Significant investment needed in private rental sector, research finds

The UK needs nearly 230,000 new private rented homes a year, according to an economics consultancy.

The National Residential Landlords Association (NRLA) commissioned Capital Economics to carry out the research.

Capital Economics found that if owner occupation and social housing continue at their typical rate of growth, the private rented sector supply would have to increase by 227,000 homes per year to meet government targets and an anticipated 1.8 million new households over the next decade.

Greater investment in the sector would, researchers argued, support new housing through a combination of an increased rate of new builds; the switching of commercial property to residential use; the switching of stock from short-term to long-term lets and bringing empty homes back into use.

Capital Economics suggested that without changes in tax or other policies, the private rented sector stock could shrink by around half a million properties over the next 10 years.

Andrew Evans, managing economist for Capital Economics, said: “The private rented sector, which is predominantly supported by private individual investors, has a key role to play in addressing housing need in the UK.

“However, the stock of homes for private rent has fallen in recent years, driven partly by a series of policy changes.

“Without further changes, that supply could fall by over half a million more over the next decade. Even with increased provision of affordable housing and higher rates of owner occupation, both of which are important, our research shows that significant additional investment is needed by landlords in the private rented sector.”

Recent research from Zoopla found that rents are now £62 per month higher on average than when the UK coronavirus lockdowns first started, analysis has found.

Across the UK, the average monthly rent was £969 by the fourth quarter of 2021, Zoopla said.

Households who agree new lets are now having to pay an additional average annual cost of £744, or £62 per month, compared with typical costs in March 2020, the property website added.

Ben Beadle, chief executive of the NRLA, said: “Today’s report highlights in stark detail the supply crisis now engulfing the sector.

“For all the efforts to support homeownership, the private rented sector has a vitally important role to play in helping the Government to achieve its housing objectives.

“Without urgent action, the increasing number of people looking for affordable housing will be the ones to struggle as they face less choice and higher rents as supply dries up.”

A Department for Levelling Up, Housing and Communities spokesperson said: “We support the private rented sector and recognise the crucial role Build to Rent homes have in boosting housing supply and increasing quality and choice for renters across the country.

“Our Build to Rent Fund provides over £630 million of development finance for the supply of new homes build specifically for private rent.

“This Government is building more genuinely affordable homes to help people on to the housing ladder. Since 2010, we have delivered more than 574,000 affordable homes and we are investing £11.5 billion in affordable housing.”