Memorandum from the Residential Landlords Association (CRED 14)

 

1. The Residential Landlords Association has in excess of 6,000 members and represents owners of over 100,000 units of accommodation in the Private Rented Sector ("PRS"). Whilst the Committee's inquiry and call for evidence essentially relates to the effect of the "Credit Crunch" on the Government's housing policies as they affect owner/occupiers and the social sector, the RLA believes that it is important that, as part of this inquiry, the Committee takes into account the importance of the PRS as a key component of the housing market.

2. Committee members will be aware of the detailed independent review of the PRS which has recently been concluded by Dr. Julie Rugg and Mr. David Rhodes of York University. This was commissioned by the Department for Communities and Local Government. This Report has made a number of significant recommendations. It also lays to rest many of the myths that surround the PRS.

3. The PRS has a key role in helping the housing market through the current turbulence that it faces. The housing market, particularly new build, has more or less shuddered to a halt, both due to lack of confidence and the supply of finance drying up to a significant degree.

4. The social sector will face ever increasing demands on it which it simply cannot meet in the time available because even if we wanted to, new properties cannot be made available in time.

5. The RLA believes that successive Governments have placed far too greater emphasis on the importance of owner/occupation. Whilst owning one's own house is a lordable objective the reality is that many people have been forced into buying they could not really afford to do so. Compared with many continental European countries the UK owner/occupier percentage is high. The current credit crunch and the dire financial situation is due at least in part to this. It has resulted because our housing boom has been much more pronounced and, when the resultant bubble has burst, the fall out has been worse than elsewhere in Europe (other than Spain). The housing market in France and Germany, for example, are not nearly as badly affected. This huge bubble fuelled by the demand from owner/occupiers has resulted in severe adverse consequences with the economy as a whole which have been magnified.

6. The Rugg Review has found that the private rented sector, which is mainly made up of smaller/medium size landlords, is far more financially stable than might be thought. In particular, the PRS should not be dismissed because of buy to let. Buy to let played a vital role in bringing finance into the PRS to help revitalise the Sector following the passing of the Housing Act 1988. Similarly, the Rugg Report concludes that, by and large, owners purchasing properties to rent did not inflate house prices. The RLA urges the Committee to carefully consider the conclusions of the Rugg Report which are in line with many of the things which we have been saying for some time. Indeed, the Report emphasises the need for the PRS to be at the heart of the housing market with national and local policies to emphasise this.

7. How can the PRS assist during the current difficult climate. Loans are still available to the right customers. However, we need to urgently stabilise the lending market. Inevitably there will be further reductions in house prices but undoubtedly there are still buyers out there who are willing to buy properties to rent out. What we need to do is to ensure that landlords, many of whom have low gearing, are encouraged to purchase properties to rent out. It will take some time before owner/occupier confidence returns.

8. Generally speaking, the market for rentals in the PRS is reasonably good. This is not surprising when people who need a home are unable to buy or are unfortunately being re-possessed. The RLA advocates the adoption of policies which will now encourage residential landlords to invest further in the market.

9. The RLA advocates urgent consideration by the Government of the Rugg Review recommendations with a view to implementing those where there is broad agreement. Whilst landlords have concerns on a number of issues, particularly the proposal for landlord licensing, the Report's recommendation that residential landlords should be treated more as businesses is very much welcomed. We need an urgent review of the tax treatment of residential landlords. It is vital that the Treasury is fully engaged in this process along with the other relevant Government Departments.

10. In the medium to long term it is essential that the PRS expands and provides overall a larger percentage than that that has latterly been the case of the UK housing market. As already pointed out in this evidence this will help safeguard us against the excesses which have been witnessed recently and which have led to the current economic crisis. Clearly, we need to ensure that more houses are built. The PRS can play its part in this particularly by converting and extending existing properties, as well as building to rent.

11. In the short term, however, to get the housing market moving again and to bring back into use the increasing number of vacant properties it is important that residential landlords are given every encouragement. PRS provides the vital intermediate sector between owner/occupation on the one hand and the social sector on the other.

12. The Rugg Review must, therefore, be at the top of the Agenda as part of Government policy to deal with the current credit crunch and the way it affects the housing market. It would be wrong, in the view of the RLA, for the Government just to concentrate yet again on problems affecting the owner/occupation market or the social sector. Rather, the entire housing market needs to be looked at, including the private rented sector.

 

October 2008