Private rents increasingly unaffordable

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’.

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4 Responses to Private rents increasingly unaffordable

  1. private rent is unaffordable now and the landlords are making a killing however when the bank of england raise the base rate, all those landlords on a mortgage will see an increase in their payments. Can you imagine the uproar if rents went up at the same time as the base rate? This is nothing but a bit of early prevention on landlords that may just struggle in the future

  2. Lesley Healey says:

    Whilst I am dismayed by the prospect of more HMOs, and especially the conversion of previously owner occupied family homes into HMOs, I am also mindful that single people under 35 years old on a low income will shortly only be able to afford such properties. More dismaying is that most of these HMOs will not be licensable and that the little capacity that private sector officers have will be directed towards inspecting licensed HMOs. What is even more likely is that 25 to 34 year olds will, generally, be more attractive tenants than the younger end of the under-25s, which will push these into homelessness. If these benefits restrictions are to be implemented (and there’s no realistic prospect they won’t) then licensing needs to be extended to cover all HMOs [using the common definition].

    • Jacky Peacock says:

      In my view the whole of the private rented sector should be licensed. Then landlords cannot evade the licensing criteria (like having a competent person managing tenants’ homes) by simply switching the way in which their properties are let.

  3. Jacky Peacock says:

    It pains me to say it but Grant Shapps has the only sure answer – we need to build more homes. Since this appears to be the answer to almost every housing problem the coutry faces, it is sad that Grant Shapps could do little more than massage of the statistics on the Today programme when the presenter quoted Labour Housing Group’s mantra about the link between investment in housing and creating jobs.

    That does not mean that we should ignore the other questions Steve poses, particularly the issues around improving monitoring and enforcement of standards in the private rented sector. It is now nearly five years since HMO Licensing came into force and most local authorities issued Licences for the maximum five year period. Has anyone noticed a marked improvement in standards in bedsits and other forms of shared homes? We are hearing horror stories of local authorities who have just woken up to the fact that licences are coming up for renewal and they have not, as the law requires, inspected any of them in that time to see if they contain any Category 1 Hazards. So they will now be scurrying around trying to inspect several hundred properties within the next few months with the tiny handful of officers left to carry out this work after all the cuts in local authority budgets.

    So there is one thing we all need to do urgently. Ask our own local authority for information on HMO Licences and inspections and call for adequate resources to address the problem of standards in private tenants’ homes.

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