We may be out of recession but the housing market story continues to be one of doom and gloom. House prices continue to fall, the mortgage market continues to contract. While even deposit ready first-time buyers are struggling, the situation is exponentially worse for low-to-middle earners. With just 2 per cent of mortgages available at over 90% loan-to-value and no indication that the market will recover anytime soon, many low-to-middle earners are bracing themselves for a lifetime of renting: analysis in our recent audit found that, in today’s mortgage market a low-to-middle earner buying their first home would need to save 5 per cent of their net household income for 45 years to obtain a deposit.
The question, then, is whether the private rental sector (PRS) will expand to meet this need. It did in the mid 90s and 2000s, assisted by the boom of buy-to-let landlords. But the situation we face today is different: demand for private rental is likely to increase at a faster rate than it has, with Savills and the Building and Social Housing Foundation forecasting that the PRS will grow from just 13 to 20 per cent of the stock by 2020. And faced with a constrained credit market, buy-to-let landlords are unlikely to fill the gap in the same way they have in the past.
Source: CLG, Survey of English Housing: Preliminary Report 2007-08, Table 1
It is in this context that we recently brought together a roundtable – in partnership with Grainger -to consider this very issue and, in particular, whether institutions could play a greater role. Representatives were drawn from each of the sectors: institutions, housing associations, landlords, government and experts. It was a unique meeting in some senses, one of the first times so many key players were in the same room, and the discussion reflected that. For every barrier that was identified– low returns, scale, planning bureaucracy, cost of land, tax impediments – a solution or model was identified.
Clearly there is no magic bullet to these difficult issues but our roundtable demonstrated that there is, without question, more to be explored – through more creative uses of land to support new-build, more flexible planning agreements, acquisition of existing stock, and tax-effective vehicles to encourage investment from would-be buy-to-let landlords, and institutions alike. Over the next few months Resolution Foundation will be continuing to explore these issues with stakeholders to see if this tricky issue can be cracked.