Where next for the private rental sector?

That's the title of a new report from Social Market Foundation which offers some excellent insights on how landlords can adapt their proposition to meet the needs of an evolving market.

SMF's report outlines how the sector might evolve over the coming years and highlights renters' appetites for policy change to improve the rental experience.

Background - how the market has evolved

Since 2000, the proportion of households in the private rental sector has increased from 1 in 10 to 1 in 5, with growth particularly strong in the under 35 age group. The reasons are up for debate, but likely include rising home prices and lower mortgage availability, combined with increased availability of rental properties due to the introduction of buy to let mortgages.

Since 2015/16 there has been a small decline in private rentals, due in part to a slight uptick in owner occupation and government policies to reduce the attractiveness to buy to let landlords.

The level of renters' satisfaction

Society's attention naturally falls on a minority of private renters who have had bad experiences, particularly 'no fault' evictions. 

SMF points out that this focus can be misleading. It's report highlights that the vast majority - 81% - are happy with their current home and 85% with their landlord.

The main dissatisfaction identified was the need to be in the private sector. Home ownership is widely perceived as a financially better long term option and two thirds of renters expect to leave the rental sector within 15 years.

Possible futures for the rental sector

The report looked at three possible scenarios for the future size of the private rental market. The results vary widely.

1. High home ownership, based on the five years to 2019 of ultra-low interest rates and enhanced government support. In this scenario, the proportion of homes in the rental market could fall from 20% to 16% by 2035. 
2. ​Low home ownership, projected from the previous 2004 to 2014 period, indicates substantial growth on the sector from 19% to 30%.
   
3. ​Mid home ownership projects forward trends based on 2009 to 2019 and indicates modest growth to 22%.

How to improve the sector for renters

The Levelling Up White Paper published last month set out areas for improvement in the relationship between renters and landlords including a Decent Homes Standard. The Social Market Foundation goes further.

1. ​Increase the stability of tenancy agreements. Currently, the most commonly used contract only offers security of tenure for six months. SMF's findings show that a majority of tenants would be in favour of setting this at 24 months.
2. Giving renters more flexibility over their homes, such as allowing pets, minor decor changes and energy upgrades.
3. Increase accountability of landlords, such as a 'Good Home, Good Landlord' kitemark.
4. ​Improve the standards of properties by giving landlords tax incentives to help meet the costs of achieving their suggested kitemark.

Those looking for a deeper dive can download the full report here