With housing likely to be a key focus of any election campaign, there have been several positive signs recently that both sides understand that supply is the fundamental issue and a driver of the housing crisis, which is encouraging.
It was very reassuring to hear Lisa Nandy, shadow secretary for levelling up, housing and communities, state that she understands that rent control will not help the rental sector and would worsen the supply side.
Although rent control may appear a seemingly tempting move and a potential vote winner for some, it is clear from examples elsewhere, most recently in Scotland, that it has exacerbated the issue: with rents rising overnight, supply reduced and just a few months in, it is already significantly deterring investment. This rent control mechanism, which aspires to make renting more affordable, has been found to repeatedly have had the opposite effect.
This acknowledgement and the political alignment on rent control should provide the investment community with the confidence that the compelling opportunity within our sector remains. There’s no doubt the fear of restrictive controls has been overlaying some people’s investment in the sector. The build-to-rent (BTR) sector continues to demonstrate resilience and outperform other real estate sectors. Given the long-term approach and commitment to building sustainable communities, landlords – while performing well and continuing to deliver strong performance – are also mindful of being responsible and ensuring homes are affordable to residents.
On affordability, while rental growth continues to align with wage growth, interest rate increases have driven a shift in affordability ratios between buying and renting. According to Capital Economics, as of May 2023, the monthly cost of a mortgage has now overtaken the cost of renting. With interest rates continuing to rise, the gap is likely to widen further, increasing demand and putting further pressure on the already challenged supply. To that point, Zoopla data shows a 51% increase in demand for rental homes over the last five years, while at the same time supply has fallen by 33%. This is further evidence, if needed, that housing policy must support rather than deter investment in new homes.
In other encouraging signs for the sector over the last couple of months, we have also had the Conservatives publish the rent reform bill, and while not perfect, for the professional landlord it is workable with a few tweaks. This is a fundamental change to the rental sector and to ensure it is effective, we must ensure that policy and process work together to the genuine benefit of all renters, and landlords. What lies at the heart of this is a shared commitment to making life better for renters, which I wholeheartedly support.
Equally, Labour has given a much clearer stance on what it would like to do on housing. Again, this clarity is important in reassuring investors that there is still a great opportunity, one that also delivers much-needed new homes. Surely that is a political win-win.
Helen Gordon is chief executive of Grainger
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