Housing sector revolts against ‘damaging’ buy-to-let landlords

Aclamp-down on buy-to-let investors is sweeping the country as an increasing number of developers, housebuilders, councils and housing associations ban or restrict sales of properties to speculating landlords.

The move comes after Regenerate highlighted in January the problems of empty and short-tenancy properties in new town centre developments that are owned but not actively let by bulk investors, who instead rely on spiralling property prices to make money.

English Partnerships, developer Oracle Homes and Midland Heart Housing Association have become the latest organisations to join the revolt against buy-to-let investors (see box).

Tom Murtha, chief operating officer of Birmingham-based Midland Heart, said the association – which has 2,000 homes in development – no longer gets involved in schemes that sell to investors. “It is simply not worth our while as it is not a sustainable investment. Put yourself in our tenants’ shoes: would you want to live in a block of 200 flats where there were only 60 let? No,” he said.

David Burke, chairman of the Oracle Group which has a £2bn development pipeline, said his company was “deliberately limiting what investors can buy and not allowing the big investors in” at a 975-home, £305m mixed-use scheme in London Docklands.

“We’re doing that because we want the schemes that we develop to have vibrancy, and also because we’ve had investors not completing on acquisitions. Also we have our own rental and investment division so we can sell homes to ourselves and rent them out, and remain in control,” he added.

The problem was raised earlier this month at the Think event in London when Tom McCartney, former chief executive of Sunderland Arc and new boss at the fledgling North Staffordshire CDC, said the issue of buy-to-let investors was “the number one issue facing regeneration in the UK at the moment”.

He cited figures from the Council of Mortgage Lenders which showed that buy-to-let mortgages now made up 11% of all new lending and that the market was worth £95bn at the end of 2006. This was up from just £5.4bn in 1999.

McCartney added: “The general point about buy-to-let is not that it is a bad thing but that it needs to be better organised. The government needs to think carefully about this as we are running the risk of wasting billions of pounds on areas that don’t work.”

David Pretty, former chief executive of Barratt and now a director at the Home Builders’ Federation, said the sorts of steps being taken by organisations such as developers Quintain, Isis and Crest Nicholson were “wholly sensible”.

However he criticised some housebuilders for selling up to 60-70% of schemes to investors, branding this “excessive” and saying it was “creating unbalanced developments”. “When I was at Barratt I laid down strict guidelines for investors. We didn’t allow more than 35% of homes on a scheme to be sold in that way.”

Another housebuilding source said: “I really think that this is the [raised housing density requirement in] PPG3 starting to bite. We are building so many one- and two-bedroom flats as this is what the government has asked us to do.”

“There often isn’t the demand from owner-occupiers, but we have to sell them somehow so we sell to investors,” he added.

Richard McCarthy, director general of programmes, policy and innovation at the DCLG, said: “The question for us is, do we need to do anything on this as central government or can we leave local solutions to work themselves?”

McCarthy pointed to the move by English Partnerships in the South-west to run a trial ban on buy-to-let investors on four schemes in the region covering 2,500 homes as an example of local solutions.