The British Property Federation's annual residential investment summit took place on 11 June with "The Power of Insight" as its theme, giving industry stakeholders an opportunity to consider and analyse the implications of the upcoming election for the living sector.
Unsurprisingly, there was a clear consensus that the key challenge the industry needs to address is the under-supply of housing in the UK. Representatives of the affordable housing, build-to-rent, later living and purpose-built student accommodation sectors all agreed that the next Government should address the housing shortage as a priority. Although the politicians appear to be receptive to this, with Labour, the Conservatives and the Liberal Democrats each respectively pledging to build 1.5, 1.6 and 1.9m homes over the next five years, there was debate amongst stakeholders as to how achievable those goals will be in practice.
We have summarised some of the key takeaways from the summit below.
What are the living sector's key asks of the next Government?
- Enhanced public funding: arguably the most obvious way to combat the housing crisis would be increasing government financial support to encourage domestic and foreign investors and stimulate building. However, the industry recognises that public funds are already limited so the Government is likely to need to consider alternative ways to generate funding for the sector such as a relaxation of Stamp Duty Land Tax rules (particularly following the abolition of multiple dwellings relief).
- Planning reforms: planning was another focal point, with the current regime seen by many as another obstacle to investment in the sector. Inefficiencies and systemic shortcomings in the planning system can cause delays or even the complete abandonment of projects, proving potentially costly to institutional investors. There should also be greater appreciation of the link between a flawed planning system and the escalation of rents and house prices. A more streamlined planning process would ensure the timely completion of development projects and safeguard investments, in turn, making the living sector more attractive to investors. Proper infrastructure and formal training for local planning officers, alongside legislative changes, are essential to ensure costly decisions are made consistently and effectively.
- Public-private joint ventures: partnerships between local authorities and investors combine public interests with the expertise and capital that the private sector offers. These joint ventures could be a practical solution for aligning the interests of the industry and government and addressing the lack of housing supply.
- Rejection of rent controls: the introduction of rent controls (at both national and local level) was considered and discussion centred on whether this would be detrimental to housing delivery and fail to provide the stability investors need. There was concern that a rent control regime could result in: an increase in illegal housing with landlords attempting to bypass the system by offering unregistered or illegal rentals, higher rents on new properties to compensate for lower rents on rent-controlled properties and escalation of the housing shortage with rent inflation rising as a result. Reports indicate that Scotland has the highest private rents in the UK despite the implementation of rent controls, with many believing the regime has exacerbated the problem.
What can housing associations and the private sector do to help resolve the housing crisis?
- Educational outreach: investors could better advocate the sector's mission statement and improve communication with policymakers. The living sector does not only seek to generate financial returns for investors, but also has a social impact with knock-on-effects on health, education, employment and crime. This represents a significant common thread between government and living sector agendas that each should seek to exploit.
- Shift to single family homes: it was recognised that the industry is pivoting from multi-family to single family home investments, partly due to the increased planning difficulties faced by multi-family developments, but also due to changing consumer preferences. Stakeholders must continue to be attuned to the market's needs and adapt business models to ensure the appropriate type and proportion of housing is being delivered. More needs to be done to convey these market changes to the local authorities to prevent delay.
- Focus on affordable housing: affordable housing addresses the immediate supply issue and should be considered from the outset of development proposals. It was suggested that construction of the necessary affordable housing in London could result in an estimated saving of almost £8bn per year by alleviating the financial strain on the healthcare, education and prison systems.
- Building for later living: an estimated 12.7m people in the UK are over 65 (approximately 18.9% of the population) so delivering appropriate housing for that demographic is of increasing importance and a growing investment opportunity. Research suggests that one of the main blockers to the older population selling up is Stamp Duty Land Tax as it can be a significant payment that may never be recouped and could be therefore be reconsidered by the next Government.
- Engagement with local MPs: investors could invite local MPs to visit their properties to gain insight into the industry's contributions - complimenting the broader educational outreach mentioned above, fostering the Government's understanding and support and leading to a cohesive resolution to the housing crisis.
How can housing policy embrace stability and adaptability?
The summit highlighted an increasing desire to stabilise the living sector, making it more accessible and attractive to investors. The next Government certainly has a challenge ahead – stakeholders are looking for a policy that addresses the immediate housing shortage but is also robust enough to foster long-term growth. However, legislation alone is not enough and should be supported by infrastructure that equips the workforce to build new homes and implement an effective planning system, which may inform wider education and immigration policies.
The industry is keen to shift the national mindset away from home ownership as the ultimate goal and to encourage recognition that renting is a long-term reality or even preference for many people now. Most people in the UK, at least for a proportion of their life, will rent a property and the living sector wants to work with the Government to implement a more inclusive, realistic housing policy for the future.
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