Earlier this year I reported on the plan of Lloyds Bank to become the UKs leading private landlord with an ambition to own 50,000 rental properties within the next ten years.
I saw this as a good thing for tenants since Lloyds would do the job right, assuring a high standard of rental accommodation at a fair market price. But as is often the case in the private rental sector, the law of unintended consequences has bestirred itself.
Having a bank or large institutional investor as landlord may be an attractive proposition for tenants, but what of those tenants desperate to get onto the property ladder? If Lloyds ambition to own 50,000 rental properties within ten years comes to fruition, that is 50,000 homes straight off the property market because institutional investors are not buying do-em-ups.
On a recent affordable homes development in the south east, an institutional investor snapped up eighty percent of the available properties off-plan. And there are tales of investors working with developers even before the planning stage. The investor will specify the type and number of properties they require built, then buy the lot. Great news for the developer as cash flow issues fade into the distance, terrible news for anyone trying to buy their first home.
Add to a shrinking affordable housing sector the fact that in the last decade, the cost of buying a home has risen faster than wages and first time buyers face a perfect storm. Low deposit mortgages are often not much help as would be home owners cannot afford the monthly repayments so need to save longer for a bigger deposit.
I have read a number of erudite articles outlining how we got here and suggesting a way out but for me, the answer is simplicity itself. Build more affordable homes for sale to home owners rather than City investors. The yearly supply of new homes has declined steadily since 1970 and more needs to be done to make first time home owning a viable option.
The situation is not helped by incomprehensible Council planning decisions. Small developers frequently have planning applications rejected and the Council officers will state their reasons. What they will not do is outline what sort of development they would prefer in a given area. So small developers are shooting in the dark, hoping to hit the target now and then.
We recently applied to build a pair of Tyneside flats’. The application was rejected but a re worked application for a three bedroom house was accepted. This was on street where we cannot keep Tyneside flats on the books, such is the high demand.
Our business is in the private rental sector but I am always delighted when a tenant announces that they are moving into their first owned home. To delight me more often, action is needed. Government needs to propose a strategy which will make affordable housing available to individuals as well as corporate giants. And Councils need to loosen their stays, working with small developers to create affordable homes from existing housing stock. Although Scottish historian Niall Ferguson said “The law of unintended consequences is the only real law in history” I feel we have seen enough of it in the housing sector.
