LSE study examines private rental markets across the world
Published by Brian Church for 24dash.com in Housing
In its dry but authoritative way, the London School of Economics has studied the private rental markets in London, New York, Berlin and four Dutch cities and concluded that "a combination of structural, economic and cultural factors are driving the behaviour of both landlords and tenants".
The report was commissioned by Get Living London, the private rental home owner of the former London 2012 Olympic and Paralympic Athlete’s Village. "A lifestyle choice for families? Private renting in London, New York, Berlin and The Randstad (Amsterdam, Rotterdam, The Hague and Utrecht)" is by Kath Scanlon, Melissa Fernandez and Christine Whitehead.
The report highlights the significant differences in the structure of the private rental markets in these major cities that have led to vastly different numbers of families choosing to rent. It concludes that the complex nature of housing systems and important differences in the economic incentives to both landlords and tenants have resulted in wildly different private rental sectors across the four cities investigated.
Its key findings include: 1) The near doubling of size of the private rented sector and the increase in house prices in London over the last 10 years means the conditions are now "right" for a larger number of families to rent in the capital. 2) Berlin and New York have a strong culture of families renting homes because many private tenants enjoy a security of tenure that offers similar benefits of owner occupation. 3) Tenants in London, and to a lesser extent New York, were worried about the lack of security afforded by short term leases and by poor maintenance of their rental homes.
The report highlights that, in the majority of cases, renting is a choice made for economic reasons. Most respondents wanted to own their homes, but could not currently afford to purchase in the area they had chosen to live in and, as a result, live in the private rented sector.
The report shows that house prices in London and New York are very high relative to earnings and that this is a key driver in the choice to rent accommodation. In contrast, Berlin and The Randstad cities do not have such high prices, they have very similar structures to each other in the rental market and yet 90% of homes are rented in Berlin and only 8% in The Randstad cities.
The high levels of families renting in Berlin and New York along with the continued growing levels in London and historically low levels of renting in The Randstad may "make sense" today but the report notes that these dynamics can change quickly. For instance, London’s private rent sector has grown significantly over the last 15 years following the abolition of rental controls in 1988 and the increase in buy-to-let lending in the 1990s. This trend is likely to continue with further incentives to both landlords and tenants and the growth of the institutionally-backed private rented sector.
Derek Gorman, chief executive of Get Living London, said: "We are particularly interested in the clear evidence that security of tenure and the benefits of a strong local neighbourhood network are critical determinants of rental satisfaction."
Get Living London is the residential owner and rental management company that has created London’s newest neighbourhood at East Village, the first legacy neighbourhood from the 2012 London Olympic and Paralympic Games. Get Living London offers three-year tenancies with a resident-only break clause after six months.