As one of the leading and influential bodies on the UK housing market, the British Property Federation has some of the country´s most prominent organisations and institutions as members. Please see an interview below with spokesman Patrick Clift where we discuss a variety of issues related to the private rented sector including the importance of landlords post-credit crunch; the need of professional standards in the industry; what the BPF are doing to encourage the sector; tax incentives; reforms to the Local Housing Allowance (LHA) system / social housing policy; UK infrastructual improvements and the future role of the organisation.
1) Can you outline the essential role of the British Property Federation (BPF)? The British Property Federation is a membership organisation devoted to representing the interests of all those involved in property ownership and investment. We aim to create the conditions in which the property industry can grow and thrive, for the benefit of our members and of the economy as a whole. BPF have three objectives. Firstly, to raise the profile of the property industry with political stakeholders, the media, and the public. Second, to improve legislative, fiscal and regulatory conditions that affect our industry and so enhance the benefits the industry can bring to the UK. And third, to encourage best practice within the industry as a means of increasing long term value and improving stakeholder perception.
2) Who are some of your main recognised members? Among our largest and most active members are Allsop, Argent Group, Bank of Scotland Corporate Banking, Big Yellow Group, The British Land Company, Cadogan Estates, CB Richard Ellis, Credit Suisse, Crown Estate, Derwent London, Development Securities, Dorrington, Grainger, Great Portland Estates, Grosvenor, Hammerson, Jones Lang LaSalle, Land Securities Group, Legal & General Property, Lend Lease, Miller Developments, Morgan Stanley, Segro and Westfield Group.
3) How important does the BPF see the role of landlords in the future of the housing industry? The private rented sector has provided 1.1m additional families with a home since 2000, accounting for nearly all housing growth in that time. However, with almost 5m people languishing on council waiting lists it is clear that more new homes are needed. The private rented sector is vital to delivering flexible tenure for a mobile workforce and providing housing where social renting or home ownership is not applicable or affordable.
4) Do you think that there are enough professional standards within the buy-to-let sector? The government recently decided against regulation of the private rented sector, and we would agree with ministers that rather than introducing new powers, local authorities have got to show they can better use what already exists.
5) What kind of actions are you taking to encourage the private rented sector? The BPF has promoted the sector every step of the way – increasing its profile, establishing it as a key sub-sector of the housing market and devising policy solutions to increase investment in it. The BPF is in dialogue with the department for Communities and Local Government, the Treasury and the Homes and Communities Agency to promote PRS and change policies to help encourage institutional investors. Earlier this year, as part of the Property Industry Alliance, we produced a joint consultation response with the Council of Mortgage Lenders and the Association of Real Estate Funds into a Treasury consultation into increasing investment in the private rented sector.
6) You have long lobbied for tax incentives – particularly for the institutional investor – what kind of progress has been made? Disappointingly, the new government has decided not to pursue this. The BPF has long argued that a simple and relatively cheap tax incentive would be to disaggregate stamp duty land tax on the bulk purchase of homes. At present, an investor has to pay SDLT on the total cost of a portfolio, as much as 5%, even if the homes would only have been charged at 1% if bought individually.
7) In terms of the recent changes that were put in place to limit the levels of Local Housing Allowance (LHA) receipts – with the government saying that one of the main reasons is to encourage people to get back into the employment market. With the economy in the state its in, how realistic do you think this is? Do you think the problems are going to be exacerbated? We agree that the housing benefit system is in need of reform. However, the government seems to assume that all claimants are long-term and need incentives to return to work, when in fact many have lost their jobs recently as a result of the last recession. By contrast, we would argue that the welfare system should seek to support a person remaining in their home in the early stages of unemployment because that will greatly assist their ability to quickly find another job.
A major issue will be linking housing benefit rises to CPI, rather RPI at present. Over the past decade rents have risen at about 4.5% per annum. CPI on the other hand, is the explicit focus of the Bank of England Monetary Policy Committee, which has a target to maintain it at 2% per annum. This will have a devastating effect. The mismatch between 2 and 4.5% will be that the pool of property notionally available to claimants will be constantly being eroded by the diminishing purchasing power of their benefit.
The Chartered Institute of Housing analysed the long term effect of this change for different property sizes. They conclude that in some areas, within two years of the change coming into effect, it is projected that no properties will be available that can be fully paid for with LHA. The consequences are stark. Either that household will build up rent arrears which consequently might lead to eviction, or they must cut back on income intended for other necessities.
8)Related to this – statistics have proven the country’s ongoing demand for social housing – but how are property buyers attracted to this sector to be encouraged with the government imposing stricter rules (such as the increase in LHA)? Powers exist to open up social housing for private investment, particularly by pension funds and other institutions, and that is something that we would be keen to explore with government.
9) On a general level – what about the infrastructural development of the UK (roads, city regeneration, transport) – what can investors expect to see in the coming years? Tax increment financing, an innovative method of funding that the BPF has campaigned for since 2005, was adopted as policy at the Liberal Democrat conference last month. This is fantastic news for the provision of new infrastructure, particularly in areas where new infrastructure is needed for property development to go ahead. TIF allows councils to forward-fund infrastructure through prudential borrowing. The loan is then re-paid through the business rates generated by the development unlocked by the new infrastructure. It is a very elegant solution, and if done property will cost tax-payers nothing.
10) What kinds of plans does the BPF have in the short-medium term future of interest to property investors? We will continue to lobby for the private rented sector – both for new investment and against the more damaging aspects of housing benefit reform. The BPF will continue to work with government to create a “local” planning system that works, and to promote ways in which central and local government can use public sector assets as a catalyst for regeneration and renewal.