When Grant Shapps comments that a new report is the ‘blueprint’ for the future it should raise suspicions. And when the Telegraph reports that the Housing Minister has said that rules forcing property developments to include cheap housing for the poor should be relaxed, it should raise hackles as well.
Sir Adrian Montague’s review of the barriers to institutional investment in private rented homes, published yesterday, highlights the potential for large scale build-to-let developments. Apart from setting up a Task Force chaired by a private developer – a new quango which should be anathema to Messrs Pickles and Shapps – he makes a series of recommendations to speed up private development for rental. Most involve the public sector being more amenable to private development by reducing planning requirements for affordable homes and releasing public land for build-to-let developments. It’s pretty much as predicted by Tony on Red Brick back in July.
The implications of his recommendations are not always clear, especially in relation to the land market. For example he calls for planning conditions or land covenants that would require developments to remain as private rented for 10-20 years rather than be sold into owner occupation. This, he argues, ‘should mean that land values used in calculating developers’ and investors’ business plans would reflect the land values based on rental tenure rather than theoretical valuations based on sale.’ Of course, requirements for a greater share of genuinely affordable homes would have the same effect, but here Montague takes a different line – proposing that requirements for affordable housing in planning consents should be reduced or removed altogether. Montague says ‘Land values based on rental tenure……..will often not be strong enough to support the imposition of extensive affordable housing obligations.’ And ‘In many cases, it will be appropriate for authorities to waive affordable housing requirements in relation to schemes for private rental.’
So the price of more private rental would seem to be less affordable rental.
Montague’s terms of reference were narrow, but the report fails to deal with any of the key criticisms of buy-to-let and build-to-let that have emerged in the past few years, especially from groups like Priced Out – which makes a noise on behalf of ‘Generation Rent’ – for example in its response to the Treasury’s consultation on the arrangements for private renting. In particular it does not address the ‘squeezing out’ impact that buy-to-let and build-to-let are believed to have had, for example by taking a very large share of the constrained amount of mortgage finance available. Although there are excellent housing association private rental schemes, like Thames Valley’s Fizzy Living, the report should also have assessed what impact the growth in such schemes might have on associations’ ability to borrow for affordable rental and shared ownership homes.
There is a common acceptance that private rental will grow and that some new arrangements are needed to facilitate that growth, and especially to engage pension and insurance funds in housing provision. But institutional investment could also be channeled into affordable rather than market rental homes, and nowhere does Montague comment on that.
We need to be particularly wary if growth in private rental does not produce extra homes but replaces genuinely affordable rental homes and homes for first time buyers. That may be exactly what Grant Shapps is after.