Despite being only 20 years old, the resurrected private rented sector has helped deliver many key Government objectives.
From trebling the number of university students and driving a flexible labour market with low unemployment, to putting a roof over the heads of migrants, young professionals and others caught between access to social housing and ownership, the buy-to-let boom has housed millions.
But now this expansion has been wiped out by the credit crunch. Buy-to-let investors’ reliance on debt finance makes further expansion difficult.
The latest Communities and Local Government figures show that housing development has fallen by over a quarter as a result of demand for ownership and affordability plummeting.
A Government housing reform green paper announced this week could provide a wealth of opportunities to deliver an increased supply of housing. These are opportunities which have, for far too long, passed us by. Everyone’s focus has been on building homes to own and only now are we starting to feel the detrimental effects of that.
The British Property Federation believes that institutional investors - pension and life funds - could provide a solution.
Encouraging ‘build-to-let’ through planning and fiscal policy changes could be an easy win for those keen to address supply and quality issues.
Institutional investors who are focused more on low-risk, long-term investments could fund build-to-let, developing high quality, professionally managed rental housing, replicating the business model used by commercial property.
Local authorities could encourage build-to-let through legal planning agreements which restrict the property’s use to rental for a period of time, say 10 years. By ensuring the properties are priced according to whether they were built for rental or ownership, we would see more realistic costs.
Local councils can already encourage build-to-let. They are able to enter into agreements with developers and alter the s106 levels to take account of the local housing need.
The key to this is demanding a lower amount of affordable housing on top of rental developments, which are already ‘affordable’.
All this would require is a legal planning agreement, so no new planning definition or legislation would be needed. We don’t need a policy change to encourage build-to-let and we could see a professional rented -sector developed within the current system.
The build-to-let model does not lead to irresponsible lending and requires very little by way of public financing.
The Government’s statement shows the kind of commitment we are seeking.
The private rented sector has housed half-a-million households this millennium, more than owner-occupation and social housing put together.
Councils can already recognise the fact that build-to-let is a form of affordable housing and we hope that more of them can use this opportunity.
Ian Fletcher is the British Property Federation’s director of residential policy