Strategy for Housing and the Private Rented Sector Govt Paper is a Bit of a Let Down

So how is the Private Rented Sector (PRS) affected by the Government’s recently published new Strategy for Housing?

Well, first of all, there will be an independent review of barriers to investment in the PRS. Doubtless this will be looking closely at new build to let models, where homes are built specifically for the private rental market, with funding coming from major investors.

Also, there will be financial incentives for investment in private rent, in which major investors such as pension funds would pay just one percent in stamp duty, plus the ongoing reform of real estate investment trusts.

Our views on this?

Well it’s good that housing is back at the front of debate (but could it be anywhere else given the dire level of new build and pressures caused by the relentless rise in the UK population?)

Groundhog Day Again

But if you are feeling a touch of “Groundhog Day” again, don’t worry you really have actually heard most of this before because the cutting of stamp duty for blocks of housing was first announced back in the spring, as were the changes to REITs

We have reported for a long time that institutional investment, which currently makes up just one percent of the sector, has wanted to get into the PRS for some time (or should I say, their advisers would like them to.)

But so far, most of the big money has sat on the sidelines, because whilst small scale independent landlords have done very well and have grown the sector, thus far it’s not been sufficiently attractive for the big fund managers.

Sure, there has been lots of talk about “fund raisings” and some schemes have actually got off the ground, but there has not been a whole lot – yet.

There are many reasons for this reticence to invest and they have all been examined very well and in much depth already. As I said on the Guardian Housing Network blog – does the government really need to commission yet another review of the PRS (which was another announcement in the Housing Strategy) to tell us what lots of highly eminent consultants have already told us.

I think not.

Build to Let – Keep Waiting

At the Guardian Housing Network blog, after many contributors and cheerleaders for Build to Let had said their piece, I commented as follows:

“Re the Build to Let issues, yes institutional money does offer some economies of scale in the PRS, but as was pointed out (in the now sadly much ignored Rugg Review), small scale private landlords deliver efficiently with lots of uncharged-able “sweat capital” which big investors have to pay out as wages. Taking this into account, we are not sure the institutional advantages (of economies of scale) are as great as some here have claimed, which is why perhaps investment so far from this source has been so sluggish.”

I stick to that view but would add that in the course of the next few years I can only see the government shelling out more tax breaks for the City to invest in the PRS, (which will finally bring them in and which be good for aggregate housing supply but not so great for small landlords who will ultimately face extra competition for tenants.)

Other Stuff: More Been There Done That

Also, in the Housing Strategy paper, the Government pledged to work with local authorities to “tackle the worst properties” and called for new fact sheets to be provided to help private landlords “understand the basic requirements of managing a property for rent.”

Well, the local authorities already have a lot of power to deal with the worst of the rogue private landlords (though recent events in Ealing – see the “Sheds for Beds” story reported elsewhere at out blogs) does suggest they could be beefed up still more.

As to “fact sheets for private landlords”, there is much that is already on line – a lot of it at the government’s own websites. So I don’t really see much need for this.

And with over 30,000 copies of our book sold to date, I could always interest the government in a bulk discounted deal if they’d like to give it free to the 1 million odd landlords who don’t as yet have a copy!

Overall Impressions

So what is our overall impression of the bits of the Housing Strategy that impact the PRS?

In summary, it feels as though the government asked a junior at the CLG to chuck something in about the PRS for completeness.

OK, it’s good that the PRS gets a good mention but there’s not much new here and so I cannot give it more than 6 out of 10 – and I feel that is being pretty generous.

Of far more interest is the infrastructure plans – new road and rail/ tube links. Smart house buyers know that these will drive up rental and capital values and they will be poring over the new routes.

ABOUT LETTINGFOCUS AND WHAT WE DO is the home of Private Rented Sector Consultancy and advice.

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