Landlord Knowledge - The Home of Savvy Buy to Let Property Investors

Private Rental Sector Thriving

The private rented sector continues to grow and at 4.4million households now has more private renters than the social sector, at 3.9million households. This must be a good thing, as a majority accommodation provider in any area can lead to horrendous social problems and not always, as the media would have us believe, due to poor standard landlords. Diversification in tenure has long been seen as a means of alleviating the situation, in the belief that an area that has large numbers of private sector tenants would mean that they were tenants who had chosen that area.

Sadly, that may not apply today, though perhaps it did 20 years ago. There is no longer an abundance of local authority property in which to house those in need. The Right to Buy, which allowed the selling of council houses from 1980 has decimated housing stocks and with it the availability of properties. ‘Inside Housing’ (14th August 2015) has undertaken research to which 91 councils responded and found that councils had sold 127,763 leasehold properties.

Local authorities therefore have to depend on the private rented sector to house those they cannot accommodate. Fortunately, numbers have risen in the private sector, often because of those tenants who have been fortunate enough to exercise their Right to Buy. The figures for how many of these sold council tenants become private sector rental properties varies throughout the country, with the average being 40%, approximately 48,000. In Milton Keynes, 69.9% of former council properties are now privately rented. Are new towns more aspirational? The same was seen in the North West in Warrington. And of course, privately rented properties attract a higher rent than that seen in the social sector.

Diversification of tenure was meant to alleviate social unrest – living together, no-one having greater status on grounds of tenure but all living decently and pulling-together to improve their communities. There are now streets and roads where no. 15 is a social property, with a rent of £80 per week; no. 17 is an identical privately rented property with a rent of £130 per week. The situation is even worse in London, where Zoopla advertise properties at over four times the level of social rent for the same type of property.

This situation can only get worse when the right to buy is extended to other social tenants, living in housing association homes or those provided by charitable bodies. It is no surprise to see that at present, the number of private sector households exceeds public sector households.

Landlords are in business and use their investments to provide homes and no blame can be attached to them for being in the right place at the right time (though social commentators and the media are always happy to blame private landlords). Their fortunes have also been improved by the drop in property ownership (down from 14.6 million in 2008/2009 to 14.3 million in 2015/2016) , due to the very high deposits required to buy a property, but also the increased aspirations of first-time buyers. Many of what had traditionally been considered ideal first-time buys are no longer desired; the lower value properties, traditional terraces, will in some areas find that the only buyers are buy-to-let landlords, seeking to increase their portfolios. This may mean that their tenants tend to be benefit dependants and the vulnerable.

The imbalance created leads to properties not being respected, landlords feeling they are throwing good money after bad, good tenants moving out as they do not want to be associated with an area that is struggling. Anti-social behaviour, empty properties and difficulties in selling – and this all leads to the landlord’s friend, Selective Licensing. It is almost a self-fulfilling prophecy – sell the houses provided with public money; those original buyers no longer want to stay in the community they bought in; sell the properties to private landlord’s; landlords find that the only tenants they can get are those with a connection to tenants who have been unable to buy or who come out of desperation; not interested in belonging to a community; standards go down because no commitment to an area and there are the reasons for a licensing scheme.

It seems private landlords are on the up, the need for private sector properties will continue, but just make sure your management practices are able to cope with increased legislation.