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Dramatic Shift From Home Ownership To Private Rent

February 22, 2013 | Company News  

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Released yesterday, the latest annual English Housing Survey provides some very interesting statistics. For the first time in close to 50 years, private rent has overtaken social housing as the second-most common tenure (the most common being owner-occupation). There are 3.81m households renting from a social landlord, while there are now 3.84m households privately renting in England. This is a remarkable shift compared with 30 years ago, when there were over 5m socially rented households compared to under 2m rented privately. Social housing has been steadily declining, thanks in part to the policy of selling council houses pioneered by the Conservative government in the 1980s, while private renting has rocketed in recent years as a result of the credit crunch pushing aspiring home-owners out of the housing market.

Campbell Robb, chief executive of the housing charity Shelter argues that this is bad news, saying, “This historic shift in our housing market is bad news for anyone struggling to find a decent and affordable home.”

Owner occupation has fallen to 65% in England from a peak of 71% in 2003. Both the private rented sector and the social sector stand at 17%. Average rents were shown to have increased less in the private rented sector than in the social sector since 2008. In the private rented sector, average rents went up 7.18%, while there was a 16.9% increase in the social sector over the same period.

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said, “The figures provide further evidence of the shift away from owner-occupation in favour of the rental sector.

“Provisional data for the last financial year puts the proportion of households in their own property at the lowest point since 1987.

“Meanwhile, an increasing proportion of the population is turning to the private rented sector for shelter with the latest figures showing this form of tenure overtaking the social rented sector last year.”

A third of private renters were shown to have been in their homes for less than one year, which contrasts starkly with home-owners, two-thirds of whom having been in their properties for over 10 years.

The short-term renters may be missing a trick, however, as the survey shows that tenants who have remained in their properties for 10 years or more pay much lower rents on average (£123 per week compared to the average £173 paid by tenants in their properties for under 3 years). Also, private renters were found to be paying almost twice as much on average per week as social tenants.

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Although, the high number of short-term rents highlights the flexibility of the private rented sector, one of its key benefits. It allows for greater mobility, enabling people to move around the country to find work.

Alan Ward, chairman of the Residential Landlords Association, said, “In difficult economic times, average rents in the private rented sector have increased since 2008 by significantly less than the social sector, despite private landlords not benefiting from the £6.5bn spent by the Government on housing.

“It demonstrates that at a time when the sector is the only one growing, rents are best controlled by boosting the supply of properties.

“The report notes that those tenants staying in their properties for longer face significantly lower rents as landlords much prefer good tenants to stay on. One in three private sector tenants has lived in their home for more than three years.

“This makes Shelter’s calls for five-year tenancies redundant, given that tenants are already able to stay in a property for up to ten years and more. Furthermore, their proposals to link longer contracts with annual rent rises linked to inflation would at present be bad news for tenants who are on average seeing rents increase at present by less than inflation.”

But the survey isn’t all rosy towards the private rented sector, as it highlights a few drawbacks. Overcrowding was found to be an issue, assessed by the difference between the number of bedrooms the household needs and the number of bedrooms available. It’s still not as bad as in social housing, but both are well above the trend for owner occupiers. However, it may look worse than it actually is when compared to owner occupied housing, as its cases of overcrowding are minute. It is only 6% for the private rented sector and 7% for the social sector. But, on the flip side, nearly half (49%) of owner occupied housing is under-occupied, compared with 16% for private housing.

Ward continued, “A growing market is good news for the economy since every £1 invested in the private rented sector provides a return to the economy of £3.50 through expenditure on building work and furniture.

“With the housing supply crisis ongoing, we call on ministers to do all they can to support the almost 90% of smaller-scale landlords to provide the new homes that are desperately needed.

“Investment on properties would be greatly improved if ministers treated landlords as a business within the taxation system.”

Another of the survey’s key findings was that private renters are generally much younger than those in social housing. Half of private renters in England were found to be under 35, compared to only 19% of social tenants. Meanwhile 29% of social tenants were over 65, compared to just 8% of private tenants.

Nearly two-thirds (64%) of social tenants were found to be on housing benefit, compared to just over a quarter (26%) in the private rented sector.

Overall housing has seen a drastic improvement with regard to damp, with only 5% of all homes found to be damp, down from 13% in 1996.

 

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