Lopsided Covid-19 policy threatens UK investment

Government moratoriums on landlords are undoing years of work to bring owners and occupiers closer together and threaten much-needed investment into the UK’s towns and cities. Industry leaders fear the government’s ban on allowing landlords to use statutory orders or winding-up petitions to collect rental income could have a wide-reaching and damaging impact on the UK’s economic recovery. “I’m pretty worried by the policy decisions that have been made by government to date, which are entirely lopsided, and they’re all about protecting the tenant,” says Bill Hughes, head of real assets at Legal & General Investment Management and chair of the Property Industry Alliance. “The truth of the matter is the tenant protections that have been put in place in the form of moratorium or voiding of conventional means are really only protecting tenants from what I would consider to be aggressive, bad behaviour, which only rarely happens from a small number of owners, sometimes for legitimate reasons and very much a small part of what’s going on here. “If the government fails to produce something that is more balanced now, then there is a worry that the case for investors – long-term investors – to invest in the built environment of the UK is undermined.” He adds: “To date they have failed to provide balancing statements or balancing measures that take into account the role that investors – and our underlying investors being pension fund savers from the UK – play. It has failed to take into account the fact there are requirements, needs and support required there too.” British Property Federation chief executive Melanie Leech says the government’s moratoriums “march the coach and horses” through the principle of real estate. “We’re extremely concerned about the impact that might have and the signal that sends to investors about the security of the asset they are considering investing in and the political risk that imports on top of all the other risks investors have to consider,” says Leech. “We should be doing everything we can to protect the attractiveness of UK real estate as an investment class, not undermine it.” The government regime to date has, if anything, reduced the need for tenants to talk to the owners of the real estate they occupy and that’s really unhelpful Bill Hughes, Legal & General Investment British Land chief executive Chris Grigg says it is incumbent on government to make it clear that any changes it brings into real estate are temporary. “When you talk about the impact these things have on international sentiment, international investment, which we’re surely going to need in the UK, then any sense from investors that this is a medium-term issue that landlords are going to have to deal with, will really reduce investment,” he says. “It will really reduce enthusiasm for the UK.” Alongside potentially damaging the UK’s reputation as a place to invest, government’s actions so far have done little to encourage a more collaborative conversation between landlord and tenant. In fact, business leaders say its actions may be destroying relationships. “The thing I want to get out of this more than anything is a transparent conversation between owners and occupiers of real estate so they can work together on an aligned basis to deliver success alongside each other,” says Hughes. “The government regime to date has, if anything, reduced the need for tenants to talk to the owners of the real estate they occupy and that’s really unhelpful.” He adds: “Given the situation that we now find ourselves in, at the very least, the government needs to provide some very clear directions with regard to what is expected from tenants, that their obligations remain unchanged, that bad behaviour will be called out and not be tolerated and there is an expectation of a minimum code of conduct from tenants so that they behave properly.” “We need to recapture the collaborative nature of the relationship between owners and occupiers that we have seen a lot of success with over the last five or 10 years,” adds Revo chief executive Vivienne King, “because at the end of the day, we have an issue that’s affecting the sector, it is not affecting one party or another party, it’s affecting the entire sector. “I would hope we would make the most of the situation and we would put our differences aside and come together to collaborate to find the best way forward… that will require some compromises on both parts and it will require some transformational change in the way we’re accustomed to dealing, but if we want to have a future, then we need to be prepared for radical steps.” To send feedback, e-mail samantha.mcclary@egi.co.uk or tweet @samanthamcclary or @estatesgazette