Housing

More than a roof: How incentives can improve standards in the private rented sector

The private rented sector is growing and, as it expands, it is housing an increasingly diverse group of tenants, including a higher proportion of people across every income decile and a growing number of families with children. However there are still a range of challenges associated with the sector which need to be addressed. These include variable standards of property condition and housing management, concerns regarding affordability and some households’ ability to access the sector and a growing demand from some tenants for greater levels of security than are currently on offer.

Addressing these challenges will require some clarification of basic legal minimum standards. However there are limits to how far legislation can go and risks associated with relying entirely on legislative/regulatory options when dealing with an extremely diverse sector, which is made up of a number of distinct sub-markets. We, therefore, think that a combination of a clearer and better enforced set of minimum legal standards and a stronger role for accreditation and incentives is required.

Key findings

In meeting the needs of this diverse group of tenants the sector faces a number of challenges, specifically:
• Variable property conditions – PRS homes are typically older and a higher proportion are do not meet modern standards, when compared to those in other tenures.
• Variable standards of housing management – most private landlords are individuals with only one or two properties. For most it is a side-line activity and very few are full time professional landlords. As a result standards of housing management, while by no means universally poor, are inconsistent. There is also a particular issue at the bottom.
end of the market where unscrupulous landlords are able to exploit vulnerable tenants who have limited housing options
• Concerns about affordability and some households’ ability to access the sector – there are high upfront costs associated with securing a PRS tenancy and some households, particularly those in receipt of housing benefit, can have difficulty finding a landlord who is prepared to accommodate them. Research also shows that a growing number of tenants are struggling to afford their rent and maintain a decent standard of living.
• A growing demand from some tenants for greater levels of security than is currently on offer – more and more private tenants are remaining in the sector for the long term, including an increasing number of households with children. This is leading to a growing demand from some tenants for a greater degree of security than is currently available.

Recommendations

  • A review of the statutory minimum standards to which landlords are subject and the arrangements for enforcing them. This should be aimed at ensuring that there is a single, easily understood set of minimum standards (covering both property conditions and housing management) for landlords and that sufficient resources are made available for enforcement to effectively tackle unscrupulous landlords.
  • Regulation of letting agents and an end to the practice of charging tenants fees for their services. Regulation could most easily be implemented by extending the arrangements already in place to regulate estate agents to the lettings industry.
  • The development of a nationally agreed set of standards for accreditation (covering both property conditions and housing management). Accreditation could still be awarded and administered by a range of different bodies, however a nationally agreed set of standards would ensure greater consistency between them
  • Greatly increasing the number of landlords who sign up to a recognised accreditation scheme by adding an element of conditionality to the tax relief currently available to landlords – a ‘something for something’ deal. Enhanced tax relief should be available to accredited landlords compared to those who remain unaccredited.
  • Considering the options to offer ‘unconditional incentives’ to all private landlords to encourage them to make physical improvements to their properties and to help address concerns about security and access to the sector.

 

Further reading

Through the roof
Recent trends in rental-price growth
·
Cara Pacitti
Housing Outlook Q1 2024
·
Lindsay Judge, Adam Corlett
Pressure on pay, prices and properties
How families were faring in October 2023
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Mike Brewer, Felicia Odamtten, Hannah Slaughter, Hannah Slocombe, James Smith