The Private Rented Sector for Housing in England: Adding to the Pain of a Cost-of-Living Crisis 

Over recent decades, a shortage of affordable housing in England has been accompanied by a steady decline in owner-occupation, forcing many residents to seek accommodation in the private rented sector (PRS) instead. The PRS has more than doubled in England since the late 1980s, just as the proportion of socially rented homes has halved since the Right to Buy was introduced in 1980, with the loss of 1.4 million homes. According to the English Housing Survey 2021 to 2022, the PRS is the second largest housing tenure, after owner-occupation, and accounts for around 4.6 million households-representing nearly one-fifth (19 per cent) of households in England. More people in England now rent their home from a private landlord rather than from a council or a housing association.

 A private landlord may either be an individual, a property company, or an institutional investor. In the case of individual private landlords, the tenant may either deal directly with the landlord, or through an estate agency or management company acting on behalf of the landlord. Private rented accommodation comprises self-contained flats or houses, properties that are shared with a landlord, and houses in multiple occupation (HMOs), including bedsits, flats, shared houses, hostels, and bed and breakfast hotels.

Despite the large size of the PRS, all is not well with this sector. Private renters who pay market rents spend a disproportionately large amount of their disposable household income on rent, when compared with social renters, owner-occupiers with mortgages, and those who occupy private properties rent-free as part of their employment, such as building caretakers. The so-called “housing overburden rate” in England is one of the highest among OECD countries, reflecting soaring rents and a frozen Local Housing Allowance. Seven in ten private renters in the lowest two income quintiles spend above 30 per cent of their household income on rent. Rents are highest for those living in London or the South East. Despite the financial stress on households high and uncapped rents, rent control remains unpopular with both the government and landlords, on the grounds that capping rental returns reduces investment in the PRS. 

Demographic data concerning private renters are revealing. According to the Department for Levelling Up, private renters are younger, more ethnically and nationally diverse among housing tenures, including a higher proportion of non-UK nationals. Those least able to afford high rents are thus at the mercy of the private rented sector. Furthermore, some landlords wrongly discriminate against tenants claiming housing benefits. 

Private renters often have to provide references from previous landlords, bank managers, or employers and then face high up-front costs of holding deposits and rents in advance, high rents, and tenancy agreements that do not offer long-term security of tenure. Despite high rents, some private rental properties are cold, damp, mouldy, unsafe, and suffer from poor upkeep. In particular, some small-scale private landlords may lack adequate finances as well as the skills to maintain their properties to a desirable standard.  Poor-quality housing imposes additional costs in the form of poor physical and mental health of tenants, also creating an environment where anti-social behaviour, drug abuse, and crime can thrive. 

The Renters’ Reform Bill was introduced in 2019. The suggested reforms included ending “no-fault eviction” by abolition of section 21 of the Housing Act 1988, bans on renting to families with children, unconditional bans on keeping pets in properties, and arbitrary rent review clauses in tenancy agreements. The Department for Levelling Up, Housing and Communities subsequently set out its long-term vision in a 12-point action plan in a White Paper, entitled ‘A Fairer Private Rented Sector’, which was published on 16 June 2022. Among the listed proposals were the requirement for privately rented homes to meet the Decent Homes Standard for the first time, strengthened local councils’ enforcement powers, a new digital Property Portal to better inform tenants and local authorities, and a reinforced commitment to end Section 21. 

Private landlords themselves have felt threatened by the proposed reforms to the PRS, the cost-of-living crisis, rising mortgage rates, the additional rate of stamp duty for second properties, falling profits, non-payment of rent, and a lack of protection against anti-social behaviour on their properties. Their anxieties are demonstrated in a shrinkage of the PRS over the last two years, according to the Bank of England, as measured in landlord property transactions. Just as private landlords exit the housing market, the New Economics Foundation has suggested the upgrading and repurposing of previously privately-rented homes local councils as social housing. 

The PRS, as it stands, can be considered a failure of the free market. Deregulation of the private rental sector by the Housing Act 1988 has had predictable results. Some of today’s horror stories about private rentals are reminiscent of the unscrupulous practices of Peter Rachman in Notting Hill in the 1950s and early 1960s. A shortage of houses, poor-quality housing stock, demand-driven astronomical market rents, the abolition of rent control, the failure to rein in predatory landlords, inadequate protections for vulnerable tenants, and the absence of a proper system to vet and accredit landlords, all demonstrate that free and unfettered markets cannot be relied upon, by themselves, to deliver socially favourable outcomes, especially when owner-occupation remains the favoured default option.

Ashis Banerjee