The government is being urged to do more to ease the housing shortage and improve standards amid the growing cost of living crisis.
According to Rightmove, the combination of rent and bills now stands at close to two thirds of the average income, outside of London.
Although energy prices have been capped, a toxic combination of rising costs for landlords through inflation, increasing demand as would-be buyers are priced out of the mortgage market and a lack of available stock, has created a perfect storm in the rental market, says Antony Antoniou, MD of Robert Irving Burns (RIB).
He commented: “The government should be doing more to ease the housing shortage and improve the quality of our housing stock. One way to do this is to simplify the planning process and encourage the long-term investment or holding of property by developers. The creation of planning classes or Government assistance for properties which are built to let rather than sale, would de-risk and encourage investment into this sector.
“Housebuilders are ready and able to address this challenge, but this is the first time in decades where government assistance in that sector has been taken away. The industry could grind to a halt as more and more developers go into administration (up 75% year on year) – due to skyrocketing material and energy costs, planning delays and fiscal uncertainty. The time to act is now, before we see the rise in homelessness and further tragedies unfold.”
Nathan Emerson, CEO of Propertymark, added: “The biggest problem facing tenants right now is a lack of choice. They don’t have a choice of property to choose from and many are finding themselves offering higher rents in order to secure a home over fierce competition.
“We desperately need more housing of all tenures, but we need investment into the private rental market perhaps the most, it is the second biggest tenure and is also pitted against a back drop of an underfunded social housing system meaning many private landlords actually support those who would otherwise be on the housing list.”
Data source table:
| Source | Household Expenditure | % of Income (Mar 22) | Actual annual | Actual monthly | % Increase (Oct 22) | £ increase Value | Actual Monthly Rise | New % Of Household Income |
| Rightmove AVE | Rent | 35% | £12,071 | £1,006 | 17% | £171 | £1,177 | 40% |
| ONS | Utilities | 17% | £5,931 | £494 | 33% | £163 | £657 | 23% |
| ONS | Food | 16% | £5,582 | £465 | 11% | £51 | £516 | 18% |
| ONS | Transport | 15% | £5,233 | £436 | 2% | £9 | £445 | 15% |
| ONS | Rec / Hols | 13% | £4,535 | £378 | 8% | £30 | £408 | 14% |
| ONS | Tax/Licences | 4% | £1,395 | £116 | 5% | £6 | £122 | 4% |
| ONS / Calculation | Income / Total | 100% | £34,886 | £2,907 | 76% | £430 | £3,326 | NA |
Build more homes! Stating the bleedin’ obvious doesn’t help. We all know that’s the answer, but it won’t happen in the numbers needed to address the crisis, and certainly not in the necessary timescale. All the while, the crisis worsens by 000s every week, with unstoppable waves of illegal migrants, and a massive backlog of legitimate asylum seekers, all needing housing in this already overcrowded country.
We’ve heard this morning it’s now unlikely the required planning reforms will proceed due to opposition of large numbers of Tory MPs [and I’m sure many Labour MPs don’t want it either!].
I have this image of Canute sitting in the waves [ironically, on the South Coast] proving he cannot stop the sea, whatever his nobles say!
However, there us one simple act the Government can take, and which they have already committed to in this Parliament.
There is a logjam in the housing market caused by the problems associated with selling leasehold properties; primarily apartments. Hundreds of thousands of leaseholders want and need to move for work or due to increased family size, but cannot do so because buyers cannot obtain mortgages due to the antiquated leasehold system in England and Wales [alone in the modern world].
Lenders won’t lend for some perceived risk that leaseholders won’t pay their Ground Rent of a few hundred £’s, and they could therefore lose their’ asset’ by forfeiture to the freeholder. This, despite there being no precedent for this. Indeed, when a freeholder claims the leaseholder won’t pay their ground rent, the lender invariably adds it to the borrower’s mortgage.
Leaseholders could overcome the problem through statutory lease extension, but the Freeholders levy huge costs, including something called ‘marriage value’, which seems to be an arbitrary sum demanded in return for extension. The legal costs are high, and the process is costly and time consuming. This is beyond most leaseholders, who are already struggling with high mortgage costs, cost of living crisis, and |for many] devastating ‘cladding’ costs.
If the Government does 2 things, it will free up hundreds of thousands of homes for sale, and improve the lives of millions of leaseholders:
1 – Reform the ground rent system and make it easy and cheap to extend their lease and remove the ground rent. This has already been promised by the Goevrnment, so just get it done!
2 – Address the spurious arguments used by lenders to refuse mortgages for these leasehold properties.
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Before you read the following, please remember that I’m a lease extension valuer and that I nearly always represent leaseholders. This is a very complicated topic that involves at least 50 Acts of Parliament. There is no simple quick fix.
But I do agree that something needs to be done.
The government has promised to make it “quicker, simpler and cheaper” but I think we’ll find that it’ll be the process that becomes “quicker, simpler and cheaper” and the costs of lease extensions themselves won’t change much. My guess is that they will abolish “marriage value” simply by rebranding it.
The problem that you have with reforming the freehold/ leasehold system is that the amount of “paper money” that is created by a decreasing lease term is mathematically real and baked into our financial and legal systems.
Article 1 of the Human Rights Act states that “Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.”
The freehold of a block of flats is considered to be a possession. Case law after the Human Rights Act came into affect means that “legal person” now includes companies, and etcetera.
Big freehold companies have expensive barristers that will run rings around a weak government with that.
But it gets worse…
Assume that your father was a property developer and left you, his sole heir, the freehold for a block of 20 flats as his only asset when he died. You’ve paid the relevant inheritance tax, kept the asset and managed the building well. The leaseholders now need lease extensions…
By an Act of Parliament and through no fault of your own you lose out on an income stream that you’ve already paid tax on and the leaseholders gain massively at no cost to themselves.
This would be considered justifiably unfair in a court of law. Compensation? Paid by the government? OK, but how much and for whom and how far back should be considered? And once again, that is using tax payers’ money to fund private businesses.
Take it one step further, the leaseholder that needs a lease extension is actually a property investment company that rents the flat out for a very profitable amount, thank you very much. They’re a shrewd investor, they’ve owned it for years, paid off any loans and now just rake in the cash. And of course their length of ownership is the reason why the lease is short.
By an Act of Parliament, the government has just handed a huge chunk of cash to a greedy landlord (yes, I am being unnecessarily inflammatory with that remark, but you get the point…).
Again, that can’t possibly be fair.
Furthermore, lots of freeholds are owned by pension companies.
It would not be in the “public interest” to deprive 10’s of millions of pensioners of their pension investment income to benefit just a couple of million leaseholders.
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I thought I’d do a separate reply to your second point.
I’m fairly sure that there is a bit of a perfect storm around ground rents.
Firstly, I actually think that an honest ground rent is probably a good idea.
You need to have a freeholder that is interested in looking after the property. To do that they either have to be the leaseholders themselves or they have to be able to make money out of doing it.
In fact an independent freeholder who is properly looking after the building might be the best solution as it takes the personality out of the management of the building. I’ve know groups of leaseholders in one building gang up against each other for very petty reasons and render the flats within practically unsaleable. Their is almost always someone in the building that “knows better” and “won’t take no for an answer”. The rules for the financial management of a building are such that one leaseholder refusing to pay their service charges can lead to the catastrophic failure of any repair programme and the subsequent dilapidation of the building.
A ground rent that “doubles every 25 years” is reasonable because all it does is keep up with normal inflation.
A ground rent linked to RPI is seen as fine but could be really dangerous, especially right now. Also, RPI outperforms CPI by about 0.4% per annum which adds significantly to the increase in any given 25 year period.
The Housing Act 1988 introduced the Assured Shorthold Tenancy Agreement and defined an AST to include any residential lease in excess of £1000 per annum in Greater London and £250 per annum outside. This was obviously very poorly written and through case law now includes long residential leases for normal flat ownership.
Fast forward a few decades and lenders are panicking because at least one flat has been repossessed by a freeholder due to the lack of payment of ground rent using a Section 8 Notice under the Housing Act 1988.
It is difficult to blame private lending institutions for being cautious when badly written laws could affect their business.
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Anyone received The Property Ombudsman survey over damp?
I have refused to do it until changes are made.
Be warned this is clearly a single edge sword to cut you. Never seen such a horrid single direction set of questions which are a distortion of the truth that matters. This information is likely to be used as a weaponizing by the Ombudsman towards landlords and agent. Recent rhetoric that there is nothing called ‘tenants lifestyle’ and escalating complaints to senior team at TPO cannot help but make the conclusion they are on the popular political bandwagon on a subject they do not understand or going by the survey … what they want to know without finding out the whole story. It looks so deliberate.
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But surely isn’t that every “consultation” by a government body?
“We have an axe to grind so we are going to grind it…”
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