Buy-to-Let and the wider Housing Market

Abstract

The role of Buy-to-Let (BTL) in the contemporary UK housing market is disputed. Promoters see it stimulating private rental and promoting the consumption of riskier sites for regeneration activity. Detractors cite damage to communities where BTL stock remains empty, bringing environmental decline, or inflating prices and excluding First Time Buyers from ownership. But these may not be the most significant effects. The investment market in housing, including BTL, has skewed new supply to its own needs. This paper uses nationally available statistics to identify the extent of BTL activity and to propose that the impact of this is to disconnect the current UK housing market from household consumption, a connection that is assumed in many discussions and models informing policy. The main indicators of this are the volume of BTL lending and investment activity, the cost of housing in relation to household income, and the consequently changed nature of new housing supply.