Ideas for improving the reality of renting for the increasing numbers doing so
Over recent decades the private rented sector has grown substantially, more than doubling in twenty years to house 20 per cent of all households. Over that period, the sector has also become more diverse. Once principally home to young, single renters looking for flexible accommodation, a growing number of families with children and couples are making a long-term home in the sector
Despite this, the regulations which govern the tenure have not kept pace with its growth. As a result, a large proportion of households now live in a sector which is failing to meet their needs.
Government is beginning to make progress, banning letting agent fees and consulting on longer tenancies and reforms to the court system. However, there is still no programme of cohesive reform to the sector. If it is serious about helping renters, government should look to take action in three key areas.
Security: Private tenants currently lack meaningful protection from eviction. Government should reform the default tenure to give much greater security to tenants by extending the minimum length of their contracts. They should actively explore open ended tenancies.
Conditions: A higher proportion of homes in the private rented sector fail to meet the decent homes standard, a minimum benchmark for housing conditions, than in any other tenure. Urgent action is needed to drive up standards and to crack down on landlords who rent out properties in the worst conditions. This could include a new minimum standard which rented properties would be required to meet.
Affordability: Private rents are unaffordable to many and this is further compounded by reforms to housing benefit which have reduced the financial support available to lower income renters. Government needs to increase funding for social and other genuinely affordable housing tenures, while reevaluating the financial support available to renters on low incomes.
IPPR are currently working on a project examining these issues in greater depth. Look out for an interim report to be published December 2018 followed by a final report in January 2019.
As long argued by the CSJ, worklessness and low pay, educational failure, family breakdown, addiction, and serious personal debt are all equally capable of holding people, and indeed whole communities, back.
In the fight against these pathways to poverty, it is vital that individuals have the foundation they need to flourish: a safe, secure and affordable place to live.
But utter the phrase ‘affordable housing’ these days and people naturally raise an eyebrow.
This is due in part to the fact that affordable housing as defined in the planning rules includes an array of submarket housing products, varying greatly in just how affordable they are to renters on low (and even modest) incomes.
Meanwhile, the proportion of new homes for Social Rent within the overall supply of affordable housing – that is, the homes provided to catch families unable to meet the cost of rent in the private market – has fallen far too low. Last year, for example, we built just under 6,000, despite there being some 80,000 families currently housed in temporary accommodation.
Thankfully, there is clear appetite in Government to energise affordable housing supply over the longer term – as shown by the recent announcement to lift councils’ housebuilding borrowing cap.
But we must ensure that these homes are suited to those who really need the support.
By delivering more homes for Social Rent, we can ensure that the renters struggling the most are protected when costs rise rapidly in the private market.
Back in the early 2000s, for every family with kids living in the private rented sector (PRS) there were nine that owned their own home. By 2016 that ratio had collapsed to 2:1. Over the same period, we barely changed the way the PRS works so it’s high time that the government introduced longer tenancies to give stability to all renters, particularly the 1.8m families with children in the PRS.
Scotland have already introduced indeterminate tenancies and the government should follow suit. Of course, this should include a sensible set of break clauses to allow landlords to repossess for legitimate reasons. This change would be a marked improvement on the current situation in which once the ‘initial term’ of a tenancy ends a landlord is able to evict residents with just two months’ notice, and need not give any reason for their decision.
Rental spikes are a source of insecurity in the PRS too. For this reason, the government should also consider introducing light-touch rent stabilisation that limits rent rises to CPI inflation for set three-year periods. New tenants should have their annual rent rises limited to a maximum of CPI inflation for three years after which a rent review can be undertaken. At this point, the landlord can increase rents above CPI so long as they can demonstrate the new level is in line with market norms and/or that it reflects significant improvements to the property.
Tenants have to find large sums of cash – often six weeks-worth of rent – to pay a deposit at the start of their tenancy. This summer, the CPS published ‘Down with Deposits: The Case for Rental Insurance’ by Brian Sturgess, arguing for a realistic alternative.
Finding the cash for a deposit is a challenge for most tenants. Many are young professionals without savings or established credit files, and so have to rely on expensive short-term loans. If they have the money saved, in handing it over to the landlord, inflation eats away at it and they lose any interest they might have earned on it. At the end of tenancy, they often find that getting the deposit back is harder than it ought to be – indeed, according to the English Housing Survey, only 62% of tenants have their deposit returned in full.
Our paper proposes an insurance system as an alternative. Rather than paying a large up-front sum, tenants would pay a small sum to a scheme that would payout to cover the cost of damages when necessary. A YouGov poll carried out on behalf of the CPS found that a majority of tenants would prefer an insurance option (‘Don’t Know’ excluded).
In order to promote this option, the Government should amend existing legislation to make free-market deposit-replacement solutions easier, regulate the deposit-replacement market via the FCA, and perhaps agree to waive the Insurance Premium Tax for the product.
We believe this would be a market-based solution to a genuine problem.