The Labour Party’s pledge to build 1.5m new homes over this parliament risks being dominated by private equity in the Build to Rent sector, Common Wealth has warned in a new report.
Indeed, chancellor Rachel Reeves has tied herself to fiscal rules to embed the neoliberal market throughout government planning. In her budget, she pledged money for the Build to Rent sector in order to ‘crowd in’ private investment, rather than treating homes as necessary shelter provided publicly and mandated as affordable to all.
The Build to Rent scandal
Build to Rent properties in the UK have increased to 20% of all new builds in recent years – and 27% in London, the thinktank states. Investors know that renting out essentials is a guaranteed way to make the most money.
That is, you get regular, passive income on resources people automatically need while retaining ownership of the ‘asset’ itself. Investors can then use the ‘product’ as collateral or eventually sell it.
At the same time, housing is a risk free investment for the government to make through public ownership, which can be organised on the basis of need and affordability.
Another way the current system is far from adequate is inherited wealth. Common Wealth notes that that in 2023 the majority of first time house buyers (57%) received financial assistance from their parents. The lottery of birthright should surely not prevail over the fact that housing is is a commonality.
Nonetheless, the thinktank further points out that between the onset of the financial crash in 2008 and 2023 the global real estate ‘assets’ under the management of “institutional investors” increased by around 450% from $385bn to $1.7trn.
Rachel Reeves: making the situation even worse
In the UK, overseas investors believe the housing market system to be staying. In absolute terms, UK real estate was the largest housing market for foreign investment in the first quarter of 2024.
Private investors want to maximise their profits at every avenue. Common Wealth points out this is at odds with providing affordable and social housing. The thinktank notes that when asset managers Blackstone bought up and renovated homes in Stockholm, rents increased by a whopping 43%.
The report further shows that a “structural undersupply” of housing leads to year on year rent rises.
Instead of tackling the issue, Reeves seems intent on making the situation worse and diverting more resources away from public housing and towards private investment.
Featured image via the Canary
