The private rented sector has overtaken social housing – and more families with children are renting. We look at two important new studies.
The latest English Housing Survey has shown that more people are deserting home ownership to live in the private rented sector. Meanwhile, the number of families with children who are renting privately has soared, according to another important new survey.
Both have important implications for private landlords and their future investments.
The English Housing Survey covering 2011/2012 says that while 65% of households (around 14.4m) in England are owner occupiers, this compares with a peak of 71% in 2003.
Altogether, 17% (3.84m households) live in the private rented sector which is now slightly bigger than the social sector which has 3.8m households.
Of owner occupiers, just 10% are under 35 compared with half of all private renters.
Around 61% of owner occupiers have been in their homes for ten years or more, in comparison to just 9% of private tenants.
The figures provide further evidence of the shift away from owner occupation in favour of the private rental sector, with property professionals believing that there is no immediate sign that this trend will slow down or reverse.
According to the Royal Institution of Chartered Surveyors, one in five households will be privately renting within a few years. The Building and Social Housing Foundation’s survey, titled Who Lives in the Private Rented Sector, agrees with this, forecasting that one in five households will be private tenants by 2020.
The reasons for such forecasts are not hard to find, says the RICS.
The Government’s flagship Funding for Lending Scheme has so far been of benefit to house purchasers with large deposits but of little help to first-time buyers – meaning that home ownership remains out of reach for many.
Social housing, meanwhile, has become a chief casualty of government cutbacks, with construction output falling by 17% year on year between the last quarter of 2011 and the last quarter of 2012, according to the Office for National Statistics.
Nevertheless, people in private rented accommodation aspire to become home owners: about three-fifths, according to the English Housing Survey, expect to buy at some point in the future. Only one-fifth of social tenants expect to become home owners.
Findings in the EHS include:
Private tenant households are the most likely to include people from ethnic minorities: 20% of private tenants were from ethnic minorities, compared with 15% of social tenants and 7% of owner occupiers.
Around two-thirds (68%) of white households were owner occupiers, compared with 61% of Indian households, 57% of Pakistani/Bangladeshi households and 27% of black households. One-third of ethnic minority households (33%) lived in the private rented sector, compared with16% of white households.
Just over one in ten (11%) of private tenant households are lone parents with dependent children. The proportion compares with 15% of social tenants and just 3% of owner occupiers.
Average (or mean) private rents were double the rents in the social sector (£164 per week compared with £83). Social rents increased from £79 a week since the previous year, but private rents showed no significant change.
Private tenants stay less time in their homes than owner occupiers or social tenants, with two-thirds of private renters in their homes for under three years.
According to the English Housing Survey, 26% of private tenant households are in receipt of housing benefit. This compares with 64% of households in the social rented sector.
Quality of homes
Social housing is more energy efficient than private homes, whether owner occupied or rented. In 2011, 34% of housing association homes and 26% of local authority dwellings had energy ratings in the A to C bands.
Houses in the private rented sector were the least likely to have double-glazing, cavity wall insulation or loft insulation.
Social rented homes also had the lowest ‘non-decent’ rate at 17%. By comparison, the private rented sector had the highest number of non-decent homes with a proportion of 35%, although this was a fall from 47%.
Private rented homes were also the most likely to have damp problems compared with other types of homes, largely because they were more likely to be older stock. However, the overall proportion of homes with damp problems reduced from 13% in 1996 to 5% in 2011.
Households with children
The needs of families living in the private rented sector are becoming increasingly important after the number of households with children living in rented accommodation doubled in ten years, says the Building and Social Housing Foundation’s study.
This lags the English Housing Survey, and so it is possible that the trends identified have since become more marked.
It found there were 588,016 households with children living in the private rented sector in 2000/01. The number jumped to 1,196,142 in 2009/10.
As a percentage of the total number of households living in private rented accommodation, this group went up from 8% to 16% over the same period, meaning that around one in six families in Britain are in the private rented sector. The report says this underlines the need for familytype rental accommodation – houses rather than flats, and close to schools, parks and other amenities.
Interestingly, the biggest sub-sector of the private rented sector was ‘higher income’ working age households, with or without children.
Other sub-sectors identified in the study include students, ‘generation rent’ who are unable to access owner occupation, residual users who are unable to access social housing, young professionals, the housing benefit market, and migrants.
The trend towards wealthier tenants is almost a throwback to the start of the 20th century when private renting was the dominant tenure, with even many relatively wealthy households renting rather than owning their own homes.
Today, private tenants may not be rich enough to afford their own homes, but because of their age group, they are likely to be economically active, with a declining proportion being pensioners.
The charity also found that the number of housing benefit claimants in the private rented sector went from 626,720 to 966,848 over the ten-year period, although remaining at around one-quarter of house-holds in private rented accommodation – in keeping with the 26% identified in the English Housing Survey.
This report also identifies the significant regional variations in the private rented sector. For example, 22.5% of London households rent privately compared with just 11.6% in the North-East.