Buy-to-let protection to be restricted

Following the evaluation of the buy-to-let protection scheme, the Minister announced plans on 16 October to amend the scheme. The evaluation concludes that, under current market conditions, the buy-to-let protection scheme is no longer an effective instrument for improving first-time buyers’ chances of purchasing a home. More targeted instruments are now available to tackle rogue landlords, such as the Good Landlordship Act.

The Minister has therefore announced two changes:

1. The purpose of the buy-to-let protection scheme will be narrowed. Improving opportunities for first-time buyers and tackling rogue landlords will no longer be objectives of the scheme. Going forward, the buy-to-let protection scheme will be aimed exclusively at addressing pressure on the liveability of neighbourhoods by ensuring a balanced composition of the housing stock.

2. The scope for applying the scheme will be restricted. Municipalities will only be able to apply the scheme on liveability grounds and will have to substantiate its use for each neighbourhood or area. A maximum property value threshold may also be introduced. The Minister is exploring whether this could be linked to the average WOZ value of residential properties in the municipality concerned.

Restricting the buy-to-let protection scheme is a step in the right direction. The evaluation shows not only that the relevance of the scheme has diminished, but also raises concerns about its proportionality and the justification for its use. Many municipalities lack adequate justification for the property value thresholds they apply and for the necessity and suitability of the measure in a specific area.

At the same time, the question remains whether these changes go far enough. The evaluation also finds that the number of purchases by investors is declining, rental properties are increasingly being sold to owner-occupiers, and this is having a negative impact on the availability of rental housing. Particular attention is drawn to people seeking housing who are unable to buy and therefore depend on the private rental market. If the need for buy-to-let protection is declining while the supply of private rental housing is simultaneously under pressure, is a more targeted application of the scheme really enough?

For professional landlords, the changes may provide greater scope, particularly because broad application of the scheme will become more difficult.

The legislative proposal is expected to be submitted for public consultation by the end of this year.