RICS warns of 1.8m shortfall of rented homes by 2025

Nearly two million new homes that are available to rent are needed by 2025 to meet the demand for rental property, according to new research from the Royal Institution of Chartered Surveyors (RICS).

The shortage of new homes available to buy has been well documented and the Government has said it will prioritise building new homes for sale but the new research shows that homes available in the rental sector are also struggling to meet demand.

However, a crisis could be generated because landlords have been hit with new taxes and a reduction in tax relief available at a time when an increase in supply is required, prompting some to call for new government support for a ‘build-to-rent’ sector.

RICS said 1.8m new rental homes are urgently needed in the UK and the news comes at a time when sales of buy-to-let properties to landlords have dropped because of the stamp duty changes introduced in April of this year, which means landlords have to pay an extra 3% in stamp duty. The organisation said the number of households renting had more than doubled from 2.3m in 2001 to 5.4m in 2014.

The survey from RICS found that 86% of landlords say they have no plans to extend their portfolios further this year, or over the next five years, despite its findings showing that the UK needs a further 1.8m homes to rent by 2025 to meet demand as getting onto the property ladder remains a pipe dream for many.

RICS found that overall a net balance of 58% of estate agents reported a drop in buy-to-let property sales since May, partly due to government policy of making changes to the stamp duty threshold, which, according to RICS, has reduced supply, meaning a rental supply crisis by 2025 is more likely.

In addition to the tax changes, landlords are facing tougher mortgage lending criteria, need to find bigger deposits and face having their own incomes as well as rental income and higher rent to mortgage payment cover criteria.

Jeremy Blackburn, RICS head of UK Policy, said: “The problem is expected to be exasperated next year when landlords’ right to deduct their mortgage interest from their income tax bill is removed. We urge the Prime Minister to abandon David Cameron’s previous home ownership focus and reverse April’s Stamp Duty measures in order to address short term rental supply issues.”

He urged the government to support a new build to rent sector in which the private sector is encouraged to build properties for the rental sector and to encourage local authorities to release brownfield sites for residential letting.

Blackburn continued: “We are facing a critical rental shortage and need to get Britain building in a way that benefits a cross section of society, not just the fortunate few. Our latest figures show that there has been a 15% decline in house sales to first time buyers over recent months.

“Yet with increasingly unaffordable house prices, the majority of British households will be relying on the rental sector in the future. We must ensure that it is fit for purpose, and the Government must put in place the measures that will allow the rental sector to thrive. Any restrictions on supply will push up rents, marginalising those members of society who are already struggling.”