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Rise of the rentals

Rise of the rentals

Renting has become the tenure of choice. More people in England are now living in the private rented sector than in social housing – something unthinkable even 10 years ago.In that time, private renting has doubled and is the fastest moving area of the market – it now accounts for 16.5% of all households, or nearly 3.8 million homes in England.Why the sudden shift? Rising house prices and tougher mortgage requirements excluded many would-be buyers, while the buy-to-let mortgage, which came to prominence in the 1990s, attracted a host of small investors.As a result, the private rented sector is dominated by thousands of small-scale, often amateur, landlords, whose standards – and those of letting agents – vary greatly. The sector suffers from an image of crooked landlords and terrible conditions.In an article in The Guardian earlier this year, chief executive of private developers Essential Living, Darryl Flay, said that many people “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.”Yet, for many housing experts, developing the private rented sector is a solution to the crisis of a severe lack of housing. The Government simply can’t build enough social housing to bridge the gap and small-scale investors don’t have the financial clout to grow the market fast enough.The solution is to attract large financers. In 2012, the Government announced a £1 billion investment – the Build To Rent Fund – to provide equity finance for purpose-built private rented housing, alongside a £10 billion debt guarantee scheme in support.Build To Rent provided an exciting opportunity for housing associations and local authorities to build and run large-scale, profit-making private rented housing developments. A few are, but most are not – so why hasn’t it taken off?The major stumbling block, says John Taylor, Managing Director for Mears’ Housing Management Services, is property management.“Housing associations and local authorities are not experienced in commercial property management, and lack the skills and systems to manage large private housing schemes, which is very different to social housing. To make private renting work, you have to compete in the market and provide a sales-led culture that focuses on customer service, which is available when it suits the customer, including evenings and weekends.“The large financial institutions want to invest in the sector but need professional, experienced managers who can help develop large purpose-built portfolios. There are only a few who are doing it – and even fewer are doing it well. This is a major inhibitor to the investment that is needed.”Under a new, more professionalised private rented sector, tenants would benefit from more transparent finances (no unnecessary fees, deposits returned, rent increases planned in advance), well-maintained properties and tenancy contracts for as long as they want – families want five-year agreements, while an increasingly flexible workforce needs shorter-term lets.Housing associations and local authorities are certainly attracted to these development opportunities, as a way of making money to reinvest in social housing, attracting mixed living, meeting local demand and regenerating areas. Equally, institutional investors are attracted to strong and stable investments that these developments would supply.“What’s needed by both sides is a really solid, commercially-led management service,” says John, “to provide a good service for tenants and for investors.“This is a massive opportunity to provide affordable, quality, well-run, well-maintained housing on the sort of scale that is required to meet demand – and we are here to support it.”