UK - A government-commissioned report on proposed reforms for UK rented housing has sparked a debate which suggests the country's top property experts disagree on the best way to help investors tap opportunities in the UK's residential marketplace.

The Review of the Private Rented Sector (PRS), written by Dr Julie Rugg and David Rhodes and published at the University of York's Centre for Housing Policy, presented proposals to the government last week suggesting there is a need to developing better relationships between local authorities and landlords and providing greater tax incentives to help investors in the residential rental market.

The report's authors have called for policing of the PRS to be extended to lessen the burden on local authorities and proposed the government draft a ministerial statement of intent and mention the PRS within the guidance of the new national indicators.

While fund investors are happy to hold residential property on the continent as part of their real estate assets, few pension funds invest in UK residential property because there is currently seen as insufficient incentive to do so.

Insisting the government must to do more to encourage investors into the residential market,
Rupert Dickinson, Chief Executive of Grainger plc, the UK's largest listed residential landlord, said "the Rugg review is a step in the right direction but the Government needs to acknowledge the importance of build-to-rent, address planning policy, facilitate residential REITs and look at ways to stimulate investment to ensure the potential of the rented sector is realised for all stakeholders".

The British Property Federation also proposed changing Real Estate Investment Trusts' (REITS) regulations to make them work better for residential property, as there are currently no UK residential REITs.

"With the average age of first-time buyers now 34, it's no wonder that more households have found a new home in the private rented market since 2000 than all other tenures put together," said Ian Fletcher, residential director for BPF.

"The government needs to recognise that and develop a strategy for this increasingly important part of our housing market."

The Review called for policy intervention to address the impact of housing benefits and tenants' sustainability and the promotion of accreditation to ensure managing agents provide consumers with more protection.
 

But Dickinson claimed there was a lack of depth in the report to make it of any value.

"We are encouraged by the call for growth in lettings, the professionalisation of the sector and fiscal incentives but were hoping for more analysis of what was happening on the ground rather than a seeming reliance on scarce statistical evidence," said Dickinson.

Falling property prices and rising rental yields could provide the perfect opportunity for cash-rich investors to tap into residential housing markets, but what else could be done to encourage investors?

Robin Goodchild, European director of strategy and research for Jones Lang LaSalle, said: "I think the idea of licensing landlords is one that can be built on. There really should be benefits for the licensed landlord: some VAT relief on repairs and maintenance for example."

Institutional investors currently pay 4% stamp duty land tax compared to small investors, who pay between 0 and 3%, because it is based on the total residential portfolio rather than the rate for individual units.

But commenting on BPF's call for the introduction residential REITs, Goodchild warned the move would be counter-productive.

"The borrowing limits would be very onerous for residential REITs because the residential income would be lower," he suggested.

Goodchild believes the review is unlikely to spark a strong reaction from investors abroad towards UK residential investment, though admits there is a brewing interest.

"I don't think the report has done anything to encourage large-scale investments from international investors, although some US REITs have been looking at the UK residential market,' said Goodchild."

That said, stronger regulations for the PRS could ward off potential investors, warned the BPF's Fletcher.

"If the forthcoming housing reform green paper focuses too much on killing off supply from a few bad landlords, and not enough on how it is going to incentivise investment to meet future demand for rented homes it will be judged as a missed opportunity."

Topics