After being lambasted for his inactivity over anti-Semitism and the EU referendum, Jeremy Corbyn can take small comfort from Civitas last week endorsing his proposal to extend right-to-buy to private rented sector tenants.
Peter Saunders, research fellow at the think tank, called for renters to get a 35 per cent discount off the market value of their home – the same offer given to tenants in council and housing association properties. A maximum cap would be set at £77,900 outside London and £103,900 in London. To prevent landlords from being penalised financially, Saunders claims capping the discount would ensure landlords didn’t make a loss on their investment (although if they’re forced to sell before planned, and not realising as much capital gain as they could, then they are still losing money in one sense).
While not the Zanu-PF-style land grab probably envisioned by Comrade Corbyn, such a policy would represent a dramatic intervention into the rental market by the government, and ultimately do more damage than good.
The prospect of being forced to sell their assets at below-market value would likely see many landlords exit the market. Given they have already had to contend with additional stamp duty, reduced mortgage relief and extra regulation – an extended right-to-buy could prove the last straw.
The rush of landlords leaving might benefit a handful of first-time buyers, but for renters struggling to find a home, a sudden drop in supply would prove a nightmare scenario, and inevitably send rents soaring.
Individual landlords wouldn’t be the only ones planning an escape route. The corporate ‘brandlords’ leading the way in Britain’s emerging Build to Rent sector would soon review their options as well. Because companies like Essential Living, Greystar, Moda Living and Fizzy Living are investing billions of pounds in building new homes which they will rent themselves, kicking in the knees of capitalism in such a crash fashion would undermine every political party’s promises to build hundreds of thousands of new homes.
The last thing any investor wants is broken blocks of part-rented, part-sold units. It’s why the British Property Federation lobbied so hard for the sector to be exempted from the government’s Starter Home policy, which would have seen traditional affordable housing, a subsidised form of rent, replaced by discount homes for sale. Having such a differing mix of tenures under one roof poses a whole host of management issues, and isn’t the basis for genuine communities, as those who live on old council estates cannibalised by buy-to-let landlords will know.
Faced with having to sell off chunks of their development bit-by-bit further down the line, most – if not all – of the big institutional investors who have slowly moved back into the UK residential market would vanish, as would the promise of a professionalised private rented sector.
What Civitas, Corbyn and others fail to understand is that the housing crisis is not one purely of home-ownership. Buying a property remains the aspiration of the overwhelming majority of Brits because of what society, the media and politicians dictate. It could soon change as emerging generations seek greater flexibility in their lives and as people come to terms with the financial realities of a life built on debt.
Regardless, those who cannot afford, or don’t want to buy, need a functioning rental market. Extending right-to-buy would undermine the workings of the rental market, and only push a lucky few into owner-occupation.
Fundamentally, housing policy should be tenure-neutral, and the focus on increasing supply across the board, not just swapping existing stock between different pairs of hands. A real revolutionary act would be to abolish the greenbelt, and allow new homes to be built near to where people actually want to live. But don’t expect politicians or the media to call for that anytime soon.
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