In his latest Mortgage Strategy column, Managing Director of Mortgages Richard Rowntree argues that a new Government must address the rental market supply/demand imbalance to support economic growth.

A friend of mine was recently looking for a three-bedroom rental home in the West Midlands as a result of a relationship breakdown. Financially secure in a well-paid job, his search proved frustratingly futile.

The choice of properties verged on non-existent. He complained of homes coming onto the market in the morning and viewing slots being fully booked by the time he got around to contacting the letting agent a couple of hours later. The property he finally managed to secure after a number of weeks was offered to him off-market, but he still had to endure a beauty parade with another prospective tenant.

His experience is not uncommon and is symptomatic of a dysfunctional private rental sector (PRS), where tenant demand is significantly higher than available supply. Recent data from Zoopla shows that even though tenant demand has come off its peak of last summer, it is still running at twice the level of the pre-pandemic world, whilst stock is down by a third compared to then.

Much of the debate between landlord and tenant groups has focused on whether there has been an exodus of homes from the PRS. For me, this misses the point as there is no conclusive evidence. The measures introduced in the latter half of the 2010s have clearly slowed the growth of the PRS and it is only more recently that we are seeing data showing stock decline as smaller-scale landlords exit.

Irrefutable

What is irrefutable, however, is that demand outweighs supply by some margin and that is not a healthy position to be in. It contributes to rental inflation, reduces choice for tenants and acts as a barrier to economic growth.

The latter point may seem like a leap, but a growing economy needs transient and flexible housing provision. For example, a business opening a new office or manufacturing base will need temporary homes for employees that follow the employment opportunity.  We have seen evidence of this along the M1 distribution centre corridor in the East Midlands; as new warehouses have been built, demand for rental homes has grown.

With the competing political parties all targeting economic growth to boost their spending power, having a functioning housing market to support it will be vital.

As an apolitical organisation, I’m not going to comment on the different manifestos being put forward by the parties. What I will say is that whatever party is in power come 5 July, they must look at the country’s housing provision in the round.

The PRS provides a home to one in five households. It is the tenure of the working population. Its importance must not be overlooked or diminished.

Of course, we understand that home ownership is the ultimate goal of most households and over the years we have seen parties focus on this group, with a myriad of support packages.

Population growth

Those packages have made a tangible difference to many people’s lives, but we must not overlook the right to a decent quality property at a reasonable price for those who want or need to rent a home.

With the population forecast to grow by 10% over the next 10 to 15 years, alongside some significant demographic shifts, it’s imperative that we increase the supply of homes for all tenures and not prioritise or pitch one tenure over another.

Whoever is in Downing Street will need to retain and build a committed base of landlord investors who can fund the expansion of the PRS, help the country achieve economic growth and provide a home to the increasing number of tenants who will use its services.  

We look forward to working with whichever party is in power to achieve that.

This article was originally published in Mortgage Strategy. Read the article here.