First a high level view: the government believes the UK’s housing market is broken, but the proposals in its White Paper are unlikely to go to the heart of the matter. Though senior figures in the industry have mostly welcomed what is there, those measures in themselves will not deliver meaningful change.
It’s striking that most of the measures, and the underlying rhetoric, assume the blame for the current situation lies with the private sector, and there’s no real consideration of the problems stemming from local authorities’ planning processes, or even the underfunding of their housing departments.
It’s true that the White Paper proposes to give those authorities the power to set their own fees for property-related transactions, but in practice this is not likely to deliver the kind of financial boost that is badly needed. What we really require is a change of ethos, and process.
That said, what are the implications for private landlords?
Agent fee ban
The government had already announced its intention to ban agent fees, and it looks as though it will be carrying out its promised consultation from March or April this year. As I write the intention seems to be to pursue as much of a blanket ban as possible, and the consultation will be designed to test this possibility.
Our view remains that even a partial ban could greatly affect the way letting agents handle tenant referencing, and so will reshape the pre-tenancy process. We would argue that this pre-tenancy process is essential, and if it is no longer possible to secure financial commitments at the beginning of the process the implications for landlords and agents will not be helpful.
Longer term tenancies
The government wants to encourage landlords to offer longer term tenancies, and so give greater security of tenure. That makes sense for families, but in Central London the picture is different. Here most apartments are let to young (or youngish) professionals looking for convenience in their work and social lives, rather than a long term home; the pressure for break clauses and short tenancies most often comes from the tenants themselves.
With job market uncertainty, not to mention questions around Brexit, this seems unlikely to change. While many if not most landlords would welcome longer term contracts, proposals for change here seem unlikely to have much effect in Central London.
The government says it wants to see more affordable rental units in the private market, with “affordable” defined as 20 per cent below the market price. Because rents in any given area are driven by supply and demand, a large increase in the supply of such units could have real consequences for all landlords in that area.
London mayor Sadiq Khan is also pushing his “London Living Rent” initiative, but the reality remains that there is a shortage of land and lower cost stock in London, which in itself looks likely to continue to limit the scope for change in the capital.
You can find out more about the London Living Rent initiative here:
You can download the White Paper for housing or browse related links here.
By Jaimie Beers
Jaimie Beers is Managing Director of Madley Property.