Tenants of private landlords should be given new rights to stay in their home as long as they please as well as guarantees that their rent will not increase above inflation, a think tank has argued.
Civitas said that a new regulatory regime is needed in the private rental sector to prevent landlords exploiting the shortage of homes to choose from at the expense of both tenants and taxpayers.
The growing private rented sector is expected to account for more than one third of the UK’s housing stock by 2032 and, at present, two-fifths (40 per cent) of private tenants’ incomes are typically taken up by their rent.
An increasing lack of affordability in the sector is being reflected in an increasing housing benefit bill for taxpayers, the report said.
The number of private renters needing housing benefit to meet their costs has more than doubled in the past decade, from 722,000 in 2003/4 to 1.7 million in 2013/14. This figure is forecast to reach 1.85 million in 2018/19, according to the Future of Private Renting report.
The document also said that the amount of housing benefit rent subsidies claimed in the private rented sector has more than doubled in real terms over the last 10 years, from £3.9bn in 2003/4 to £9.5bn in 2013/14, and is set to top £10bn in 2018/19.
The report said that while these sums are vital for growing numbers of low-income households with little choice but to rent privately, they are also creating a “vicious circle” by helping to prop up the rent inflation that they are meant to alleviate.
In areas with very high numbers of claimants, this could give landlords the opportunity to set their rents at artificially high levels, in line with the local housing allowance, the report said.
The report argued that the private sector should be required to offer indefinite tenancies “as the norm”. And once an initial rent has been agreed, index-linked ceilings on rent rises would give renters the security they need, it argued.
Daniel Bentley, author of the report, said:
“As private renting grows it is important to ensure that it offers a fair deal to those who have little choice but to rely on it.
“This vicious circle will only worsen as the private rented sector comes to represent an ever-larger proportion of the housing market and more and more tenants have to fall back on housing benefit.”
Civitas said that exceptions to rent ceilings could be made in cases where a property has genuinely been improved.
Landlords who buy new-build homes would also be exempted from the regulatory regime, but they would be encouraged to enter similar voluntary agreements.
The report said that at present, the vast majority of landlords invest in existing homes rather than new-build, with this added competition for homes helping to push up prices and crowd out first-time buyers.
Mr Bentley said new regulations would not necessarily spell an exodus of private landlords, “many of whom have invested to capitalise on rising house prices and are influenced in their investment decisions by a much broader range of factors”.
He said: “Future landlord investment must be nudged towards new-build rather than being encouraged to buy up existing owner-occupied homes.”
Source – Northern Echo, 02 Jan 2015