The RLA launched a collection of essays looking at the future of the PRS as part of its 20th anniversary celebrations.
Prof Kenneth Gibb, Director, UK Collaborative Centre for Housing Evidence was one of the contributors to ‘Private Renting: A Vision for the Future’. You can read his essay below.
Contemplating what the rental market will look like, and what one would like it to be, in 20 years, is challenging. Just thinking back to how the sector was 20 ago and what has happened since is reason enough to go carefully with future speculations. In Scotland, private renting has nearly trebled in size and not much of that growth is to be explained by active policy; rather it is a consequence of the buy to let phenomenon and favourable demand created by challenges elsewhere.
We would be wise to be sceptical about too much futurology when it comes to open systems susceptible to a wide range of uncertain environmental shocks. Nonetheless, a bit of scenario planning combined with reflection of where the rental market might be in order to play a deeper role in a better functioning housing system is perfectly possible. Complex market There is a tendency for commentators to seek to boil the rental market down to simple single terms. Some would say that it is rife with bad practice, poor conditions or bad tenant and landlord relationships; or that it is the solution to making our housing system more geared up for a market economy; or that it needs to be regulated more closely and rent controls introduced.
These perspectives betray a range of prior political beliefs as well as different degrees of engagement with the evidence. However, the private rental market is much more complex, nuanced and segmented than any of these broad brush views would suggest. Figure 1 indicates that there are several consumer or demand groups; many different producer or supply groups and of course several different actors or institutions making markets, regulating then in different ways and intervening in others to affect market processes and outcomes. We need all to do a better job of thinking through the segmentation of the sector when we describe it, analyse it and think about policy for renting. How could the rental market support and strengthen the operation of the wider housing system? For me, a well-functioning housing system operates where rents and prices grow over time in line with general prices; the market is less volatile and there is, over time, sufficient housing provision to both meet demographic requirements in total, but also to cater adequately for different life stages, housing careers and short term requirements.
How can a probably large rental market, consisting of the different components suggested by figure 1, and probably including a larger share of supply from institutional investors and larger housing associations – contribute to this sort of arrangement?
It should play its critical role providing easy access market housing that remains a critical pressure valve addressing short term requirements and the needs of the economy. It is also often the obvious and likely only player in several of the segments suggested in figure 1.
Consumers and other stakeholders should be confident in the quality of the sector, in terms of the standards operated by letting agents, landlords, dispute resolution and in the quality of the housing stock. Regulation to enforce and police these standards must be consistently applied and sufficiently funded. Second, I do not think the six month tenancy will be still with us. Scotland has already broken ranks and whether or not indeterminate length tenancies with specified termination clauses is the way to go or something else instead would be better – I think we will inevitably move to longer term arrangements.
Making these reforms work may well, in the context of a more stable housing system, also reduce the demand for rent controls or limitations. I remain somewhat sceptical about how ‘softer’ or later generational rent controls might work (let alone harder traditional rent controls). As with all these debates, the devil is in the detail and much depends on intervention design and the incentives they create. The larger and more confident rental market seems to be here to stay.
There are important unknown factors, however, that may well impact on the market over the next twenty years: taxation of landlords, the short lettings sector, the longer term impacts of Brexit, to name but three.
However, I do hope that the sector continues to be a site for policy innovation and also one where there is continuing resolve to improve and enforce standards and to place the rental market squarely within and not at the periphery of thinking about our housing system as a whole.