Finance News

Call for Investors to be Encouraged into Market

Em Morley - November 27, 2012

A new report from MPs has suggested that more build to let investors must be encouraged into the market in order to tackle the housing crisis.

The report from the Communities and Local Government select committee, entitled Financing of New Housing Supply called for large investment in the sector to tackle the growing problem. Additionally, the committee also said that they appreciate the role that smaller landlords will have to perform.

Clive Betts MP is head of the committee that published the dossier.

Financing of New Housing Supply

Included in the report is a suggestion that pension and institution funds “could make a significant contribution to the building of new homes in both the private and social rented sectors.”

Furthermore, the panel believes that real estate investment trusts “should be revamped to encourage investment in housing.”[1]

Call for Investors to be Encouraged into Market

Call for Investors to be Encouraged into Market

The report also calls for the ways that landlords are regulated to become easier. A small passage reads: “While it is right to consider the potential for large institutions to invest in the private rented sector, it is also important to remember that the sector is, and will continue to be, dominated by small companies and individual landlords.

“There are a number of issues facing those in the sector: the financial crisis had a significant effect on the availability of buy-to-let mortgages; many landlords no longer have the benefit of capital gains; and there is some concern about the levels of return.

“We have heard that the burden of regulation and taxation has deterred landlords from expanding their businesses.

“While constraints on mortgage finance will continue to affect investment in the sector, the Government could provide some support by taking steps to address this burden.”[1]

Welcome

The British Property Federation (BPF) has welcomed the findings of the report, having previously campaigned for the Government to remove barriers relating to institutions. This in turn would encourage pension funds to be invested in housing and to reinforce real estate investment trust (REITs) regimes.

Director of Policy at the BPF, Ian Fletcher, said: “We welcome the findings of the report and particularly the support for several of our proposals. With current finance models struggling, we must look at the broadest range of options for funding the UK’s housing supply and institutions and REITs, as well as smaller investors, can all play a part.

“Institutions have for some time expressed an interest in investing in residential property.

“While many of the conditions are already in place, such as rental demand and political support, the lack of scale to deliver an acceptable return remains a barrier.

“We underplay the important contribution individual investors make to housing investment, and I would rather see them investing in housing than classic cars or fine wine, but if we want to see institutions deliver on a large scale we’ll need to see specific build to let schemes.

“The select committee correctly highlights that whilst there is no silver bullet, we need to encourage and support a broad range of different investors in housing supply if we are to meet the nation’s housing needs.”[1]

Chairman of the Residential Landlords Association (RLA), Alan Ward, also welcomed the report. Ward stated that there is a “chronic shortage of accommodation,” and “many tenants are faced with too high rents and are left to simply accept whatever housing they can find.”[1]

As such, Ward believes that encouraging more build to let investors into the market can only be a good thing in attempting to tackle the housing crisis.

[1] https://www.scottfraser.co.uk/news/view/mps-call-for-build-to-let-investors-to-be-encourag