How to regulate the Private renting Sector in UK

Today, renting a house has become the way of life in UK/London. Since the home buying in UK is expensive and even those who want to move up in the property ladder by purchasing a house in UK through, do so through mortgage finance or mortgage loan, later only to repent on the decision as they find themselves unable to repay the mortgage loan, seeing themselves fixed in a situation, they get burdened by the debt. The other reasons attributed are the consequences of the economic downturn in terms of lower salaries and higher rate of home loans.

Plagued by the situation, people in UK have no other option but to be tenants of private rented sector in UK.  Desperate by the situation, this has led to an increase in the demand for rented houses in UK, falling short of supply, the private landlords capitalizing on this situation, are charging exorbitant rent from the tenants,  added to it are the problems of  unsecured tenancy and non-returning of tenants’ deposits. 

Keeping in mind these issues, there is thus a grave need to regulate the private rented sector of UK.  So what really can be done? Here are some of the suggestions:

• The government and even the local authorities should come up with plans, programs and policies that guarantee tenants secured tenancy and also regarding security of tenant’s deposits and returning them on due time.
• Institutional investment will help make better, quality rented accommodations
• Building more houses, as this will increase the supply, the problem of demand will be eased and so will the rent become cheaper/affordable.
• Rent control is a better way out, only in hard situations
• License should be made compulsory for every landlord who has decides to rent out their home/ property.
• Quick renting websites

Following are some of the tips to regulate the private rented sector in UK. All of them have its on advantages and disadvantages. Therefore, while implementing, a thorough research needs to be done. Also, what is more important is the fact that legislation is vey easy but implementation and further recognition of such unfair practices is what is more important for having sustained results from a policy/plan/program.

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UK’s torpid economy may flourish its rental market

Recent reports from Resolution Foundation and Shelter from Cambridge University notices serious implications that could been seen in the UK’s housing/property market given the economic indicators such as low economic growth, credit crunch, lower level of incomes, low levels of building houses.

If these indicators are going to going to show the same tendencies, then this would mean that half the UK’s population would opt for a rented house by 2025. Despite the crunch being felt, even in the mortgage sector, still there are a few out there who can afford to buy a home in UK through UK mortgage finance. But a continued weakened Britain economy would mean that the proportion of people who can own a home in UK through mortgage will be one among four households. This accounts to 27% which is much lower than what the percentage of 43, in initial 90s, on the percentage of home buyers in UK through mortgage finance.

That aside, the trend is welcomed by the private rented sector and the private landlords for; the lower mortgage finance will obviously make the Britons want to live in privately rented houses rather than choosing to own a house through mortgage loan.

This trend is further pushed by the families in UK with children. More than half the families of UK with children are now planning to rent a house rather than buying it through a mortgage loan. This increase is recorded at an 86%.

However, with the growing rental market in UK, there are many issues faced by the UK tenants. These prospective tenants, having no way out for a shelter, desperate, chooses to rent a house. The demand being more than the supply, these private landlords are seen to exploit the tenants by charging exorbitant rents and also do not guarantee a secured tenancy to the tenants. Therefore, with the growing rental sector in UK, it does become way too imperative for the government, especially the social housing sector to address the issues of stability and affordability in rents in the private rented sector.

This also means having to make provisions for renters of UK in terms of quality rented accommodation where the families can lead a better, secured, affordable life not only for themselves but also for their children. Institutional investment in private rented sector in UK would surely be a welcoming step that would better and strengthen the UK rent sector.

All in all, this seems to be for time the new reality of the housing market in UK – a flourishing rental sector over the house owning pattern. Having to be known the reality, the challenged faced, its time the government to do something substantial in terms of housing for the people of UK.

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Analyzing/Bifurcating UK’s housing market into homeowners, tenants and people leaving through mortgage

According to the latest data revealed from Department for Communities and Local Government (DCLG) shows marks the end of UK's property owning democracy.  The European economic downturn has changed the living landscape of Britons.

Report further shows that the trend of owning a home has registered a sharp decline from 71% to 61%, which almost amounts to 14.8 million in 2005 to 14.5 million in2009 -2010.

The particular reason for this decline can be attributed to the fact that buying a home in UK today has become only remained a dream come true for few. As the time has caused much more expense, Britons, already covered by the blanket of economic crunch, have whatsoever no liquid cash to buy a home. This is true especially for the low income bracket of UK, which outgrow in population than the higher income group.  So what generally these Britons do is, they seek mortgage finance. However, because of the Eurozone crisis, it has become much harder to apply for a mortgage loan and even if you are that lucky one who have got the loan, only to find yourself later dipped and chained in the mortgage debt, unable to pay the mortgage arrears.

Hence, the only option left is renting.  Which is what a part of this report shows in its finding. It shows that private renting or rather renting in general has become the way of life for Britons. It shows an intense rise of private sector renting of 56% since 2004-2005.

Below is the chart/table by the Department for Communities and Local Government, helping figure out how Britons live in UK – house owning, mortgage finance or renting:

England's housing market
TYPE	Households	% 2003/04		Total 2003/04	% 2009/10	Total 2009/10	% change in totals
TENURE	owned outright	28.5		6,021	31.3	6,820	13.3
TENURE	buying with a mortgage	37.7		8,521	34.4	7,695	-9.7
TENURE	all owner occupiers	66.2		14,542	65.7	14,515	-0.2
TENURE	local authority	10.8	2,470	7.4	1,745	-29.3
TENURE	housing association	6.3		1,459	8.2	1,927	32.1
TENURE	all social renters	17.1		3,929	15.6	3,672	-6.5
TENURE	rented privately unfurnished	4.9		1,513	8.4	2,621	73.2
TENURE	rented privately furnished	1.4		636	2.0	725	13.9
TENURE	all private renters	6.3		2,148	10.5	3,346	55.8
AGE	16-24	1.7		720	2.1	826	14.8
AGE	25-34	12.3		3,331	11.9	3,185	-4.4
AGE	35-44	19.1		4,401	18.2	4,269	-3.0
AGE	45-64	31.9		6,955	34.3	7,688	10.5
AGE	65 and over	24.6		5,212	25.4	5,565	6.8
TYPE	couple, no dependent children	33.7		7,544	34.1	7,831	3.8
TYPE	couple with dependent children	19.8		4,484	19.4	4,516	0.7
TYPE	lone parent and dependent children	5.7		1,369	6.1	1,521	11.1
TYPE	other multi-person households	5.3		1,349	6.9	1,716	27.2
TYPE	one person	25.2		5,873	25.4	5,949	1.3
ECONOMIC STATUS	full time work	46.6		11,035	46.7	11,095	0.5
ECONOMIC STATUS	part-time work	6.6		1,537	7.2	1,692	10.1
ECONOMIC STATUS	retired	26.9		5,715	27.2	5,974	4.5
ECONOMIC STATUS	unemployed	1.3		331	2.9	756	128.3
ECONOMIC STATUS	other economically inactive	8.1		1,975	7.7	2,017	2.1
TOTAL	Total	89.6		20,619	91.8	21,533	4.4

Source: DCLG

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The thriving rental market of UK

Latest report from Royal Institution of Chartered Surveyors (RICS), states a marked increase in the rental rates of residential property in UK from the onset of the year till month.  The increased rental rate has been due to an increased demand over the supply.

One of the effective reason for seeking rental houses is due to the struggling times the economy is challenging people to lead a different style. This had made renting a "way of life".  It is for this reason we see the private rental sector growing wherein more household are seen renting houses for a longer time of period.  With the house price rising, and mortgage finance becoming expensive, renting is the only way out as it is a feasible option and easy to fund.

Now these rental rates for residential properties are not high everywhere.  It is true that rates have roared in general, but if considered city/area wise, the rents could be much more higher/lower than that of other areas.  For instance, in London, a two bed house is equivalent to 53% of the average single person's salary whereas the same property in North East of England is equal to 25% of an individual's salary.

Other factor affecting the rent, other than the area is the size of the property.  The smallest of the properties have seen a rush of demand for them since they are cheaper. This is good for the landlords holding small property but on the whole, this has been creating enormous demand over supply, thereby only letting to increased rental rate, which in future will have a detrimental effect on the present as well as prospective tenants.  While the rental rates for big properties and those in posh areas have registered a downfall, while making the median band of property remain stable.

Many people in UK are considering buying a property but with the higher mortgage finance, renting only seems to be an affordable option.  But, however, even here the demand will make sure the tenants pay more rent. Therefore, the rental rates are expected to go up further in the next one year.

The survey by the RICS prompts a positive growth trend of the renting marking from the second quarter of 2012. 13% of the survey participants predicted a rental increase while the rest predicted for the stability in the rental market.

While on the whole the rent market of UK looks too good and promising, there is the problem of rent arrears, with the unpaid rent going up to as high as 10%, around £306 million.

Today, with the changing times and the economic pressure faced, people are choosing to rent rather than to buy. Keeping the factors in mind, it becomes vitally important to regulate the renting sector and provide the best services to the needed.

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How to deal with Rental Crisis

A report from Halifax stated that in most parts of UK, people are preferring to buy a house on mortgage rather than renting.  The simple reason being, interest rate for mortgage loan is much lesser than the monthly rate of rent.

The reason of this unusual trend is based on the infrequent yet fast growth of the mortgage market in UK.  The banks in UK are providing mortgage finance at the lowest interest rate. However, there are reports that sate about the changing of this trend soon, where the rate of rent would decrease and lending rates for mortgage loans will increase.  To support that, a report from "The Resolution Foundation's Essential Guide to Squeezed Britain" stated that despite of the fact that mortgage rates are much lower than the rate of rent, still, the monthly mortgage payment consumes more than 25% of monthly incomes of quarter of UK's middle and lower-middle class families.

The solution to this ever increasing rent crisis is the proposed policy of rent control. The real problem faced by the renting market in UK is that the there is a lack of supply , so proposing a rent control would only lead to a further lack in supply.  Hence, there needs to be some other options to deal with the problem.

One of the suggested solutions lies in by making investments in purpose built rental accommodations by pension funds and insurance companies.  This would help meet the needs of ordinary people of UK.  But investors won't invest in rental accommodations if they rental caps are proposed.

That aside, the other solution lies in public –private partnership in terms of investment. This will help bring new rental schemes.

These are some of the possible solutions to deal with the UK rent crisis, in absence of the option of "rent controls".  Since rent controls will have a negative effect on supply, it would be wise if not implemented, and since supply of homes cannot be increased that quickly, the stated solutions, at present are feasible way to deal with the problem.

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