A leading group of cross-party peers has criticised the private rented sector (PRS) for its increasing unaffordability in a report published today by the House of Lords.

Called Meeting House Demand, it looks at all the factors creating the UK’s housing crisis and follows months of interviews with the key movers and shakers within the housing market including several housing ministers and the National Residential Landlords Association.

It also set out to discover the market’s structure, demographics, demand for different types of housing tenure including rented, and whether the government’s target of building 300,000 additional new homes a year is realistic.

But the NRLA told the Lords’ Built Environment Committee that unaffordability within the PRS is down largely to government policy, highlighting how the curtailing of mortgage interest tax relief and the introduction of a 3% stamp duty surcharge is restricting supply while high house prices, particularly in the south of England, is increasing demand for rented accommodation.

Highly questionable

The NRLA says these decisions by then Chancellor of the Exchequer George Osborne were based on the ‘highly questionable’ assumptions that landlords ‘crowd out’ homeowners from the sales market and that landlords were taxed more favourably than homeowners.

The committee’s report says the biggest problem facing first-time buyers is not competition from landlords, but the inability to save up a deposit, ‘a goal that becomes increasingly out-of-reach if house prices rise faster than savings’ it says.

But it also points out that the proportion of private tenants income spent on rent has risen from 12% in 1980 to 32% today across the UK but 42% in London.

In comments published by the report, Toby Lloyd, Chair of the No Place Left Behind Commission and an Independent Housing Policy Consultant, said: “The private rented sector is by far the most expensive, by far the lowest quality and by far the least popular.

It is absolutely the worst possible tenure for almost everybody in it.” He added.

“Most people who are private renting would much rather be in something cheaper and higher quality. Who would not be? That means either social renting or owner-occupation. It is absolutely the tenure of last resort.”

More redress

Key recommendations of the report, which was chaired by Baroness Neville-Rolfe (pictured), include giving tenants greater redress – something the government is likely to introduce within its soon-to-be-published Rent Reform proposals, and that more rented social housing should be built to take more financially vulnerable tenants out of the private rented sector, where they tend to live in more crowded, poorer quality conditions than homeowners.

Talking to LandlordZONE, Baroness Rolfe said: “We were struck by the huge growth in the private rented sector in recent years from 10% to 20% of the housing market, and the change in landlord demographics in recent decades,” she said.

“45% of landlords have only one property and another 38% have between two and four properties – but most worryingly landlords are getting older and the evidence we heard suggested a younger generation is not joining the sector.”

Read the report in full.


23 COMMENTS

  1. I resent the statement – “The private rented sector is by far the most expensive, by far the lowest quality and by far the least popular.”

    My properties are all maintained to a good standard – not something all Housing Associations & Councils can say. The fact that tenants in the PRS have nowhere else to turn is mostly down to Govt policy. The lack of social housing & daft policies like the SDLT holiday (how many FTBs has that helped?) has made the PRS the only choice for thousand of renters. We are entitled to make a decent return from our investment but then we are blamed for the failure of successive Govt’s housing policy!

    If the Govt built high quality, affordable social housing for everyone then the PRS would cease to exist. In the meantime we are a business supplying a demand and making a small, highly taxed profit!

      • Hi Dave, I guess your from Generation rent or one of that lot, perhaps you should get yourself some housing stock and show landlords how its done. Until you have done it, I suggest you keep your uneducated and stupid comments to yourself.

      • Dave, maybe you have had a bad experience with a landlord(s). Your view is based on ignorance. Don’t speak until you know what you’re talking about.

      • My guess would be arguably that the Social sector is more consistent so some of the poorest conditions are in the PRS although this is a minority.. I would say though that most properties in the PRS is of a high standard, and actually the way to increase that standard would be competition… In the electrical industry the social housing sector is a joke as the pay is so low and those that work in it do things like a driveby EICR, just look at electrician jobs, they expect you to do 5 EICR’s a day, I can do 2 if they are relatively small, but would go over 8hrs in a day by the time I have done the paperwork. The social sector is actually a very basic standard but as said it is more consistent.

  2. Landlords have been squeezed until the pips squeak. Their only choice to redress this by increasing rents. Anyone with half a brain would realise that.

      • Supply and demand and investment risk. Increase investment/operational risk, increase demand reduce supply = rents increasing. Simple market pricing which most Conservatives promote, are in favour of and understand.

      • The costs to landlords be it increase SDLT, increase house purchase costs, increased insurance, increased maintenance, taxation on income rather than profit.. Yes the costs have gone up and this has affected rents… Also because of the hostile environment the media and government have created people are leaving the sector which is leading to a lack of supply which drives up prices.. But how is that any different to gas, electricity prices at the moment?

  3. Well said Tricia. As older small-portfolio landlords we maintain high-quality properties and establish a good friendly business relationship with tenants – we live near the properties and deal with problems asap and usually in person, unlike many large corporate landlords who have no personal interest in tenants or their properties.

    The Noble Baroness’ comments: “45% of landlords have only one property and another 38% have between two and four properties – but most worryingly landlords are getting older and the evidence we heard suggested a younger generation is not joining the sector” are bizarre to say the least. So what?
    Is there evidence that these aged landlords with between one and four properties are worse landlords than others, or better, or what?

    And as a Conservative peer arguing “that more rented social housing should be built to take more financially vulnerable tenants out of the private rented sector”, perhaps she should have a word with the government about that one.

  4. So LL potentially were taxed more favourably than homeowners.

    As far as I am aware being a homeowner isn’t a business.

    Whereas the proverbial butcher; baker or candlestick maker is allowed to offset their finance and other costs against income to hopefully produce a taxable profit.

    Only LL aren’t allowed as a sole trader to offset their finance and other costs against income to hopefully produce a taxable PROFIT!!

    Clearly sole trader mortgaged LL are taxed very unfavourably compared to any business.

    Homeowners cannot be compared with LL.

    Nobody mentions the MASS UNCONTROLLED IMMIGRATION in their millions since 1997 when dopey Labour flung open the borders to all and sundry.

    There was a housing shortage back then.
    Hardly surprising that this has bern exacerbated with millions og legal migrants.

    Not forgetting of course the about 2.5 million illegal immigrants many of whom are arriving by dinghy daily.

    No wonder there is pressure on housing stock.

    You could build 300000 properties of all types per year for the next 50 years and there still wouldn’t be sufficient.

    Only by reducing demand and building in high demand areas will sufficient housing be made available.

    LL aren’t to blame for supposed expensive and unaffordable rents.

    LL just operate in the current market and charge what the market will bear.

    LL aren’t in the game for the love of it.
    Most do it for

    PROFIT.

    The more inconvenient Govt makes it for LL to operate the fewer LL there will be.

    Just because market rents are unaffordable for many clearly many do afford such market rents.

    If they didn’t then LL would face long voids!!

    LL clearly are letting at what are for some unaffordable rents.
    Have to say to those unfortunates………..TOUGH S###!!

    No private LL is obligated to let at less than market rents.

    Many actually choose to do so and that of course is their business choice.

    Though of course it is the case that lenders expect market rents to be achieved to comply with the mortgage application and it’s conditions.

    LL do not cause unaffordability.
    Only the market and bonkers Govt policies cause that!

    If Govt wishes to ensure more rental properties are available for long term tenure then these are the 3 most important factors that will encourage that to occur.

    1

    Abolish S24

    2 Abolish SDLT surcharge

    3

    Abolish the ridiculous length of time to get rid of feckless rent defaulting tenants.
    Should be 45 days and NO court action required.

    Just these 3 things will cause a mass return by LL to long term letting.

    But of course we all know Govt will never abolish any of these things so the PRS will continue on it’s terminal decline.

    Govt can’t force LL to offer affordable rents.

    If it tries to with Rent Controls then LL simply sell up!!

  5. I am a very small landlord, luckily with alternativre sources of income. I had three residential properties and two commercial properties. Until two years ago at the start of covid all three properties were rented out, one of the properties was vacated just prior to lock down and the house was in need of total renovation, (it had been renovated only three years before and had suffered severely in the following three years as I’m positive other landlords will have found with some of their tenants)

    It was impossible to obtain workmen for many months and whilst eventually the property was renovated and redecorated to its previous high quality at a cost approaching £11.000 and after paying council costs for almost two years along with having to pay all ancilliary cost without income I decided to sell it and invest the income into another commercial property.

    I had owned the property along with the other two since the early 1990’s I have lost substantial money due to some poor tenants and unpaid rents over the years, however the two remaining tenants are excellent, one of whom moved in over 15 years ago and they are still on the same rent as when they moved in, the other family moved in over 5 years ago and have not had their rent increased since then.

    Surprisingly my costs have risen over time and continued attacks by successive administrations and the continued increases in costs and tax are most likely to force me to raise rents and by a massive percentage. The rents will still be below the local market secto, the tenants will probably not be able to move or find lower rents and but this is something that will be forced on to them. I also need to spend approximately £11,000 on each property to reduce their carbon footprints. This is more than the total gross annual income for the two properties.

    Since I have owned properties I have always maintained them to an excellent condition and have always pitched rents at well below the mean for similar properties (unfortunatley not all tenants in the past have been appreciative of the fact.

    Government legislation consistently paints landlords as an evil and admittedly there are some unscupulous alements, I do not believe that the majority however fall into this category. There are laws that can sort out rogue landlords, unfortunately the laws that penalise rogue tenants are inefficient, astoundingly complex, ineffective and designed to ensure that councils and Goverment throws relatyed costs as far as possible back into the laps of the landlord. There are after all more votes from tenants than from landlords.

    Successive Government policies have contributed to the current high rents and failure of the housing market which is being propped up by the PRS.

    • Reading your very distressing story I’d suggest sell up.

      The hassle is it really worth it.
      Your net yield must be zero with all the costs that you have occasioned through no fault of your own.

      Yours is a story oft repeated.

      With a dysfunctional repossession process and inadequate deposits is the game worth it!

      I decided no so I’m getting out.

      Perhaps you should consider the same.

      Remember there are some horrendous regulations and additional taxes coming soon.

      Your yield would take years to match the additional costs.

      Why bother!?

      Sell up and stash the cash for when Wealth Taxes are introduced by an incoming Labour Govt next GE.

  6. The title of this article should be PRS is increasingly unaffordable for landlords as well as tenants. I cannot afford to be a landlord anymore (tax, costs and risk) I am one of those older landlords leaving the sector. Even if I were to put up rents which I have never done for existing tenants, I cannot recover enough costs to make this a viable proposition going forward. so I agree with all the above as well as Dave. But if normal PRS providers cannot make money, and tenants can’t afford rent there is only one way this story ends. Tenants in poor quality social housing if they are eligible and lucky, homeless ness and just a high end PRS for the better off tenants. Govt policy, leading to the ruin of the breadth of the PRS at the same time as councils selling off council stock because, guess what, it was too expensive to maintain housing stock!, has caused the unaffordability of the PRS for both landlord an tenant over the years. And increasing legislation and constant vilification of the majority of landlords is the death knell of the PRs as it was both good average and bad. But at least it was there and there was a choice. Conservative or Labour makes no difference any more. I am voting with my feet and leaving the PRS.

  7. Clearly the investigation underpinning these conclusions was not done in the town where I live, as the conclusions don’t stack up with reality.

  8. It’s hard not to think that the Government want only the dumb, the stupid, the tax dodging (cash only) criminal to remain in the market as unincorporated LLs.

    The government has encouraged institutional investment in the Build to Rent sector, but this cherry-picks from the traditional PRS, with developments creating silos (students, professionals, homeless, elderly) with profitability ensured by only accepting tenants with impeccable references and credit scores or subsidy from the public purse.

    That said, I fail to comprehend why you would never raise the rent over the life of a tenancy. Without a capital reserve, how are you able to deal with emergency and planned repairs and other works, such as energy efficiency, even f you have no plans to build your portfolio. I also think it is unfair on tenants as by subsidising their rent may keep your property tenanted but it discourages them from taking opportunities which would require them to move, as the cost of doing so becomes increasingly draconian.

    Comparing 1980 rent costs is at best disingenuous – after all, these were the days of controlled rents, with limited access to BTL loans and Maggie was still getting Right to Buy through parliament. Using 1990 would provide a more meaningful comparison, as this was when the 1988 HA with the current AST/S8/S21 regime had come into effect.

    I agree with most of the industry comments above on the taxation of unincorporated LL
    – 3% SDLT surcharge on residential hasn’t stopped the surge of 2nd and 3rd homes but has made getting new stock harder due to initial cash required to pay the SDLT
    – S24 restrictions making finance costs a burden which has held back growth and investment
    Look what happened to Prime Central London – masses of properties moved to Airbnb model until the pandemic
    – Accelerated CGT payment, within 2 months of sale
    – 8% premium on CGT with no roll-over relief for reinvestment, which would allow us to sell unfashionable rentals to FTBs and reinvest in something better suited to current market demands
    – No business relief for IHT when passing rental properties on death, forcing sales to pay tax.

    With a likely increase in wealth taxes due to coincide with further regulation (LL register, mandatory training and redress, etc) and the possibility of losing S21, it’s no wonder unincorporated LL are selling up in order to put their funds into more profitable and tax efficient investments.

    Help to Buy, FTB SDLT exemptions, H2B ISAs, SDLT holidays – these are gifts to developers and the wealthy but often of limited benefit to FTBs as they either drive up the market or have some form of complexity which allows the Government to claw back some of their taxpayer funded largess.

    Councils and HAs have a record of poor response times and repairs, which would match some of the telly slum landlords. They have failed to build sufficient stock to house the vulnerable and economically disadvantaged, with HAs content to sell partial ownership to buyers who stand little chance of being more than hybrid tenant-owners. They rely on the PRS to provide housing for these tenants and for emergency housing.

    Mind you, even those of you who do provide decent homes, in a compliant manner, are often guilty of not promoting your cause.

    How many of you baulk at the cost of joining a landlord association or accreditation training?
    I’m sure many of you pay for bookkeepers, accounting software and tax planning advice.

    The NRLA and other smaller landlord associations, such as iHowz, are not afforded as much recognition from government and regulators as they might, due to their membership only representing a small proportion of all landlords. For a small annual fee you get the benefit of up-to-date advice, documentation, support and (usually) tax investigation insurance.

    Landlord associations are there to promote and support for your property rental business, not just emergencies. They have represented you in consultations, such as the log awaited EPC review, local authority licencing and make your case as we await the details of the various element of the Renters Reform Bill.

    If you want proper representation and are not already a member of a landlord association, make it the next thing you do – yes, even responding to this post.

    • Perhaps you could enlighten me on how “Landlord associations” have had any effect on EPC changes, local authority licencing, Renters Reform Bill – or indeed any legislation hammering PRS LLs over the last 10 years?

      The NRLA even welcome the 6 month Welsh notice period! With their typically insipid comments, they are just ignored by Government who only listen to uncompromising pro-tenant groups.

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