A sustainable rental market

Ann McKechin MP

A recent report from the Resolution Foundation and Shelter starkly outlined the rapidly changing housing patterns now evident in almost every community throughout the UK. This has been fed by a rapid increase in the number of short-term private rental lets by the under-35 age group, and it’s not difficult to see why this is happening. The under-35s have increasing levels of unsecured debt; their incomes are being squeezed and they are more likely to be on temporary/part-time contracts. In addition they face a significant contraction in both mortgage finance and housing supply.

Despite the severe economic downturn, the buy-to-let market remains buoyant. Rental levels are increasing above inflation and have reached eye-watering levels in the south east, with demand increasing year on year. Many urban neighbourhoods are now being impacted by a much larger transient population. But many stakeholders, including the UK government and financial institutions would have you believe that we simply need to grit our teeth through the pain on the premise that at some undefined point everything will return to where we were in 2007 or even 2000.

But the changes in the jobs market may be much more permanent and there are valid concerns that ‘back to normal’ simply leads us to precisely the kind of unsustainable behaviour which caused our current economic problems. Is it really sensible, in an increasingly fractured labour market, to encourage those on modest incomes to exhaust all their savings to meet such hefty deposits at a time when their outgoings will be at the highest during their lifetime?

A more sustainable solution might be to look at alternative forms of property tenure, and to question why in the UK we place such an emphasis on outright ownership. When we look at other European nations, we see a more relaxed attitude to home ownership which often starts at 40-plus age group and an emphasis put instead on long-term, good quality rental accommodation, creating a stable market of supply and demand for responsible landlords and tenants and long term residential leasehold interests. If the purpose of property ownership is to provide a family home and to create the stability of long-term residence, the tenure which is held by the occupier becomes less relevant if adequate protections.

We need to establish both a legal and financial structure that encourages a long-term private/not-for-profit rental sector which will provide good quality affordable accommodation. That means proper regulation that supports reputable landlords – possible partnerships between major builders and housing associations should be considered –and a regime that controls rent levels so they do not thwart a reasonable return for investors but are still within the reach of those on middle incomes.

5 Comments:

  1. Mike Vincent

    This is blindingly obvious and has been for decades.
    The fact that Labour were in power for 13 years and did nothing about housing shows we have a very long way to go.
    Stable / affordable housing is a pre requisite for a stable society, many of the problems we have now are down to housing.
    I earn bout 80,000 a year but still cannot buy in London, my landlady thinks it’s fine to pop round any time. I am 48 and have lived in 30 houses in 25 years mostly on 6 month tenancy agreements, my kids don’t know if they will be living in this house for christmas let alone next year.
    Almost without exception our landlords over the years have been self serving.
    Our last move cost £10,000, the last landlord lied and managed to squeeze 50% of our deposit out of us. I went to mediation but the tribunal found in their favour, the adjudicator had not even read or looked at my photographic evidence. Had he done so he would have seen he was wrong. There was no scope for a second appeal.
    I am not alone 60% of people still do not get their deposit back…
    the whole system is broken and is not fit for purpose.
    Only massive amounts of cheap council housing can bring the situation under control.
    What can I say…

    Reply
  2. George Talbot

    The good quality rental sector you describe would be nice and I agree that most young adults in Britain must rent. But how could you protect your reasonable rental sector from free market ownership? This has become acquisitive because some seek to maximise their returns from houses by playing the boom bust cycle of usurious finance and by minimising the quality of accommodation and maximising rents supported by housing benefits. Now neoliberals are raising social rents to market rents.

    I have an index of house prices divided by average earnings from 1979 that is one in the early 80s when council houses were put on the market. It peaked at one and a half at the end of the 80s and was one for much of the 90s. But I do not advocate returning to 2007 when it peaked at two. QE is intended to raise asset prices so as to improve the balance sheets of banks!

    You rightly note the fall in the quality of jobs and I urge Fabians and Labour to admit that the deregulated global economy is structurally unsound. Rather than stimulating it and be blamed for spending too much, they should introduce a better system. Governments cannot ensure that men and women have good lives when they are set against each other worldwide.

    Reply
  3. Yonatan Smith

    Edited from before as the last sentence needed it:

    A succinct yet developed explanation of the need for a change in our legal and financial structures. I would be interested to work alongside stakeholders and investors to find out what is a reasonable return for their money benchmarked against other opportunities for investment – for example green energy or waste management – and then to work out policy that helps lend towards a reasonable return for everyone involved. Reasonable return of investment balanced against affordable rents that are based on average to low incomes and the GDP of the country instead of the less relevant bloated market price.

    Reply
    • Mike Vincent

      Yonatan,
      No offence intended but your thinking and most thinking on housing is simply too complex.
      Housing is a social good it is not a commodity in as much as it is a basic necessity like air and water.
      As such you can see wars fought over land and over available living space across the world.
      We need to bite the ullet admit the patently obvious (housing policy over 50 years has not worked) and build cheap council housing now, I would make one proviso, that the housing is managed by the tenants as in saga co-housing / housing co-op situation rather than allow councils and the manifest problems with council bureaucrats running them.
      That would resolve a few problems with one solution, namely housing and social fragmentation.

      Reply
  4. Yonatan Smith

    A succinct yet developed explanation of the need for a change in our legal and financial structures. I would be interested to work alongside stakeholders and investors to find out what is a reasonable return for their money benchmarked against other opportunities for investment – for example green energy or waste management – and then to work out policy that helps lend towards a reasonable return for everyone involved. Reasonable return of investment balanced against affordable rents that are based on average to low incomes and the GDP of the country and the less relevant bloated market price.

    Reply
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