1. Housing Futures AN AFTERNOON AT THE MUSICALS! Ian Fletcher Director, British Property Federation 17 July 2007

2. Act 1  What do you do with a problem like….buy-to-let? (The Sound of Music) Act 2  This is the moment! (Jekyll & Hyde) Act 3  Who will buy rent? (Oliver!) Act 4  Wouldn’t that be loverely! (My Fair Lady) THE ROLE OF THE PRIVATE RENTED SECTOR

3.  £95 billion of lending – CML, Feb 07  850,000 mortgages – CML, Feb 07  Houses over 1 million households – M. Ball, for ARLA, Sept 06 BUY TO LET

4.  Impact on demand/supply BUY TO LET - CONCERNS

5.  Wrong type of housing BUY TO LET - CONCERNS Source: Hometrack

6.  Quality of management  Impact on planning “Concerns remain, however, over reported poor management of investor owned homes on some developments; the effects on the sustainability of very large housing developments should a high proportion of homes be privately rented; and over the possible effect on the investor market of falling house prices in the future.” KEN LIVINGSTONE, FEB 07 BUY TO LET – CONCERNS

7. Significant exit costs  Capital gains tax  Fixed rate mortgage penalties  Transaction costs (estate agent fees etc.)  Entry costs Motivations of investors – JRF report October 2003  In it for long term pension planning  Live on the rental income when retired  Counter-cyclical BUY TO LET – ARE WE HEADING FOR A CRASH?

8. Using buy-to-let, and in particular a single buy-to-let property as the main source of retirement income can be a high-risk strategy, similar to relying on investing in one company on the stock market. The value of the property may fall, or rental income may be lower than expected, or even zero. An alternative is to invest in a property fund, which owns a large number of properties. PENSIONS POLICY INSTITUTE, MAY 2004 BUY TO LET AND PENSIONS

9. OVERSEAS COMPARISONS - % RENTED Switzerland Netherlands US UK Australia Spain

10. THE INSTITUTIONS – THIS IS THE MOMENT! The rest 85% 15% Commercially managed

11. Commercial property  £750bn invested in shops, offices, industrial by a range of big investors: Land Securities, British Land, Prudential Private rented sector  Grosvenor £2.6bn, Grainger £1.5bn, Wellcome Trust £800m, Terrace Hill £500m, several other smaller funds, ING, HSBC, Schroders, Dorrington…. Investment in residential….is larger  £20bn in student accommodation, Unite £1.5bn...  Some investment in equity release, senior housing… INSTITUTIONAL INVESTORS – WHO ARE THEY?

12.  Quality housing management  Diversification and professional investment management  Help support supply INSTITUTIONAL INVESTORS – WHY ENCOURAGE THEM?

13. Source: EMAP Glenigan, 2006

14.  The PRS to offer a competitive risk/return profile  No residential REITs yet – some fine-tuning required  Tackling some cost disincentives – stamp duty, VAT….  Access to appropriate stock INSTITUTIONAL INVESTORS – WHAT THEY NEED

15. Students  Higher education numbers up from 600k to 2.25 million since 1990. Government target is 50% participation rate by 2010. Currently, just over 43%. Immigrants  Net international migration of 235,000 in 04/05. Overall, migration is predicted to contribute about a third of all housing need over the next 20 years. Those with affordability problems  Bramley – 121K in 2001 for Barker Report – Currently providing less than half that number of affordable homes – 1.5m on waiting lists Other social trends  Children living at home longer, separation and divorce, ageing population. WHO WILL RENT?

16.  33,000 per annum up to 2021 Calculating the growing demand’, Richard Donnell in More homes for rent: stimulating supply to match growing demand, Smith Institute, London, 2006.  About half that on central projection The Outlook for the Private Residential Rental Market, Oxford Economic Forecasting and University of Reading for BBG Group, 2006. WHO WILL RENT – FUTURE GROWTH

17. WHO WILL RENT - FAMILIES?

18. WHO WILL RENT – FAMILIES? GLA - Households in Temporary Accommodation - Sept 05 Number in B&B, shared annexes and HMOs2795 Number in self-contained annexes3777 Number in private rented sector41571

19. Housing Act 2004  Licensing – in various forms  Tenancy deposit protection  Housing Health and Safety Rating System Anti Social Behaviour Act (Scotland) 2004  All those involved in letting are required to be registered. WOULDN’T IT BE LOVERLY!

20. New legislation/ potential legislation and campaigns  HB reform – local housing allowance  Equality bill – extension of disability discrimination legislation  Housing Green Paper?  CAB – retaliatory eviction  APPG Balanced and Sustainable Communities – planning permission for, and increased licensing of HMOs  Various – security of tenure reform  Various – reform tax treatment of buy-to-let interest WOULDN’T IT BE LOVERLY! 2

21. Other approaches  Law Commission – enforced self-regulation  Growth of accreditation  BPF – Code of Practice and Plain-English Tenancy Agreement WOULDN’T IT BE LOVERLY! 3

22.  In a relatively short space of time the modern PRS has become a vital ingredient of the UK housing market  Future economic and social trends suggest it will continue to need to grow, to meet various housing needs  Much of the current focus is on the buy-to-let market and its impact on supply and management standards  The institutional sector is small, could provide different facets, but needs encouragement  The sector continues to suffer from an image problem  A key facet of future policy will be to see how it tackles standards without negative impact on standards or the sector’s growth IN CONCLUSION

23. THE END