The DCLG has savaged the Government for ‘impeding’ the supply of social housing…

A new report titled 'The Supply of Rental Housing', criticises disincentives that prevent improvements to properties and stops large investors from building new homes.

The report is particularly scathing about the Government’s oppressive tax regime: "Taxing an activity which so badly needs to be carried out appears perverse. The tax system should not impede or deter any housing provider from taking the steps necessary to improve the supply of rented housing".

The supply of social housing is also damaged by the complex system of corporation tax and with many social homes also being delivered through private development taxes (known as s106s), the downturn in house building will hit the most vulnerable, pushing more into private rental.

The report also blasts buy-to-let:  "BTL is pressure on housing markets, particularly for first time buyers. Indeed, in London around two thirds of new build properties in 2005 were bought by investors rather than owner-occupiers”.

Things must improve

In addressing solutions to the crisis, the report argues: "We recommend that the Government investigate the potential for improvements to the regulatory process to encourage further investment from large institutions to improve supply.

“One of the main issues raised by potential investors is the effect of aggregating the stamp duty of all properties, rather than applying the tax separately to properties, which acts as a disincentive for larger investors. Another fiscal disincentive is the application of VAT to repairs and maintenance.

"Given that one of the main problems with the private rented sector is the relatively poor standard of repair (the sector has the largest proportion of non-decent homes), taxing an activity which so badly needs to be carried out appears perverse. VAT is also an obstacle for community ownership and management organisations.

Public needs assistance NOW

Ian Fletcher, the British Property Federation's director of residential policy, said: "The fact is that the public needs assistance now, and any legislation will take years to come through. Local councils already have the powers to treat developments built for let differently, and to reduce the level of S106s they have to pay.

“Councils can already recognise the fact that build-to-let is a form of affordable housing, and we hope that more of them can make use of this great opportunity to increase the supply of quality, professionally managed housing."

Jacqui Daly, director of residential research at Savills, added: "The build to let model could work under a licensing system, agreed through a local development order or s106 agreement, with less onerous affordable housing requirements where there is high demand for rented housing.

“All that would require is a legal planning agreement, so no new planning definition of legislation would be needed. We don't need a policy change to encourage build to let and we could see a professional rented sector developed within the current system. What we do need, is explicit housing policies supporting rented housing that local authorities can use to assess planning applications."