A recent suggestion by the charity Joseph Rowntree Foundation, for government aid to allow private tenants to buy their landlords’ homes, has been criticized as a pie in the sky economy.
Last week, the charity said successive governments had promised to solve the housing crisis by building more homes, while ignoring the pattern of ownership of existing homes of 25 million across the UK. So, as landlords reassess the profitability of private renting in light of upcoming reforms, the foundation says it’s time to “see this as an opportunity to implement policies that see homes move from landlords to tenants”.
The charity therefore proposes that the government put in place a strategy to reduce the size of the private rental sector “by rebalancing the position of first-time buyers and owners in the mortgage market and by discouraging property speculation”.
But David Alexander of DJ Alexander Ltd – part of the fast-growing Lomond Group – says the idea will do nothing to help people get onto the property ladder and is more likely to make housing shortages worse. rather than relieving them.
He says, “That makes no sense. Why would the government subsidize tenants to buy the property they live in? If you did, then everyone who was not a tenant should also be supported to buy their house. You cannot subsidize part of the market and not the rest.
He continues: “Besides being extremely inflationary, he also fails to understand that a lot of people are happy to be in the private rental sector. The private rental sector is a vital part of the housing market and any proposals to reduce its size should be viewed with caution.
“It is estimated that around 40% of private sector tenants come from outside the UK. They are here to work for a few years and then return to their home country and the private rental sector provides them with suitable accommodation to live in during their stay. These people cannot access social housing and they have no desire to buy property, so removing the private rental option from this group makes no sense if we want to create a growing and prosperous economy.
Alexander says the foundation’s proposals show a misunderstanding of the role of landlords.
“These are people who own properties that they rent out to tenants. They are not obligated to provide this service but do so as an investment. They can just as well get out of the market and invest their money elsewhere.
“A tenant buying a property from a landlord doesn’t need government intervention because that can already happen, all it takes is a willing landlord and the tenant paying the market value. The JRF seems to assume that market conditions do not exist in real estate but exist in all other aspects of life.
“The solution is relatively simple. If more social and private housing is built and supply exceeds demand, prices will fall and real estate will become more affordable. If this does not happen, we will continue to experience rising prices and a housing shortage. Artificial interventions such as the one suggested in this report will do nothing to alleviate the current housing difficulties.
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