UK facing critical rental shortage—what next for generation rent?

UK facing critical rental shortage—what next for generation rent?

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A recent report from the Royal Institution of Chartered Surveyors (RICS) claims that the UK is facing a ‘critical rental shortage’. Rising house prices and pressure in social housing have resulted in a more than doubling of the number of households in the private rental sector since 2001, with projections showing that one in four households will be renting privately by 2025, and for the 20–39 age group dubbed ‘generation rent’, the figures will be one in two. Jonathan Northey, partner at DLA Piper, considers some of the options to address the shortage.

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What solutions does RICS suggest to deal with this shortage? How would the proposed solutions address the issues?

RICS suggests that reversing the current 3% surcharge on second homes would help with the shortage. I don’t think this would address the heart of the issue, as although the 3% surcharge is the clearest policy intending to discourage individual buy-to-let landlords, there have been plenty of other changes over the last few years which are all mounting up to deter individual investors entering the market. Since the 2013 Communities and Local Government Report: ‘The Private Rented Sector’, which appears to have convinced the government that the majority of rental homes should be provided by institutional landlords as opposed to individuals, there have been over 50 new Acts of Parliament which affect the buy-to-let landlord and a further 70 pieces of delegated legislation. These include:

  • the Tenancy Deposit Scheme
  • immigration checks imposed by the recent ‘right to rent changes’
  • the energy efficiency regulations, and
  • the loss of mortgage relief

So simply changing the 3% would not in itself repair all the damage done to the individually owned part of the market.

Will an increase in home building help to solve these issues?

The burgeoning institutional-led private rented sector (PRS)/build to rent (BtR) market is starting to gain substantial traction with a lot of purpose-built rental stock currently in construction. So if these assets, once up and trading, show good returns then more money will be invested and the size of the stock will increase sharply and help solve the issue of lack of supply. Increasing home buil

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