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Working families risk being shut out by Montague row

23 August 2012

Today’s publication of the Montague Review into institutional investment in build-to-let addresses an important gap in our housing market. Large numbers of people, and a growing number of families, who would have bought homes in the past are now shut out of ownership for the medium to long term.

Dominated by buy-to-let landlords, the private rented sector currently offers them variable quality and limited security at a high price. These working families represent a new form of housing need but they risk being overlooked if the Review’s recommendations get caught up in a conflict between affordable housing (or social housing as it used to be called) and the private rented sector.

The recommendation causing all the consternation is the Review’s proposal that local authorities should have greater flexibility in negotiating affordable housing requirements on build to let schemes to help them get off the ground.


The Review proposes that build to let developments should contribute a level of affordable housing commensurate with the returns that can be expected from such schemes. These will always be lower than the returns developers make on homes for sale. But nowhere does the Review advocate waiving affordable housing requirements on all market developments as much of today’s coverage suggests it does.

The housing associations that have come out against the Review largely because of its proposals on affordable housing are right that we desperately need more affordable homes. The stock is declining and policies such as right to buy will lead to further declines, regardless of what the Government says.

However, more affordable housing will not meet the needs of working families who are shut out of ownership. They will never qualify for an affordable home. Waiting lists stretch into the millions and the sector rightly prioritises the most vulnerable.  Build-to-let creates the opportunity to provide these low to middle income individuals and families with a purpose built, professionally managed, secure rented home.

The economic rationale for build-to-let is strong too. House building could help kick start the recovery, much as it did after the 1930s recession. The Review sets out evidence of its potential contribution to growth. Right now, lack of mortgage finance is the block to this growth. House builders will not build homes that no one can buy. Build-to-let has the potential to draw a new source of private finance into the sector to get building going while the mortgage market continues to struggle. The pilots on public land proposed by the Review could provide the catalyst for institutional investment to take off in the UK.

Of course, opponents are right that build to let is only one part of the solution to our chronic housing shortage. We also need greater investment in social housing and a return to sensible mortgage lending. But Britain needs to get building and to meet the needs of the growing numbers in the private rented sector, a new type of long-term rented home must be a significant part of our future housing market.

Vidhya Alakeson is director of research and strategy at the Resolution Foundation.

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  • James

    Fine. Let’s promote BTL.

    But first, adopt the German system whereby renters actually have rights and can’t be turfed out at four weeks notice for no reason, and landlords cannot ban anything or anyone (e.g. pets, children, welfare tenants).

    No? Then **** off government and **** off landlords.

  • andagain

    “social housing”…”affordable housing”…why do we need all these euphamisms? Why not call them subsidised homes? That is what they are.

  • dorothy wilson

    If we had a system under which one of the criteria for eligibility for social housing was the number of years the applicant had been a citizen of this country and had worked for a living the problem would not be nearly so bad. It might also have a positive impact on the number coming to this country.

  • Ian Walker

    Switch the tax basis from income to land value. At the moment there’s no penalty for holding on to undeveloped land in perpetuity. Make it expensive to own unused land and you get higher land usage. This brings prices down to affordable levels, and also stabilises the market cycles.

  • james102

    There are two aspects to our housing shortage: population
    pressure and outdated laws.

    We need to end the open borders policy that has allowed
    literally millions of people to enter the country and look at our housing laws
    so private investment is encouraged to build and manage rented accommodation.

    Social housing has the big guns of publicity and access to
    politicians but they are not the solution.

    Make tenancy conditions easily and swiftly enforceable, pay
    housing benefit directly to landlords and the private sector will enter the
    market on a scale that is needed.

    • James

      I think you are forgetting planning. It’s harder to build in the UK than almost anywhere else in the world. That not only makes it difficult to react to need, it also makes it expensive because it keeps land higher in value than it would otherwise be.

      And no, that’s not a good thing and no, it’s not because we’re such an overcrowded island. 92% of the UK is natural open space. Large swathes of France, Germany and the Benelux countries have much higher densities (but less stupid government and less greedy people). The ironic thing is, our towns and cities *are* very crowded – but precisely because we refuse to expand our living space. Reducing the natural space from 92% to 91.9% creates space for a million new homes. Who seriously thinks we can’t lose 0.1% of farmland, grassland, or woodland in order to make life easier for us and the next generation?

      As for the “immigrant problem” and how sending them back will cure our ills (not quite true, see my previous comment), no-one seriously believes that we are going to see mass deportations from this country. So what people who think this are actually saying is “F**k you, everyone who can’t afford a home and has to pay high rent for low quality housing. F**k you to protect people like me.”

  • anyfool

    Stop immigration, remove the millions of illegals, housing shortages ended.

    • James

      Nonsense. We haven’t built enough to cover indigenous population growth over the past twenty years either. And what about the future?

      And what happens if other countries start to remove the seven million Brits who live in their countries and send them home?

  • In2minds

    Property crash, house prices fall and then we have affordable housing, easy.

    • james102

      With a population increasing as fast as ours?

    • Charlie the Chump

      Too many people + too few dwellings = unaffordable housing into the future unless something is done.The best you can hope for is price stagnation or marginal value reductions with the prospect of further large jumps when the economy turns round.
      In the 1930’s there was a massive housebuilding effort to the west of london (and around the other major cities). The price of a 3 bedroom house in 1935 in west london was £320 – £350, many families on average wages could not afford this and there was no effective mortgage market available so many, like my fathers family who had lived in Brixton for many years, moved into open green spaces, renting a 3 bedroom suburban terrace right up until the late ’60’s when my parents bought the property from the, then very elderly, landlady.
      As long as rents and conditions are fairly regulated this is a good idea, but the current market rents in west london are far too high to be any standard for the future.

    • dorothy wilson

      And we have millions of people in negative equity.

      • james102

        Any fall in house prices will not make it easier to buy, the
        reverse in fact. Lenders will seek more security by advancing a smaller loan to
        value morgage.100% (and more) mortgages are only realistic when house prices

        Only the private market can alleviant this problem and that
        means making it financially worthwhile.

        • James

          “Any fall in house prices will not make it easier to buy, the
          reverse in fact.”

          Yes, for the first two or three years. Then, the market recovers after houses become affordable again. It’s been nearly five years since the credit crash: seen the market recover with prices in reasonable range again? No.

          Ideas like yours are the very reason we’ve had nearly five years of economic disaster and still houses are massively overpriced, with savers and the have-nots sacrificed on the altar of the indebted and the greedy.

          We need the correction you so fallaciously insist is a danger, so in three years an average person can afford a home again.

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