What reforms do homeowners want to see introduced and will they make a difference?

Property investors, homeowners, and landlords appear to be in general agreement about the state of the current housing market. Most of us tend to agree with the belief that the government isn’t doing enough to address the housing crisis. But in terms of what needs to be done to fix things, there are mixed feelings.

Market Financial Solutions (MFS) recently surveyed 2,000 UK adults, with 1,323 respondents being homeowners. There were also 70 participants who owned multiple properties, but who didn’t rent out their additional assets, along with 163 landlords.

Across all these groups, we found that only 21% thought the state was doing enough to combat the housing crisis in the UK. What’s more, just 28% of our respondents believed the government had effectively supported people with their rising mortgage rates. In addition to this, a clear majority (69%) thought the shortage of affordable housing was one of the UK’s most pressing social issues, which rose to 83% for those located in Northern Ireland, 80% in London and 77% in the Northeast of England.

In terms of policies or legislative changes, rental reforms emerged as the key area participants wanted to see tackled. When asked if they were in favour or not of a list of potential reforming options, 71% of all respondents said they were in favour of raising the minimum quality standards for rental properties. However, there was a noticeable disparity between homeowners and landlords in the results. While 74% of homeowners were in favour of raising minimum quality standards, this dropped to 54% for landlords.

Overall, 67% wanted to see controls introduced, or higher taxes levied on holiday lets or second homes in tourist hotspots. These options had more support than any other alternative, such as scrapping inheritance tax on properties passed on after death (63%), reforming the planning system (58%), or re-introducing mandatory housebuilding targets (48%). Again, we witnessed an evident gap when addressing homeowners and landlords individually, with 69% of homeowners were in favour of second home limitations, while only 55% of landlords agreed.

Are landlords worried?

It’s likely that some landlords are fearful of stricter rules, given how challenging the market has become, having faced a difficult market in recent months. Rising rates have raised affordability issues, looming EPC rules threaten to raise costs across the board, and a new Renters’ Reform Bill could make the market difficult to operate in.

Apparently many landlords are opting to quit the market entirely, rather than deal with the potential challenges ahead. A recent survey from the National Residential Landlords Association covering Q1 2023 showed some 33% of private landlords in England and Wales planned to downsize their portfolios, up from 20% in the same period in 2022.

Furthermore, only 1 in 10 landlords said they planned to increase the number of properties they rent out. The latest market snapshot from RICS also warned that the Renters Reform Bill would only add to the pressure and may force more landlords to abandon the market.

We’re already seeing these concerns impact the buy-to-let scene. Several landlords have turned to auction houses to offload their assets quickly, and we’ve seen a wave of buy-to-let investors retire in recent months. Around 140,000 people who bought rental property in the 1990s sold them in 2022, to fund their later years.

While many might have done this as part of a planned retirement strategy, some may simply have deemed the market as no longer viable. It’s possible however, that much of the expected damage may not cause as many problems as feared.

Could some of these fears be overblown?

Homeowners want housing reform, and the government has promised that changes are on the way. But often, there is a big difference between what’s been assured, and what’s eventually delivered.

As the opening months of 2023 emerged, we saw the government abandon its long-held target to build 300,000 homes a year. More recently, plans to abolish leasehold ownership of homes were also, reportedly, abandoned. Even with the Renters Reform Bill, Michael Gove supposedly backtracked on proposed student let changes a mere week after the bill was introduced.

It may also be the case that property owners are unaware of what exactly is on the horizon entirely. Our survey revealed just 20% of respondents knew who the current UK housing minister was.

Is it possible that - without checking on the details - homeowners, landlords, and portfolio owners have built up the legislative issues in their heads, leading to a scenario that is worse than what they actually are.

Perhaps, if property investors sat down and looked through the details, they may find their situation isn’t as bad as initially feared. After all, the devil you know is better than the devil you don’t.

Despite everything, investors still hold faith in property

Fortunately, some optimism does seem to be seeping through. Over half (52%) of our respondents believed, despite everything, that property is a safe investment in the current economic climate. This rose to 59% for landlords. Those located in London were the most optimistic, with 60% in agreement with the safety of property investment, closely followed by the South East at 54%.

Indeed, now could be the opportune time for property investors. The recent landlord ‘exodus’ led to a dramatic reduction in property value, allowing buyers to lock in bargains. What’s more, demand for rental space is still outpacing supply. This is pushing up rental prices, which in turn may lead to heightened yields for investors, particularly for those looking to invest in Houses of Multiple Occupation (HMOs).

In London alone, demand for co-living rental properties recently hit an all-time high, according to analysis from Built Asset Management. Rightmove also found there has been a surge in tenant demand along the Elizabeth Line.

Regardless of whether property investors want to see tougher legislation or not, and no matter how effectual said legislation may be, supply and demand ultimately drives market dynamics. So long as there is a need for rental property, there will be plenty of upcoming opportunities for budding landlords.