An assessment of the long run impact of the Business Expansion Scheme and the prospects for individual investment in privately rented housing in the UK

The privately rented housing sector has a key role in the UK Government's housing policy for the next millennium. One of the main planks of 1980s government policy for reviving the fortunes of the sector was the extension of the tax reliefs available under the Business Expansion Scheme (BES) to individuals investing in residential property letting companies. Previous research has shown that, in the short run, the BES had a considerable impact on the supply of privately owned housing to let. However, no previous research has been carried out into the effects of the BES on the individuals who invested in it, their intentions towards investment in private renting in the future, including their BES holdings, and their views about the private rented housing sector in general and the policies required to encourage them to invest further capital. This paper sets out the results of the first comprehensive survey of individual shareholders in BES housing companies based on a large-scale national postal survey. It finds that, while most BES shareholders were satisfied with their investment, few intended to retain their BES shares longer than necessary under the tax rules. The probability is that, unless new measures are implemented, most BES properties will leave the privately rented sector in the near future and there is little prospect of significant individual investment in private renting in the medium term. A number of policy proposals are identified which could act in a countervailing way.