If we need further landlord investment, it should be nudged towards new-build homes. Photo: Getty
Show Hide image

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

Photo: André Spicer
Show Hide image

“It’s scary to do it again”: the five-year-old fined £150 for running a lemonade stand

Enforcement officers penalised a child selling home-made lemonade in the street. Her father tells the full story. 

It was a lively Saturday afternoon in east London’s Mile End. Groups of people streamed through residential streets on their way to a music festival in the local park; booming bass could be heard from the surrounding houses.

One five-year-old girl who lived in the area had an idea. She had been to her school’s summer fête recently and looked longingly at the stalls. She loved the idea of setting up her own stall, and today was a good day for it.

“She eventually came round to the idea of selling lemonade,” her father André Spicer tells me. So he and his daughter went to their local shop to buy some lemons. They mixed a few jugs of lemonade, the girl made a fetching A4 sign with some lemons drawn on it – 50p for a small cup, £1 for a large – and they carried a table from home to the end of their road. 

“People suddenly started coming up and buying stuff, pretty quickly, and they were very happy,” Spicer recalls. “People looked overjoyed at this cute little girl on the side of the road – community feel and all that sort of stuff.”

But the heart-warming scene was soon interrupted. After about half an hour of what Spicer describes as “brisk” trade – his daughter’s recipe secret was some mint and a little bit of cucumber, for a “bit of a British touch” – four enforcement officers came striding up to the stand.

Three were in uniform, and one was in plain clothes. One uniformed officer turned the camera on his vest on, and began reciting a legal script at the weeping five-year-old.

“You’re trading without a licence, pursuant to x, y, z act and blah dah dah dah, really going through a script,” Spicer tells me, saying they showed no compassion for his daughter. “This is my job, I’m doing it and that’s it, basically.”

The girl burst into tears the moment they arrived.

“Officials have some degree of intimidation. I’m a grown adult, so I wasn’t super intimidated, but I was a bit shocked,” says Spicer. “But my daughter was intimidated. She started crying straight away.”

As they continued to recite their legalese, her father picked her up to try to comfort her – but that didn’t stop the officers giving her stall a £150 fine and handing them a penalty notice. “TRADING WITHOUT LICENCE,” it screamed.


Picture: André Spicer

“She was crying and repeating, ‘I’ve done a bad thing’,” says Spicer. “As we walked home, I had to try and convince her that it wasn’t her, it wasn’t her fault. It wasn’t her who had done something bad.”

She cried all the way home, and it wasn’t until she watched her favourite film, Brave, that she calmed down. It was then that Spicer suggested next time they would “do it all correctly”, get a permit, and set up another stand.

“No, I don’t want to, it’s a bit scary to do it again,” she replied. Her father hopes that “she’ll be able to get over it”, and that her enterprising spirit will return.

The Council has since apologised and cancelled the fine, and called on its officials to “show common sense and to use their powers sensibly”.

But Spicer felt “there’s a bigger principle here”, and wrote a piece for the Telegraph arguing that children in modern Britain are too restricted.

He would “absolutely” encourage his daughter to set up another stall, and “I’d encourage other people to go and do it as well. It’s a great way to spend a bit of time with the kids in the holidays, and they might learn something.”

A fitting reminder of the great life lesson: when life gives you a fixed penalty notice, make lemonade.

Anoosh Chakelian is senior writer at the New Statesman.