Private renting
after the global financial crisis
Peter A. Kemp
Overview
1.
2.
3.
Key points about the PRS (in the advanced economies)
Private renting and GFC: a case study of GB
Implications for policy
Key points about the PRS
1.
The PRS varies cross-nationally
2.
The institutional & policy & context also varies
 Hence need for caution when importing policy design
3.
The internationalisation of financial markets has affected the PRS
 Hence so has the GFC
4.
The PRS is growing in some advanced economies
Private renting in Britain: brief overview
1.
2.
3.
4.
5.
6.
Growth in private renting began before the GFC
Free market rents and weak security of tenure
Very high tenant mobility
1 in 4 private tenants receive housing benefit
Predominance of ‘sideline landlords’
Tax bias in favour of owner-occupation
New housing completions
(UK: 1970/71 to 2013/14)
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Housing tenure in England
Year
(% households)
Owner
occupiers
Private
renters
Social
renters
Total
1981
57
11
32
100
1991
68
9
23
100
2001
70
10
20
100
2007
70
13
18
100
2013/14
63
19
17
100
The Buy-to-Let boom: Lending
New BTL mortgage market:
1. New willingness to lend to landlords
2. Innovation in mortgage products
3. Easier credit conditions
Facilitated by:
1.
2.
3.
4.
International integration of financial markets
Global savings glut
Increased lender competition
Low interest rate regime
The Buy-to-Let boom: Landlords
Emergence of BTL landlords:
1.
2.
3.
4.
Rising house prices
Low interest rates
Poor stock market returns
Pension concerns
The Buy-to-Let boom: Tenants
Rising demand for private renting:
1.
2.
3.
4.
Increase in single person households
Growth in higher education *
Change to student funding
Immigration (2004+)
5.
Falling supply of social housing
* Emergence of student housing companies
BTL and the credit crunch
BTL lending 1999 to 2013 (£bn)
50
45
Collapse & recovery of
BTL lending
40
35
30
Increase in BTL arrears
& possessions – now
falling
25
20
15
10
Shift to low interest
rates (2009+)
5
0
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Private renting after the crisis
1.
2.
3.
4.
Accelerated growth in private renting
Rising private rents (esp. London)
Cuts in housing benefit (2011+)
Increased homelessness (2010+)
After the crisis: Landlords
1.
2.
3.
4.
5.
‘Search for yield’
Cash and BTL-financed landlords
Overseas property investors
Emerging institutional investment
Housing associations as private landlords
After the crisis: Tenants
Changing rental market:
1.
Increase in ‘reluctant renters’


2.
3.
4.
Frustrated FTBs
Increase in social housing waiting lists
More longer term renting
Families renting privately
More in-work poverty
Policy concerns
1. The majority of private tenants are satisfied.
2. But:





Insecurity of tenure (families & long-term renters)
Affordability of rents
Access barriers (low-income tenants)
Letting agents fees
Substandard property and management (bottom end of the market)
3. The policy response: England v Scotland
Concluding points
1.
Growth of private renting likely to continue
2.
PRS has not adapted to its new roles
3.
Policy dilemmas:
 How to address insecurity of tenure & high rents without undermining the supply
of rental homes?
 Tackling causes v symptoms?