was in). So the utopian so called housing charities do not necessarily get it right and they influence the politicians who definately don’t get it right and ignore or punish the open market where the investment comes from. I guess we all think we are right and everyone else is wrong but us Joe public have a voice that only whispers at the quietest level and have no influence (“other than told you so!” when it goes wrong, as it usually does). Well there you go thought for the day! May the JRF would like to give all their money to me rather than try to rob me of my hard earnt investments to achieve their communist amibitions or perhaps go and use your political ideas in Putin’s Russia .
A classic case of too much utopian liberal intellect but no common sense!!!
Politicians and ‘informed’ commentators who live in fantasy land and refuse to read history; just look back to post war political intervention in the rented housing sector and the impact that rent and housing controls had on the quality of the rental housing stock, as a result.
Do these idiots really believe this would work?! Be afraid, be very afraid folks
The chairman of JRF spent years at shelter spouting this nonsense and vilifying private landlords before polly bleat took over there and carried on the hate of the PRS. Perhaps he’s worried that people have forgotten about him?