Private Rented Sector Bigger than Social Housing Sector Now
In last weeks’ blog post I quoted figures from The English Housing Survey, which indicated that for the first time since the mid 1960s, the private rented sector (PRS) was larger than the local authority / housing association sector combined.
The latest survey available is for 2009/10 and shows there were 3.7 million households in social housing, compared to 3.4 million in the private rented sector – a difference of just 300,000. A year earlier, the same source found the respective figures were 3.8 million for social housing and 3.1 million in the PRS – a difference of 700,000.
So, I suggested that it was a fair bet to say that if the trend of those years continued into 2010 and 11 – and there is no reason to think that it hasn’t – we must have already passed the point where the PRS is the larger sector.
But why has the PRS grown so much and why has the social housing sector shrunk?
Well, of course, the “right to buy” policy, introduced in 1980 by the Thatcher government led to huge transfers of housing stock from the social rented into the owner occupied sector. Thatcher also effectively ended local authority house building activity, so there was no new new-build local authority owned housing coming on line to replace the stock that had been transferred out.
Deregulation of the PRS
Fast forward a bit to the mid to late 1980s when the deregulation of the private rented sector started with the ending of rent controls and security of tenures.
Rent controls were measures that had been started as “temporary measures” back in World War One – but which became permanent. Over the next 73 years from 1915 to 1988, they led to landlords selling their holdings whenever they could – and to the long term decline of private renting from around 80 per cent of the market in 1914 to 8 per cent at the end of the 1980s. This is an astonishing fall by any measure.
But, in 1988, the introduction of assured shorthold tenancies, provided for rents to be set at market levels, and it also gave landlords the right to recover their property at the end of the agreed tenancy period. This really changed everything.
Mortgage lenders – never the fastest on the draw – took another 8 years before a group of them felt comfortable enough to launch the first “buy to let mortgage” in 1996 (though smart landlords, seeing the early potential, had been using mortgage financing usually arranged as “commercial mortgage” deals since the mid 1980s.)
Latest data shows the private rented sector has grown back – from its nadir of 8 per cent to 15.6 per cent of all housing stock (in the 2009/10 figures) but we think, by now, it is well over 17 per cent. In London, in some boroughs, it is probably over 30 per cent.
Owner Occupation Continues to Decline
Meanwhile, owner-occupation continues to decline from its high point in 2003 when it was a smidgen under 71 per cent of all housing stock.
It is 67.5 per cent on the 2009/10 figures, but we think, by now, it could now be under 67 per cent – taking it right back to where it was in 1991.
The falls in owner occupation are due to a number of factors.
Mortgage tax relief withdrawal started the process off but in recent years a tighter mortgage lending environment has continued it.
Today, the prospect of rising interest rates, job insecurity, reduced real personal disposable incomes and an aversion to debt make a continuation of the fall in the rate of owner occupation and a rise in the private rented sector look a near certainty.
But added to that, there is the end of the job for life culture and an increased willingness for people to move in and out of employment and training through their lives. For many people, these lifestyle factors are the main reasons why they are now choosing to rent in the private rented sector. The PRS gives them flexibility and means they are not tied down with a mortgage.
There will be no blog next week. The next blog will be posted on May 3rd.
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LettingFocus.com is the home of Private Rented Sector Consultancy and expertise and I’m David Lawrenson, a landlord and property investor myself for over 25 years and best known as the author of “Successful Property Letting” – the UK’s top selling commercially published property book for the last 3 years. 26,000 copies sold (up to Feb 2011).
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