Private renting after the global financial crisis Peter A. Kemp

Overview 1.Key points about the PRS (in the advanced economies) 2.Private renting and GFC: a case study of GB 3.Implications for policy

Key points about the PRS 1.The PRS varies cross-nationally 2.The institutional & policy & context also varies  Hence need for caution when importing policy design 3.The internationalisation of financial markets has affected the PRS  Hence so has the GFC 4.The PRS is growing in some advanced economies

Private renting in Britain: brief overview 1.Growth in private renting began before the GFC 2.Free market rents and weak security of tenure 3.Very high tenant mobility 4.1 in 4 private tenants receive housing benefit 5.Predominance of ‘sideline landlords’ 6.Tax bias in favour of owner-occupation

New housing completions (UK: 1970/71 to 2013/14)

Housing tenure in England (% households) YearOwner occupiers Private renters Social renters Total /

The Buy-to-Let boom: Lending New BTL mortgage market: 1.New willingness to lend to landlords 2.Innovation in mortgage products 3.Easier credit conditions Facilitated by: 1.International integration of financial markets 2.Global savings glut 3.Increased lender competition 4.Low interest rate regime

The Buy-to-Let boom: Landlords Emergence of BTL landlords: 1.Rising house prices 2.Low interest rates 3.Poor stock market returns 4.Pension concerns

The Buy-to-Let boom: Tenants Rising demand for private renting: 1.Increase in single person households 2.Growth in higher education * 3.Change to student funding 4.Immigration (2004+) 5.Falling supply of social housing * Emergence of student housing companies

BTL and the credit crunch BTL lending 1999 to 2013 (£bn) Collapse & recovery of BTL lending Increase in BTL arrears & possessions – now falling Shift to low interest rates (2009+)

Private renting after the crisis 1.Accelerated growth in private renting 2.Rising private rents (esp. London) 3.Cuts in housing benefit (2011+) 4.Increased homelessness (2010+)

After the crisis: Landlords 1.‘Search for yield’ 2.Cash and BTL-financed landlords 3.Overseas property investors 4.Emerging institutional investment 5.Housing associations as private landlords

After the crisis: Tenants Changing rental market: 1.Increase in ‘reluctant renters’  Frustrated FTBs  Increase in social housing waiting lists 2.More longer term renting 3.Families renting privately 4.More in-work poverty

Policy concerns 1. The majority of private tenants are satisfied. 2. But:  Insecurity of tenure (families & long-term renters)  Affordability of rents  Access barriers (low-income tenants)  Letting agents fees  Substandard property and management (bottom end of the market) 3. The policy response: England v Scotland

Concluding points 1.Growth of private renting likely to continue 2.PRS has not adapted to its new roles 3.Policy dilemmas:  How to address insecurity of tenure & high rents without undermining the supply of rental homes?  Tackling causes v symptoms?