The private rented sector (PRS) has latterly been the subject of a great deal of political interest both nationally and internationally. This is partly because rents are increasingly seen as unaffordable, leading to calls for additional regulation – but more fundamentally it reflects the rapid growth in the significance of this sector over the past two decades here and elsewhere.
In England, the PRS, once seen as really only suitable for younger and mobile households, now accommodates more households than the social rented sector and includes large numbers of families seeking longer-term accommodation. This new reality calls for structural change to meet the very different needs of a mainstream sector and requires innovative and evidence-based policies to address the issues of tenure security, cost, and quality. In a report entitled, ‘From ideas to reality: longer-term tenancies and rent stabilisation – principles and practical considerations’ sponsored by the Resident Landlords Association, Christine Whitehead and Peter Williams suggest a definition of a good tenancy and set out arguments for change, looking particularly at the potential for long term security of tenure and associated within-tenancy rent stabilisation to benefit both good landlords and good tenants.
So what makes a good tenancy? The authors suggest the basic requirement is for a mutual and willing relationship between tenant and landlord that responds to market demands. But, in the real world, there are always power dynamics and market pressures that mean the reality is often very different – hence the need for regulation, notably with respect to the security of tenure, rent determination and standards. These issues are, of course, deeply interlinked.
Turning to practicalities and based on the evidence from other countries, the authors argue that longer-term or, better, indefinite tenancies together with rent stabilisation against a defined index within the tenancy could bring greater stability and order – reducing costs for both landlords and tenants. They also clarify that these are not enough without careful implementation, suggesting that ‘risks can be reduced if there is a clear means of ensuring that contractual terms are met by both sides of the contract and changes in individual circumstances can be addressed’. The belief that this is not the case is at the core of the problems in the current system. To some extent, this is recognised by the government in their current proposals but these give little security to tenants and as yet no details on the possible new housing courts. But more is required.
Finally, the authors make the case that incentivising landlords may be a necessary part of persuading them to implement an effective regulatory structure, given their current lack of belief in the system. But because of the increasing importance of the sector and the need for a reliable PRS that works for landlords and tenants alike, this may be a cost worth considering.
The report can be accessed here.
A brief summary of the report written by Nick Clay from RLA is available here.
You can read more of our work on the private rented sector in the ‘Finance‘ and ‘PRS‘ themes from our blog.