House of Commons - The Private Rented Sector - Communities and Local Government Committee

The Private Rented Sector - Communities and Local Government Committee Contents

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 tenures—social housing and owner occupation—forcing 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