A few newsworthy items have caught my eye this week. The Conservative Party conference is taking place and a few weeks ago I attended the main property development conference of the year, RESI 2012.
There is a huge shortage of housing and the Government wants to encourage developers to build more. There is also a great lack of property to rent in the Private Rented Sector (PRS). The Government would like to encourage pension funds to invest in the private rented sector (PRS) as a way of solving this crisis, especially London. However, pension funds are not interested in schemes of less than 100-200 units. Only last month, the Government published the findings of Sir Adrian Montague’s review into what can be done to increase institutional investment in private rental properties. Details of the recommendations are here.
While this is going on the Residential Landlord’s Association has revealed that almost half of landlords are finding it very difficult or impossible to obtain a buy-to-let mortgage. Interestingly, only 1 per cent of landlords own more than 10 properties. If pension funds move into this market in a big way then they will fall into this 1 per cent category. This means that 99 per cent of landlords in the PRS are therefore small buy-to-let investors. Many of these probably have a few properties to help with their pension. However, small landlords can’t get mortgages and most developments don’t produce 100-200+ residential units. Therefore, the biggest providers of private rented accommodation are frozen out of the market.
It would appear to me that if the Government wants to encourage the PRS, then it would get a better and quicker result if it gave help to the 99 per cent rather than the 1 per cent. Basic maths.
It would also help smaller developers who aren’t in the business of building 200 units on one site.