Will Affordability Become the Next Battleground for Landlords?
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With political pressure mounting over housing costs, landlords who prioritise affordability and quality may be best placed to avoid further regulation and maintain long-term rental demand.
Once again the revolving door at Number 10 Downing Street is about to turn, bringing us our seventh prime minister in just ten years. And as ever, a change at the top is leading to speculation about how the new premier will make his mark politically and how he will intervene in areas such as the private rented sector.
There are clues in what he did in Manchester, and in the various pronouncements he has made during the process which has brought him to the top job.
In Manchester, his tenure as mayor saw remarkable regeneration, attracting investment and business and with them a growing population. That in turn brought familiar housing challenges: rising rents, restricted supply and affordability pressures. All of this will inevitably lead to a boost in Andy Burnham’s instinct to intervene and apply more regulation.
With a pressing need to be seen to do something about the cost of living – and quickly – housing affordability may well be near the top of Burnham’s to-do list. Are we about to see the introduction of a rent cap, or even a freeze on rent increases for a year or longer?
If affordability is at the front of politicians’ minds, it should be in landlords’ sights as well. The past two or three years have seen healthy increases in rent levels as a result of strong demand and restricted supply.
We are now at the stage where these rent levels are starting to breach the level of affordability for all but the most affluent tenants. That position is not sustainable, and if the private rented sector wants to remain an intrinsic part of the housing market, landlords must accept that there is a balance to be struck between making rents affordable and maximising revenue – because ensuring the former is actually a necessary part of achieving the latter.
Andy Burnham has already stated he wants to see a focus on social housing: not only does he want more homes, but there is a clear ambition to exert greater influence over the type, quality and affordability of the housing being delivered.
If the private rented sector does not provide good quality housing at rents that most people can afford, further political intervention is inevitable – and that will certainly be in favour of the tenant. If landlords want to avoid more regulation, closer scrutiny and further financial squeezes, then readjusting the balance between affordability and maximising returns seems inevitable.
Phil Cooper is lettings partner at Arnolds Keys.
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