The emerging consensus on private renting

What goes up may come down.  Only 10 years ago, the growth of home ownership was believed to be inexorable: people would talk of it reaching 90% of households. But without much advance warning, it peaked in 2003 and has fallen from 71% of households then to 65% now (figures for England).

Virtually all net housing growth in the last 10 years has been in private renting. Although the number of home owners has remained fairly constant, in the mid 14 millions of households, and the number of social renters has also been fairly constant at around 3.8m, the number of private renters has grown from 2.2 million to 3.8 million households (in percentage terms from 10.8% in 2003 to 17.4% in 2011-12).  Now people talk about the growth in private renting being inexorable…..

This truly astonishing turnaround in the housing market – which pre-dated and was not caused by the global financial crisis, even if the credit crunch reinforced the trends – has raised a whole new set of dilemmas for policy-makers. Some issues remain the same – the crap end of the market is still crap, and still nothing much gets done about it. But new issues have emerged, and I would highlight four:

  • Many of the households coming into the sector are families with children who have been excluded from social renting or from home ownership, but the arrangements in the sector have not changed to reflect the different needs of such families.
  • Many new landlords are in a position where the non-payment of rent by their tenant means the non-payment of a mortgage for them – despite high rents and a long-term capital gain they are not necessarily coining it in week by week. Although buying to rent is often described as being ‘the new pension fund’, we still know very little about the new landlords, and in particular whether they are in it for the long term or just until some other investment with a better return comes along.
  • Many new landlords are also amateurs at the job and are more likely to be dependant on a lettings agent or manager. Lettings agents in particular are not the friend of the landlord or the tenant – they want turnover because finding new tenants brings in the cash and the possibility of a rent hike, whereas landlords’ business plans are easily wrecked by an unplanned void period. Tenants face an ever-increasing set of fees and charges to access a home.
  • One of the effects of the clamp-down on local housing allowances has been to push people out of the more expensive areas into the ‘cheaper’ areas (everything is relative). This has had little or no effect on rents in the expensive areas, where demand is strong, but it is having the effect of pushing rents up in the cheaper areas because there are now more people competing for the same number of ‘affordable’ vacancies.

The upshot of all this is that some new thinking has been needed about the sector. The old remedies – leaving it all to the unrestrained free market, as favoured by the right, and stringent rent control advocated on the left – will not do the job and carry too much risk. There is no silver bullet and a package of new policies are needed. A lot of good policy work has been done (but only outside Government, I am sorry to say) by a range of organisations and think tanks, including landlords’ organisations and responsible agents, and something resembling a consensus is beginning to emerge with the broad aim of stabilising and modernising the sector. This approach is about moderating rent increases, encouraging far longer tenancies, registering landlords, heavily regulating lettings agencies, and reinforcing the role of local authorities in improving standards and stamping out rogues.

Today’s report from the CLG Committee of the House of Commons on the private rented sector is firmly in this new mainstream. Its analysis seems spot on and its key recommendations – around better regulation, the key role of local authorities, ending sharp practice, better court procedures when things go wrong, and changing the culture of the sector so it becomes more family-friendly – allied to the Committee’s continuous exhortation for more house building in all tenures – reflect the emerging view about the best way forward.

Whilst the Government has its head in the sand – the last people to recognise that an unfettered free market doesn’t work for landlords or tenants – Labour has done a lot of work in this area and the Shadow Housing Minister, Jack Dromey, is to be commended for taking time over the detail, consulting widely with all parties, and publishing intelligent policy papers about what should be done.

To get housing right over the next decade, we have to take action in all tenures: we have to enable more people to become home owners, we have to provide far more social rented housing at genuinely affordable rents, but we also have to find a new stable settlement for private renting which is fair to tenants and landlords: homes at good standards on fair terms.

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