My way out of the buy to let mess

The Buy to Let boom is over. From Manchester to the Thames Gateway there are reports of empty properties. David Blackman’s piece in the last issue showed how controversial the issue has become.

There are only a limited number of mobile, relatively well-off, single, younger people for whom private renting is the best option. So rather than leave properties empty – a wasteful and antisocial investment option – lettings are instead made to homeless households. But the size of the accommodation – predominantly one-bedroom flats – is not helpful for families and can be a trap for single parents with children.

Worse, the management of buy to let properties is not in the hands of social landlords or agencies skilled in support for tenants on the lowest incomes. Handling the management of blocks of apartments with homeowners, market tenants and homeless households presents challenges which a variety of amateur landlords – who are there for investment reasons only – cannot be expected to handle.

Meanwhile shortages of family homes for rent to those on low incomes, and for the ever-growing number of households on middle incomes who cannot afford the cost of outright purchase, become more acute by the day. More funding for registered social landlords to produce rented homes in mixed-income developments is essential. But we also need family housing for sale at prices to suit the “intermediate housing market” between social housing and the cheapest houses now available.

The appetite for buy to let must be sated for the benefit of those priced out of home-ownership

Buy to let has had its day, yet it has proven hugely popular with investors who have pumped well over £100bn into housing over recent years. This is an appetite that we should look to sate for the benefit of people who are now priced out of home-ownership. I propose that housing associations, local authorities, government and mortgage lenders get together to offer a new investment opportunity: let’s call it “invest in owners”. This allows investors to continue to pump money into housing, but instead of renting a property out to a tenant, they obtain capital gains without the hazards and hassles of management and maintenance.

The financial institutions that have done so well in creating the huge buy to let market need to recognise the need for change. I see a role for them offering equity mortgages that bring investors and buyers together. “Invest in owners” investment vehicles could be set up so that investors can have a share across a portfolio of properties. For this they would receive 2% interest each year on their stake as well as all the capital growth on their share of the portfolio when properties are sold.

There is still a huge interest in investing money in property, but “invest in owners” could be used to redirect these funds to the much more pressing demand for affordable home-ownership for families.