Towards a Sustainable Private
Rented Sector in the UK
Lessons from Abroad
What we have learned?
Kath Scanlon and Christine Whitehead
Private rental growth in the UK
• Now 17% of the housing stock in England and growing
faster than other countries
• So the question is probably not about size per se but
more about sustainability and stability
• Scale is as much about the size of other sectors – at the
moment owner-occupation is declining and social renting
at best stable
• ‘Push’ factors have tended to dominate with private
renting seen as second or third choice for many tenants
and some landlords there by default
• ‘Pull’ factors are more obvious in other countries – not
just ease of access and flexibility but portfolio and risk
management reasons for both landlords and tenants and government support
Problems identified in the light of other
countries’ experience
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Scale of sector increasing but rents still rising
Insecurity of that growth if circumstances change?
Uneven quality and professionalism of management
How developers might fill the gap left by the near
removal of build for Buy to Let
Fragmentation of ownership in multi family apartment
blocks
Role of institutional investors? Or more generally those
looking for long term investment based on rental returns
rather than capital gains
Would it help to break down barriers between the rented
sectors
Can the private rented sector meet the range of
demands and needs especially where help to lower
income households is being reduced.
Learning from abroad: correcting
negative assumptions
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Institutional investment does not dominate private
rented sectors in other countries – generally
fragmented ownership but often long term
commitment.
Regulation is not inherently associated with smaller
poorly operating private rented sectors. Countries with
larger sectors often have controls on rent increases
and long term security
Private renting is not just for the young and mobile but
can be a tenure of choice for older, better off, more
stable households
Learning from abroad: correcting
negative assumptions (2)
4. Private renting is not inherently unsuitable for
more vulnerable households – but providing
well for such households involves considerable
government support and regulation to work
well – making it more like social housing.
5. Scale is not to be equated with a well (or
indeed badly) operating private rental market.
The appropriate size depends on the relative
desirability and accessibility of other tenures.
6. The objective should be to meet the full range
of demands and needs as effectively as
possible
Learning from abroad: positive lessons
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Funding: private renting needs a range of investors
including a high proportion of individuals and small
companies. Many will come and go so there have to
be adequate incentives to enter; others may stay of
decades or generations if the circumstances are right.
Regulation: many countries, not just the UK fear the
reintroduction of heavy and inflexible regulation. But
the evidence from other countries does show that
scale and stability can be associated with well defined
regulatory frameworks giving long run security and
security to both landlords and tenants with respect to
rental returns
Learning from abroad: positive lessons
(2)
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A wider range of tenants: private renting can suit families and
even older households – but must be good quality, well managed
and potentially on long leases.
Similarly with vulnerable households- most countries have part of
the private rented sector of which they are ashamed - but best
practice is usually associated with generous income related
benefits and well defined government licenses.
New supply: depends on who are the investors, but also on built
form and ownership structures. Many countries only allow single
ownership of apartment blocks which helps company and
institutional investors and REITS.
Also relevant here is a potential role for privately registered
providers of grant or tax break assisted social housing as in the
USA and Australia
Learning from abroad: positive lessons
(3)
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Fiscal arrangements: the international evidence shows that the relative
tax and subsidy position is fundamental to a successful private rented
sector. Tax incentives such as the right to against other income are
present in many of the more stable sectors. But whatever any incentives
must be tailored to the overall UK tax system.
The scale of the sector: sustainability is not about scale as such - but
demographic changes, income distribution and the nature of the labour
market all point to increased demand. Matching supply requires the
capacity to make reasonable and predictable rates of return on
investment. Scale on the other hand is as much about policy decisions in
relation to all tenures as well as returns elsewhere in the economy,
financial markets and cultural norms.
No country has everything right - those with larger, well operating private
rented sectors tend to be prosperous, have generous income support –
and stable or declining demands for housing. Others with large private
rented sectors but also housing market volatility and uneven income
distributions show considerable signs of stress.
Policy transfer is difficult - all we have done here is identify potential - the
hard work starts here.