Mortgages  

Private renting trends and statistics

There is good news for the buy-to-let sector as private renting has come under scrutiny. A parliamentary report published in July suggests that the private rental market has exhibited growth and that the trend is likely to continue. The report was the result of an in-depth investigation of the private rented sector by the Select Committee on Communities and Local Government.

In the report, the Committee suggests that the growth of the sector predates the 2008 global financial crisis and has occurred over the past 10 years or so. Constraints on owner occupation and the social housing sector as well as the growth of buy-to-let lending are all factors in the change.

Chart 1 shows the proportion of owner occupiers, social renters and private renters in England in 1999 and in 2011/12. In 1999, only 9.9 per cent of English households rented privately, compared with 69.9 per cent who were owner occupiers and 20.2 per cent who lived in social housing. By 2011/12 only 65.3 per cent were owner occupiers, 17.3 per cent were social renters and 17.4 per cent were renting privately.

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Shortcomings

However, the news is not all good. Evidence given by many of the 170 or so witnesses to the Committee pointed to serious sector shortcomings. For example, housing charity Shelter described the private rental sector as having developed “unintentionally and largely unchecked” resulting in an “unsuitable climate” for renting families. It says that while private renters make up 17 per cent of the English housing population, they constitute 43 per cent of its clients. It points to growing unaffordability. It reveals nearly 40 per cent of private rented homes are non-decent compared with 30 per cent of owner occupied homes and 27 per cent of social rented homes.

As a result, the report calls for longer tenancies because, as the private rented sector has become more mainstream and more families with children use it, they require tenancies to be longer than the standard six or 12 months. However, some buy-to-let lenders specify in their products that tenancies can not exceed 12 months. Most tenancies are assured shorthold, giving landlords automatic right of possession once the tenancy period comes to an end. The fear is that they may not be able to get vacant possession in the event that a landlord defaults on his mortgage. In June this year The Mortgage Works changed its terms and conditions to allow buy-to-let borrowers to offer tenancies of up to three years. In its report, the Select Committee urged other lenders to follow suit.

Sharp practice

The Committee describes the private rented sector as “developing”, and in need of help to “edge its way to maturity”. It suggests that both landlords and tenants are likely to have suffered at the hands of letting agents whom it accuses of sharp practice and abuses. Evidence of problems with letting agents came from several witnesses, including Shelter and the Office of Fair Trading (OFT). One witness described letting agents as “the property industry’s Wild West”. It was pointed out that anyone could set up a letting agency with no prior knowledge or experience of the industry necessary. There were complaints about poor customer service, mishandled deposits, rental income not being passed on to landlords and failure to vet tenants properly or inspect properties adequately.