On a couple of occasions since we launched Red Brick a year ago we have agreed with Housing Minister Grant Shapps about something he has said. Only a couple mind you!
One was when Shapps made a sensible pronouncement about the need for house prices to stabilise in real terms or even decline gradually to improve affordability. He said he wanted a housing market that is more ‘rational’ than it currently is.
It would be helpful if he now took a similar view about private sector rents. Shelter’s latest research, which got good media coverage this morning, for example here and here, shows that average private rents are unaffordable to ordinary families in over half of local authority areas in England. Typical rents are more than 35% of average take home pay, one of the widely accepted definitions of affordability.
Shelter is calling for urgent action to stabilise the rental market and to bring rents more into line with average earnings. Affordability still varies hugely around the country, with parts of the north significantly more affordable (or less unaffordable?) than the south. Rents in London come close to justifying the phrase ‘out of control’. Shelter’s view is that families are increasingly priced out of home ownership, cannot get access to affordable social housing, and now cannot find affordable private rented accommodation, and are being squeezed by changes to local housing allowance, so their only option is to cut down on other expenses and in particular on consumer purchases and food.
Shapps’ only response was to say that the government stopped Labour’s imposition of more ‘red tape’ on the sector, and he offers no hope or even an aspiration that the rising trend will be stabilised or reversed. Given that over 40% of homes in the sector fail to meet the decent homes standard, tenants often get very poor value for money as well as insecure terms. Rising rents and better returns mean there is growing interest in buy to let, which is adding to the difficulties faced by first time buyers facing mortgage famine and high deposit requirements.
Over the past decade there has been some hope that the increasing supply of rental properties would eventually begin to satisfy demand, thereby stabilising prices. There is now no hope of this happening in any foreseeable period. The Government’s conviction that cuts to the Local housing Allowance would lead to rent reductions is proving to be complete fantasy.
The only real alternative is some kind of state intervention, but there are genuine fears that any measure of rent control might reduce confidence in the market and make things even worse by choking off new supply as potential landlords who need to buy with a
mortgage would see their hoped-for returns reduced.
There is an urgent need for government to pay more attention to the sector. Are there mechanisms by which rents could be constrained without impacting unduly on supply? Could rent restraint be linked to the achievement of decency standards? Do we want to control the transfer of owner occupied homes into private renting, and especially into multiple occupation? Are there ways of ensuring that new investment in private renting is channeled into supporting new build instead? In a period of huge cuts, what more can be
done to improve monitoring and enforcement against rogue landlords?
There are more questions than answers, as Johnny Nash sang, but he was wise to add ‘and the more I find out the less I know’.