After long-term decline throughout the twentieth century, the sector has grown in the last twenty years, following liberalisation through the 1988 Housing Act (which abolished rent controls and introduced short-term tenancies and ‘no fault’ evictions), and the introduction of previously unavailable buy-to-let mortgages in the mid-1990s.
Together, these two developments made privately rented properties a much more attractive and realisable investment, accessible by those who aren’t professional landlords but have some existing capital or property wealth. Against a background of insufficient housebuilding and a global property market, landlords have often been able to win three times over.
These wins are, firstly, having their mortgage paid off by someone else; secondly, by charging rents well above their mortgage payments they have received a good second income; and finally, through a market that has seen ever-increasing house prices they have seen strong investment returns.
Of course, the above represents the best-case scenario for landlords (though the growth of the PRS suggests the average landlord can’t have it too bad), but for tenants of all backgrounds the overall direction of the market continues to have negative consequences, whether those renters are aspiring first-time buyers or struggling on low incomes.
For years, buy-to-let landlords have been able to out-compete first-time buyers, in part through tax advantages that are now being gradually phased out.
The loud, outraged and vociferous lobby against ending landlord tax advantages (which, after all, only brings landlords into line with regular homeowners) also shows that while the economic orthodoxy is very much a cause of the current crisis, it’s also a political problem, with organised landlord bodies advocating for the status quo and a cautious or complicit government following their lead.
Despite the PRS operating perfectly well in many countries that offer caps on rent rises and greater protection from eviction, we’re told that the UK is a special case that would collapse under the weight of further regulation. In fact, England has virtually the most deregulated PRS in Europe when it comes to affordability and security, yet across much of Europe, private renting makes up a larger proportion of housing tenure. Regulation, surely, is needed when we consider the social consequences of the current system.
When social housing remains unavailable to large numbers of people in housing need, households are then rehoused in new private tenancies and the cycle continues, at a great cost to the state. It’s also hardly surprising that while a system that allows rents to rise at whatever rate the landlord decides each year will hit all private renters, it will be most harmful for those at the bottom of the market.
In London, for example, approaching 1 million private renters live in poverty, many as a direct result of high rents. Restrictions on housing benefit (known as local housing allowance) mean many claimants struggle to find somewhere to live, and the freeze on this benefit up to 2020 will only exacerbate this situation.
The argument goes that the market will decide rents – and naturally stop them rising above what people can pay.
Furthermore, although an affordable rent is generally considered to be no more than 30% of income, households are able to get by while paying 50% or 60%; it just means they are further immiserated and their landlord enriched. The consequences for inequality are clear.
In the current climate, then, rent control and ending no-fault evictions would bring down the housing benefit bill, reduce get-rich-quick landlordism, and drive up many people’s standards of living.
Speculation in housing and land is both an economic approach, and a social norm that needs to be broken. Regulating the private rented sector stands against both the culture and economics of speculation and would start to restate the principle that everyone has a right to a secure, affordable home.