Building millions of new homes
Demand far outstrips supply in private rented housing. More housing of any tenure should reduce excess demand, and with it rents. It could also increase competition among landlords, meaning higher standards, and restore the possibility that young renters could eventually afford to buy.
The question is: how much more? One respected estimate says building 380,000 homes a year for the next 15 years across Great Britain would meet the backlog of more than 3.9 million households in “housing need”, as well as helping households in poverty after paying housing costs and private renters who can’t afford their rent. Big changes would be needed to build the 5.7m new homes needed.
One radical answer could be to scrap the discretionary planning system introduced after the second world war and instead create zones where the right to build new homes is a given. The permission-based system set up in 1947 coincided with a fall of more than a third in housebuilding rates. Housing supply grew 2% a year between 1856 and 1939, but only by 1.2% between 1947 and 2019. Victorian and Edwardian volume housebuilding meant builders could buy land and build with few limits. In 1907 the Property Owners’ Journal complained: “The builders go on building, notwithstanding the 90,000 empty houses and tenements in London.” Embattled renters would probably prefer that state of affairs to today’s bidding wars for scarce rentals. Any return to more liberal planning could use design codes on scale, appearance and environmental performance to broadly control quality.
Delivering the renters reform bill
Private renters live in constant fear of eviction as a result of section 21 of the Housing Act 1988. It allows landlords to repossess properties without having to establish fault by the tenant. After Theresa May promised a ban in April 2019, the December 2019 Conservative manifesto pledged “a better deal for renters” including abolishing “no-fault” evictions. A renters reform bill was included in the Queen’s speech in December 2019 but it has yet to be passed into law.
Other promising measures in the bill include extending the decent homes standard from social housing to private rented housing. This would ban private rentals with “category 1” hazards such as damp or faulty electrics, which pose a serious risk of harm. There will be a new ombudsman to field complaints from tenants and a “property portal” – a database of all properties and landlords – so tenants and local councils can access information about property standards. Landlords would also be required to consider tenants’ requests to keep a pet and there would be a ban on refusing to let homes to benefit claimants.
Creating rent pressure zones
Scotland and Ireland have experimented with limiting rent increases in hotspot areas where demand outstrips supply. These RPZs are billed as an alternative to blanket rent caps. In Scotland councils can in theory apply to declare a pressure zone if they can show rents in the area are rising too much, rent rises are causing problems for tenants, and the council is under pressure to provide or subsidise housing as a result. But as the rent increase cap would be at least 1% above CPI inflation, they have not been used in this period of high inflation. A temporary rent cap was introduced instead. In Ireland they have been used widely since 2016 and rents are now capped in line with inflation (or 2% a year if inflation is lower than that). However, with recent inflation running so high and a degree of non-compliance by landlords, commentators say they have not managed to make renting significantly more affordable. Could England do it better?
Unfreezing housing benefit
UK private rents have risen by more than 6% in the past year, according to this week’s latest official figures. It was the sharpest annual rise since the data was first gathered seven years ago. But the amount the welfare state is willing to pay for rents has been frozen in cash terms since 2020. So, the number of affordable homes available for housing benefit claimants has been falling with every passing year. Just 5% of private rental properties in England and Wales are now affordable to people relying on local housing allowance, the Institute for Fiscal Studies has found. Those that are affordable are more likely to be leaky, more expensive to heat and in low-employment and high-crime areas.
This in turn places greater strain on councils, which have a duty to prevent homelessness at a time when there isn’t enough alternative social housing. Councils end up seeking ever cheaper emergency accommodation – often in unsuitable private-sector bedsits.
Increasing housing benefit rates so it covers at least the cheapest 30% of rentals is now a familiar call from housing campaigners and charities, but it is unclear when the freeze will end.
A right to buy for private renters
One radical idea is to extend tenants’ right to buy their home from council housing to the private sector, although landlord groups have warned that this would mean their members selling up in droves.
The idea has been floated in the past by the Joseph Rowntree Foundation and Civitas thinktanks. The Civitas proposal suggested that after three years renters would gain a legal right to buy their home at a discount of up to 35%, capped in the most expensive markets in the way social housing right-to-buy discounts are capped. The theory runs that this cost should be borne by the landlord out of the unearned capital gain they have made as property prices have risen.
A more palatable version for landlords could involve the Treasury offering tax breaks for landlords who agree to sell to tenants. This could push down the price of the sale and achieve an asset transfer that could help rebalance the inequality of property ownership that underpins so much of today’s crisis in private renting.
