Fixing the UK Property Market: Ending Buy-to-Let Mortgage Distortions and Boosting New Home Construction

To address the distortions caused by buy-to-let mortgages in the UK property market, the following policy takes a multi-step approach. The policy recognises that the competition between landlords and investors for properties sought by first-time buyers is detrimental to the market and seeks to rectify this issue.

The first step involves the establishment of a network of local private / public partnership development companies. These entities would act as intermediaries, raising capital from various sources such as pension funds, institutional investors, and pooling development budgets from local councils and housing associations. The primary objective of these companies would be to initiate and guide the construction of a first wave of new affordable homes.

Once up and running development companies would introduce a buy-to-build investment product targeted at individual investors. This product would offer a government-backed and guaranteed return on investment, providing incentives for investors to participate in the construction of new housing and a new way for these independent investors to save for their retirement.

To reinforce the shift away from buy-to-let mortgages, a law / regulation to ban the sale of new buy-to-let mortgages by banks and building societies would be passed. This measure would help reduce the number of existing homes being purchased by investors and end the rise in the number of landlords entering the market.

After a few years the next phase would kick in and involve restricting the sale of buy-to-let re-mortgage products. This step aims to avoid creating a sudden rush of landlords exiting the market, which could lead to rapid price reductions and market instability. Instead, a carefully planned phasing scheme would be introduced, gradually increasing the number of properties sold by landlords without causing disruptive market fluctuations.

Ultimately, the objective of this policy proposal is to restore a significant social housing sector in the UK. By increasing the availability of new build properties and limiting the dominance of buy-to-let investments, the policy would aim to provide more opportunities for first-time buyers to enter the property market. Additionally, by curbing the monopolistic purchasing of existing homes and subsequent charging of extortionate rents, the policy seeks to address the issue of unaffordable housing and create a fairer market for both tenants and potential homeowners.