1 Introduction
Background: growth of the private
rented sector
1. The private rented sector is growing. In 1999,
9.9% of English households rented privately. By 2011/12, the figure
had risen to 17.4%, with the number of households renting privately
overtaking the number in the social rented sector (see Table 1).
In the course of our inquiry, witnesses suggested a number of
reasons for this growth including: the deregulation of the private
rented sector and changes to tenancies in the late 1980s generating
increased investment;[1]
the introduction of new lending instruments in the late 1990s;[2]
constraints on the other two main tenuressocial housing
and owner occupationforcing more people to rent privately;[3]
and economic, social and lifestyle factors leading to an increased
demand for more flexible forms of housing tenure.[4]
Most likely, all these drivers have contributed in some way to
the growth.

all households
|
|
|
|
| owner
occupiers
| social
renters
| private
renters
| all
tenures
|
|
|
|
| percentages
|
1999
| 69.9
| 20.2
| 9.9
| 100.0
|
2000
| 70.6
| 19.5
| 10.0
| 100.0
|
2001
| 70.4
| 19.5
| 10.1
| 100.0
|
2002
| 70.5
| 19.2
| 10.3
| 100.0
|
2003
| 70.9
| 18.3
| 10.8
| 100.0
|
2004
| 70.7
| 18.3
| 11.0
| 100.0
|
2005
| 70.7
| 17.7
| 11.7
| 100.0
|
2006
| 70.1
| 17.7
| 12.2
| 100.0
|
2007
| 69.6
| 17.7
| 12.7
| 100.0
|
2008
| 68.3
| 17.7
| 13.9
| 100.0
|
2008-09
| 67.9
| 17.8
| 14.2
| 100.0
|
2009-10
| 67.4
| 17.0
| 15.6
| 100.0
|
2010-11
| 66.0
| 17.5
| 16.5
| 100.0
|
2011-12
| 65.3
| 17.3
| 17.4
| 100.0
|
2. It is important to consider whether this growth can be
expected to last. The recent trends in tenure predate the 2008
financial crisis. For a decade now, as the private sector has
grown, owner occupation as a share of total tenure has been falling.
This suggests that, even though the growth might slow as the economy
improves, we may be looking at a long-term structural change to
the housing market, and potentially a permanent shift towards
renting. Certainly, a number of witnesses to our inquiry suggested
that, while historically the private rented sector had been a
marginal tenure, it can now be seen as a more mainstream housing
option. The housing charity, Shelter, for instance, stated that
private renting was "becoming the new normal".[5]
Indeed, the Minister of State for Housing, Mark Prisk MP, acknowledged
that "with the fact that not only is the population growing
but the gap remains at the moment between supply and demand, the
prospects for the [private rented] sector are [...] strong in
terms of its growth".[6]
One consequence of this trend is that the private rented sector
is increasingly catering for people looking for housing for the
long-term, including a growing number of families with children.[7]
Our inquiry
3. It was against the backdrop of steady growth that we decided
to conduct our inquiry into the private rented sector. The growth
has put the spotlight on four key issues, and these have been
central to developing a thriving market and to our inquiry. First,
there is a common view that more should be done to raise standards
of property and management in some parts of the sector. Second,
concerns have been raised about the lack of regulation of letting
agents and the extent of sharp practice by some agents, in particular
the fees they charge to tenants and landlords. Third, especially
with the increase in the number of families living in the sector,
there have been calls by some for much greater security of tenure.
Finally, there is widespread lack of awareness amongst both tenants
and landlords about their respective rights and responsibilities
and about the law covering the private rented sector.
4. Our report has therefore been structured around
these issues. In chapter 2 we consider how to raise awareness
of rights and responsibilities and how to ensure, where regulation
is necessary, that there is a straightforward approach to make
it understandable to both landlords and tenants. In chapter 3
we look at how standards of both property and management could
be improved. In chapter 4 we consider whether improvements can
be made to the way letting agents are regulated. And in chapter
5 we examine rent and security of tenure. At the outset of our
inquiry, we stated that we did not intend to focus in particular
upon supply. Some of the evidence we received, however, pointed
to the importance of building more homes if standards in the private
rented sector were to be raised and pressures on rents reduced,
and suggested that the issues we were considering could not be
viewed in isolation from supply. We therefore consider supply
briefly in chapter 6, returning to some of the issues raised in
our 2012 report on the Financing of new housing supply.[8]
5. In examining these issues, we have been conscious
that the private market is still relatively immature, especially
compared to that in countries such as Germany, which we visited,
where renting has historically been a much more mainstream tenure.
There are dangers in interfering too much in a dynamic market
that has changed significantly in recent years and has yet to
settle down; it is more important to find ways to bring this market
to maturity and encourage the sector to grow. In the report, we
will consider the roles of a whole range of actors: central government;
local authorities; developers; investors; letting agents; landlords;
tenants; and their respective organisations. We shall review the
operation of the current system, examining how action can be taken
to address problems to make the market more mature and the sector
a more attractive place to live. We have italicised those conclusions
and recommendations which are particularly key to the smooth and
sustainable development of the private rented sector.
6. Throughout the inquiry, it was made clear
to us that there was not a single market, but a number of distinct
(if related) sub-markets, catering for a variety of different
people, amongst them: the 'high-end' luxury market; students;
young professionals; families priced out of owner occupation;
and housing benefit claimants.[9]
Indeed, Julie Rugg and David Rhodes in their 2008 review of the
sector identify as many as eleven sub-markets (and suggest that
their list is not exhaustive).[10]
Each of these markets has particular needs: families, for instance,
may be looking for a long term home, while students may only want
a property for a year. Equally, the luxury market will, for the
most part, regulate itself, while those properties at the 'bottom
end' of the sector are more likely to require intervention to
bring them up to an acceptable standard.[11]
Just as it is impossible to pick out a 'typical' tenant, there
are also many different kinds of landlord: individual landlords
who own outright or have buy-to-let mortgages; 'accidental' landlords
renting out properties they are unable to sell, as well as ones
who accidentally become landlords but then decide to stay in the
sector; individuals and companies with portfolios of housing;
and an increasing number of housing associations and large institutions
moving into market renting. Again, there can be no single approach
to dealing with these very different types of landlord. In drawing
up our recommendations, therefore, we have been conscious that
there is not a 'one size fits all' model to provision within the
sector. We have also been mindful of geographical variations:
for instance that the picture in London and the South East is
not replicated in other parts of the country.[12]
This suggests the need for a more localist approach to housing
policy, something we have argued for in previous reports.[13]
EVIDENCE AND ACKNOWLEDGEMENTS
7. We received written evidence from over 170
organisations, groups and individuals. We explored the themes
arising from this written evidence in nine oral sessions which
took place between February and May 2013. In addition, we made
two visits: one to Leeds; and one to Berlin, to explore how the
English approach to private renting compared with that in Germany.
We also held informal discussions with groups of tenants and landlords
in London and Leeds. We are grateful to all those who provided
written or oral evidence; to the tenants and landlords we met
in Leeds and London (and the local authorities who helped arrange
these meetings); to Leeds City Council for organising our visit
and hosting one of our oral evidence sessions; to the British
Embassy in Berlin for arranging our German visit, and all those
who took the time to meet us in Berlin; and to the Royal Institution
of Chartered Surveyors who hosted a briefing session for the Committee
at the start of the inquiry. Finally, particular thanks are due
to our specialist adviser, Professor Christine Whitehead OBE of
the London School of Economics and Political Science.[14]
1 See, for example,Ev 300, para 13 [Department for
Communities and Local Government], Ev w303, para 6.2 [The LandlordZONE],
Q 395 [Stuart Corbyn]. Back
2
See, for example, Q 50 [Alan Ward], Ev 227, para 32 [National
Landlords Association], Ev 250, para 7 [Council of Mortgage Lenders].. Back
3
See, for example, Q 50 [Alan Ward], Q 318 [Richard Lambert],
Q 636 [Cllrs Sarah Hayward and Tony Ball] and Ev 307 [Note of
meeting with tenants in Leeds]. Back
4
See, for example, Ev w96, para 2 [SpareRoom], Ev 224, para 8.8
[Grainger plc] and Ev 307 [Note of meeting with tenants in Leeds]. Back
5
Ev 133 Back
6
Q 683 Back
7
See, for example, Ev w42 [James Spencer], Ev w115 [Save the Children],
Ev w186 [Newcastle City Council], Ev 254, para 2.2 [Paragon Group],
Ev w252, para 1.3 [Building and Social Housing Foundation], Ev
133, summary [Shelter], Ev 159, para 2.27 [Citizens Advice], Ev
w283, para 2.2 [Chartered Institute of Housing]. Back
8
Communities and Local Government Committee, Eleventh Report of
Session 2010-12, Financing of new housing supply, HC 1652 Back
9
See, for example, Ev 219 [Westminster City Council], Ev 256, para
7 [City of York Council], Ev 125 [Dr Tim Brown] and Ev 131 [Dr
Julie Rugg]. Back
10
Dr Julie Rugg and David Rhodes, The Private Rented Sector:
its contribution and potential, Centre For Housing Policy
University Of York, 2008, pp 15-28. The sub-markets they list
are: young professionals; students; the housing benefit market;
slum rentals; tied housing; people on high incomes; middle-age,
middle market renters; immigrants; asylum seekers; temporary accommodation;
and older tenants and regulated tenancies. Back
11
See, for example, Q 524 [John Statham]; Ev w121 [Bob Young] Back
12
See, for example, Ev w31 [Sue Thompson], Ev w58 [Tessa Shepperson],
Ev w74, para 3.2 [Pennine Lancashire Local Authorities], Ev 243-244,
paras 3.1-2 [British Property Federation], Ev w266 [National Housing
Federation]. Back
13
See, for example, HC (2010-12) 1652, Chapter 6. Back
14
Professor Whitehead declared the following interests: Adviser
to the Board of the Housing Finance Corporation; independent research
for Shelter, RICS, JRF, the Housing Futures Network; Project for
the European Investment Bank on housing finance for affordable
housing; fellow of the Society of Property Researchers; Member,
RICS. In terms of independent research working with the National
Housing Federation and the Department for Work and Pensions on
welfare reform; with Joseph Rowntree Foundation on equity housing
products; with Realdania in Denmark on a four country comparison
of the role of private renting in different legal, administrative
and economic contexts; and with Berkeley Homes, Qatari Diar Delancey
via the Young Group on aspects of viability, and Homes for Scotland
on aspects of institutional investment in private renting. Back
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