For years, the private rented sector has all-too frequently been painted as a cause rather than a solution to the housing crisis.
Reports in the media have suggested that landlords can be greedy and don’t always care enough about their tenants, while tenants themselves are ‘trapped’ in rented housing because they can’t afford to get on the property ownership ladder. The implication is that if there were less landlords, more tenants would be able to become home owners.
But what we at Reeds Rains have seen over the years is quite the opposite. We know that landlords do comply with the law and provide good-quality homes that are managed well. And they do care about their tenants – they want to know that the people living in their properties are safe and secure, and they also know that happy tenants tend to result in longer, more successful tenancies. As for the tenants themselves, the reality is that most are in the Private Rented Sector because renting suits them, not necessarily because they can’t afford to buy.
Some have just moved out of home for the first time; some are only planning to stay in their current job for a couple of years and want or need the flexibility to move at short notice; some are couples who want to live together but don’t want the commitment of buying a home; others have separated from or divorced their partners and now need to rent, either short or long term. Sometimes, people simply find they can rent property of a type and in a location they couldn’t or wouldn’t want to buy, such as a city centre flat or on a rural estate. There are many reasons why people prefer to be tenants rather than home owners at various points in their lives and there’s no doubt that the Private Rented Sector provides a vital housing resource for them.
Less than a fifth of private tenants wish they already owned a home
The National Residential Landlords Association (NRLA) recently commissioned a survey of 2,000 private tenants in England and Wales, which was published by ChamberlainWalker Economics in January this year. The report found that while just under three-quarters of respondents wanted to buy a home in the future, only 18% would have already done so if they could and, of those who want to continue renting, 29% said they don’t ever intend to buy. A fifth simply don’t want to be tied down to home ownership at the moment and a third said that renting suited them for career or social reasons, with that rising to 56% in the 16-34 age bracket. This backs up what we already knew: that it’s entirely wrong to assume that private tenants are ‘trapped’ in the Private Rented Sector.
Private Rented Sector households are getting older – an opportunity for landlords
While you might think that most private tenants are younger people, only 43% of the 4.6m households in the UK Private Rented Sector are aged between 16 and 34. As the report says: “everybody is different, and the age at which private renters want to buy is not decided by affordability alone, but also by life-stage factors”, so it’s important for the sector to cater to a variety of tenant types.
And it’s well worth noting that an increasing number of older people are living in the Private Rented Sector. While the number of young renters (16-34) has barely changed over the last decade (+4%), the Private Rented Sector as a whole has grown by 20% and that has been driven by a rise in the number of middle-age households – those between 45 and 64 – which has increased by 56% since 2011/12. And although only 9% of the sector is aged 65+, that cohort is also growing, up 30% in the last 10 years.
Older people often struggle to maintain a larger family home that they may have owned for many years, and these homes are also less likely to be of a decent standard or have a good energy efficiency rating. Downsizing is the obvious solution and research suggests that around 3 million older people want to do just that, but high transaction costs and a lack of availability of suitable homes means that most of them end up staying where they are. As a result, around 2.5 million homes owned by the over-65s are under-occupied and this stock is not coming to market.
The report suggests that there is potential for the Private Rented Sector to help free up these family homes for purchase by those moving up the ownership ladder, by offering more rented housing that specifically meets the needs of older people. This would grow the sector and help ensure the housing market works better for everyone.
A thriving sector - great news for landlords
Despite the current economic situation in the UK, the evidence from across the industry paints a picture of a thriving rental sector. The latest Zoopla report shows that demand for renting was up by 46% while supply was down by 38% - versus the five year average, so its clear the rental market is much needed and currently tenants are short of homes in many areas.
Given that average new lets have grown well over the last few years – up 12.1% just in the year to November 2022, according to Zoopla – there has been some concern about rental affordability, but the ChamberlainWalker report states that just over 40% of tenants who responded said it was ‘excellent’ or ‘good’, while 38% rated it ‘fair’. That’s around 80% of tenants who are confident they can afford their homes, with only 6% saying affordability is poor.
In its conclusion, the report stated that the Private Rented Sector is “the tenure of choice for many private renters” and “a high-quality and well-provided Private Rented Sector is likely to be a good thing both socially and economically.” So, with rental stock struggling to satisfy the huge demand that is continuing to come from tenants of all ages, Buy to Let remains a great opportunity for landlords.
As always, the most successful landlords are those that offer high-quality, well-maintained accommodation that satisfies local demand over the long term. To discuss current and likely future trends in your area, just get in touch with your local Reeds Rains branch - our experts will be happy to help you understand the market and answer any questions you might have.
Interested in finding out how much rental income your property could achieve? Book a lettings valuation with your local lettings expert and find out.
The Reeds Rains Content Marketing Team
