PRS Homes Supply Crisis
With a new report showing almost 230,000 new PRS homes a year will be needed in the coming years NRLA chief executive Ben Beadle calls for Government action to help landlords continue to supply homes for those that need them.
Demand has been outstripping supply in the PRS for some time now, with rents rising as competition for homes intensifies.
Now a new report by the economics consultancy, Capital Economics, commissioned by the NRLA, lays bare the extent of the crisis facing the country in the not too distant future.
To meet Government targets a total of 340,000 new homes will need to be provided each year across the UK by the middle of the decade.
Even allowing for both the owner occupier and social housing sectors to grow at their current rates, the PRS would need to provide 227,000 new homes a year to meet demand.
Indeed modelling showed that even if these other tenures doubled their rate of growth, PRS landlords would still need to provide an extra 105,000 homes per year.
It is clear to us here at the NRLA that, with taxation and other Government policies as they stand, the PRS is not going to be in a position to provide these desperately needed homes.
The Government’s own figures show that the number of properties available to rent privately in England has fallen by 260,000 in the last five years.
This number is expected to drop even further, with Capital Economics modelling showing that without incentives to encourage landlords to continue to invest, this figure will decrease by around a further 540,000 properties over the next ten years.
It is no exaggeration to describe this as a severe crisis, and one which will inevitably see younger people and those on the lowest incomes lose out.
Not only will these groups struggle to find a home in the PRS, their ability to save for a home of their own – one of the Government’s key aspirations – will be severely hampered as rents are forced up by the dwindling supply, making saving for a deposit ever more challenging.
Ahead of the budget next month the NRLA has written to Government outlining the findings of the report and outlining positive changes that we believe could encourage supply.
These include proposals that would encourage the conversion of former commercial properties to residential homes; the switching of stock from short term to long term lets and incentives that would help bring empty homes back into use.
We have also called for a range of taxation changes, which would not only encourage landlords to remain in the sector and continue to invest, but would also help boost Government coffers at a time when they are struggling to cover the costs of the pandemic.
- Cutting capital gains tax when selling a property with a sitting tenant. Capital Economics found this could increase supply by up to 210,000 homes and would earn the government £4.6bn.
- Introducing a taper to Capital Gains Tax for long term landlords. While this would not increase supply it would boost revenues by £7.3bn.
- The removal of the 3% stamp duty on additional properties. This was found to be the single most compelling call and would have the greatest positive impact on supply of any policy considered. Axing stamp duty in this way would create 890,000 more homes than the ‘base case’ over 10 years, increasing government revenue by £9.6 billion.
The issue of supply and demand within in the PRS is not going to go away, and the time for the government to grasp the nettle and take action is now.
We would encourage the chancellor to listen to our proposals and work with us to develop creative, workable solutions to mitigate the impact on the renters they – and we – wish to support.
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