Buy-to-let lending has become a bit used for target practice recently, sometimes looking like a lightning rod for every gripe, criticism and complaint about the housing market. Recent strong growth may have fuelled this narrative but we still need to put everything into context.
It is easily overlooked that buy-to-let mortgages fund only a third of the total private rented sector and are less than a fifth of the total mortgage market. Let us not get carried away in our estimation of its importance.
But let us also recognise its contributions. A lot of people will continue to rent – by choice or by necessity – and this will not change any time soon. There will need to be a sudden and exponential increase in housing stock before homes stop being expensive relative to incomes; so there is great value in having a robust and wide reaching rental market.
Still, the buy-to-let market is going to have to get used to a heightened level of scrutiny. The Financial Policy Committee is looking to be granted increased powers of intervention in buy-to-let lending, to go along the similar powers which it already has in residential lending. Both segments of the market are validly seen as a factor in financial stability.
We expect a consultation on what those powers might be from the Treasury later this year and we will need to provide evidence round the effect and extent of buy-to-let lending. It is a part of the market where there are fewer data available than elsewhere.
The rationale for a ‘whole of market’ policy approach to managing financial stability risks arising from the housing market is understandable, but I hope that the public debate does not artificially pit home-ownership against buy-to-let in some sort of battle line. Both tenures – along with social renting – are important. When it comes to housing tenure choice, there are no saints and sinners – the name of the game needs to be peaceful co-existence.
Ultimately, especially if supply of new homes can be increased, it will be market forces which determine the precise mix between the tenures.