Opinion

Stormont must take on the landlords turning us into a tenant society

Newton Emerson

Newton Emerson

Newton Emerson writes a twice-weekly column for The Irish News and is a regular commentator on current affairs on radio and television.

<span style="color: rgb(51, 51, 51); font-family: sans-serif, Arial, Verdana, &quot;Trebuchet MS&quot;;  line-height: 20.8px;">Almost all the increase in housing supply in Northern Ireland has occurred in the private rented sector</span>
Almost all the increase in housing supply in Northern Ireland has occurred in the private rented sector Almost all the increase in housing supply in Northern Ireland has occurred in the private rented sector

Home ownership has fallen sharply across the UK over the past decade and the biggest drop has occurred in Northern Ireland, where 63 per cent of households are now owner-occupiers, down 10.5 per cent from a 2006 peak.

The reason is the same as everywhere else - affordability is squeezing out buyers, with the average house price in Northern Ireland over five times the average private sector wage. Prices are up 7.3 per cent on last year, against a UK average of 6 per cent.

Where we differ is housing supply. Northern Ireland has by far the best record on building new houses - up 13.6 per cent in the first decade of this century, over half as much again as in Britain. We have also had nothing like the rise in demand seen in much of England.

So what is going on? The answer is landlordism - almost all the increase in housing supply in Northern Ireland has occurred in the private rented sector.

This does not mean new properties are being built by landlords or even built to sell to landlords. What is happening is that landlords are outbidding other buyers.

As an illustration, picture a family moving from a three-bed house in town to a four-bed development on the edge of town. They receive offers from landlords, either in cash or via buy-to-let mortgages. The family will prefer these offers to most others, even at the same value, because they are more likely to reach completion. So another house is taken out of owner-occupation and added to the private rented sector.

The landlord’s money is pumped into the property market, pushing up prices and forcing more families to rent. Yet the landlord’s investment in itself has added nothing to the overall housing supply. It is a vicious cycle of speculation and inflation that is rapidly returning us to a tenant society, the consequences of which are too numerous and obvious to list.

Thank goodness there is plenty Stormont can do to address the problem. Its first step should using its existing registration scheme to identify productive and unproductive landlords.

Productive landlords invest to build or at least to significantly improve, increasing supply and putting downward pressure on prices. They are invested for the long-haul, so they want to offer secure tenancies and appropriate accommodation. Stormont can encourage them with low rates on purpose-built rental property and with regulations that favour professional operators. There is also more Stormont can do to encourage private investment in the social rented sector, mainly by ensuring housing associations are properly managed.

Every other kind of landlord should be discouraged. Punitive rates and regulations should be imposed, housing benefit levels should be cut to the bone and tenants’ rights should be ramped up and ruthlessly enforced.

Stormont does not need to beg for the devolution of stamp duty or any of the other powers being used to tinker with the market in England. It can take all the above steps now. A review of the private rental sector is currently overdue from the executive, having been delayed by this year’s election.

The growth in small-scale speculative landlordism is an issue across the UK but there are reasons to believe it is a particular temptation here. As a conservative society with limited entrepreneurial opportunities, many of us seem drawn to the apparent security and ‘respectability’ of building up a pathetic little property empire. Quite apart from the damage this is doing in general, it is not an especially rewarding move for most individuals. Better and safer returns are available through a stocks and shares ISA, with no more hassle than opening a bank account. If someone really believes in the private rental market and wants to invest in it, they can buy into one of the many firms or funds that do so.

Another key step Stormont could take to increase home ownership is to adjust the planning rules for developers. If permission for new houses was easier to obtain but quicker to lapse, developers could not squat on land waiting to build once prices go up (a practice that in turn forces prices up.) They would have to build continuously to stay in business.

Our two parties of government are fond of waving their hands in the air over the social problems caused by a dysfunctional housing market, yet they can go a long way to fixing it with straightforward measures against speculation by landlords and profiteering by developers.

Why would they not?

newton@irishnews.com