Right to Reply on the Right to Buy
Thoughts from our CEO, John Goodall
Imagine if every time you hired a car you could buy that very car at a discount to its market value, and there was nothing the car rental firm could do about it. You would likely see some enterprising folk hiring, and then purchasing, a car in this way – something that would have quite an impact on the broader second-hand car market.
Values of second-hand cars would almost certainly fall as demand for non-rental second hands cars plummeted. It’s hard to imagine car rental firms not struggling with profitability if they’re forced to sell their assets at a discount. This would likely lead to the knock-on effect that Hertz, Avis and co. would pull out of the UK, or at least dramatically increase prices to stay buoyant.
Of course, they may find more creative avenues such as changing their fleets to cars that people might be happy to rent but not to own. These would be lower quality cars with a greater ongoing costs and maintenance requirement. Broadly speaking, it would become much harder and more expensive to hire a decent car.
You’d be forgiven for not labelling this idea as a positive development, regardless that there would clearly be a few early winners, perhaps snaring a one-year old BMW at a bargain price. But it’s clear that this implausible, somewhat dystopian future would be damaging in the longer term.
With that in mind, I ask you this. How, when the above scenario is applied to the housing market, can the idea ever be touted as positive and progressive?
Yet this is exactly what the Labour party are proposing with their recent Right to Buy suggestion.
For the UK’s 2.6 million landlords, there would be zero incentive to invest in rental properties knowing that they could be forced to sell at a discount. And how would this be good for those that want to rent or cannot afford to buy? The private rented sector is crucial to the UK economy and by undermining it, and neglecting its importance, the Labour party show a real lack of understanding of the housing market.
On a broader point, how does this serve to reassure businesses in other sectors or overseas investors that Britain is open for business?
If a government is prepared to force owners of houses to sell at a discount, what is to stop them doing it with any other form of asset? The reality is that we’d see Foreign Direct Investment in the UK dry up almost overnight.
It is extremely likely that we will face an election in the coming months where we will no doubt hear various policies related to housing that are aimed to win votes rather than improve the housing market.
The fundamental premise of any policy aimed at penalising private landlords simply cannot be supported as positive for the private rental sector. It’s high time policies reflect this, which means we need more thinking to ensure that there is sufficient quality housing for both those that want to buy and those that want to rent.