In England the combination of a significant squeeze on housing affordability in large swathes of the residential market plus a decline in social housing supply has meant a significant increase in the supply of private rental housing – in fact an 86% increase from 2004 to 2016. Whilst in itself not an issue, there is increasing concern that the private rental sector (‘PRS’) in England is increasingly becoming the ‘poor relation’ in terms of housing. This report by the IPPR investigates whether there is any best practice/lessons learned from the German private rental market.
In other parts of mainland Europe PRS houses a significant proportion of the population securely and over the long term. In Germany PRS is the dominant form of tenure for over 40% of households (compared to 19% in England). The report sets outs that the German and English PRS markets have many similarities, including ownership patterns (64% of landlords have only 1 or 2 properties); high deposit levels; and similar processes for searching and security rental properties.
However there are some major areas of divergence which, the report concludes, makes the German PRS market significantly fairer and more attractive to tenants. This includes:-
- strong security of tenure, with indefinite tenancies and strict controls around eviction: the average rental tenure in Germany is 11 years (compared to 2.5 years in England), which has wider positive effects upon community stability and cohesion but also ironically is proven to positively impact upon housing stock condition
- strong rent controls, both for in-tenancy increases and re-lets;
- strict regulated quality controls on landlords obligations re: quality of PRS properties;
- powerful well-supported tenant bodies providing, advice, arbitration and legal cover;
- average monthly rentals 30% less than in England
- 50% less housing cost ‘overburden’ than in the UK (which is 33% and rising rapidly)
The report does point out that whilst this system provides many advantages for German PRS clients, it does make finding available PRS accommodation difficult as there is little move-on/market churn.
The report makes several recommendations. Firstly that more detailed and more local data on rental values be made freely available by the National Valuation Office. This would enable tenants to better understand real local market values, plus support challenges to proposed rental level changes. It also proposes that England moves towards a system of longer-term rentals, rental uplift controls and greater protection for tenants: it suggest in the interim this could be achieved by bringing in planning requirements on new build-to-rent schemes for longer tenancies, which - if embedded within the NPPF - could be supplemented via Section 106 Agreements. Any housing built upon public land or with public support should have similar requirements.
The authors recognise that new housing only makes up a small proportion of the current market offer, and for the majority private rental providers incentives such as service discounts could be offered to landlords offering longer-term rental contracts: however it is not clear how the latter would work, nor how convincing the take-up from private landlords would be. The feasibility of local authorities working with the insurance industry to develop replacement products for deposits in the prevailing municipal resource climate is also questionable, especially for smaller, more rural authorities.
On tenant rights, the report suggests that in the short term these can only be strengthened through collective political pressure from all existing key stakeholders, including trade unions, TMOs and housing NGOs. The longer term aspiration would be to develop a national housing tenants association, similar to the German model.
In summary the report does not suggest simply transposing the German model to England, but rather adopting the most beneficial elements and building on these over time. It provides an excellent benchmark analysis, but is less convincing on how some of the component elements could be delivered.