If we need further landlord investment, it should be nudged towards new-build homes. Photo: Getty
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Labour must be bolder about curbing the growth of landlord-investors

The Lyons review is too timid about the principle of putting first-time buyers at the front of the queue.

Time will tell whether Sir Michael Lyons’s long-awaited housing review will deliver the dramatic increase in house-building the country needs over the coming decades. But for now at least it breaks important new ground in the policy debate about how the homes we do have are sold, and to whom.

Among the most eye-catching of the proposals he presents to Labour today is for a percentage of new homes to be reserved for a certain time for purchase by first-time buyers. There should also be powers to restrict their sale into the buy-to-let market, he says.

This is different from previous attempts to help first-time buyers in that it is not only designed to give them a head-start but, importantly, places a restraining arm across eager landlord-investors.

This could mark a decisive turning point in housing policy, which from the 1980s until now has been geared towards boosting the private rented sector and giving would-be investors every opportunity to pile in with their cash. The deregulation of the housing market, the exponential growth of buy-to-let mortgages and rapid house price inflation – all engineered by ministers in one way or another - have all encouraged the colonisation of the market by a rent-seeking generation of small landlords.

The initial idea was that the private sector would pick up the slack in the supply of new homes after councils were effectively prevented from building any more. But this never happened and instead the housing shortage set in and first-time buyers were shut out.

It is a common complaint that rising house prices are condemning more and more younger people to renting, where the costs are so high that they have never enough money to save for a deposit.

Obviously, obviously, there are not enough homes to keep up with demand. But what we tend to consider less is who might be buying up these homes, at their inflated prices, instead: the answer is private landlords.

The story of the housing market over the past decade or more is the decline of owner-occupation and the rise of a new rentier class comprising small investors, who of course already own their own home and have done very well out of the property boom, thank you very much. As a result, these people have the resources to get ahead of first-time buyers every time.

The number of homeowning households barely increased between 2001 and 2011, from 14.9m to 15m, according to the Office for National Statistics. Virtually all of the growth in the housing stock during that time was absorbed by the private rented sector, which grew from 6.7m to 8.3m. Proportionately, owner-occupation fell from 69 per cent to 64 per cent of all homes, while privately-rented accommodation grew from 12 per cent to 18 per cent. Social housing has also been in decline, due to the lack of investment in new homes for the sector, and is now smaller than the private rented sector.

A major part of the drawback with buy-to-let investors, and the reason they have driven up costs rather than funding supply as was once hoped, has been that they tend to buy existing stock rather than funding new developments. The Treasury’s best estimate in 2010 was that just one in 10 buy-to-let loans was taken out on a new-build property. (A subsequent consultation discovered that even that was an optimistic figure.)

So putting some kind of break on buy-to-let investment, and putting first-time buyers ahead in the queue, is vital and Lyons’ proposal is to be welcomed.

However, to limit the application of this approach to new homes is not ambitious enough, as they represent only a small proportion of the homes coming onto the market in most areas. Why not apply this policy to the sale of all homes, new and existing?

And to the extent that we need further landlord investment at all, it should be nudged towards – not away from – new-build homes.

In this regard the Lyons review, while representing a step forward, is not realistic enough  about the challenge facing first-time-buyers in the property market and the need to give them greater access to all homes that come onto the market, not just new ones.

And if we are to allow our new landlord class to keep sinking their capital gains into the property market, let them use their stacks of cash to fund the building of new homes.

Daniel Bentley is director of communications at Civitas: Institute for the Study of Civil Society, and co-author of Finding Shelter: Overseas investment in the UK housing market

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Stability is essential to solve the pension problem

The new chancellor must ensure we have a period of stability for pension policymaking in order for everyone to acclimatise to a new era of personal responsibility in retirement, says 

There was a time when retirement seemed to take care of itself. It was normal to work, retire and then receive the state pension plus a company final salary pension, often a fairly generous figure, which also paid out to a spouse or partner on death.

That normality simply doesn’t exist for most people in 2016. There is much less certainty on what retirement looks like. The genesis of these experiences also starts much earlier. As final salary schemes fall out of favour, the UK is reaching a tipping point where savings in ‘defined contribution’ pension schemes become the most prevalent form of traditional retirement saving.

Saving for a ‘pension’ can mean a multitude of different things and the way your savings are organised can make a big difference to whether or not you are able to do what you planned in your later life – and also how your money is treated once you die.

George Osborne established a place for himself in the canon of personal savings policy through the introduction of ‘freedom and choice’ in pensions in 2015. This changed the rules dramatically, and gave pension income a level of public interest it had never seen before. Effectively the policymakers changed the rules, left the ring and took the ropes with them as we entered a new era of personal responsibility in retirement.

But what difference has that made? Have people changed their plans as a result, and what does 'normal' for retirement income look like now?

Old Mutual Wealth has just released. with YouGov, its third detailed survey of how people in the UK are planning their income needs in retirement. What is becoming clear is that 'normal' looks nothing like it did before. People have adjusted and are operating according to a new normal.

In the new normal, people are reliant on multiple sources of income in retirement, including actively using their home, as more people anticipate downsizing to provide some income. 24 per cent of future retirees have said they would consider releasing value from their home in one way or another.

In the new normal, working beyond your state pension age is no longer seen as drudgery. With increasing longevity, the appeal of keeping busy with work has grown. Almost one-third of future retirees are expecting work to provide some of their income in retirement, with just under half suggesting one of the reasons for doing so would be to maintain social interaction.

The new normal means less binary decision-making. Each choice an individual makes along the way becomes critical, and the answers themselves are less obvious. How do you best invest your savings? Where is the best place for a rainy day fund? How do you want to take income in the future and what happens to your assets when you die?

 An abundance of choices to provide answers to the above questions is good, but too much choice can paralyse decision-making. The new normal requires a plan earlier in life.

All the while, policymakers have continued to give people plenty of things to think about. In the past 12 months alone, the previous chancellor deliberated over whether – and how – to cut pension tax relief for higher earners. The ‘pensions-ISA’ system was mooted as the culmination of a project to hand savers complete control over their retirement savings, while also providing a welcome boost to Treasury coffers in the short term.

During her time as pensions minister, Baroness Altmann voiced her support for the current system of taxing pension income, rather than contributions, indicating a split between the DWP and HM Treasury on the matter. Baroness Altmann’s replacement at the DWP is Richard Harrington. It remains to be seen how much influence he will have and on what side of the camp he sits regarding taxing pensions.

Meanwhile, Philip Hammond has entered the Treasury while our new Prime Minister calls for greater unity. Following a tumultuous time for pensions, a change in tone towards greater unity and cross-department collaboration would be very welcome.

In order for everyone to acclimatise properly to the new normal, the new chancellor should commit to a return to a longer-term, strategic approach to pensions policymaking, enabling all parties, from regulators and providers to customers, to make decisions with confidence that the landscape will not continue to shift as fundamentally as it has in recent times.

Steven Levin is CEO of investment platforms at Old Mutual Wealth.

To view all of Old Mutual Wealth’s retirement reports, visit: www.oldmutualwealth.co.uk/ products-and-investments/ pensions/pensions2015/