This is according to Paragon Mortgages’ managing director John Heron, who hailed 15 years of buy-to-let as he opened the Council of Mortgage Lenders’ annual buy-to-let and private rented sector conference.
Heron, chairman of today’s conference, said that buy-to-let had revolutionised the rental market, driving up standards and choice for consumers, whilst providing an attractive alternative asset class for property investors.
The concept of buy-to-let was created by the Association of Residential Letting Agents and several mortgage lenders, including Paragon and Mortgage Trust, in September 1996.
Heron told delegates: “When we look back on what we have achieved over the past 15 years, we can, as an industry, be justly proud.
“In 1996, the private rented sector offered little choice and generally poor quality housing. Today, standards have improved significantly, as has property choice.
“Since 1996, the number of privately rented properties in the lowest energy efficiency bands has effectively halved, whilst the growth in the number of homes meeting the decent homes standard has exceeded both the owner-occupied and social housing sectors.
“The private rented sector makes a great contribution to the UK economy – it facilitates labour mobility and flexibility, provides an income to thousands of small businesses, supports a number of associated industries, such as letting agents and maintenance companies, oils the wheels of the housing market and makes a great contribution to the public purse.
“Buy-to-let has played a major role in this, providing the vital finance needed to fund the improvement in choice and standards. Buy-to-let is not just about a balance sheet – it has had a clear and tangible beneficial impact on the lives of millions of renters.”
Heron added that buy-to-let had proven its resilience during the credit crunch. He said: “A common accusation levelled at the buy-to-let market pre-credit crunch was that it was untested in recessionary conditions. After the worst economic environment for nearly 60 years, buy-to-let has been severely stress-tested and has proved its resilience with the credit performance of buy-to-let now clearly every bit as good as prime residential.
“We appear to be at a critical point in the market’s development as buy-to-let lenders face the challenge of supporting a major shift in the way in which we view housing and where we live. The aspiration to own our own homes will always remain high, but the fact is that major socio-economic and demographic changes will result in an increasing proportion of the population living in rented housing for longer.
“Based on Government household formation projections and economic forecasts, it is estimated that there will be 4.1 million households living in the private rented sector by 2016, a significant jump from the 3.4 million we have today. The existing stock of private rented property is already under great pressure, so there needs to be a major expansion in the supply of privately rented property to ensure the sector can cope with the number of renters already in the pipeline.”
Heron concluded that landlords need to be viewed as small-to-medium-sized businesses and should be supported as they develop their portfolios. He said: “For years housing policy has failed to address the fact that if we want a larger private rented sector, private landlords have to be motivated to expand supply.
“If we look abroad to countries around the world with larger private rented markets you find housing and fiscal policies considerably more supportive of private landlords, with tax breaks for depreciation and capital losses a routine element of the mix used to motivate landlords. Such an approach in the UK would make investment less cyclical and more long-term, to the benefit of landlords, tenants and ultimately the UK plc.”