The UK is facing a “critical” rental shortage which requires a major policy rethink, according to the Royal Institute of Chartered Surveyors (RICS).
It says that almost 1.8 million new rental homes are needed by 2025 to keep up with demand.
The rental market is stagnant at the moment. RICS figures suggest that 86% of private landlords have no plans to add to their housing portfolio this year.
That’s because buy-to-let sales have declined since April, when the government introduced an extra 3% stamp duty tax on second homes and investment properties. RICS says that 58% of estate agents have reported a decrease in buy-to-let sales since May.
At the same time, the number of households renting properties has grown rapidly due to rocketing house prices and relatively stagnant wages. The number of renting households increased from 2.3 million in 2001 to 5.4 million in 2014, according to RICS.
If that number keeps growing, there is going to be a major shortfall.
RICS called for the 3% tax increase on buy-to-let homes to be scrapped, although this move might upset first-time buyers, who often say they are outbid by buy-to-let investors.
Reversing the stamp duty increase would also incentivise “build-to-rent” schemes, in which firms construct apartment blocks and must pay stamp duty on each unit.
RICS also called on the government to encourage local authorities to release brownfield sites for build-to-rent schemes.
Brownfield sites are cheap areas of land previously used for industrial purposes.
The organisation’s head of policy, Jeremy Blackburn, said in an emailed statement the government should focus less on home ownership and more on the rental sector.
He said: “The private rented sector became a scapegoat under the previous prime minister, and because of that it suffered. Yet with increasingly unaffordable house prices, the majority of British households will be relying on the rental sector in the future.
“We must ensure that it is fit for purpose, and the government must put in place the measures that will allow the rental sector to thrive. Any restrictions on supply will push up rents, marginalising those members of society who are already struggling.”
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.