The RLA launched a collection of essays looking at the future of the PRS as part of its 20th anniversary celebrations.
Luke Murphy, Associate Director of the Institute for Public Policy and Research was one of the contributors to ‘Private Renting: A Vision for the Future’. You can read his essay below.
The private rented sector has been the subject of fierce policy and political debate in recent years. Policy proposals announced by the government have attempted to tackle a range of issues in the sector, including banning letting agent fees charged to tenants; increasing stamp duty land tax for private landlords and the removal of tax allowances in order to advantage first-time buyers over investors; and most recently proposals for more security with three-year tenancies.
The focus on the sector given the dramatic growth in private renting is hardly surprising. There are now 4.5 million households renting privately (2016) equivalent to 20 per cent of all households, a doubling in the size of the sector from 2002.1 There has been particularly strong growth in London where the number of households living in the sector has increased rapidly and it is now the second largest tenure.
Recent projections suggest that nearly two in five households will be renting privately by 2025 in the capital, the same number of households who will own their own home. Underneath the headline figures is a significant rise in particular cohorts.
Rapid rise in younger renters
As might be expected, the number of younger renters living in the sector has risen rapidly as they have been locked out of home ownership and access to social housing has become even more scarce. For instance, since 1993 the number of 16 – 29 year olds has increased by 95 per cent and the number of 30 – 44 year olds has risen by 236 per cent. Moreover, the number of families with children living in the sector has grown dramatically with 2 million now renting privately, double the number just a decade
ago. Yet there has also been an increase in poorer and older renters with the number of households living in the sector living below the poverty line (below 60 per cent of median income after housing costs) rising by 11 per cent since the early 90s and those aged over 65 increasing by 12 per cent.
Despite this rapid expansion and a series of interventions by government, the private rented sector still presents a number of problems. Affordability within the sector is a real issue with the proportion of a household’s income spent on housing costs far higher than in other tenures, at 34 per cent compared to 18 per cent for those buying a home with a mortgage and 28 per cent for social renters. Housing quality remains a more significant issue with 27 per cent of privately rented homes not meeting decent homes standards compared to 20 per cent for owner occupiers and 13 per cent in the social rented sector, suggesting private renters pay far more for less.
Furthermore, private renting provides a great deal less security than the other tenures with assured shorthold tenancies only providing six months guaranteed tenure – the ending of private rented tenancies is the biggest cause of homelessness acceptances in England.
So what role should the private rented sector play in twenty years’ time? The answer must surely be for it to provide a decent, stable and affordable home to the diverse types of households that are living in it. The days of the private rented sector only providing a home for the young and mobile professionals or students are gone (a myth in any case, as there have long been low-income households living in the sector). In truth, no matter the political or policy priority given to building more homes to buy or for social rent, the PRS will remain a significant housing tenure in the years to come.
In recognition of this, piecemeal reform of private renting by the government should come to an end. Public policy needs to provide a solid foundation on which to build a private rented sector that can provide those decent, stable and affordable homes that tenants need. In this regard, as currently formed, the private rented sector is not fit for purpose.
The government should focus on long-term structural reforms of the sector that ensure it can deliver the homes that tenants need. That means new legislation to give private renters additional security through longer or possibly indefinite tenancies (through the ending of Section 21). It means providing a clear set of quality and energy efficiency standards that all homes must reach with clear milestones set out over the decades to come.
It must mean ensuring that local authorities have sufficient resources to enforce against the minority of bad landlords who give tenants a hard time and other landlords a bad name.
Yet a new deal for private renting cannot and must not all be one way. Yes, the balance of power in the sector should be tipped more towards the tenant – it is common elsewhere, not least in Germany, for tenants to have far greater rights.
But the sector must also work for landlords too. That means ensuring that there is a properly functioning court system or property tribunal that ensures that if a tenant is guilty of anti-social behaviour, fails to pay the rent or damages the property, then a landlord can swiftly regain possession. The new rights for tenants should also come with responsibilities too, as is common in other countries, some repairs and maintenance may fall to the tenant to deal with in exchange for these additional rights. Moreover, consideration should be given to tax allowances or incentives for landlords who invest in the upgrade of the quality or energy efficiency of their property.
The private rented sector should play a similar role in 2040 in the housing market to the one it does today. But only with fundamental reform that works for both tenants and landlords will it do so in a way in which it provides decent, stable and affordable homes for all those that live in it.
You can read all of the essays from the RLA essay collection by checking them out on our website here.