Expansion of private rented sector could help ease lack of social housing

Private renting now plays a bigger role than social housing and this trend is set to increase

The government should do more to support the increasing provision of private rented accommodation by housing associations and local authorities to help ease the housing crisis, according to a new report from the London School of Economics and Political Science (LSE).

Researchers concluded that “light-handed” government regulation and a supportive approach will help the efforts of social landlords and councils to expand and improve private renting to help many low income families who cannot get access to social housing.  Local authorities are increasingly setting up housing companies and special arms to provide housing for rent or sale directly.  Private renting now plays a bigger role than social housing and this trend is set to increase, they add.

The report, Private Renting: Can social landlords help?, is by LSE Housing and Communities, a research unit led by Professor Anne Power within LSE’s Centre for Analysis of Social Exclusion (CASE). It presents evidence from 20 social landlords, four local authorities, three leading housing charities and several private landlord organisations. Other findings include:

  • Private renting is weakly regulated, offers little security and is increasingly relied on by low income families with children and homeless families via local authorities, and vulnerable people desperate for housing.
  • Social landlords have shown that they can break even, or produce a small surplus if they let property at sub-market rents. Peabody, the Joseph Rowntree Foundation and Wolverhampton Council (via a Tenant Management Organisation) have all demonstrated this.
  • With limited grant funding many social landlords are developing intermediate market rentals to house key workers and people on a limited income.
  • Social landlords, as major institutional investors, have the potential to make the private rented sector more stable, more secure, more affordable and of better quality. They also have a duty to provide decent quality and secure homes to people who need them and private renting is one way they can do this. They have an ethical purpose and core mission to house people, so they should not seek to maximise profits as their main purpose.

The report explains that since the financial crisis in 2007/8, owner occupation has been harder to access and people are buying much later than previously due to a number of factors, so the share of owner occupation is shrinking significantly for the first time in many decades. Nearly 20% of all households, including many low income families with children, rely on the private rented sector.

It adds:

“Social housing is also shrinking due to continuing Right-to-Buy sales, demolition of large council estates, big funding cuts for new social housing, and the conversion of new tenancies into ‘affordable’ sub-market rents, gradually replacing the lower social rents. There is also a significant increase in shared ownership where the tenant becomes part-owner of the property. These trends have accelerated an unexpectedly fast expansion in private renting.

“One of the most contradictory and problematic development in private renting lies in the growth in buy-to-let tenancies on council estates. Former Right To Buy property is often converted to private renting. Many councils no longer have enough accommodation for homeless families that they are obliged to help, so they house them in private lettings in former Right To Buy properties on large social housing estates. Around 40% of all Right To Buy properties are now re-let privately. This poses major challenges for housing management; it drives up Housing Benefit bills, and it causes maintenance problems on flatted estates.  At the moment, there are no proposals to tackle this new form of problematic private renting in England. But the Scottish government has abolished the Right To Buy, and the Welsh Government is proposing to do likewise.”

It explains that social landlords play a crucial role in providing a workable private renting model:

“Social landlords have long-run management and maintenance experience, they understand what decent standards and reasonable security mean; they are credit-worthy and can borrow to invest; they can open the door to a workable private renting model that helps low-income households.”

“Social landlords are de-facto becoming major institutional investors in private renting. Councils are helping raise the quality of private renting through regeneration and licensing schemes. They are also creating local housing companies to expand direct housing provision, often for the private rental market. There is scope for social landlords to do more to help poorer households by being more flexible on eligibility criteria, but this does depend on the Local Housing Allowance being sufficiently generous.

The report ends by recommending that government could do more to help those who use private rented accommodation:

“With government support for secure, decent quality, well managed rented homes that pay their way, social landlords are able to make “long-term, slow, patient investments” that allow them to deliver this.  

 “Government can foster this progress through “light-handed” regulation and a supportive approach to private renting itself. The efforts of social landlords and councils to expand and improve private renting demonstrates a commitment to raising the quality, security and stability of private renting, and to enhancing its standing as a socially beneficial tenure. “

Keith Exford, Chief Executive of Clarion Housing Group, one of the research sponsors, commented:

“Clarion is providing private rental homes for people who do not qualify for social housing, but have been locked out of the home ownership market.  Our objective is to provide this growing group with the good quality, affordable and efficiently managed home they want.”

Professor Power commented:  

“Our core conclusion is that long term, slow, stable investment in low cost, secure renting allows social landlords to use their management experience, their existing assets and their capacity to borrow, to expand private renting. This would lead to more socially responsible, more stable and therefore more useful private renting. Social landlords can do much more to house lower income households in receipt of Housing Benefit, but able to pay rent reliably with this help. This is an urgent task and a real opportunity for the sector.”

The research was sponsored by Clarion Housing Group, the Wheatley Group, Poplar Harca, South Yorkshire Housing Association, Crisis, Futures Housing Group. It was also supported by the International Inequalities Institute, based at the LSE.

The report is available here: