What does the Housing White Paper in 2017 mean for Landlords?22nd Feb, 17
What is the Housing White Paper 2017
The Housing White Paper that was released in February 2017 is an invitation to the sector to join forces to tackle the housing crisis. A lot has already been written on the impact by various parties but here I want to look at how it will effect small to medium property investors/ landlords specifically.
We have picked our way through the Housing White Paper and supporting documents setting out the government’s plans “to reform the housing market whilst boosting the supply of homes in England” with that aim in mind.
If you did want to ready through the full housing white paper entitled “fixing our broken housing market” click here to get to the Government website that hosts it.
What are the key points for Landlords then?
First Point to bring up is that the government want to “encouraging more institutional investors into housing including building more homes for rental and also encouraging more family friendly tenancies”.
What does that mean? The government seem to be contradicting themselves here by now wanting to encourage more homes for rental whilst over the last 12 to 18 months they have also seemingly actively discouraged private landlords (See my January 2017 Blog Post called “is there a future for Buy-To-Let-Landlords” for more information).
However the UK is increasingly becoming a nation of people that are willing and wanting to rent.
The key word here however seems to me to be “institutional”. The government wants the future of the rental market to be more dominated by larger organisations rather than the lots of smaller landlords that currently exist. The main reason for this is most likely that they feel institutional investors will be able to fill the need more quickly and also be easier to control. That would include things such as the government can boss them about by giving them tax breaks in exchange for them doing certain things they want/need in return.
One such example is forcing the investors to build homes for “affordable rent”. The white paper defines affordable rent at 20% below market rate. There seems to be a flaw in this theory however as institutional investors still want to maximise their profit in their investments so quite how the government will incentives them to take less than they could is yet to be seen.
If they are successful in providing homes for rent at 20% under market value the issue for private landlords would then be lots of new properties becoming available undercutting our own properties. So it is worth watching this element but as with most things there is a counter argument which also still presents opportunity. For example traditionally institutions generally specialise in certain property types – i.e. student accommodation, blocks of flats etc) and are likely to do so in the future. That means it would still leave space for landlords of homes outside of those areas.
The other element the government is looking at is offering family friendly tenancies on new build properties. They define this as 3 year or more tenancies. So in the near term it would not effect landlords not building homes but if the market expectation changes it may push private landlords to offer longer tenancies. On a standalone point this seems an admirable objective – a win win for all involved - however it has long been argued that current eviction laws are likely to need changing if longer term tenancies are to take off.
A potentially positive element that will be good for tenants and landlords is the white paper states it will “do more to prevent homelessness by supporting households at risk before reaching crisis point”. It is hoped this may eventually translate into housing organisations and councils not telling tenants in trouble to hang on until they are finally legally evicted from a property. There seems to be no winners in this situation currently so why they do it now still baffles me. I hope that will indeed change in the future.
And finally the government will “take action to promote transparency and fairness for the growing number of lease holders”. This will indirectly impact landlords as more properties are leasehold now but rouge freeholders are providing them and then pumping up ground rents over the time and/or selling freeholds on to other companies that then pump up ground rents. This causes problems across the market as if landlords find themselves with higher costs they will either stop investing in leasehold or will be forced to increase rents to maintain yields.
The good news is that the key points above are all that are likely to effect landlords in the white paper. The bad news is although they have made broad statements very little detail exists are how they plan to deliver this.
It is therefore still for us to wait and see how this is implemented.
Ultimately the problem is simple – we do not have enough homes. The solution however is anything but simple.
Watch this space and we will try and keep you up to date.
Happy property investing and renting.
Written By Bo Ibrahim – Working successfully investing and renting property for himself and his clients.