The government is to do another U-turn, to ditch one policy set up to tackle the housing crisis for another. David Cameron wanted to turn Generation Rent into Generation Buy, with proposals to build affordable housing to allow younger people to get a foot on the property ladder. Property ownership has been a key issue for the Conservatives for decades, but the new plan by Theresa May changes direction to help renters by delivering more affordable rental properties.
The UK’s soaring property market means millions of people, especially the younger generations, cannot afford to buy. Instead of trying to find ways to open up home ownership, the government is to change planning rules so that councils can build more rental homes. It will also conduct a consultation on how developers can be encouraged to build more affordable private rentals. Another strand to the plan is to announce new measures to encourage family-friendly tenancies of three years or more. The government has pledged to build one million new homes in the United Kingdom by the end of the decade via a mix of schemes such as encouraging council house-building and more prefab homes, which are cheaper and quicker to build. However, the house-building project has been slow to get off the ground, with just 190,000 homes built in the UK up to April 2016. Sajid Javid, Secretary of State for Communities, said the government needs to build at least 250,000 annually from now on to hit this target.
The housing crisis has been worsening over the past few years and it does not help for governments to switch policies every few years as well. A long-term solution needs to be sought, not just a quick fix makeover. Governments should be consulting with landlords and tenants associations to work out the best way to deal with the housing shortage and high rents. They should investigate models in countries like Germany or Switzerland, where far more people rent.
Also, it could be a good time to look again at the way landlords are taxed and treated in the UK. Stripping buy-to-let landlords of mortgage interest tax relief and taxing landlords on their income rather than their profit is bound to have an effect on the market. Some landlords are getting out of the private rental sector and investing in commercial properties, while others will have to pass on the increased tax burden to tenants by putting up their rents. If rents rise, then it would also exacerbate the problem for would-be homeowners who are living in rental properties while trying to save a deposit to buy a home. As they will be forced to spend even more of their income on their monthly rent, it will take even longer to save up for the deposit. Making buy-to-rents a less attractive investment option will only serve to reduce the growth in the supply of rental properties and drive up rents even further. This smacks of short-termism at a time when more people are relying on rentals, which are forecast to account for 25 per cent of all housing by 2025.