Long Read  

Private renting has changed and regulation needs to catch up

Private renting has changed and regulation needs to catch up
(FT Money)

Last month the government unveiled a new deal for renters as Boris Johnson announced plans his government said would "improve lives of millions of renters".

Such plans will have sounded familiar given former prime minister Theresa May announced a similar deal in April 2019, with little to nothing done to progress the reforms since.

With significant shifts in the sector over the past few decades and ongoing issues on quality, stability and affordability, the proposals were belated in 2019 and long overdue by the time they were re-announced in the Queen’s Speech last month.

Not fit for purpose

The stark truth is the private rented sector is no longer fit for purpose. It has changed and grown beyond all recognition over the past three decades.

The sector is now home to 19 per cent of households (4.4mn), 400,000 more than council homes and those owned by housing associations.

Many more people now expect to live in the private rented sector for longer, this includes 1.4mn households containing nearly 3mn children. Many of those children will grow up, go to school and transition into adulthood in homes rented from private landlords.

Yet, as our findings at the Institute for Public Policy Research show, the rules and regulations that underpin the private rented sector have not kept pace with this growth. Tenants face unaffordability, poor conditions, a lack of tenure security and limited control over the place they call home.

The private rented sector is insecure. Around one in 10 tenancies that come to an end do so as a landlord has terminated them, typically through a no-fault eviction, called a section 21. Tenancies ended by landlords remain the biggest cause of homelessness.

Private rents are unaffordable for many. Analysis by the housing charity Shelter pre-pandemic showed that in two-thirds of the country working families on low wages could not afford to privately rent a typical home without turning to housing benefit.

Indeed, a third of private renters (1.8mn) now claim housing benefit, up 32 per cent on pre-pandemic levels.

A higher proportion of private rented homes are of poor quality compared to other tenures, with 21 per cent of homes failing to meet the decent homes standard. Meanwhile, cuts to benefits and welfare reform, a slow court system and a lack of strategic policy mean that the structural foundations that are essential for a thriving sector are being eroded.

Problematic motivations

A comprehensive survey of private landlords by the government, also released last month, lays bare the fundamental problem. Asked why they became a landlord, the two most prevalent answers were ‘investing in property’ (42 per cent) and as a ‘pension contribution’ (40 per cent). Just 4 per cent said they had become landlords to let the property as a full-time business.

Is it sensible, in 21st century Britain, to leave the sector so woefully unregulated when many landlords see these houses as an asset to earn from rather than a home for tenants to live in? Yet we still expect the sector to house one in five of the population and millions of our children.