As we are all aware when housing is in short supply, the private rental sector is extremely important. Countrywide’s Tonic for Tomorrow paper has called for measures to protect the private rental sector and make improvements to benefit both landlords and tenants.
Recent research by Countrywide, the UK’s largest estate and letting agency, has revealed that occupancy in the private rental sector outstrips that of owner-occupiers and, as such, could play an even more important role in tackling the current UK housing shortage.
The research revealed that if all 135,000 new homes built in the UK in the last 12 months went into the private rented sector (PRS) they could be expected to house 281,000 people. However, if the same number of homes went to an owner occupiers, 40,000 fewer people would be housed.
Countrywide argue that there are two main reasons for higher occupancy rates in the PRS. First there is a bigger incentive not to pay for empty rooms as there is no gain from capital growth on the extra space. Second, with no stamp duty, legal costs or waiting lists, the flexibility of the private rented sector means those renting can move as their housing needs change. Private tenants account for 60% of households that move each year, but just 19% of the general population. Countrywide believes that if we recognise that renting is a serious tenure for both the short and long term, it needs to be more attractive for tenants and investors.
The growth of buy to let lending has helped add stock to the private rental sector and hence some choice to tenants, but Countrywide believe that without faster additions to the overall housing stock it doesn’t solve the problem of a lack of housing supply and its effect on affordability.
Countrywide claim that to make private renting a more acceptable choice for the long term, landlords and tenants need certainty over rents and tenure length. They believe that many landlords would like to offer longer term tenancies but are constrained by lending conditions limiting tenancy length to one year. Nationwide Building Society has notably extended its terms to allow three year tenancies which could see other lenders follow.
They maintain that certainty of rent can also be achieved through the mutual benefit and agreement of both parties. While rent control sounds scary, Countrywide doesn’t believe it needs to be so heavily regulated as was the case under assured tenancies. They argue that in Germany the majority of rental agreements are unlimited, but rents are pegged to an index, giving landlord and tenant certainty. On top of this there are options for review to reflect improvements or if rent falls behind the prevailing rate in the vicinity.
Countrywide continue to campaign for a fairer housing market for all and urge the new government to keep the fight to combat the shortage at the top of their political agenda.