Private sector rents sucking life out of the economy

Shelter Housing charity policy team member, Peter Jeffreys, has estimated that the proportion of  private sector rents increases over inflation since 2000 equates to £8 billion per year. A large proportion of this excess has been paid to banks to fund landlords’ buy-to-let mortgages which takes money out of circulation within the economy. “If banks were re-lending this money, again it might not be a problem. But, as we’re constantly hearing – bank lending has dropped massively since 2008.”

Had the £8billion been retained by tenants it would have largely been spent on consumer goods and services which would have a significant impact on boosting the economy. Private sector tenants in London are paying on average between 42% of 46% of disposable income on these higher  rents.  This is in turn is increasing Government expenditure on housing benefits which have doubled over the last 10 years to £20 billion.

Mr Jeffreys points out that “the balance of government spending on housing has shifted from spending on house building to spending on housing benefits. Our analysis shows that if just 8% of private rented tenants moved to affordable social homes the government would recover £200 million in savings." and  recommends building affordable social homes and a reformation of the private rented sector as a means to solve the problem.