Shift happens! A look at changing tenure patterns
For the first time in 50 years, levels of owner occupation in the UK are falling and the trend looks set to continue. The tenure filling the gap that this is creating is the Private Rented Sector (PRS). Usually switches of tenure like this are related to affordability; if private renting is cheaper than a mortgage, then people make an economic decision and follow the cheapest route. This time it is different. Mortgages have never been cheaper with interest rates at an all-time low.
The switch on this occasion is not about affordability, but about accessibility. The continuing requirement of 25%+ deposits means that a lot of people simply cannot access the owner-occupied sector. And for once it is not just a London or a South East phenomenon. Most of the big UK cities are seeing the same trend. University cities like Manchester, Leeds and Birmingham, with large student populations hungry for rented accommodation and with a well-established PRS, are seeing significant increases in demand. Demand leads supply and rental yields are improving.
Buying to let is looking like a good investment, but where “buy to let” is the main provider there are two potential problems: amateur landlords or worse still rogue landlords. The PRS is largely unregulated although some local authorities are introducing licensing schemes. LB Newham launches a borough-wide licensing scheme in the New Year having run a very successful pilot. Newham councillors tell me that it is having the very positive effect of driving out the rogue and sub-standard operators. This is good and I can see many more local councils following the same route, especially when the license fees can be used to fund the scheme.
There is a crying need for good quality, well-managed, market rented accommodation, particularly in our big cities. Some Registered Providers are entering the market. The CEO of Thames Valley, Geeta Nanda, told me recently that their “Fizzy Living” market rented product is selling like hot cakes. Institutional investors have a growing interest in the sector. With increasing demand, a lack of good quality supply and available finance, it is no wonder that more and more RPs are showing interest.
However, we have seen RPs with burnt fingers in the outright market sale sector and more recently providing student accommodation. PRS is a different type of provision from the traditional RP offer and needs a different approach to management, and also a different market analysis.
If your local authority wants to grow a good quality PRS or your Association wants to enter the market, we can help with developing the strategy, undertaking the market analysis and introducing good quality providers.
For an informal discussion please contact Chris Wood on 07932 693292 or email firstname.lastname@example.org