Invest & Fund cautions over rented sector reforms
Any government moves to protect tenants from rogue landlords could have a knock-on effect for both peer-to-peer property lenders and the wider housing market, Invest & Fund has warned.
The P2P development and bridging lender said that any changes could potentially impact on the ability of developers to raise project finance.
The comments were made in response to a recent interview by secretary of state for Levelling Up, Housing and Communities Michael Gove, where he referred to possible government intervention in the rented property market, without mentioning any specific plans or policies.
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In a company blog, Invest & Fund wrote that “changes could affect smaller property investors first and foremost; however, with the growth of corporate BTR (build to rent) and developers retaining units for future cash flow, any legislation centred around tenancy protections could impact onward refinancing options”.
It said that while it understood the need to protect tenants from exploitative landlords, the hinted-at proposals would “reduce the number of homes built at a time when we need more”.
It said that most mid-level developers complete projects by raising a mixture of investors’ capital and primary development facilities, and the rental expectations confirmed by the surveyors are priced into the end game refinancing decisions.
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It cited the example of how political intervention stalled the building of new homes in Scotland, where the devolved government introduced rent controls.
Referencing an article in the Architects’ Journal, it said: “A 1,500-home development in Glasgow being built by the developer Get Living has now stalled even with full council planning approval, as banning rental increases had led to a situation where the numbers aren’t tenable. In an ideal world, government decree can control rents in this way. Still, unfortunately, often these policies are introduced without a fundamental understanding of how the debt pile works to get bricks in the ground.”
Invest & Fund said that the issue needs to be tackled from the supply side, rather than with “blunt instrument policy”.
“Make it easier for developers to build, support smaller developers, nurture that industry, and let the free market look after itself,” it said.
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