Trends in Rent to Buy Policy – affecting consumer demand

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Since the Brexit vote, Britain’s housing market has endured political uncertainty, price falls and decreasing consumer confidence. Unfortunately, this situation does not look likely to improve anytime soon, with the UK’s largest estate agency group, Countrywide, revealing yesterday that sales were down by 7% in the most recent quarter. The Royal Institution of Chartered Surveyors commented that the Bank of England’s announcement on raised interest rates for the first time in a decade may have had an influence on consumer demand.

English Housing Survey found that home ownership in Britain has plunged to its lowest level in 30 years, as the growing disparity between earnings and property prices has created a housing crisis that has consequently extended beyond London to towns and cities across the country. With the increasing gap between wages and house prices further generating a fall in ownership in the UK, it is questionable how successful the Government’s policy of rent-to-buy schemes has been in helping those that are priced out of the market, and to what extent rent-to-buy schemes have affected consumer demand.

A recent report by the National Housing Federation stated that the average £30,000 required to purchase a house at present is nearly ten times the required amount in the 1980’s, with first-time buyers needing about 22 years to save up that much without any financial assistance.

With the view to address this, the Government introduced the ‘Rent to Buy’ initiative, aiming to increase the provision of low-cost rented accommodation to young people. However, some have argued that this policy is only a short-term win for the Government, and resources would be better utilised in incentivising homeowners to rent out the approx. 15 million empty bedrooms in the country.

Our researchers at onefourzero found that consumer demand for rent –to- buy had several peaks and falls. The highest peaks were in January 2015, when the Department for Communities and Local Government (DCLG) under the Coalition Government announced that the number of people joining the housing ladder was continuing to grow as new figures show more than 73,000 homes had been bought under the Government’s flagship Help to Buy schemes.

The next peak was in January 2016, following the Autumn Statement, when Chancellor Phillip Hammond announced a large-scale regional pilot of the right to buy extension to social housing tenants.

Finally, in January 2017, Communities Secretary Sajid Javid announced £7 billion for the government’s affordable housing programme to meet the housing needs of the country. Funding was allocated for rent-to-buy, giving tenants the opportunity to save for a deposit and then the option to buy their current home. Our research evidently shows that there is a concurrent growth in searches for rent-to-buy schemes with rent-to-buy policy announcements, indicating that consumer behaviour within the housing market is directly affected by government regulations and policies.

 

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