Homeownership isn’t the be-all and end-all

Mortgage Introducer

October 20, 2017

Ian Boden is sales director at LendInvest

Last month, there was much handwringing about NatWest senior economist Sebastian Burnside’s prediction that by 2025 there will be more private renters in the UK than homeowners with a mortgage.

But in my view, a lot of the concern this prediction raised is somewhat misplaced.

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There is no doubt that we aren’t building enough homes in the UK, and that steps need to be taken to make it much easier for would-be first-time buyers to be able to purchase a home.

The Help to Buy scheme, in its various iterations, has been a useful tool in helping buyers climb onto the property ladder.

Lasting change will only come when first-time buyers are given a more significant helping hand than simply enabling a lower deposit.

But I think we also need to move away from the concept of homeownership being the be-all and end-all. It is a very British thing, this obsession with owning your own home.

On the continent, choosing to rent rather than buy is seen as a more acceptable choice to make.

Yes, some people are renting because they cannot afford to buy, but it would be wrong to assume that is the case for all tenants.

Plenty are actively choosing to rent, recognising that the flexibility offered through being a tenant is better for their circumstances.

It’s easy to understand why.

Renting a home is a far more flexible option, allowing you to move around the country – indeed to another country – if you so wish, whether for work or any other reason, without needing to worry about the lengthy process of selling a property or the inconvenience of becoming an accidental landlord.

Equally, there are plenty of tenants who cannot see the appeal of signing up to an enormous loan which will take decades in order to pay off, with all the rigmarole that comes attached to life as a homeowner.

A study by CBRE earlier this year looked specifically at millennials and their attitude towards renting. It found that around 12% of young renters choose to do so because they don’t want the commitment of owning their own home, while 12% prefer the wider choice of affordable properties offered by the rental market compared to homeownership.

If we are to build a healthy housing market, then the needs and rights of tenants must be taken into account, rather than all of the focus going on routes into homeownership.

There will always be people who prefer to rent – and that number is only likely to grow in the coming years – so we need to ensure that at least some of the new properties we build are specifically for that rental sector, and that the quality of these homes and the tenancy agreements landlords impose are up to the highest standards.

Housing policy needs to reflect all the of the different housing tenures, not simply homeownership.

That will likely mean producing more co-living spaces, like The Collective’s HMO properties that have proven very popular with young professionals in London.

We are already seeing the first co-living spaces opening in Manchester, and I would fully expect the likes of Leeds and Birmingham to play host to similar homes before long.

These properties are excellent examples of how the housing needs of those who choose to rent may differ from those looking to own their own home.

Recognising that difference, and building it into the way we approach the housing shortage, will mean that the homes we produce actually do meet the needs of future generations.

So much of the talk in recent months when it comes to the rental market has been on the Prudential Regulation Authority underwriting rule changes, and understandably so when so many different lenders have chosen to interpret them in different ways.

Keeping on top of the varying requirements of lenders is a big ask for brokers, so it is understandable that this has been the focus.

But the truth is that, no matter what underwriting or tax changes take place, the fundamentals of buy-to-let remain incredibly strong. Yes, the days of the dinner party landlords may be over, but for the professional landlord the future still looks promising.

We just need more focus on delivering the homes that both the tenants and owner occupiers of the future will want.

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