The Government has finally reached agreement on a package of measures for the housing sector, following weeks of negotiations. These measures are an attempt to address a number of interlinked problems – among them the lack of housing supply and rising rents. They may assist in some of these goals but major work remains to achieve the key policy target of encouraging increased supply of properties.
Political intervention in markets always risks unintended consequences, particularly in a situation where a compromise has emerged between different positions. That said, it has been clear that those renting properties had faced unreasonable pressure in a market where there is a shortage of supply. Increasing the time between rent reviews to two years is one of a range of measures attempting to tip the balance towards renters.
Measures to get landlords to justify increases in relation to market trends make sense in theory, though it is important that unwieldy bureaucracy it not added to the system. In the short term, there is a danger of landlords trying to increase rents before the legislation comes into place.
For all these reasons it is obvious that increased supply is the long-term solution. The latest package adds to existing measures to try to increase housebulding, for example by allowing for rebates of development contributions to local authorities in certain cases, and by easing regulations on apartment buildings. It is difficult as yet to judge the impact of these measures, together with what has already been introduced.
However, there are wider issues. There appears in recent months to be a lack of building activity related, in part, to the financial state of many developers and, in part, to more restrictive lending policies by banks which do not want to repeat past mistakes. The recent shortfall in social housing construction will also take time to correct. We may not see much more from this Government before the general election. But a co-ordinated effort at national and local level will be needed over a number of years to address this supply issue.
