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Meeting the Housing Challenge: The Role of the Private Rented Sector

Meeting the Housing Challenge: The Role of the Private Rented Sector. Economic and Social Context 17 th August 2011. Historic and recent trends. Historic decline in PRS has started to reverse in past 2 decades. Households under 35 increasingly in PRS.

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Meeting the Housing Challenge: The Role of the Private Rented Sector

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  1. Meeting the Housing Challenge: The Role of the Private Rented Sector Economic and Social Context 17th August 2011

  2. Historic and recent trends

  3. Historic decline in PRS has started to reverse in past 2 decades

  4. Households under 35 increasingly in PRS

  5. BTL fuelled growth in PRS, but hit by credit crunch

  6. Half of PRS tenants move within 2 years – need for longer tenancies?

  7. Prospects for Sector

  8. (Real) house prices gradually unwinding, limiting capital growth

  9. Housing Benefit reforms may pressure parts of PRS • 470,000 HB claimant households in Scotland (July 2010) – 86,000 (18%) in PRS • Estimated impact of reforms: • Capping LHA weekly rates at £250 (1 bed), £290 (2 bed), £340 (3 bed), £400 (4 bed), no 5 bed rate • Setting LHA to 30th percentile • Removal of £15 excess In total will affect almost 55,000 households who will lose an average of £10 per week. • Further reforms • Uprating by CPI rather than market rents • Extend shared room rate to 35 years – around 7,500 affected (mainly Edinburgh and Glasgow)

  10. But FTB deposit barriers likely to keep PRS demand high

  11. Meaning rental yields relatively attractive • Despite lower expected capital growth & Housing Benefit changes, rental yields potentially attractive compared to other investments • 10-year UK government bonds: 2.5% • FTSE 100: 1.0% over 1-year period • Rental yield: 6.6% (Glasgow postcode G31; source FT Money)

  12. Challenges

  13. Lower satisfaction than in owner sector, especially where children

  14. Significant energy-efficiency improvements required

  15. Final point: Scotland’s PRS still has room to expand!

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