14 September, 2015
The Private Rented Sector (PRS) has been on the increase for some time and is an important solution where homes are becoming more unaffordable. The English Housing Survey has revealed that social housing household figures recently fell below that of private rented sector households and that there are now around half a million more people living in the private rented sector than social housing.
Expansion into the private rented sector was enabled as a result of the Housing Act 1988 which introduced shorthold tenancies thereby making the sector seem more attractive to potential investors. In 1996 buy-to-let mortgages were announced which made it much easier for smaller investors to get into the property market, and without the rent controls previously in force, investment into the PRS was considered a viable source of income.
There are however many people who would prefer to own their own homes rather than rent but higher house prices and the reduction in lending since the recession have made this almost impossible. Social housing, it is considered, is now also more difficult to come-by. When properties are sold on under Right to Buy, there is often the lack of investment in the provision of replacement social housing. Tenants are then forced to turn to private landlords, hence the increase in reliance on the PRS.
One issue of concern with the PRS is the lack of security afforded to tenants where security is only really offered for six or twelve months depending on the terms of the agreement. Whilst this might be useful for tenants occupying a property in the short term, it provides little protection for those families who cannot afford to get on the housing ladder at this present time.
More homes that are both affordable and provide value for money, together with better lending are required and until the economy allows for this, the PRS is likely to be, in the main, a favoured model for landlords going forward. But where does this leave social housing providers? With reductions in grant together with the need to manage risk and the fact that registered providers are now more accountable for any decisions made, it seems one feasible option would be diversification into the private rented sector. It may ultimately produce a higher return on their investment, allowing for the reinvestment of any profit back into the provision of affordable housing.
For further information please contact any member of the Housing & Regeneration (Property) Team on 01772 220022.