A better private rented sector can weed out rogue landlords for good
It's the fastest growing area of the market, but rented homes are dominated by amateur landlords. It's time for that to change
Whatever your political persuasion, most people would agree that if we had a new home for every white paper, consultation and ministerial promise to fix the planning system, there would be no housing crisis. Yet one area constantly overlooked has been the private rented sector, the fastest growing area of the market.
Fuelled by rising house prices, demographic change and a tight mortgage market, demand for renting has doubled the size of the PRS over the last decade. One of the major opportunities in a changing financial climate is to encourage a totally new private rented sector, backed by large-scale long-term investors instead of amateur buy-to-let landlords, that could eventually weed out the criminal rogue landlords for good.
This is where institutional investors – such as pension funds – come in. Portfolios of rented homes can provide strong and stable income at a time where traditional investments are underperforming.
Yet many vilify rented accommodation because of stories of rogue landlords, poor conditions and other horror stories. This is an unfair representation, but in a sector dominated by individual, often amateur, landlords, people take what they can get because in many cases, they cannot get any better. Partly because of this, policymakers still view renting as a tenure of last resort. But renting is vital to support Britain's mobile workforce as various councils has made clear in report published this week which highlights numerous examples of how Britain is beginning to mimic America's multifamily sector, in which many families live in rented apartments.
However, getting traction with planners is tough. Planning guidelines need to be stronger and financial viability models need to reflect the fact that building for long-term rent is not the same as traditional housebuilding. In return, developers can agree rental covenants agreeing such properties will be rented out for a minimum term, providing families with the security that comes from long-term tenancy agreements. The mayor of London and various councils support these ideas already. And if we get it right, thousands of new homes with real long-term owners could be created.
In Elephant and Castle in south London, we're developing a 44-storey tower for private rent in what will be the first time public land has been used for a major private rented sector development backed by institutional investors. London mayor Boris Johnson, like many other politicians, wants to encourage more private investment into housing – but making public land available for projects such as these will be absolutely key.
The exciting thing for Britain is that foreign pension fund investors are starting to pour in. From global investment funds to local authority pension funds, money is now available to build a better private rented sector, but the planning system needs to catch up.
Everyone agrees that tenants should be treated as customers and we think that by designing homes specifically for rent – and managing them properly – this can happen. Onsite maintenance will avoid tedious battles securing plumbers or electricians, while booking systems and longer tenancies will cut out costly agents' fees that snare people who are forced to renew tenancies every six months.
While ownership will always be an aspiration, we need to start realising the potential of a professional rented sector.