Single, silver bullet solutions rarely work, we must look at the bigger picture says Yolande Barnes
Once again an argument is raging (at least on my Twitter feed) around the regulation of private residential tenancies. On the one hand, some landlords’ organisations are arguing that ending no-fault evictions risks depleting supply while other lobby groups deride this argument, saying ”no homes will be demolished, so how can supply be depleted?” The debate is polarised, sides are taken as they have been for centuries along the lines of landlords vs tenants, or the rapacious landowning rentiers vs beleaguered, exploited renters. Both sides are right in their own way and at the same time terribly wrong. It all depends on the prism through which you are viewing the issue.
I argue that, if the right policy responses are to be made, it has never been more important to view housing holistically, from all sides and angles, and to understand the complete issue. The complete issue is, however, more complex than most politicians, with their eye on a five-year (at most) term of office, want to deal with. The search for a single, silver bullet solution has defined the housing agenda for decades, it has resulted in the regulation then deregulation of tenancies; tax incentives for landlords followed by penalisation; an alternate drive for supply quantity and then quality; private sector then public sector landlords. It is little surprise then that the history of housing policy, swinging from one simplistic ideology to another is fraught with unintended consequences. Decades of unintended consequences add up to a crisis.
It is little surprise then that the history of housing policy, swinging from one simplistic ideology to another is fraught with unintended consequences
The quirks of post-1989 housing history, tradition, finance and regulation in England and Wales means that currently, the majority of landlords in the open-market sector are private individuals with a small number of properties apiece. We know that, as demand for renting grows (or rather the capability of people to access owner occupation diminishes), more large, professional organisations are becoming landlords. But still many landlords are individuals and “mom and pop”-type enterprises whose housing investment constitutes a very high proportion of their total wealth, is very often their main or only pension plan. They need to be able to access and liquidate their assets particularly as they age.
In the opposite corner is the, often younger generation renters, who, quite reasonably want peaceful enjoyment of their home while they comply with the terms of their lease. In a civilised society it seems right that these people should not have to risk all the pain and upheaval of losing their home because another individual needs to sell it.
If the right to dispose of tenanted homes is removed from private landlords, it is to be expected that those landlords who need this provision to make their investments work will then disinvest. This will probably mean selling their properties. When this happens, the property still exists so is still “housing supply” in numerical terms – but whether it is still available as supply to the occupying family of tenants is another matter. This is where a joined-up approach to policymaking is so important.
If there are no new landlords (public or private) to take the place of those disinvesting, then would-be new tenants suffer
As with much tenancy regulation, it may benefit existing tenants by giving them greater security. But if there are no new landlords (public or private) to take the place of those disinvesting, then would-be new tenants suffer. Over-burdensome regulation can, and did, drive landlords away from the residential sector in the 1950s, 60s and 70s. It is difficult for the millennial generation to imagine this, but by the 1980s this meant that only a tiny proportion of homes were available for open-market rent and the young generation of that time complained of being forced into ”premature owner-occupation”. The kind of regulation proposed at present is not going to result in such a swing but every action has consequences and it is the responsibility of policymakers to fully understand these and make sure any negative effects are ameliorated.
So any policy to restrict no-fault evictions will only work in the long term if active measures are put in place to then encourage the type of landlords who do not need to liquidate their holdings on a frequent basis. This could be long-term private companies and institutions, housing associations, local authorities or a combination of these. More radical solutions may be to encourage small landlords to pool properties into tradeable funds or to virtually unitise or securitise their properties through new technologies like blockchain, for example. The aim of such solutions would be to increase investment liquidity without decreasing tenant security.
Whatever the technical solutions are to encourage investment while protecting tenants, the supply of rented housing will need to cater for the many, not just the few
Whatever the technical solutions are to encourage investment while protecting tenants, the supply of rented housing will need to cater for the many, not just the few. As “generation rent” gets older and has children, so demand will change away from the corporate, 20th century, American “multi-family housing” model for affluent singles and couples and toward family housing in lifetime neighbourhoods. More experienced, long-established investment funds in the US now already own more of the latter type of property. In the UK, this type of property is currently more likely to be owned by small, private landlords. The challenge for the nascent UK residential property industry is to move toward this more diverse range of offering. And the challenge for government is to enable public, private and third sector agencies to join in the provision of much-needed housing, of the right type, without diminishing what we already have.
This is yet another case in the world of housing, where all sides have to come together to solve a problem. At the moment, each group is looking at the issue of housing supply from very different positions and consequently missing the whole picture. We can no longer afford to continue operating a system of specialist silos where everyone has a detailed knowledge of their own little piece of the jigsaw puzzle but little clue as to how it all fits together with everyone else’s.
Professor Yolande Barnes is chair of the Bartlett Real Estate Institute at UCL