Last year, when Britain announced its third Prime Minister within the space of a few months, the news was announced by US President, Joe Biden at an event.
In his own inimitable fashion, Biden said: “…today we got news that Rashi Sunook is now the Prime Minister. As my brother would say, ‘Go figure’.”
Go figure indeed. It was probably mystifying to Biden that this was happening again in such a short space of time, and you’ll sense the level of Biden’s knowledge of our new PM by the mispronouncing of his name. Go figure.
I tend to think that a similar level of understanding is often being shown by large numbers of people when it comes to the buy-to-let market in this country, or the importance of the private rental sector (PRS) to this country’s housing strategy.
Unfortunately, at various points over the last decade or so, this has resulted in a series of measures seemingly designed to cut a hugely valuable sector down to the bone. It’s not exactly been death by a thousand cuts but it’s been close.
Apparently, according to various media reports, the buy-to-let market has now ‘died’ again – this will be news to the hundreds of thousands of landlords in the country, the advisers who secure their finance, the lenders (like us) who provide those mortgages, and the tenants who occupy their properties.
Let’s not be under any illusion though, we’re not exactly working in an environment conducive to the buy-to-let ‘patient’ even if it has been subject to numerous, ongoing attempts to take away its health.
That being said, I get the impression that – for once – there are forces at work which may hopefully result in a much-needed reappraisal of our sector, and what it delivers, and what should hopefully be a reassessment of the role buy-to-let plays and why it needs to be cultivated not condemned.
The rumour mill has been working itself up lately and, given we are only weeks away from a Budget, we can perhaps speculate on what that could mean in the future.
I have it on good authority that there are elements within the Bank of England and HM Treasury who are now beginning to understand the importance of the PRS, what it would mean for the housing gap should we continue on the current path of low supply-high demand, and what may need to happen in order to rectify the recent wrongs.
Now, of course, this may mean diddly squat in terms of action in the near future, but the very fact that these discussions are being had at the highest level is, if not a cause for celebration, then at least a welcome recognition the sector is not where anyone would want us to be, particularly from a supply point of view.
It surely will not have escaped the notice of those who make the rules, that the current supply-side pressures for the PRS are not easing, in fact they look to be getting worse.
Every survey/piece of research I’ve seen lately has talked about existing landlords and the plans they might have for disinvestment in the short- to medium-term as a result of the financial pressure they are currently under.
You would hope it will not take a leap of understanding for those in power to ascertain what that will mean for tenants and rents, should we continue to see further PRS property supply leaving the sector. There is, after all, no guarantee that a PRS property once sold will end up back in the hands of those who will make it available to rent.
It’s so vitally important that, not only does the PRS keep functioning at its current level, but it actually grows with the demand for tenanted properties. The flow has been too far in the other way for too long, and if there isn’t action in this area, then the problem can only get worse.
What might this mean in terms of action? Well, as mentioned, who knows – we might not get anything, after all, landlords are not the most popular of demographics at the best of times and any measure which appears to work in their favour is likely to be met with less than enthusiasm.
However, action is needed, and the most obvious areas to look at include the mortgage interest tax relief and the stamp duty extra charge, both of which have had a significant detrimental impact.
We need an environment to keep landlords invested, but to also help them add to portfolios and – of huge importance – to bring in new landlords who are currently finding the barriers to entry so huge and the costs so high, they are likely to be looking at other asset classes rather than property.
Buy-to-let nor the PRS is dead, that is certain, and it will continue to function and provide homes for hundreds of thousands of people. But it should be doing so much more and with greater government understanding and action, it could be achieving this.
It really is time to bite the bullet and recognise that what we need to keep functioning and grow is not the approach that has been followed for the last 10 years. Everyone should be able to understand that.
Steve Cox is chief commercial officer at Fleet Mortgages