PRS Access Schemes, Build to Let and the Rugg Review. LettingFocus Surveys the Wreckage
Reading the housing section of the Labour party manifesto, one can see that the PR campaign that the British Property Federation (BPF) and their members waged on Labour Grandees has paid off in terms of Labour support for “Build to Let,” which for the uninitiated, is where the Government tries to open up the private rented sector (PRS) to big property firms and institutions.
Curious Move – And What Would Julie Rugg Say?
As I have said before, this is all very curious because Labour has decided to ignore Julie Rugg and the finding of the report they themselves commissioned.
Just to remind you, the Rugg Report said that those small pesky private landlords do a better job of being a landlord than the big boys. To quote her: “Bigger doesn’t necessarily mean better – as can be seen when you look at banks and utility companies. Small landlords are more flexible: they don’t necessarily feel that they have to put up rents year after year. I also think larger investors aren’t impressed by the private rented sector because they simply don’t understand it. Indeed, there is a complete dearth of management skills in the corporate sector” (Julie Rugg quoted in “Residential Property Investor” the RLA magazine March/April 09 edition.)
Fast Growing PRS
And with the private rented sector growing from 8% of all housing stock to 14% plus over the last 20 odd years, you could add that the individuals who make up the bulk of the UK’s army of private landlords is doing quite well on their own and is also coping rather well with the current level of reduced mortgage availability. Read this piece for more on how well they are doing right now: http://bit.ly/dkoFz0
So, like me, you may be wondering, why does the Government need the big property firms to come in and join the private rented sector party? (And, no the answer is not to do with payback for donations to political parties.)
More Stock Needed in the PRS
Well, I guess one answer is that we need even more stock in the private rented sector. (Everyone now accepts that the Thatcher claim that most of us could be homeowners was always utter nonsense.)
The Government will certainly understand this need for more stock as it faces an ever mounting bill for Local Housing Allowance as more tenants – who would in times long gone, be housed in council houses – must now be housed by landlords. And so the Government clearly thinks: More stock in the PRS equals lower rents equals a lower local housing allowance (housing benefit) bill for us to have to foot.
And that’s all true. We do need more houses in the private rented sector. But what I’m not sure about is whether the big property companies and the institutions are the best people to provide it.
Tax, the PRS and Build to Let
It seems that the institutions and big property firms worry greatly about trying to get the Government to give them suitable tax breaks so they can make investing in the private residential sector or “build to let” work for them.
Now, we know the money is there to be made in the private rented sector. (At www.LettingFocus.com we show both corporates and private individuals how to do this.)
But the institutions that wish to join the party and invest, first need to understand how to maximise the “tenant asset” – and that is all about getting the right tenant in the first place and then providing a high level of service focused on their needs. If they can understand that part of the work and learn to get it right (doable but not easy), they can make money in the PRS without recourse to special tax breaks or other unique treatments doled out by Government. (Indeed we argue that these tax breaks are unfair on the UK’s small scale landlords.)
Who Will Help the Big Property Firms Get It Right?
Who can help these big institutions and property firms, who are much more used to commercial property, get the knowledge to allow them to be good in the private rented sector?
Well, managers of public housing assets (such as housing associations) could be candidates for this role, but I would suggest that managing tenants in the private rented sector is a tad different and calls for a slightly different approach and treatment.
At LettingFocus we work as consultant in the area around Private Rented Sector Access Schemes for the local authorities and housing associations. We know these bodies do a lot of good work in this area but we have found that they lack a really close understanding of the needs of landlords and are often inefficient in recruiting them. Indeed, the way many private rented access schemes are currently set up are a long way from being the optimum method of recruiting landlords and in some cases are incredibly wasteful of taxpayers’ cash.
MORE ABOUT LETTINGFOCUS AND WHAT WE DO
LettingFocus.com is the home of Landlord Information.
I’m David Lawrenson, a landlord and property investor myself for over 25 years and author of “Successful Property Letting” – the UK’s top selling commercially published property book for the last 3 years.
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