The UK faces a housing crisis. There seems to be general agreement about that. A report added to the House of Commons Library a little over a year ago recognised the problem, and cited another report, which suggested that in England alone 340,000 new homes a year are required.
There are many issues here, including the balance between home-owners and renters; a steadily rising population exacerbated by net immigration; poor quality housing stock; the hangover caused by Thatcher’s sell-off of council housing (a policy subsequently adopted by Tony Blair when Labour Prime Minister); high house prices, fuelled by years of ultra-low interest rates and quantitative easing; and high rental levels. It’s a sorry picture, to which we can add another issue, namely the limited amount of housing stock that is available for rent.
An article on the BBC website today is headlined “Renting: Number of UK homes available down by a third”. A casual reader might assume that the housing stock owned and let by landlords has fallen by a third, but apparently this isn’t the case. The key word is “available”. The article tells us that the number of homes available to rent in the UK has fallen by over a third in the last eighteen months, and the inevitable result of demand exceeding supply has been to push up rents for new tenants by 11%. The issue, we are told, isn’t that the number of properties has fallen – they have remained at a fairly constant level since 2016. Rather, the issue is far more people chasing broadly the same number of properties.
We are also told that rising interest rates add to landlords’ costs, and this is an extra factor driving higher rents. It seems that the Government has recognised the problem of rents being driven up to unsustainable levels, and we are told that it is to “introduce a new Renters’ Reform Bill in England before the summer, which it says will redress the balance in the market and provide more security for tenants.”
It’s good to know that politicians are aware of the problems, and are taking steps to deal with them. But then they go and spoil it all by doing something stupid. And of course, it’s our old friend “net zero” that’s going to exacerbate an existing problem. This week a story appeared on the Daily Telegraph website under the heading “Landlords to get five years to hit net zero targets – Buy-to-let investors face spending thousands of pounds on retro-fitting properties”. If the Daily Telegraph has the right of it, this is the story:
Landlords will be blocked from letting properties unless they upgrade them to meet net zero energy efficiency targets within five years.
Ministers are poised to announce that landlords will have to spend thousands of pounds increasing the energy performance of their properties by 2028 – or face a fine of up to £30,000.
It is understood that the Government plans to force up to two million landlords to increase the Energy Performance Certificate rating of their properties to a minimum of a C standard to help reduce the nation’s carbon footprint.
It means buy-to-let investors could have to spend thousands of pounds installing insulation or eco-friendly devices such as heat pumps and solar panels to make their properties more energy efficient.
Currently, all privately rented homes in England and Wales need to meet a minimum energy performance of band E before they can be let.
Ministers had previously proposed a deadline of 2025 for newly-let rentals to achieve an energy performance rating of at least a C, and a deadline of 2028 for all other rented properties.
Given that many private landlords don’t own their properties outright, and have borrowed heavily against their buy-to-let portfolios they, like all borrowers, are being hurt by the recent rises in interest rates. Many are leaving the market already. The BBC article cited above tells us:
Large numbers of landlords are leaving the market – 11% of homes for sale on Zoopla were previously rented.
For others, short-term lets, such as holiday lets or Airbnb, offer better returns than long-term tenants. Zoopla has seen a three-fold increase in short-term lets since 2019.
I can think of little better calculated to encourage hard-pressed landlords to sell up than the Government’s plans for the rental sector, driven by the obsessive dogma of net zero. I suppose this is what happens when we have career politicians, many of whom have never had a “proper” job, and who have little understanding of how the world works. The only positive I can derive from all of this is that the problems it will cause should rapidly become self-evident, and perhaps – just perhaps – it will be another nail in the coffin of the net zero folly.
Climate Scepticism 
The market will find a way, it usually does.
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catweazle
Unless stymied by the dead hand of government.
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It seems I’m not alone in drawing the blindingly obvious conclusion. Here’s a letter in the Telegraph:
https://www.msn.com/en-gb/money/other/letters-landlords-will-simply-sell-up-rather-than-meet-new-net-zero-targets/ar-AA19eQOZ
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Slightly off-topic. There is a real shortage of rental properties already, and some obvious solutions. It seems that landlords are increasingly eschewing long-term lets in favour of Air B’n’B weekend lets – which naturally has obvious pros and cons. Some local authorities are beginning to charge more council tax on second homes, partly in response to the problems of dead villages in the middle of winter and a lack of available housing for locals. There are some trendy coastal villages in Norfolk that are seemingly largely abandoned out of season. At the moment I have heard anecdotes of some folk re-badging their main home as their second home and vice-versa in order to avoid the extra council tax levied on second homes where their (original) second home is. I have also heard similar anecdotes of people buying second homes in far-off places (northern Scotland) and spending a fortnight there in summer, leaving it empty the rest of the year.
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The ever-sensible Douglas Fraser gets it:
“Rental health: Scotland’s landlords versus the rent freeze”
https://www.bbc.co.uk/news/business-65148719
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I believe the agenda here is to drive out smaller, independent landlords in favour of corporate entities, who can absorb these extra costs and still make a profit. We used to let out our flat in Peckham. We got on well with our tenants and provided a very personalised service. That era is now gone. Big corporations are muscling in on the rental market, assisted by government regulations and red tape.
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Jaime,
I suspect the same is true across the board, though private landlords are increasingly feeling the pressure now. I wonder why anyone has the determination to set up a business these days – the powers-that-be seem determined to make it a nightmare at every turn.
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Behind a paywall, unfortunately, but it seems that it may not just be residential lettings that are about to come under pressure due to the net zero folly:
“Net zero rules saddle high street with ‘disastrous’ £90bn upgrade bill
More than nine in ten shops to fall foul of new energy standards”
https://www.telegraph.co.uk/business/2023/04/07/high-street-saddled-with-90bn-bill-from-net-zero-rules/
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Not a cat in Hell’s chance, Mark.
Not only are they unable to afford it, even if they could afford it there isn’t the workforce available to carry out the necessary installation nor the equipment and materials necessary either.
Nut Zero is a bust.
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Paul Homewood has the Telegraph story in more detail:
https://notalotofpeopleknowthat.wordpress.com/2023/04/08/net-zero-rules-saddle-high-street-with-disastrous-90bn-upgrade-bill/
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“Renting: Shortfall of properties creates frenzied market, surveyors say”
https://www.bbc.co.uk/news/business-65252376
What a good idea to impose extra net zero burdens on landlords at great expense to them just at the moment when many are already getting out of renting or are seriously thinking about it.
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So what happens to these properties after they have been sold?
I guess that they either become owner-occupied or are relet. I can’t see them being left empty for any length of time.
Of course a few of them could be used for high value incomes, like brothels or canabis farms.
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Bill, if they are bought by people to live in, there is an argument that the overall housing stock is unaffected, albeit tilted away from tenants to owner occupiers. The problem is that many seem to be turned into holiday lets and Air B&Bs, in which case the total housing stock is reduced.
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