Near 50% increase in households renting privately in five years
Published by 24publishing for 24dash.com in Housing and also in Central Government, Communities, Health, Local Government
50% increase in households renting privately in five years
The number of households renting privately has increased by nearly 50% in just five years, according to a new report, which estimates that an additional £57bn funding will be needed per year if the sector is to provide the homes needed to meet demand.
The Jones Lang LaSalle report, however, notes the positive moves by Government - through the Montague Review and changes to the Real Estate Investment Trust structures - to reduce the barriers to institutional investment in the sector.
The report estimates says that since 2006, the number of households renting privately increased by 47.9%, or 8.2% per year. If this rate of growth continues, it warns, it will mean some 1.7m additional privately rented homes will be required by 2016 equating to an annual investment of circa £285bn – over eight times the size of the current buy-to-let market.
The Montague Review suggests that planning authorities specify that a certain proportion of schemes – perhaps ones that struggle to be viable in the current climate – remain in the private rented sector for a set period of time, with no affordable housing requirements attached to these units. This, says the report, would allow the creation of a “separate asset class” valued in a different way to conventional owner-occupied housing.
It points to the “booming” US ‘multi-family’ model – where private funds have developed large single blocks – to demonstrate how REITs could be used to generate management efficiencies and provide a variety of high-quality accommodation for tenants that are specifically built-to-let unlike the vast majority of PRS properties in the UK.
There are now more than 10 such funds active across the country, it says, including the largest, Equity Residential, which operates 550 “apartment communities”. Another major player is Aimco, which operates across 36 states and has around 250,000 residents in 520 blocks. There are also well developed “apartment REIT” markets in Australia and Singapore.
Jon Neale, director – residential research at Jones Lang LaSalle, said: “For most young people, high prices and unrealistic deposit requirements make homeownership unachievable and as a result many households are now finding themselves in private tenancy. Given that the mortgage market is likely to remain constrained in the near term, it is not unfeasible that the expansion of the sector could accelerate.
“Much of the historic growth of the sector has come from individual private investors, resulting in highly fragmented ownership with significant management overheads; rental returns, at least, are proportionately lower than in the commercial sector. There is now an opportunity for institutions to enter this market, perhaps incentivised by some of the recent changes outlined in the Government’s Montague Review.”