By 2018, 1 in 5 households will live in private rented accommodation and if demand for private renting continues, £57 billion of investment a year will be needed by 2016.
Amongst the measures the UK’s leading business group is calling for are the Government to reduce the VAT rate on repair and renovation to lower costs, and councils to do more to drive investment from large institutions.
Katja Hall, CBI Chief Policy Director, said: “Despite the rapid rise of the private rented sector, generation rent is often an afterthought when it comes to housing policy. While it’s right to support first-time buyers, we must make sure people who rent are not forgotten.
“The rental sector offers huge opportunities for growth in the economy and more large-scale institutional investment is needed. A VAT reduction on repair and renovation would really help push investment decisions over the line.”
A supply of housing to both rent and buy is critical for businesses trying to recruit and retain staff. Currently the rental market is dominated by small scale ownership and management, with larger landlords owning 10 or more properties making up only 1 per cent of the market.
Existing policy to boost the rental market is helping, but to meet the increasing demand for rental homes new sources of private finance are needed, and existing schemes such as the Build to Rent Fund should be turbo charged. The CBI is calling for:
– Increased roll out of the Private Rented Sector Guarantee Scheme
– The Government to use the success of the Build to Rent Fund to showcase how investments in rental homes can generate attractive returns
– Local authorities to consider how they will meet rising demand for private rent accommodation when planning for local housing need
– Local authorities to make better use of existing flexibilities in planning to get schemes off the ground, for example how they approach affordable housing requirements in S106 agreements
– Business and the Government to work together to pursue innovative partnerships when developing on public land, such as ‘build now, pay later’ schemes
– Regulation that strikes the right balance between protecting tenants and not overburdening landlords and deterring investors.
The CBI believes the number of people living in the private rented sector will continue to grow due to three major drivers: population growth and more new households, imbalances between demand and supply inflating the price of housing, and the cost of living slowing the ability of people to save to buy.