05 Oct 2023

By Tola Amodu

The rented housing market in the UK has historically relied on supply of housing stock from the state. More recently, the private rental sector has grown significantly in size attracted by continuing low interest rates. This blog post argues that with a change in the economic landscape, quite a bit more needs to be done, particularly establishing a clear knowledge base for regulation and engaging both landlords and tenants, if the sector is to be improved and catastrophe avoided.

We are used to hearing about the housing crisis – the lack of available housing to rent and the excessive cost of housing to buy. This is now impacting upon every age group and not just ‘Generation Rent’. The private rented sector (PRS) now houses those of all ages and demographic profile – from young professionals to families, and those over retirement age. Further there are costs to wider society where housing stock is in poor condition and the health costs associated with defective homes places a burden on us all. Given this, the UK Government’s recent proposal to reform the letting sector, contained in its Renters (Reform) Bill places in the spotlight again, the ongoing conundrum of how to regulate a sector upon which the state currently depends heavily. The PRS is a key component in meeting housing need at a time when rising interest rates, inflationary pressures, and the spiralling cost of homes to buy combine to place home ownership beyond the reach of many. This together with continuing constraint on public provision creates a relation of state dependency upon a sector which historically has a poor reputation.

The UK Government’s White Paper, “A Fairer Private Rented Sector” envisaged a reinvigoration of the rental sector, giving tenants greater right to their home (including allowing them to keep pets with consent), securing an end to “no fault” evictions (historically, landlords could evict tenants without any default on the part of the latter, by simply following a set process) and creating a PRS Ombudsman to provide a fairer resolution system on disputes between parties, while at the same time educating landlords on their legal obligations all seemed praiseworthy. However, one thing was overlooked and that is both the structure of the sector and the potential response of the key player – the private landlord. A closer look at the composition of the sector might alert us to future problems, the consequences of which could ‘spillover’ onto society, as a whole.

National datasets, especially the English Private Landlord Survey highlight a level of heterogeneity unknown to many regulated sectors. This is a sector which has grow rapidly since 2008 – and in fact increased by 45% between 2008 and 2021. Further it now houses 19% of all households and is second in size only to owner occupation – the decline in Council housing and the limitations of the social sector, both contributing to its importance. Interestingly 94% of all landlords are individuals, who provide around 84% of all tenancies. Of these, 43% own only one property. This leads to what might only be termed a headache for those seeking to regulate let alone upskill the sector, particularly reaching those who cannot or do not comply. The Bill itself (which did not reach its Second Reading in the last session) gave rise to a level of coverage in the media that highlighted the polarized nature of landlord tenant relations, which itself speaks potential difficulties in regulatory compliance, if (or when) the Bill returns to the House.

All scholars of regulation note that to regulate, effectively the capabilities and capacities of the target community need to be known. Further any mechanisms of control should, as a last resort, be capable of enforcement. We still know very little of the motivations for letting out and it is questionable whether the rational actor motive holds good in a sector where property ownership carries with it symbolic weight. Regulation of the sector most often falls to local authorities, themselves under resourced and financially stretched. It is often the case that compliance with existing provisions cannot occur and so we might wonder if any proposals, should they be enacted, will be of symbolic rather than actual significance [effect]. There is little, on the face of it, to suggest that without the support of the private landlords themselves – whether through their representative bodies or otherwise, the stated aims will be achieved. The carrot and stick approach has long been seen as outmoded and lacking in sophistication and the complexity of any realistic compliance process will require much more groundwork to co-opt the regulated community into achieving “win-win” outcomes. If, as some suggest landlords are already exiting the sector given unsustainable leveraging, we might ask who or what will have the capacity to “step into the breach” at short notice, if disruption to this rather niche market is to be avoided at all costs. This cannot be a site of experimentation without potential catastrophic effects which will ultimately harm both tenant and landlords. Perhaps it is time to go back to the drawing board.