Private Rented Housing : Is it fit for purpose, should it be controlled?
- 1. Click to addtitle Click to add subtitle Click to insert presenter name and/or date The private rented sector Hexham Housing Debate 21/10/17 Brian Robson, Acting Head of Policy & Research
- 3. What I’ll cover •What purposes did we have in mind for the PRS? • What purposes does it now fulfil? • Is it any good at them? • Should it be controlled?
- 4. 0 10 20 30 40 50 60 70 80 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 percentage owner occupiers privaterenters social renters Housing tenure over time PRS Deregulated Buy-to-let mortgages introduced Source: English Housing Survey, DCLG. The data is for England.
- 5. Why grow thePRS? • ‘Wider choice for the consumer’ • Greater private sector investment in housing • Concentrate supply in places where need is greatest • Labour mobility/transitional tenure
- 6. Today’s Private RentedSector Locked out of social rent Transition Locked out of ownership
- 7. Is it anygood at what it does? Access Affordability Quality Stability
- 8. Access Lots to choosefrom… • c4.5m properties in the PRS • 182,273 properties for rent on Right Move
- 9. Access (2) Graphic fromShelter
- 10. Affordability 0 10 20 30 40 50 60 70 80 90 Owned with mortgageSocial renters Private Renters Percentageofpeoplespendingmorethan1/3of netincomeonhousingcosts Middle fifth Poorest fifth Source: Households Below Average Income, DWP. The data is for UK, 2014/15
- 12. Quality 0 5 1015 20 25 30 %non-decent,England2015 Non-Decent Homes by tenure, England 2015 Private Rented Owner-occupied Social Sector Source: English Housing Survey, DCLG. The data is for England, 2015
- 13. Stability • Typically 6or 12 month contract • After initial period, 2 months notice • Ability to evict with ‘no fault’ – section 21
- 14.
- 15. Largest single causeof homelessness
- 16. Is it anygood at what it does? Access Affordability Quality Stability
- 17. Should it becontrolled? Some regulation already exists: - Selective licensing by local authorities - Tenancy deposit schemes - Some basic safety standards - Register of rogue landlords - Forthcoming ban on letting fees - Redress scheme requirement
- 18. Should it becontrolled? We don’t back old-style rent controls: • ‘Very significant’ risk of disinvestment We’re more open to ‘rent smoothing’ • Scottish ‘Rent Pressure Zones’ • Ireland regulates frequency of increase
- 19. Other ideas • Registration •Incentives for landlords • Social/ethical lettings agents • Better enforcement Ultimately • #endthefreeze… • Deliver 80k genuinely affordable homes pa
- 20. Thanks for listening Brian.Robson@jrf.org.uk 01904615 936 @jrfbrian
Editor's Notes
- #3 A quick word on JRF. We exist to create a prosperous and poverty free UK, and we do that through research, policy and practice. 14m people in the UK living in poverty. Would be 3.5m lower if we looked at it before housing costs taken into account. Poverty levels in London double once housing costs are taken into account. So housing costs have a big impact on poverty levels – and this impact has been growing.
- #5 Housing tenure over time in England Decline of the PRS to the late 1980s – 88 housing act deregulated: intended to reverse the decline and increase quality. Interestingly earlier attempts to bring in shorter tenancies in the early 80s (without deregulating rents) didn’t stem the decline. Massive growth since then, and especially since 90s. Growth slow after deregulation (caution re policy stabilty – Kinnock) Not an accident – a result of deliberate policy intervention (removing rent controls, development of buy-to-let as a proposition) Regional picture different – PRS largest single tenure in London 4.5m households now in the PRS
- #6 Quote/reasons from 80s: Wider choice for the consumer Private sector investment Market would allocate supply where supply greatest Labour mobility / Transitional tenure – so typically young people leaving home, who don’t want to be tied down, wouldn’t qualify for social housing and who value the flexibility of private rent 1988 Housing Act deregulated the PRS. From January 1989, Especially for You number one, controls on rents removed and short-term assured shorthold tenancies introduced.
- #7 Julie Rugg – identified 11 niche markets. My simplified version has just three: Transition: Students Young professionals People who rent at other stages in life by choice – labour mobility etc Generally younger – 46% of those aged 25-34 live in the private rented sector Locked out of social rent: Housing benefit market (about 25% of all private renters) Temporary accommodation/allocated via homelessness route This is my concern at JRF – 4.5m people in the private rented sector in poverty. Locked out of ownership People who enter intending to transition but aren’t able to Young people aged 25-34 : 10 years ago, 53% lived in ownership, now just 35% Looking at future intentions: 59% of private renters intend to buy at some point in the future (2.6m households) Only 25% within next two years 42% say 5 years plus.
- #9 In theory, there’s lots to choose from. 4.5m properties in the PRS in England 182,273 properties to let on Right Move yesterday, not counting all the other ways properties are brought to market Big plus versus council housing – 1.2m on the waiting list
- #10 Shelter graphic which really effectively shows the barriers to access if you’re on a low income - Demand – landlords can be choosy. We know their most desired client group are ‘young professionals’ - LHA rates – this is the amount of housing benefit you get to cover your rent. Only covers the bottom third of local theory in theory, so denies you access to the top two thirds right away, but been frozen since 2015 and wasn’t keeping up with rents before that, so that reduces your available properties still further and because the freeze is going to continue to 2020, that puts landlords off housing you, because they know you won’t be able to afford a rent rise Administration – UC is administered nationally, not locally (for housing costs); delays commonplace Prejudice – 63% would prefer not to let to LHA claimants; 40% of landlords say they wont let to people on housing benefit as a rule, some because of bad experience but a good proportion of those who’ve had no direct experience still say they won’t… Deposits/guarantors – Zoopla say fees c£650, plus 4-6 weeks rent in advance Costs of access - £676 – optimistic – Zoopla; Plus 4-6 weeks rent as a deposit (which you will get back eventually)
- #11 JRF’s view is that if you’re spending more than a third of your income on housing costs, that’s probably unaffordable. This is an internationally recognised rule of thumb. This chart shows us the percentage of people in that position, by their housing tenure. First let’s look at your ‘average’ person – the middle fifth of earners. Owned with mortgage – just 3% Social renters – slightly more – just 5% Private renters – 30% of private renters on average incomes are spending more than 1/3 of their net income on housing costs If we then look at the poorest fifth of earners – people living in, or near, poverty, we see a much starker picture: Owned with mortgage – 27% spending more than 1/3 Social renters – 48% spending more than 1/3 Private renters – 73% spending more than 1/3 – nearly 3 out of four. Private renters in poverty are the group who face the most acute housing affordability pressures. And the system we - as a nation - put in to support people with their housing costs, housing benefit, is failing. Rates have been frozen since 2015, they weren’t increasing in line with rents before that, so there’s now a growing gap between real rents, even in the bottom third of the market that housing benefit is supposed to cover, and support for housing costs.
- #12 And this is where we end up. People who haven’t got a lot of income in the first place having to dip into it to top up their housing benefit. Powerful quote from a guy in his 40s who ended up being evicted because he couldn’t make it work.
- #13 Government has defined a relatively basic Decent Homes Standard. It’s not a legal requirement, but there has been a big effort, particularly in the social rented sector, to bring properties up to this standard. It’s pretty basic: - meet the HHSRS minimum safety standards for housing - be in a reasonable state of repair - have reasonably modern facilities and services - have a reasonable degree of thermal comfort (heating/insultation) 13% of social sector fails 18 of owner-occ 28 of PRS Always higher for those in poverty, whatever tenure they’re in. Note: 1/3 of private rented properties built pre-1919 – they are much older than owner-occ (20%) or social rented accom (6%).
- #14 Fine for a transitional tenure. But at a time when 36% of households in the PRS now contain kids. Average length of tenancy at present is 4 years, but this masks a varied experience. There are 800k moves per year within the PRS – lot of churn, about 1 in 5 households.
- #15 Research by Cambridge University for JRF published earlier this year. Growth in evictions, as the sector has grown – 40k of all type last year. But change in the type of eviction used – growth has come from use of Section 21 ‘no fault’ eviction Particularly concentrated in London and the SE – areas where rents have been rising. We think linked to benefit cuts.
- #16 Homelessness acceptances in England End of AST 2009/10 – 4,600 2015/16 – 17,900
- #17 It can offer all these things. But they key to securing them is affordability. The market is such that you can buy access, quality and stability if you need them. But without affordability, you’re more likely to be exposed in the other three areas.
- #19 Old-style rent controls – controls on the level of rents and their increase: Cambridge found ‘very significant’ risk of disinvestment Also risk of deterioration in property standards Not effective unless you also do something on security of tenure. We’re more open to rent smoothing Scotland, from December, LA Rent Pressure Zones, once approved limit increases (likely to CPI + 1%) Ireland regulates the frequency of increase but not the level (12 months, now 24). Something along those lines more in the art of the possible.
- #20 - Registration : light touch, marry up TDS, recourse schemes etc. Give us better knowledge on the operation of the sector - Incentives for landlords – drive positive behaviours (enabled by registration) - Social/ethical lettings agents – Carla – huge potential; privately owned, socially allocated; research (Belgium) Better enforcement – resourcing councils to use existing powers Ultimately Making PRS work for people in poverty starts with helping them pay the rent. Govt should end the freeze on housing benefit in November, reset to 30th centile and increase in line with local rents Build the 80,000 genuinely affordable homes we need in England each year and reduce pressure on the PRS.