The Royal Institution of Chartered Surveyors (RICS) says that the UK needs 1.8 million new rental homes by 2025 to keep up with current demand.
Since May’s Stamp Duty changes, sales of buy to let properties have dropped sharply, says the RICS.
The majority of landlords (86%) say that they have no plans to raise rental portfolio this year – and this trend is set to continue for the next five years.
At the same time, a net balance of 58% of RICS estate agents have reported a 58% fall in buy-to-let sales since May.
As rising house prices make home ownership more and more unaffordable, 1.8 million more households will be looking to rent, rather than buy.
The number of UK households renting property doubled from 2.3million in 2001 to 5.4million in 2014. However, earlier in the year, the Government took measures to dampen the demand for buy-to-let investments by changing the Stamp Duty threshold.
This has reduced supply further and has arguably made a 2025 rental supply crisis more likely. The problem looks set to be made worse next year when landlords’ right to deduct their mortgage interest from their income tax bill is removed.
The RICS says, “We urge the Prime Minister to abandon David Cameron’s previous home ownership focus and reverse April’s Stamp Duty measures in order to address short term rental supply issues.
“However, they are recommending that Government takes a much bolder long-term approach and pioneers a new build-to-rent sector, with the private sector encouraged to build properties specifically for residential letting.
“It would like to see pension funds incentivised with tax breaks to build large scale rental properties with affordable elements. Additionally, local authorities holding brownfields sites should be encouraged to release land for such properties.
“We call for the Housing Minister to adopt the existing voluntary Private Rented Sector (PRS) Code, which would regulate both the build-to-rent and buy-to-let sectors and protect the most vulnerable renters.”