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| Ken Livingstone |
But I don't rent privately so how does this affect me? Well read on:
A recent housing market analysis undertaken by Oxford Economics (OE) confirms that owner occupation in London is increasingly unaffordable . In 2001 owner occupation accounted for 60% of households in London. In 2010 it had fallen to 52%. OE estimate this will fall to just above 40% by 2025.
The fall in owner occupation will force more people to rent privately as it is impossible for social housing (Councils and Housing Associations) will fill the gap. OE estimate rents in London will rise by 4% each year over the next 10 years.
The Halifax who coined the phrase ‘Generation Rent’ to show that people no longer feel that they will be able to buy and that half of 20-45 year olds now think renting is the norm, similar to much of the rest of Europe.
The increasing number of families unable to pay the mortgage and facing repossession are typically families on middle and low incomes. They are often younger families who stretched themselves to buy during the mid-2000s and do not have much of a cushion to absorb a loss in income or an increase in their mortgage rate. As our communities become more reliant on private landlords to provide their homes more people are suggesting that the private sector needs reform. The Assured Shorthold Tenancy (AST), with very limited security of tenure, was introduced in 1989 to encourage new landlords into the market and was seen as an acceptable option for younger mobile workers.
As a result there are a lot more small landlords using property as an investment encouraged by buy-to-let financing and inheritance. Many of these smaller landlords use agents to find tenants and manage their property at often extortionate rates. Some agents charge sitting tenants an extortionate fee just to renew the tenancy each year, sometimes without the knowledge of the landlord. A small proportion of landlords have leased their property to social landlords to house homeless families at market rents and largely paid for by the taxpayer through housing benefit. This is particulary ironic when the rented property was previously a Council home sold at a discount under the right-to-buy.
Extremely high rents are almost exclusively found in London and areas close to London with good commuter links. In L.B Hillingdon average rent for a 2 bed home costs £968 or 49% of average take-home pay, which is actually one of the cheapest areas in London. As a result when housing benefit cuts start to take hold in 2012 we can expect increased pressure on the local housing market from low income families forced to move out of central London because of cuts in benefits and tax credits.
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There is an urgent need for government to pay more attention to the sector.
Here are some of the questions being asked by Steve Hilditch and others in the Labour Party:
- Are there mechanisms by which rents could be constrained without impacting unduly on supply?
- Could rent restraint be linked to the achievement of decency standards?
- Do we want to control the transfer of owner occupied homes into private renting, and especially into multiple occupation?
- Are there ways of ensuring that new investment in private renting is channeled into supporting new build instead?
- In a period of huge cuts, what more can be done to improve monitoring and enforcement against rogue landlords?
