Major new review of the Private Rented Sector in England highlights challenges for a complex and evolving sector

Dr Julie Rugg and David Rhodes from the centre for Housing Policy at the University of York, launched a review called, ‘The Evolving Private Rented Sector: Its Contribution and Potential’. It was funded by the Nationwide Foundation, and released on Monday 10th September.

The authors had carried out a similar research project ten years ago, allowing for a review which looks at the complex and evolving nature of the PRS, which has expanded rapidly over the past ten years.

Dr Rugg said: “We need to see a fundamental rethink of the role renting plays in our housing market and a comprehensive strategy to ensure it meets the needs of all those who live there.”

Although the research found that the majority of PRS tenants were meeting their rental obligations without difficulty (with fewer than 10% in rent arrears), there was an issue with affordability particularly amongst lower income households.
In spite of the Government’s commitment to deliver rental properties at ‘affordable’ levels, this is often only slightly below market rates, rather representing affordability for those households on minimum income.

They also found a progressive mismatch between rents and the level of Local Housing Allowance available to low income households. Their research suggests that tenants don’t tend to move in response to these pressures, but rather try to reduce expenditure on other essentials, which is not suitable in the long term. The roll out of Universal Credit is likely to exacerbate this insecurity for low income households.

The review finds that one third of the PRS is made up of households with one or more characteristics of vulnerability and that the impact of welfare reform has created difficulties for lower income tenants in particular. The authors therefore recommend that, as a matter of urgency, the Government undertakes a thorough review of how best to meet the housing needs of low-income tenants, with a particular focus on tenants in receipt of benefit.

Highlighting the changing nature of renting, biographies of PRS tenants show that many are renting for a variety of reasons and often aspire to homeownership in the long run, with affordability cited as the main reason for not purchasing a house. Whilst affordability was an issue for those aspiring to homeownership, it was also a problem for renters as the report showed that younger people are living in the parental home longer prior to moving out, suggesting affordability and access issues with regard to renting for this group.

The market for Buy to Let (BTL) and Build to Rent (BTR) properties has increased substantially in the past 10 years. Opportunities for potentially higher returns from property letting than from other forms of investment encourages both individual landlords (some of whom are also tenants themselves) and investors with large portfolios of properties.

The review notes that part of the PRS constitute a globally-traded asset class and that becoming a private landlord is commonplace amongst households on middle and high incomes. The review called for the introduction of a combined landlord and letting agent register, with registration becoming a compulsory requirement for anyone letting property.

The increase in availability of PRS homes was not indicative of the quality of the dwellings, with 27% of PRS properties failing to meet the Decent Homes Standard, albeit with considerable variation in this proportion throughout England (e.g. the worst proportion being in the West Midlands at 40%). The review found that fewer than 2% of PRS dwellings were formally inspected in 2013/14. This prompted the authors to propose the introduction of an annual ‘MOT’ type certificate approach to house inspection, similar to that used for vehicles.

Under the proposed system, all properties would be required to meet a minimum property standard and the current standards should be reviewed in consultation with the industry, environmental health professionals and tenant representatives.   

The review highlighted the disconnect between the expansion of the PRS and overall housing needs. It was not clear how far BTR developments were meeting local needs. The authors call for a review of the PRS which would address the role of the PRS in the wider housing system. The review highlights the need for a clear vision for the sector and a need to tackle wide-ranging and increasingly complex and urgent issues by the creation of an overarching PRS strategy.

The full review can be found here.