Labour's Right to Buy proposals could devastate the PRS
Labour’s shadow chancellor has suggested that a Right-to-Buy scheme could be introduced into the private rental sector (PRS). While few details have been mentioned and its not clear if it’s an official policy from the opposition party, if such a scheme were to become part of the PRS, then there are fears it could have a detrimental effect on PRS landlords and the availability of rental homes across the UK.
Labour’s John McDonnell told the FT.com in an interview that the Right-to-Buy scheme which saw council house tenants able to buy their homes at a discount on market prices, could be extended to the PRS. Even if the scheme was only used where PRS landlords weren’t properly maintaining their properties, this type of rule could further encourage landlords and potential BTL landlords that becoming a PRS investors isn’t the right move for them.
Shadow Chancellor’s suggest PRS Right-to-Buy plans
In his interview, Labour’s shadow chancellor, John McDonnell only gave a few details as to how such a scheme could work and why is might be needed.
He suggested that only landlords who don’t manage their PRS rental properties properly and allow them to fall into disrepair and become overcrowded with tenants might be made available to existing tenants to buy them at a discount to the market rate. However, no details as to who would bare the brunt of that discount were mentioned.
“We’ve got a large number of landlords who are not maintaining these properties and are causing overcrowding and these problems,” McDonnell told the FT.com.
“You’d want to establish what is a reasonable price, you can establish that and then that becomes the right to buy. You (the Government) set the criteria. I don’t think it’s complicated,” he added.
RLA, ARLA both warn of damaging impact of Right-to-Buy in the PRS
Following the McDonnell interview, the Residential Landlords Association, (RLA) has warned that such action from a Labour Government could lead to a sharp fall in the stock of PRS properties available to rent.
“Labour’s proposal would effectively kill off a large part of the private rented sector denying a home to many thousands of people,” said the RLA’s policy director, David Smith.
“If there was to be any chance of this becoming law, there would be a mass sell-off of properties in advance. The RLA is all in favour of landlords selling to sitting tenants but it must be entirely voluntary. Anything else amounts to a form of compulsory purchase,” Smith added.
Meanwhile, the National Association of Landlords, (NLA), is also concerned over how such a scheme could affect the PRS.
“To suggest that private landlords should be selling their properties to their tenants at a below market rate arbitrarily set by politicians is ludicrous,” said Director of Policy and Practice at the NLA, Chris Norris. “John McDonnell’s assertions that landlords are looking for a quick buck and don’t maintain their properties shows a serious lack of knowledge about how the vast majority of landlords run their businesses.”
Given the current political uncertainty at a time when the Conservative party are already placing additional scrutiny on PRS landlords, McDonnell’s comments are badly-timed at best and damaging to the sector, which is an incredibly important part of the UK’s housing provision, at worst.
PRS landlords are an essential element of the UK’s housing provision and while rules to ensure all housing is well-managed and safe to live in are important, supporting those PRS landlords to ensure they continue to provide the much-needed housing for the UK’s still growing population is also something the UK government should do.
