Will the Real Private Rented Sector Please Stand Up? Reflecting on the Lyons Review By Ben Pattison (University of Birmingham)

The dust has settled after the publication of the Lyons housing review[1] in October. This publication represented a major intervention in the debate on increasing housing supply in the UK. As I have reflected on the review I was struck by an apparent contradiction over the role of the private rented sector.[2] On one hand the growth of the private rented sector is highlighted by Lyons as a negative consequence of the failure of housing supply. At the same time, the review recommends increased investment in private renting as one of the measures to boost housing supply. Is the growth of this tenure a symptom of the housing crisis or a possible solution? Is it possible to reconcile these two views of the private rented sector?

The view that private renting is a negative consequence of inadequate housing supply appears right from the start of the Lyons review. In the executive summary, the statement that “we face the biggest housing crisis in a generation” is supported with evidence that “the 2011 Census shows that there were one million more children living in the private rented sector than ten years previously” (p. 6). This view is expanded upon later in the report when it is argued that “the private rented sector has absorbed many of the households put under pressure by the housing crisis” (p. 17) and that “the poorest conditions in housing stock now exist in the private rented sector” (p. 130).

Despite these concerns, the review proposes “a new role for the Homes and Communities Agency in investment in housing and infrastructure” (p. 39). This would involve the creation of a new investment arm which would “act as a vehicle to aggregate opportunities for investment to provide the scale needed to attract private investment” (p. 41). It is highly likely that this kind of institutional investment would deliver private rented accommodation. The Lyons review highlights the development of private rental accommodation by Manchester City Council as an example of good practice in this area (page 40). This represents the continuation of political support for greater institutional investment in the private rented sector seen most recently in the Montague review.[3]

So it appears that the Lyons review regards the growth of families in the private rented sector as one of the major problems with the current housing system. At the same time, one solution is to encourage institutional investment to deliver more private rented accommodation. Is it possible to reconcile this apparent contradiction? It could be argued that this simply represents a pragmatic response to the scale of the housing supply crisis. The review states that “with private rental market affordability stretched, a shortage of homes for affordable and social rent and an ageing population, we will need to build more of all tenures”. It appears to suggest that our crisis in housing supply is so severe that we simply need to build as much accommodation as possible. However, I would contend that this apparent contradiction within the review also highlights deep tensions within UK housing policy on the roles played by the private rented sector.

The recent growth of private renting has become popularised as ‘Generation Rent’ and is front page news.[4] Most popular discussions focus on younger households who are ‘priced out’ of owner occupation. My own PhD research demonstrates that the private rented sector is highly diverse – both spatially and demographically. The ‘Generation Rent’ label fails to fully capture this diversity. Private renting is expanding at the expense of both social housing and purchasing with a mortgage. It is also important to note that the private rented sector consists of diverse sub-markets or ‘niches’[5] which play different roles in local housing markets. Examples of these niches might include students, Housing Benefit claimants and city centre living.

Some niches appear to be viewed positively by the Lyons review and should therefore be supported. These niches tend to include purpose built student accommodation and city centre living. The review notes that “strong rental growth has been mostly associated with locations experiencing stronger economic recoveries, particularly in London and other cities such as Manchester, Oxford and Brighton” (p. 16). These niches tend to be viewed as serving a socially useful purpose, supporting labour market mobility and providing reasonable accommodation. They are also more likely to be financed by institutional investors.

In contrast, other niches appear to be viewed by Lyons as problematic and in need of reform. The review argues that “by reducing the amount of genuinely affordable homes and leaving the private rented sector as the only option for many in need, governments have effectively broadened the base of dependant households, who are more vulnerable to changing economic conditions and to rent rises” (p. 153). Discussion of “dependent households” often focuses on the rapid increase in Housing Benefit claimants and expenditure in recent years.[6] Concerns are often raised that “large sums are paid out to private landlords via housing benefit but this does not necessary improve standards or stability for tenants”.[7]

It appears as if the Lyons review is arguing for greater investment in some niches within private renting (such as city centre living) and reform of other niches (such as Housing Benefit). However, this is not explicitly stated within the review. I would argue that this lack of clarity exposes deep tensions within housing policy on the private rented sector. As academics, policy makers and practitioners we need to think carefully about this tenure. What roles is the private rented sector currently playing within the wider housing system? What roles should it be playing? Is it possible for private renting to provide decent, affordable accommodation for a range of households and also contribute to tackling the housing supply crisis?

Ben Pattison, Postgraduate Researcher, University of Birmingham (@ bmpattison)

[1] Lyons, M. (2014) Mobilising across the nation to build the homes our children need, http://www.yourbritain.org.uk/uploads/editor/files/The_Lyons_Housing_Review_2.pdf

[2] With thanks to Alan Murie for discussion about this.

[3] Montague, A. (2012) Private rented homes: review of the barriers to institutional investment, https://www.gov.uk/government/publications/private-rented-homes-review-of-the-barriers-to-institutional-investment

[4] i newspaper, 3rd October 2014.

[5] Rugg, J. & Rhodes, D. (2008) The Private Rented Sector: Its contribution and potential. York, The University of York.

[6] Pattison, B. (2012) The Growth of In-Work Housing Benefit Claimants: Evidence and policy implications. Coalville, BSHF.

[7] Webb, K. (2012) Bricks or benefits? Rebalancing housing investment. London, Shelter, page 19.

 

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