We can build as many homes as we want, but Private Rented Sector tax changes could crush the home owning dream for millennials

 

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Amanda Wiewiorka, Managing Director, Wardhaugh Property 

With the release last week (7th February) of the UK Government’s long awaited housing white paper, Scotland’s own problems in the area were propelled into the limelight. The simple fact is, not enough houses are being built to meet increasing and changing demand, making homeownership an unaffordable dream for many millennials.

‘Modular homes’ or ‘off-site’ construction could offer part of a solution to this crisis. The process of constructing ‘modules’ complete with everything from electrics to plumbing at a factory away from the development site has already been identified by the Scottish Government as a way of addressing the housing shortage.

The concept is widely used around the world to provide strong, energy efficient homes.  Here in Angus, the first six houses of a new development on the site of the old Inverpark Hotel in Arbroath were built in complete units at a factory in Dunfermline before being delivered to the site last week.

It was Theresa May’s proclamation that the UK would take a different stance to homeownership, supporting long term renting as a viable alternative, which struck me. If she does indeed wish to move towards equal perceptions in Britain between renting and homeownership, then she must echo that sentiment in her policies.

Even if we increase the number of ‘modular’ homes and increase the levels of traditional house building to keep up with demand, the UK Government’s disastrous ‘tenant tax’, which comes into effect in April this year could undermine the entire effort.

The Government has decided that landlords, unlike every other business, will be taxed on their income rather than their profits.  This tax raid will only succeed in driving up rent levels in order for landlords to meet their costs.

With saving for a deposit noted as one of the biggest hurdles to homeownership, how will tenants who rent a property ever be able to save up enough money when they are forced to pay sky-high rents by a Government policy that is, in reality, detrimental to the very people the recent white paper aims to help.

Similarly, if the government truly wishes to achieve parity of perception between renting and buying a house, making it a much clearer choice for people rather than something they have no choice on, they will require the investment of professional landlords and letting agents.  Yet, the very tax changes being implemented will drive those same people out of the market and rob the country of that investment.

The UK Government has to make up its mind, is it trying to drive landlords out to increase the supply of housing available to buy, or does it need landlords to increase the supply of quality properties available to rent to achieve balance?

So whilst innovations such as modular housing can help supply at the edges, both the UK and Scottish governments must begin to make consistent policy decisions if we are to seriously tackle the country’s housing problems.

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Landlords and others must be part of benefits solution

 

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John Blackwood, Chief Executive, Scottish Association of Landlords @Scotlandlord

When it comes to improving social conditions for those on the lowest income in society, those in the private sector are often ignored when it comes to finding practical, effective solutions.  This is no more true than when it comes to ensuring there is a proper supply of high-quality affordable housing.

 

Traditionally, finding housing for low income individuals and families, such as those on benefits, was considered to be the role of government, either nationally or locally.  However, with budgets reduced and the long-term challenges of councils investing in new housing stock, they are unlikely to be able to meet this challenge alone.

Yet the private rented sector has a large number of well-maintained, quality properties available at rates which would be affordable for those on benefits.  The challenge in releasing these properties for rent has been an understandable reluctance by landlords to rent to those on benefits because of the delay in receiving rent each month.  Most landlords are small businesses working on tight margins and who rely on steady cashflow.  As a result, they are naturally cautious about the delays that can be caused in these circumstances despite many wishing to do so.

SAL has been campaigning for a number of years to find a way to overcome this barrier and release this stock for rent by low income households.  We were therefore delighted by the announcement at the start of the year that the Scottish Government will use its new powers to increase the frequency of Universal Credit payments and give recipients the choice of having the housing cost element of their benefits paid direct to the landlords, as already happens in the social rented sector.

This move will encourage more landlords to rent to those on benefits, increasing the supply of available housing across Scotland.  As well as having clear benefits for tenants, this will reduce the financial burden on local authorities who have to provide emergency accommodation at very high cost.

This represents a win/win/win situation for tenants, government and landlords.  We hope that in future, landlords can do more to help the most vulnerable in our society by working with different partners to deliver homes for those in need.

A version of this blog first appeared in the Edinburgh Evening News on February 13th 2017.

Solving the housing crisis must acknowledge broader changing demands and demographics

 

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John Blackwood, Chief Executive, Scottish Association of Landlords @scotlandlord

A recently published report found that home ownership has dropped from 69% in Scotland at its 2004 peak to 63% now.

The Scottish Association of Landlords (SAL) would like to see a long-term strategic plan that allows people to choose the right housing solution for their circumstances, recognising those requirements are likely to change over time.

For example, although more people now rent than buy in city centres, often this is through choice.  Homes in the centres of cities are often large, multi-bedroom properties, which would always have required a large deposit and are out of the reach of most young people.  However, small groups of young professionals may seek to rent this kind of property as they prioritise a desire to live in fashionable city-centre areas and the supply should exist to allow them to do this if they choose.

However, an even larger number of people, recognising the growing flux in the job market choose to prioritise saving money for a time when they might be out of work, rather than focussing on a deposit to buy a house.  This would seem like a very sensible long-term plan and considerably more responsible than the situation we saw a decade ago with people over-stretching themselves simply to “get on the property ladder”.  These people were the ones hit hardest by the credit crunch and property crash of 2008 which is still affecting supply in city centres.

None of this is to say that there are not challenges which landlords must address.  We must work with the third sector and government to educate landlords about the law and encourage stronger enforcement of regulations to drive criminal players out of the market.  Equally, we must work with tenants to ensure they are aware of their own responsibilities under their lease.  Achieving this balance will help defuse tensions which can often arise through misunderstanding between tenants and landlords.

By working together and acknowledging the changing nature of the demand in the housing market it is possible to achieve the right balance that will end the housing crisis in Scotland in the future.

Private Rented Sector vital to success of Dundee regeneration

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Amanda Wiewiorka, Owner/Comapny Director, Wardhaugh Property

Uncertainty and discouragement must stop if landlords are to provide the accommodation needed for Dundee to grow, says Amanda Wiewiorka (Director, Wardhaugh Property)

For the past two decades Dundee has been at the centre of what could be one of Scotland’s greatest city regeneration stories.  The growth of the biotech sector, the video games industries and the variety of education and research opportunities, not to mention the transformation of the Waterfront are the signs of a city that is developing rapidly.  That is good not only for Dundee and the wider Tayside region but for the whole of Scotland.

In the Private Rented Sector (PRS), we have seen a similar transformation in the city.  For years, the market in Dundee was flat with rent levels and yields low, restricting the ability of landlords to either expand their portfolios or improve existing properties.  However, in the past couple of years all that has changed – yields are increasing and investment has been on the up.  As a result, there have been more properties available for rent, including landlords bringing derelict homes back in to use, as well as an increase in quality and standards, providing more value for money for tenants.

This increase in the supply and standards of accommodation is vital for any region looking to grow and thrive, be that the rented accommodation, hotel rooms or new housing for families or students.  However, it is the PRS, in particular, that provides the kind of high-quality and flexible accommodation that employers and workers require, be that in Dundee itself or in the wider Tayside area.

However, this optimistic outlook is being threatened by tax changes and other uncertainties that are making it harder for landlords to invest either in new properties or in renovations and improvements.  For example, tax changes brought in last year by Westminster and Holyrood are already starting to choke off investment.  This, coupled with the continued uncertainty around the EU referendum vote which we are told could reduce the attractiveness of Scotland for business investment and to students, is making landlords cautious and highly risk-averse.  Although there was a rush of buyers prior to April when the increase in the Land and Building Transactions Tax (LBTT) took effect, we now hear from landlords in Angus and Dundee that they are holding back on investment until the uncertainty around the EU Referendum has passed.

Unless there is a halt to actions which create uncertainty or discourage landlords from investing in more privately rented property, there is a real danger that the fantastic economic turnaround we are seeing take hold in Dundee could stall, with far-reaching implications not only for the city but for the wider Tayside region and Scotland.