"Home is not where you live, but where they understand you" - Christian Morgenstern, German writer and poet.
This week’s quote pertains to the deep dive, as ever, and I get into one of the very most emotive topics in housing. Homelessness.
As the calendar creeps towards a new year, it’s a natural time to pause and tackle the biggest challenges that keep SME property businesses from achieving true, sustainable growth. For most, this boils down to two core areas: Laying a bulletproof strategic plan for the next 12 months, and finally cracking the code on financial measurement and accountability. If you’ve ever felt lost in a sea of bookkeeping data, or if your productivity methods are falling short, it’s time to switch from doing to leading—and truly understand how your assets are performing. Book in on the next Property Business Workshop with myself and Rod Turner - Thursday 22nd January - Central London - https://tinyurl.com/pbwnine
First up - I’m continuing the iterative process of delivering more in the Supplement in fewer words. More for less is notoriously the most difficult value proposition of them all. I’m some way through a voyage of discovery with AI and using it a bit differently than I seem to see many using it on social media (to write posts for them and pretend it was them, when you can spot them a mile off) - I am trying to harness it to help me to be more concise, and also lay out arguments in a better and more structured fashion. I’m trying!
With that in mind, I’ve once again tried some refinements this week. Please, again, let me know what you think.
Trumponomics to discuss once more. Highly effective domestic policy this week, followed by geopolitical friction and diplomatic failures. Generally, business as usual then!
The tariff-funded farmer bridge assistance program was announced - $12bn of one off support for commodities. Fairly classic protectionism that runs alongside a tariff strategy - conventional, if anything. Standards on vehicle emissions were rolled back, to levels that are achievable by conventional or “ICE” cars if you prefer. Deregulation in the automotive sector in the US will now be difficult to reverse even if they lose control of various parts of the administration in the midterms in 2026.
Trump was again involved in the Supreme Court in a case which, essentially, will end up ruling whether DT can or can’t do what he wants when it comes to removing the heads of “independent” agencies. He wants absolute power, of course - no news there.
In a Pennsylvania rally, Mr Trump made sure that everyone was clear that the cost of living crisis was all “the last guy” and everything he was doing was getting prices down. This is a case of “the greatest trick the devil ever pulled was convincing the world he didn’t exist” as people are, with their own eyes, watching prices in the US tick up instead of down (at a rate higher than they otherwise would have done if the tariff interference hadn’t been carried out, as it goes!)
He ended another war this week, until he didn’t - this one was Thailand and Cambodia. Thailand was quick to debunk Mr Trump’s public claims that the ceasefire was back on, on Saturday 13th. Oops!
The special relationship continues to be in special measures, as (with little choice, to be honest) the MPs in the House of Commons issued an extraordinary condemnation of the controversial “National Security Strategy”, which reads very “neutral” on the traditional enemies of the west, Russia and China, and quite negatively towards the whole of the EU and the UK. “Chilling interference in European Democracies” - hard not to agree, demonstrably.
The Commissioner of the Met Police also rejected “the Donald”'s claims about “crazy” crime levels in London. Unusual to see a public spat like that - but then, he started it. Nar-nar-ne-nar-nar. Seems suitably mature and befitting of these situations.
So - bit of a schism between home and abroad for the US this week. How about the real time UK property market?
Chris Watkin - who I am delighted to say I will be joining for a “review of the year” (keep an eye on the channels) is “Agent Zero” as always. A stripped-back summary of his weekly article:
Sales Performance & Pipeline
- Gross Sales (SSTC): 20.9k homes were Sold Subject to Contract (SSTC) this week, which is an expected seasonal drop from the 22.9k recorded the previous week.
- YTD Gross Sales: Gross sales for 2025 year-to-date stand at 1.182 million. This is 3.4% ahead of 2024 and 12.2% above the 2017–19 average.
- Net Sales: Weekly net sales (sales minus fall-throughs) were 15.7k. YTD net sales are 890k, which is 3% ahead of 2024 figures.
- Sales Pipeline: The pipeline of homes SSTC remains robust at 511k homes as of November 1st, 2.2% higher than 12 months prior.
Reductions & Stock
- Price Reductions: Weekly reductions dropped slightly to 12.8k.
- Reduction Rate: The percentage of homes seeing price cuts in November was just 8.8%. The 2025 average remains high at 13.2%, but price cuts are not the way people are going at the moment.
- Fall-Throughs: The fall-through rate for the week was 25.8%, a minor increase from the 24.9% reported last week; it remains close to the long-term average of 24.2%.
- Total Stock Levels: Stock levels on the market at the start of December were 678k. A carbon copy of December 1st 2024. Without the incentive to complete by 31st March, of course!
- Regional Stock: London has seen notable increases in homes for sale, with 9% more than 12 months ago (9.96% in Inner London).
Summary
The market shows a strong performance in sales volume that continues to track ahead of 2024 figures. The most important new finding is the significant narrowing of the price gap between seller listings and agreed sales (down from 29.3% to 11.8%), indicating sellers are reacting to market realities. This, combined with the drop in the average price of sold homes (£365k to £352k), suggests that affordability-driven transactions are increasing. The jump in total stock to 742k at the start of November is a key figure to watch, especially the increase in London listings. The market is resilient with strong YTD numbers but is showing clear signs of price adjustment heading into the New Year.
Listings were well below the average week 48, 15% below, so the budget “rubber band” really didn’t snap back that hard, as I had speculated. The snap comes in the new year, in my view. Only 0.2% ahead of 2024 now, so it looks like 2025 will only be the SECOND most popular year for property listings in the past decade since that’s retreating by double digit basis points per week. The 19.4k was the lowest week 48 for listings in a decade, individually.
SSTCs at 18.5k were 10% below the average week 48 - looked quite “middle of the pack” compared to every year other than 2024, which was a surge as the rush to beat the stamp re-introduction deadline was well underway, 12 months ago.
I always give Chris a weekly shout out - he comes up with some great stats on a regular basis. Drop him a like, subscribe, and all the rest of it and some kind words for his content creation. His article gets published on the Property Industry Eye website, and the video on his YouTube channel - @christopherwatkin
- The Macroscope is out. The RICS Residential Market Report. Growth, Growth, Growth (laugh, or you’d cry). Lots of competition for the third slot, but I’ve gone with the Zoopla/Hometrack rental market index, because there’s definitely a pattern emerging that’s worth noting. In the final slot? Gilts and swaps to round us up - always.
The RICS residential report rarely makes you go out, beating the chest, and seeking to buy up England or other nations. It’s thin gruel - miserable stuff. If you were to look at it in isolation, with no other info, you’d swear that prices have gone down this year (rather than up a bit, nominally, but down in real terms/after inflation).
Indeed, if you relied on it to tell you what to do next, you’d probably just sell up! The mainstream press feasted on the gloom: "Weakest demand in two years," "Sales plummeting," and the pièce de résistance from Letting Agent Today: a "five-year low" in tenant demand.
On the surface, the metrics are ugly. New buyer enquiries have dropped to a net balance of -32%. Agreed sales are languishing at -23%. The national house price balance sits at -16%, with London hemorrhaging value at -44%—a direct, mathematical consequence of the High Valuation Council Tax Surcharge and the lingering hangover from the Autumn Budget. The Capital is being punished for its asset values, while Scotland and Northern Ireland quietly march upward, oblivious to the carnage in the South East.
But before you panic, look closer. This is where the amateur sees a crash, and the professional sees a mispricing of risk.
The most fascinating data point isn't the sales drop - it’s the rental market. Tenant demand has recorded a net decline of -22%, the weakest reading since April 2020. A slump? Perhaps. But look at the supply side. Landlord instructions have collapsed by -39%. We are witnessing a market in deep freeze, not freefall. Landlords are exiting or pausing, spooked by fiscal tinkering, while tenants are hitting an affordability ceiling that simply cannot stretch further. When supply contracts faster than demand, yields don't crash; they harden.
This is something we ARE seeing playing out in the market. Asking rents are DOWN in many locations, although the figures are not necessarily percolating through. I am in conversation with broader professionals, not the majority of the market which is still (at the moment, with the clock ticking down in the background) 1, 2 and 3 property landlords.
The herd is looking at the -16% price balance and seeing 2008. They should be looking at the 12-month expectations. The same surveyors reporting a grim November are forecasting a +24% net balance for house prices over the coming year. Sales volumes are expected to turn positive (+15%) as we move into 2026. Why? Because the fundamentals of supply constraints haven't changed. If anything, the lack of new instructions (-19%) and the dearth of market appraisals (-40%) guarantee a stock shortage when sentiment inevitably pivots.
We have been here before. The "uncertainty" of the Budget was a temporary psychological tax on the market. Once the clarity settles - and it always does - the structural deficit of housing stock reasserts itself. The -44% in London is an adjustment, not an apocalypse. It is a repricing of yield in a higher-tax environment.
So, what is the play? While the casual investor retreats to cash, paralyzed by a "wait and see" approach, the smart money is digesting this data differently. We are seeing a window where vendors are motivated, competition is thin (-32% enquiries means fewer elbows in your ribs at the viewing), and the long-term trajectory remains upward.
Don't mistake a pause for a pivot. The data shows a market taking a breath, constrained by affordability and policy shock, but coiled for a recovery. The 12-month outlook is bright for a reason. Buy value, add value, manage the risk, and ignore the noise.
Growth. You remember it. In theory. The promises, the pledges - the cutting of regulations to achieve more growth! The misery guts, like me, after the last budget, saying that we’d be lucky to hit 1% growth this year (and my number was 0.75% or so). A mere few months ago I was lamenting being “too miserable” as growth numbers had significantly outperformed what the PMIs suggested. Well, we are having our correction. The JLR cyberattack is still taking a lot of flak for it (and rightly so, but there has been a rubber band effect there). The reality is that the budget speculation was damaging to the economy this time round, and I hope the incumbents learn their lessons. I doubt they will, so instead we better just hope that taxes don’t need to go up again next budget (the numbers looking around 60% likely that they won’t - hardly a shoo-in).
The meat - down 0.1% for October. The second monthly decline in a row. Over the last 3 months reported on (August to October), we are going backwards. Recessions are defined in calendar quarters - this is “just” a quarter, so we are not halfway to a recession, although I’d suggest that we should see it like that. Why? Services up 0.0%, and we rely on services, basically.
This was because in October itself, services rowed backwards a massive 0.3%. One thing that was highlighted? A massive pullback in business services for information and communication. Why? Budget……
We’ve been waiting for construction reality to match the miserable PMIs (and don’t forget November’s figures were much, much worse) - down 0.6% in October and 0.3% for the quarter. Production was hammered by the cyberattack in the quarter and whilst the rubber band snaps back, that isn’t the same as catching up - that damage is permanent and will stay in the figures until it drops out in about 10 months time.
NIESR do a “growth nowcast” when the figures come up; I’ve critiqued them a number of times this year for being too optimistic, but they have November down as -0.1% as well. The PMIs were positive, so for once it MIGHT be a bit bearish, but I can’t ignore the budget dampening effect for November. I hope they are wrong and instead we print a 0.1% - their track record isn’t great, but then this stuff is particularly hard month-on-month. Black Friday only JUST squeezed into November, whereas Cyber Monday was in December - so that in itself will have an impact (just as an example) compared to a “normal” November.
The graph just trends down and down from April, I’m afraid, when that Employer’s National Insurance kicked in. Business rates reports are coming in from individual businesses, and in spite of respected commentators saying that no business would see more than a 15% increase in rates, many a story is coming in from pubs, retail and leisure (where their covid discounts have now expired) showing increases of 25% - 70% (not seen higher than 70% yet). There have been a few things going on simultaneously, but that all kicks in next April, where people are expecting this huge dropoff in inflation (energy prices will help, no doubt, and so will base effects) - but I see the flip side where more price hikes will be needed to pay for the higher tax burdens one way or another (primarily on premises, but don’t forget - national living wage plus NICs will put staff costs up another 5%, which is not congruent with a 2% inflation world). Inflation IS embedded within the system which is what the dissenters at next week’s Bank of England rates meeting will say, when the rate is cut. I am going for a 6-3 vote in favour of a cut. The consensus says 5-4 in favour of a cut.
The growth figures will offer more reason to cut. There will now be a real cause behind what the doves have been saying for 2 years - rates are too high, and stifling the economy. We are now at the stage where GDP has fallen every month since June - 4 months in a row. It is the first quarterly print with a row backwards, but it will take some growth to snap this off, and that’s unlikely to come in November’s figures as stated. December - who knows, always a tough month to predict - what I’d say in front of my eyes when I’m out and about is that many venues that you’d expect in the last week to have been packed out were instead very quiet indeed, but the individual variance of one man’s observations are not enough to build an economic forecast on the back of. My gut feel is that people are saving for the big day because the cost of living crisis is still biting.
The Hometrack/Zoopla rental market report, then - December’s insights. Instead of a drop in asking rents, Zoopla is seeing 2.2% growth, down from 3.3% 12 months ago and well below average earnings growth, which is good. Demand down 20% YOY, Supply up 15% YOY, but those are from fairly extreme 2024 figures remember, compared to say pre-pandemic “normality” (Was it a thing? It felt like a thing).
Why? As so often, Zoopla turns to migration to explain - and rightly so. The huge drop in net migration is a huge factor, just as I spoke of it on the other side as a huge factor on the way up. The numbers are 78% down from June 2023 to June 2025. First Time buyer mortgages up 20% in the 9 months to September 2025 also helps supply as they leave the rental market and enter the owner occupier market.
17 days time to let is also up 20% from a year ago. Easing market pressures, limiting future rent increases. This is readjustment - in the real world, the larger landlords seemed to raise rents a fair bit more than the figures were suggesting, but then overshot and are cutting rents relatively aggressively (quite a few are reporting 7.5% - 10% cuts to me in their asking rents compared to 12 months ago).
Rent growth remains strong in the cheaper areas, where affordability is still not choking the market - the North East and the North West continue to outperform (+4.5%/+3.2%). Northern Ireland rents are still rocketing forwards at +11%. Zoopla still has London asking rents going upwards at 1.6% - but then what’s being asked and what’s being agreed might well be two different things. London supply at +6% on the year is a lot smaller than the +15% broader figure, as weak yields force sell-offs as there are limited options other than weak returns or even putting money in each month to keep the property (just like the old days, but without the capital growth).
Zoopla’s expectations for 2026 - a 2.5% rise in rents. The figure that leapt off the page though - 31% of homes for sale on Zoopla in London were formerly rented. Now - if they don’t sell, they may well be rented again - it is a rock and a hard place at the moment, because I don’t believe the amateurs have a great handle on the market and they think “sell” not “sell at this specific price because the market is weak”. I’ve said many times before, we all make decisions every day on the future of the market - it is just that with so many landlords, the default position is “hold at all costs” - a position which I used to hold myself but happily switched from back in 2021, and it was a great decision to do so at the time.
- Safely made it to the gilts and swaps. The 5 year had a flat week for yields, but that was strengthening from the open of 3.957% to a peak of 4.04% early on Wednesday, only to drop back again on the back of weak growth figures which were released on Friday. However - the consensus miss on growth - which was significant, the assembled nodding dogs had predicted 0.1% growth, not a contraction - did not have the normal impact on yields, suppressing them dramatically - instead it barely moved the needle.
I often conclude in these situations - when the market doesn’t do what you’d expect, be careful. This looks like a sign to me that the market is hardening a little, and yields may instead be trending upwards - I suspect it was because of the speculation that the Bank of England committee vote would be close.
Either way, it cements a position that I’m taking for 2026. I think between right now and Q3 next year, we will see 3 cuts in the base rate. I still feel as though it will be tough to get too far below the natural rate, which is speculated to be at around 3.5% in this economy. However, the economy might need more help - it really won’t take much to go wrong from an external perspective for us to need some boosting on the monetary policy front. Not a Black Swan - more of a black speck of dust, if you will.
Great news, eh? Well, let me finish. I don’t think this will have much of an impact at all on 5-year mortgage rates, specifically. 2-years should come down a bit, maybe even 0.5% although I would say more like a third of a percent. 5-years won’t go down much at all I don’t think. Remember, we’ve been benefiting from a 35 basis point discount between the gilts and the swaps for some months now. That might decay. There’s no historic right to it - if rates go down and mortgage demand goes up because confidence returns in the housing market - that discount might swallow up some of the slack too. I hope we might see 5% no-fee kind of rates as best buys from the Paragons of the world, but I daren’t hope for better than that.
So what? Don’t sit waiting for rates to get better - today’s rates already reflect some very fair pricing bearing in mind the broader economy and the cost of the debt. You’ll only sit and be disappointed. Set, forget, move on to the next project.
Thursday’s 5 year close on the gilt yields at 3.977% compared to a swap rate at 3.65%, so the discount does seem to be narrowing somewhat already, with its second week around 32 basis points. Keep your eyes peeled. One month ago - 3.528%, one year ago 3.823%. I will carry on watching this one!
How about the 30-year? I have posted some research this week on the “Moron Premium” after a new paper came out by the IPPR, suggesting we are spending £7bn a year more than we need to by being inefficient on our debt management. I think this figure is at the low end. The 30s sharpened this week after the 5s didn’t move much at all; opening at 5.211% and ending back above 5.25% again, at 5.271%. Ergo - 6 basis points up, yield curve gets sharper and steeper again. There’s still no long term confidence in the UK economy. Whether the incumbents are in for the long term - I think we all think they aren’t, but it is hard to split hope from calculated analysis (although the polling numbers speak for themselves).
That brings us, once again, to the diving hire shop so we can mask up, get the SCUBA kit, and dive deep.
The confluence of reporting here is significant. The Ministry of Housing, Communities and Local Government (MHCLG) released their National Plan to End Homelessness (at a time when temporary accommodation will continue rocketing thanks to the Renters’ Rights Act, the irony was not lost on me) - and both Crisis and Shelter released timely reports on homelessness.
I must kick off with a mini-rant. Shelter upset me this week. I was making a charitable donation to support a bit of pro-bono work that a friend of mine was doing. The charity in question, if you are interested, is Acorns Children's Hospice. Noble work, I don’t think anyone would disagree. He told me to just do it direct, no need to go through his website or anything like that. So I googled it, and the first result - sponsored link - was Shelter. Trying to redirect/hijack my very specific search query. I did think - I wonder if that is known about and seen as a good use of funds raised, speculating to accumulate. Certainly very business-like, I am sure we would all agree!
Anyway - after that segue about the organisation that leaves a nasty taste in the mouth above all others that come under the badge of lobby groups……onwards we go. Homelessness.
The persistent failure of the UK housing market has advanced beyond a technical supply-side inadequacy. What was once excusably framed as a "market failure" - a simple shortfall of units - is now unequivocally a catastrophic "social failure," culminating in an unsustainable annual taxpayer burden estimated at £2.8 billion, with the numbers looking more like £4bn by the end of this decade, if not more.
The data underpinning this judgment is clear and chillingly demonstrates the accelerating scale of the crisis:
- Statutory Homelessness Data:
The system is overwhelmed. Currently, a family is being made homeless or threatened with homelessness every five minutes. This relentless rate of crisis entry highlights the fundamental instability embedded within the current economic and landlord-tenant framework.
- Temporary Accommodation Misuse:
The fiscal and social costs converge most sharply in temporary accommodation. We are witnessing the egregious misuse of unsuitable settings, with 2,070 households trapped beyond the six-week statutory limit in unfit B&Bs. The cost to the public purse for managing this crisis is escalating rapidly, with taxpayers paying the price of failure as temporary accommodation costs are skyrocketing. The Government is onto this part specifically.
- The Hidden Cost:
Beyond the visible statistics, extensive research reveals the invisible depth of the crisis, where people are sleeping in cars, staying in sheds or garages, or sofa surfing with friends, family, or even strangers because they have nowhere else to go. These experiences are precarious and transitory, with 40% of participants in one study reporting moving more than six times within a typical month.
This hidden reality results in stark social outcomes, impacting 81% of participants’ mental health and 72% of their physical health, creating long-term dependencies that ultimately increase the state's future welfare burden.
The intersection of fiscal policy and landlord economics has created this untenable situation. While legislative changes, such as the introduction of the Renters’ Rights Act to end Section 21 ‘no fault’ evictions, are necessary to stabilize the private rented sector, they address symptoms, not the underlying supply catastrophe.
The government has committed to a £3.5 billion investment over the next three years to combat homelessness and rough sleeping, recognizing that this scale of societal damage requires a collective responsibility.
However, the immense annual expenditure on temporary accommodation - the very definition of paying for a system that has broken down - underscores that our current policy approach is fiscally punitive. Until we can meaningfully increase the supply of genuinely affordable homes and ensure robust collaboration between public services to prevent crisis entry, this exorbitant £2.8 billion bill will remain the quantifiable price of a social failure we can no longer afford to ignore. Is there a realistic plan for that? I’ve not seen one with political support, that’s for sure.
The current financial haemorrhage due to temporary accommodation is analogous to having a roof leak so badly that you spend more money on constantly replacing buckets than you would on installing a whole new roof. It is an economically irrational response to a profound social problem.
So - it’s people selling up, right?
The analysis that the exodus of private landlords - specifically, "landlords selling up" - is the single greatest driver of statutory homelessness is not merely anecdotal; it is a critical economic vector confirming the "rental safety net failure".
Policy-Driven Supply Contraction
The Private Rented Sector (PRS) acts as the largest source of flexible housing in the UK, yet fiscal and legislative burdens have driven capital away from this asset class, creating a profound supply shock.
The legislative context is crucial:
The recent introduction of the Renters’ Rights Act, which notably puts an end to Section 21 ‘no fault’ evictions, is a necessary reform for tenant security but represents an undeniable increase in risk and administrative friction for landlords.
This shift, combined with unsupportive fiscal conditions (taxes up on rental income in the recent budget, for example), incentivizes exit over retention. When landlords sell rather than re-let, the housing stock is sometimes removed from the rental market entirely, shrinking the available supply for the most vulnerable. Sometimes it is bought by another investor, of course.
The Rental Safety Net Failure and the Mathematical Link
The concept of a 'rental safety net failure' describes the systemic collapse of housing stability where the primary source of accommodation (the PRS) can no longer absorb household shocks, pushing all displacement directly onto the statutory safety net - local authorities.
- Supply Loss as the Input:
As the PRS contracts due to landlords selling up, the pool of affordable, accessible housing for low-income and vulnerable households diminishes. This immediately impacts the rate of prevention - the government's own strategy aims to increase the rate of prevention to protect thousands more households from homelessness, acknowledging that current prevention mechanisms are insufficient.
- Statutory System Overload: Every household that exits the PRS into homelessness adds to the overwhelming demand on local councils. We see this manifested in the chilling statistic mentioned previously: a family is being made homeless or threatened with homelessness every five minutes. This constant, severe rate of crisis entry is the direct consequence of the loss of private rental stock.
- The Temporary Accommodation Bottleneck:
This reduced supply and high crisis rate create an inescapable bottleneck at the final stage of statutory assistance: temporary accommodation (TA). When there are not enough private or social homes available to move families into, the number of households "trapped" in TA spirals upwards. This directly explains the record figure of 132,410 households now reliant on this emergency measure. This will be close to 200k by the end of the decade, in my view.
This is not a coincidence; it is a mathematically verifiable result of supply-side economics. The shrinking supply in the PRS forces households into an already deficient statutory system, resulting in the skyrocketing costs of temporary accommodation, where taxpayers are effectively paying the price of failure.
The attempt by the government to counteract this by boosting the supply of good-quality temporary homes, backed by £950 million, is a recognition of the desperate need to manage the massive influx, but it does not resolve the foundational supply deficit driving the crisis.
Until the underlying economic incentives are adjusted to stabilize and grow the affordable PRS, or until the £39 billion investment in social and affordable housing to build 1.5 million homes materializes, the rental safety net will continue to fail, and the 132,410 households in temporary accommodation will remain a tragic demonstration of failed housing policy.
How about the freezing of LHA rates, a concept the Labour Party are ideologically married to?
The discussion around the Local Housing Allowance (LHA) and Housing Benefit (HB) is fundamentally an examination of fiscal neglect, where policy failure at the national level directly creates catastrophic costs and social chaos at the local authority level.
The core mechanism of failure stems from the economic absurdity of maintaining a frozen, or deeply constrained, benefit rate in a soaring private rental market. The consequence of this policy divergence is demonstrably evident in the resulting statutory homelessness crisis. This is one area where the lobby groups, and the more well-meaning charities, and the housing providers ALL agree - LHA rates MUST be unfrozen.
The Mathematical Transfer of Failure
The function of LHA and HB is to operate as the primary preventative financial safety net, ensuring low-income tenants can retain their homes in the Private Rented Sector (PRS). When the LHA fails to cover even the lowest quartile of market rents, that net disintegrates, leading to three direct and costly outcomes:
- Forced Eviction and Crisis Entry: When LHA ceases to function as a viable subsidy, tenants are rendered immediately unattractive to landlords or are forced into unsustainable arrears, resulting in evictions. This fuels the relentless crisis rate where a family is being made homeless or threatened with homelessness every five minutes, I say again.
- Statutory Homelessness Escalation: Every failed prevention attempt - which the inadequate LHA system guarantees - pushes the household into the statutory homelessness system. Local authorities are then legally obliged to house them. The sheer volume of this policy-induced crisis necessitates government action aimed at increasing the rate of prevention to protect thousands more households, acknowledging current failures.
- Fiscal Burden on Local Authorities: The inability of the central benefit system to provide an adequate payment transfers the financial burden entirely to councils in the form of emergency accommodation costs. We see the direct result of this transfer in these skyrocketing costs of temporary accommodation, where taxpayers are paying the price of failure.
The evidence of this catastrophic overload is quantifiable: the government has been compelled to provide an additional £50 million in-year funding through the Homelessness Prevention Grant to local authorities. Furthermore, nearly a billion pounds - £950 million - is being injected through the Local Authority Housing Fund simply to boost the supply of good-quality temporary homes, recognizing that the system is fundamentally reliant on emergency measures due to the failure of upstream prevention mechanisms.
The ultimate sign of this policy breakdown is the severe and unlawful conditions faced by the displaced. The benefit freeze contributes directly to the fact that 2,070 households are trapped beyond the six-week statutory limit in unsuitable B&Bs. These locations are often unfit, offering only one room with no cooking facilities, which fundamentally compromises the well-being and future prospects of vulnerable families.
The LHA, in its currently constrained form, has thus transitioned from a protective benefit to a mechanism for institutionalizing homelessness. It is no longer an adequate subsidy; it is merely an accelerator that ensures vulnerable individuals transition swiftly from private tenancy failure to public sector dependence, dramatically escalating the cost and complexity of the resulting social failure.
This benefit structure is operating like a rusted firewall in a spreading blaze: it is not containing the problem; it is merely conducting the heat of rising rents directly into the weakest parts of the public housing infrastructure.
The current financial architecture of homelessness provision is fiscally catastrophic, representing the ultimate, quantifiable evidence of policy failure. The taxpayer bill for managing this crisis - primarily through emergency sheltering - will go well over this £2.8 billion annually that it is already costing. This exponential rise in expenditure proves that the system has transitioned entirely from prevention to punitive crisis management.
The £2.8 Billion Black Hole: The Price of Failure
The figure is more than a cost; it is the financial measure of the housing system’s systemic breakdown. The government itself admits that taxpayers are paying the price of failure as temporary accommodation costs are skyrocketing. This enormous outlay is necessary because the preventative mechanisms upstream - like the Local Housing Allowance (as discussed previously) and sufficient affordable housing supply - have collapsed, guaranteeing ongoing homelessness.
To manage this crisis influx, central government is forced into massive emergency interventions:
- Bolstering Temporary Supply: £950 million is being injected through the Local Authority Housing Fund specifically to boost the supply of good-quality temporary homes. This is an acknowledgment that the volume of need exceeds current capacity, necessitating a huge capital outlay merely to shelter the displaced.
- Emergency Mitigation: An additional £50 million of in-year funding is required through the Homelessness Prevention Grant. This grant is focused on prevention, demonstrating that local authority budgets are so strained they require emergency central top-ups to perform their most basic statutory duty.
The Self-Defeating Cost-Transfer: Bankrupting Local Government
The true fiscal poison lies in the self-defeating cost-transfer mechanism. The economic reality is clear: inadequate reimbursement from central benefit systems (like DWP via Housing Benefit) for emergency accommodation costs forces local authorities to shoulder the difference.
This is a disastrous circular economy:
- Central policy failure (e.g., inadequate LHA rates and supply stagnation) drives massive demand for temporary accommodation.
- Local authorities must meet this statutory duty, running up astronomical bills (the £2.8 billion cost).
- If central funding fails to match the actual market cost of provision - especially given the high rates charged for emergency placements - councils are left with a hundreds-of-millions deficit.
Angry circles simply do not get a lot more vicious than that.
This system is inherently unstable and fiscally reckless. The expenditure is not an investment in housing stock, but a continuous revenue drain - money spent on renting high-cost, short-term, and often unsuitable emergency housing, like the B&Bs. The need for the government to move to simplify funding for councils and end bidding processes is an implicit recognition that the administrative complexity and insufficient funding models are crippling local delivery.
By funding failure at an exponential rate, the central state is effectively exporting its policy negligence to local balance sheets, ensuring that housing costs erode the capacity of local government to deliver other essential services. This cycle turns the massive £2.8 billion cost into both a social tragedy and a significant driver of local insolvency.
The situation is akin to a company that earns £100 million in revenue but spends £200 million fighting constant lawsuits caused by a faulty product design, all while refusing to fix the original design flaw. The money is spent, but the problem - and the debt - only grows.
The launch of the National Plan to End Homelessness, backed by a substantial £3.5 billion investment over the next three years, is a necessary governmental acknowledgment of the catastrophic social failure we are currently witnessing. However, when subjected to the critical lens of property economics, this plan reveals itself to be predominantly a sophisticated "crisis management" measure rather than a genuine structural solution to the fundamental supply deficit driving statutory homelessness.
Core Targets: Addressing Symptoms, Not Causes
The Plan sets out three key pledges to be achieved by the end of this Parliament:
- Halve the number of people experiencing long-term rough sleeping.
- End the unlawful use of B&Bs for families.
- Increase the rate of prevention to protect thousands more households from homelessness.
These targets are undeniably critical to restoring dignity and mitigating the most visible and cruel aspects of social failure. The focus on long-term rough sleeping, including the £124 million supported housing scheme and the £15 million Long-Term Rough Sleeping Innovation Programme, addresses the cohort with the most complex needs.
However, these targets focus almost exclusively on mitigating the consequences of housing failure - rough sleeping and temporary accommodation - rather than dismantling the primary driver of statutory homelessness: the collapsing supply in the Private Rented Sector (PRS), exacerbated by the exodus of landlords selling up (as established in our previous conversation).
Assessment of Proposed Solutions vs. The Supply Crisis
The solutions proposed within the Plan are geared toward improving system efficacy and managing flow, yet they largely bypass the market mechanism required to solve the supply crisis:
| Proposed Solution |
Function |
Impact on PRS Supply/Statutory Homelessness Driver |
| Duty to Collaborate (DTC) |
Requires public bodies (prisons, hospitals, social care) to work together to prevent homelessness. It sets specific goals, such as halving those made homeless on their first night out of prison. |
Crisis Management: The DTC excels at managing the risk of homelessness from public institutions. It fixes internal state failures but provides no mechanism to increase the overall availability of low-cost, secure housing stock, which is the necessary safety valve for the collapsing PRS supply. |
| Long-Term Rough Sleeping Innovation Programme |
Funds councils to develop fresh solutions for complex needs and provides stable housing via a £124 million supported housing scheme. |
Crisis Management: This targets the most chronic and visible failure, focusing on those who have spent years on the streets. While vital, it is dedicated to treating specialized complex needs and does not alleviate the general systemic pressure caused by evictions from the mainstream rental market. |
| £950 million Local Authority Housing Fund |
Dedicated to boosting the supply of good-quality temporary homes. |
Crisis Management: This is the most explicit admission that the Plan is focused on managing the crisis. This funding is used to acquire emergency or interim housing, not long-term, genuinely affordable housing that would reduce the need for temporary accommodation in the first place. It is a high-cost solution to accommodate the record 132,410 households trapped in TA (as discussed previously). |
Structural vs. Crisis Management
A true structural solution to the UK's housing failure must address the fundamental market imbalance. The Government is investing £39 billion in the biggest boost to social and affordable housing in a generation, aiming to build 1.5 million homes. This scale of investment and construction commitment is the necessary structural response. It’s just a shame that these figures are pipedreams, with sensible market participants putting the number of homes built over this parliament at between 850k and 1 million.
However, the immediate National Plan itself, coupled with the £3.5 billion investment, functions primarily as an emergency overhaul of service delivery. It seeks to make homelessness "rare, brief, and not repeated" by focusing on prevention at the service delivery level, such as the Duty to Collaborate. It aims to stop people falling out of the system in specific failure points (prisons, hospitals) and improve the experience once they are already homeless (ending B&B use).
While the government has also passed the Renters’ Rights Act to end Section 21 ‘no fault’ evictions - packaged as “a crucial reform to stabilize the PRS” - the Plan's accompanying investment is primarily channeled into mitigating the crisis (temporary accommodation, rough sleeping services, and improved collaboration) rather than incentivizing the rapid expansion of affordable PRS supply, which remains the critical missing piece.
In the real world, outside of the Government reports, disincentivizing housing providers means that a functional market relies on first time buyers to sort themselves out, and vacate rental units at a rate fast enough to ensure there continues to be enough supply to pick up the market failure from the social housing system that is a shadow of its former self.
Therefore, this Plan is best categorized as a high-level, expensive crisis management strategy. It is designed to plug immediate leaks and treat severe trauma, but without the sustained delivery of the promised 1.5 million affordable homes, it cannot fundamentally solve the structural deficiency - the collapse of the accessible private rental safety net - that is driving a family to be made homeless or threatened with homelessness every five minutes.
The current economic environment - characterized by the exodus of Private Rented Sector (PRS) landlords and the resultant £2.8 billion annual expenditure on failed temporary accommodation - demands an immediate, decisive, and integrated Propenomix-style intervention. What is required is a shift from expensive crisis management to structural market re-engineering.
Based on the demonstrated failures in prevention, supply, and finance, I prescribe a tri-partite strategy for ending this crisis, which has support from within the lobby groups and the honest actors within the marketplace:
1. Fiscal Reform: Re-Engaging the Private Rental Safety Net
The fundamental policy error has been allowing the financial viability of the PRS, particularly for low-income tenants, to collapse. The continuous skyrocketing costs of temporary accommodation prove that the taxpayer is paying the price of failure because the initial financial safety net is non-existent.
Prescription:
- Immediate LHA Uprating (The Minimum Viability Floor): The LHA must be uprated to reflect genuine market rents—not the lowest 30th percentile, but a competitive market rate. An effective LHA rate would reduce the dependency on local authorities, curtailing the spiraling cost of emergency temporary housing.
- Targeted Tax Relief for Retention: The Government will stick to the party line, since they think they’ve done a great thing, when they cite the Renters’ Rights Act, which puts an end to Section 21 ‘no fault’ evictions, as a necessary tenant protection. To counterbalance the resulting increased risk and administrative friction that causes landlords to sell up, the government must incentivize stable, long-term PRS engagement. Targeted tax relief - structured around duration of tenure and maintenance of affordable or LHA-rate rents - must be implemented to retain existing stock and stabilize the market that is currently hemorrhaging supply.
2. Supply Transformation: Institutionalizing Affordable Housing
The crisis is rooted in insufficient supply, and relying solely on the private individual landlord is unsustainable. The government's structural solution is the commitment to build 1.5 million homes backed by £39 billion in investment. However, the institutionalization of this supply must be rapid, reliable, and decoupled from short-term political cycles.
Prescription (A New Institutional Model):
- Leveraging Patient Capital: Instead of relying solely on traditional social housing models, a new framework must attract large-scale, long-term institutional investors ("Patient Capital," such as pension funds or sovereign wealth funds, which I must clarify is an external concept) into a purpose-built, regulated affordable rental sector. This could be facilitated through specialized Real Estate Investment Trusts (REITs) or similar vehicles, offering stable returns in exchange for adhering to affordable rent caps and long-term security of tenure.
- Focus on Housing Outcomes, Not Just Units: This institutional approach must prioritize the creation of stable, supported housing, recognizing that housing outcomes are deeply linked to complex needs. Research conducted through programmes like the Systems-wide evaluation of homelessness and rough sleeping highlights the importance of supported housing and its interaction with the wider system, noting challenges like declining provision and fragmented funding. The new model must provide secure funding and standardized quality for this critical supported stock.
3. Prevention Mandate: From Collaboration to Accountable Outcomes
The proposed Duty to Collaborate (DTC), which requires public bodies (like prisons, hospitals, and social care) to work together to prevent homelessness, is a welcome shift. It seeks to end the needless homelessness that results from people leaving public institutions. However, collaboration without consequence is merely bureaucracy.
Prescription:
- Tying Funding to Measurable Outcomes: The DTC must transition from a general 'duty to refer' into a Prevention Mandate with quantifiable targets. The current National Plan sets specific goals, such as halving the number who become homeless on their first night out of prison and ensuring no eligible person is discharged to the street after a hospital stay.
- Financial Accountability: Local authorities receiving the Homelessness Prevention Grant and other related funding must demonstrate progress against these specific, measurable outcomes. Failure by partner agencies to meet DTC targets - such as the prison system or health trusts continuing to discharge individuals into crisis - must result in corrective action or a reallocation of targeted prevention funds. This mirrors the systems-wide evaluation research, which explores the drivers of homelessness and identifies where interventions can have the greatest impact. A failure to enforce accountability simply sustains the current pattern, where taxpayers are paying the price of failure while the crisis accelerates.
This tri-partite prescription provides the necessary fiscal stability, catalyzes the required structural supply, and enforces the preventative discipline needed to dismantle the expensive and devastating social failure we currently face. It requires a brave shift from mitigating the crisis's symptoms to addressing its deep-seated economic and systemic root causes.
The staggering £2.8 billion taxpayer expenditure on temporary accommodation in 2024/25 is not merely a cost; it is the definitive measure of our systemic failure, confirming that taxpayers are paying the price of failure as these costs are skyrocketing. This enormous financial haemorrhage presents, paradoxically, a profound moral and financial investment opportunity.
We must recognise that every pound spent on short-term, high-cost emergency shelter is an unproductive spend. It buys temporary space, not structural stability, perpetuating a crisis that sees a family being made homeless or threatened with homelessness every five minutes. It isn’t ending anytime soon under the current plans and structure.
The Investment Opportunity: Redirecting the £2.8 Billion
The core argument of a sensible macroeconomist that the Treasury might listen to is that ending the "cost of crisis" cycle is achieved by converting crisis-driven revenue expenditure into long-term capital investment.
The government has already recognized the need for major capital investment, committing £39 billion in the biggest boost to social and affordable housing in a generation to build 1.5 million homes. However, the urgency dictates that we must accelerate this by leveraging the immediate, enormous, and recurring stream of temporary accommodation funding.
If just a fraction of the £2.8 billion annual expenditure were redirected into long-term, institutional, affordable housing finance, the returns would be multifold:
- Fiscal Dividend: Redirecting high-cost, short-term rental payments into institutional finance vehicles (as outlined in the previous prescription) provides guaranteed, stable funding for the construction and acquisition of permanent, genuinely affordable homes. Every completed unit reduces the demand on the statutory system, directly curtailing the need for the £950 million Local Authority Housing Fund dedicated to emergency temporary homes. This transforms a continuous, high-rate revenue drain into a productive, depreciable asset.
- Superior Social Return: Ending the reliance on high-cost, poor-quality emergency housing mitigates the devastating social impacts observed in crisis conditions. Research on hidden homelessness, for example, reveals that precarious and transitory living situations significantly harm mental health (affecting 81% of participants), physical health (72%), and sleep (81%). By providing stable, permanent homes, we break the cycle of complexity, dependence, and trauma that results in long-term public sector burdens across health, social care, and justice systems, which the government's own linked data research is seeking to understand.
- Ending Policy Negligence: This redirective strategy shifts the primary focus from managing failure (the £2.8 billion TA bill) to securing success (permanent, affordable housing stock). It is the only economically rational way to sustain the ambition of the National Plan to End Homelessness, which aims to ensure homelessness is "rare, brief, and not repeated".
In essence, continuing to spend £2.8 billion on temporary fixes is a financially irresponsible act that funds the problem, not the solution. By reallocating this capital, we purchase not just houses, but long-term social stability, health improvement, and a reduced future burden on the state - the ultimate fiscal dividend that ends the crisis once and for all.
The overarching message this week, peeling back the layers of geo-political friction, domestic protectionism, and UK economic gloom, is simple: the professional investor is currently standing in a field of mispriced risk, armed with the knowledge that the structural failure of the housing market guarantees an upward trajectory for prices and rents in the medium term.
Let us dispense with the finance noise first. The weak growth figures - services contracting a massive 0.3% in October and GDP falling for four consecutive months - mean the doves will eventually have their day. I still anticipate three base rate cuts between now and Q3 next year. However, do not mistake monetary policy easing for immediate mortgage relief; the 5-year rate is unlikely to move much, maybe a small fraction of a percent, as the current basis point discount is likely to decay. The long-term gilt yields confirm there is still no confidence in the UK economy. Therefore, the instruction remains: Do not sit waiting for rates to get better. Today’s rates are fair; lock in your cost of debt now, set, forget, and move on to the next project.
Now, to the core opportunity. The RICS Residential Market Report is "thin gruel," designed to generate gloom: 'weakest demand in two years,' agreed sales languishing, and a national price balance of -16%. The amateur sees a crash; the professional sees a pause. This temporary psychological tax, driven by the Budget uncertainty, has created a window where competition is thin (-32% new buyer enquiries) and vendors are motivated. Crucially, the data shows sellers are adjusting, with the price gap between listings and agreed sales narrowing significantly from 29.3% to 11.8%. Your play must be to exploit these affordability-driven transactions now, buying value while ignoring the noise, before the inevitable snap-back predicted by surveyors who forecast a +24% price balance over the next 12 months.
The strategic investor must also position themselves against the catastrophic "social failure" of the Private Rented Sector (PRS). The exodus of landlords, spooked by fiscal burdens and the Renters’ Rights Act, is contracting supply (-39% instructions). This is driving statutory homelessness, confirmed by the horrifying statistic that a family is being made homeless or threatened with homelessness every five minutes. Taxpayers are footing a crippling £2.8 billion annual bill for temporary accommodation - the ultimate price of systemic failure.
This colossal failure creates acute investment opportunities, particularly in the South East. London is actively "hemorrhaging value" at -44% due to the High Valuation Council Tax Surcharge, forcing sell-offs. London has seen a 9% increase in stock, and 31% of homes for sale on Zoopla were formerly rented. The amateur landlords selling up "do not have a great handle on the market". Your objective is to become the institutional-minded capital that acquires this distressed rental stock in the Capital and surrounding areas. Alternatively, exploit the affordability ceiling by focusing on regions where rent growth remains strong (North East at +4.5%, North West at +3.2%), areas that are oblivious to the carnage in the South East. Your choice!
The government's £3.5 billion National Plan is a high-cost crisis management strategy, not a structural solution. Until the core supply deficit is fixed, the market will remain coiled for recovery. Your action is to Buy value, add value, manage the risk. This brief period of vendor motivation and depressed sentiment is the time to secure stock while the herd is paralyzed by fear. The long-term trajectory remains upward because the structural constraints haven't changed. Continuing to sit on your hands while the government spends £2.8 billion managing failure is an economically irrational choice.
So - as I draw this week to a close, the next Property Business Workshop is filling up. There are less than 2 weeks left before the end of SUPER Early Bird ticket sales! We start the year with a bang, discussing strategic planning and how to make the most of the next 12 months, with some of our own methods and takes on productivity and time management, alongside systems and processes. The other half of the workshop is about the most common pain point in SME property businesses - accounts, bookkeeping and group accounting. This is about measuring asset performance - not “how to use Xero”, but “how to make the most out of financial information” - what should you be seeing monthly, and how should you interpret it properly and use it strategically to grow your business, safely but quickly?
SUPER EARLY BIRD tickets are available for a couple more weeks with a genuine 20%+ discount off the face value. As always we have real life case studies about our own experiences, and close with our “no-holds-barred” Q+A. Anything individual to consider? Get a VIP ticket and join us for dinner, in a smaller setting with an opportunity to discuss any specific roadblocks or issues in your property business at the moment. There’s only ONE Super Early Bird VIP ticket left as I write this! It’s the best way to get a substantial conversation with myself, Rod and other experienced Property Business people! Join us! Thursday 22nd January 2026, Central London; https://tinyurl.com/pbwnine
Above all - please remember to Keep Calm, ALWAYS listen to or read the Supplement, and Carry On. There will be opportunities abound this year and towards 2030 and beyond - the landscape has been set for a surefire bull run. It will be slow(ish), and take a little while longer to get off the ground - and the amount of stock around is still keeping things suppressed at the moment - but as the market continues to improve slowly, it is a case of “here we go” in my opinion.
