Is Government Policy Making the Rental Housing Crisis Worse?
By Clive Scrivener, Founder Partner, Scrivener Tibbatts Chartered Surveyors
There is a growing contradiction at the heart of government housing policy.
Ministers repeatedly acknowledge that Britain needs more homes to rent. Demand continues to rise, home ownership remains out of reach for many younger households and local authorities are struggling to meet housing needs. Yet at the same time, landlords are facing an ever-expanding range of regulations, higher taxation and rising compliance costs.
The result is that many private landlords are beginning to ask whether remaining in the sector still makes commercial sense. We have a client who has just sold his studio flat in Westminster for this very reason.
Over the past decade landlords have absorbed additional stamp duty surcharges, the withdrawal of mortgage interest relief, tighter lending criteria, energy efficiency requirements and a succession of legislative reforms. The Renters’ Rights Act is merely the latest chapter in a much longer story.
What is different now is that the pace of change is accelerating.
During the next few years landlords will need to navigate a new national rental database, mandatory ombudsman membership, revised housing standards, stricter enforcement powers and future energy efficiency upgrades. By the middle of the next decade, rental properties will be expected to satisfy significantly higher standards than many currently achieve.
Few would argue against improving housing conditions. Most responsible landlords already invest heavily in maintaining their properties and providing decent accommodation. The difficulty lies in the cumulative effect of multiple reforms arriving one after another, each bringing additional costs and administrative burdens.
The government often presents these measures individually. Viewed collectively, however, they represent one of the most significant restructurings of the private rented sector in modern times.
At precisely the same moment, the housing market itself is becoming increasingly challenging.
Recent market data suggests that buyers are becoming more cautious. Transaction levels remain subdued and surveyors across much of the country are reporting weaker demand than was evident earlier in the year.
Higher mortgage costs continue to affect affordability, particularly in London and the South East where house prices remain elevated compared with local incomes. Uncertainty surrounding inflation and the wider economy has also encouraged many prospective purchasers to delay decisions.
For investors, this creates an unusual situation. Capital values are no longer rising rapidly, borrowing remains relatively expensive and operating costs continue to increase.
Traditionally, landlords might have accepted tighter margins if strong capital growth compensated for lower annual returns. Today that calculation is becoming more difficult.
The next major concern centres on taxation.
The government’s planned increase in the taxation of property income from 2027 may prove to be a turning point for some landlords. Industry surveys suggest that many are already considering rent increases to offset the additional burden, while others are contemplating selling properties altogether.
Neither outcome is likely to help tenants.
If landlords increase rents, housing costs rise further for households already facing significant financial pressures. If landlords sell properties and leave the sector, the supply of rental accommodation shrinks, creating even greater competition among prospective tenants.
Economics has a habit of asserting itself regardless of political intentions. If the cost of providing rental housing rises, somebody ultimately pays the price.
The question is whether policymakers have fully considered the cumulative impact of their decisions.
The private rented sector has become an essential component of Britain’s housing system. Millions of households rely upon it, including young professionals, families, key workers and retirees. Any policy that discourages investment risks reducing the availability of precisely the homes that are most needed.
This is not an argument against regulation. Poor-quality housing should be improved and rogue landlords should be driven from the market. Equally, tenants deserve security, transparency and decent living conditions.
However, there is a significant difference between targeted regulation and an environment in which every year appears to bring another layer of cost and compliance.
The danger is that responsible landlords – the very people policymakers should wish to retain – decide that the effort is no longer worthwhile.
From a surveying perspective, we are already seeing landlords become far more selective about future investment. Conversations that once centred on expansion increasingly focus on disposal strategies, succession planning and whether properties can achieve forthcoming energy efficiency standards without disproportionate expenditure.
This should concern anyone interested in solving Britain’s housing shortage.
The challenge facing government is not simply to regulate the private rented sector more effectively. It is to ensure that regulation improves standards without discouraging investment.
Achieving that balance will not be easy. Yet unless it is achieved, we may find ourselves in the curious position of demanding more rental housing while simultaneously making it less attractive to provide.
That would be an outcome that serves neither landlords nor tenants.
Clive Scrivener is a Chartered Surveyor and Founder Partner of Scrivener Tibbatts, Wimbledon. He advises clients on residential property, valuation and housing market issues throughout London and the South East.
