Private rented sector

The Private Rented Sector is a classification of UK housing tenure as described by the Department for Communities and Local Government, a UK government department that has amongst its remit the monitoring of the UK housing stock.

Other classifications are:
Owner Occupied,
Rented from Registered Social Landlords,
Rented from Local Authorities.

The private rented sector consists of 2.7m dwellings in the UK or 10% of the total housing stock. Of this total, 2.4m are in England, representing 12% of the English housing stock. The sector has grow by over 10% in the last ten years and, according to The Centre for Economics and Business Research, is forecast to grow by a further 40% over the coming ten years.

History of the private rented sector

For the greater part of the 20th century the private rented sector was in long-term decline. The combination of growth in owner-occupation and the role of the state as a landlord, through local authority housing and latterly the Housing Association movement, contributed to a decline in the private rented sector (PRS).

Rising prosperity and pro home-ownership Government policies brought owner-occupation to its peak in the 1980's, whilst reducing the private rented sector. During this period owner-occupied dwellings rose by 24% whilst the private rented sector contracted by 10%.

Growth in the PRS was inhibited by a regulatory regime that disincentivised landlords. Regulated rents impacted on returns and tenant legislation limited the landlords' right to recover their property from a defaulting tenant.

Regulatory change

This long-term decline was arrested by the Housing Act of 1988. This introduced a radical reshaping of landlord - tenant law, and in particular introduced the Assured Shorthold Tenancy (AST). This arrangement made the contractual relationship between landlord and tenant clearer and allowed landlords to recover their property relatively easily from a defaulting tenant. (However, the process still often requires recourse to the courts for a Possession Order. In addition a local council may deem that defaulting tenants who leave before the court bailiffs are sent in have made themselves voluntarily homeless and refuse to house them, causing further difficulties for landlords. [http://www.trashedhouse.com] ) This provided a platform from which the sector could grow. The growth was met by tenant demand as improvements in the quality of the stock made renting a viable option.

More recently, legislation requiring the licensing of houses of multiple occupation and the impending tenant deposit rules will ensure that the sector remains fair and transparent for both landlords and tenants alike.

Economic and social change

Of equal importance to the changes in legislation have been the economic and social changes that took place over the next decade. The recession of the early 1990's reduced the appeal of home ownership as a complete solution for housing need, and the impact of unprecedented levels of arrears, possessions and falls in value remain etched on the national consciousness.

More recently, social changes, especially an increase in student numbers, greater labour mobility amongst young people and a rise in immigration, added to the demand for rented accommodation, causing a second growth period in the last four years.

With local authorities unable to expand public rented housing to fill the gap and limited funding for Housing Associations, the newly liberalised private rented sector expanded in response to demand and grew by 27% in the fifteen year period to 2004.

References

1. http://www.trashedhouse.com. Retrieved on 2007-02-02
2. http://www.privaterentedsector.org.uk