RENTING NORTH WEST AN EXAMINATION OF THE REGIONAL RENTAL MARKET - MAY 2019 - Your Housing Group
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RENTING NORTH WEST AN EXAMINATION OF THE REGIONAL RENTAL MARKET MAY 2019
CONTENTS
EXECUTIVE EXPERIENCE OF
SUMMARY RENTERS IN THE
NORTH WEST
HOUSING MARKET
05 08
PROBLEMS WITH THE COST OF LOST
THE CURRENT OPPORTUNITY
RENTAL OFFER
10 12
HOW CAN THE WHAT
RENTAL OFFER RENTERS
BETTER SUIT WANT
TENANTS’ NEEDS
AND LIFESTYLES?
14 15
HOW CAN WE EXPANDING THE
OFFER A BETTER ROLE OF HOUSING
RENTAL SERVICE? ASSOCIATIONS
16 17
CONCLUSION:
A NEW MODEL OF
HOUSING DELIVERY
18
Creating more p
laces for people t o thrive and be recognised asa sector leading landlord 3
FOREWORD 1. EXECUTIVE
I’m CEO of one of the North’s biggest housing associations. SUMMARY
I’m also one of the growing number of people who rent
the home they live in. With more people renting than ever THE PERSISTENT LACK OF HOUSEBUILDING
before, it is crucial we understand whether the rental IN THE UK IS NOT ONLY PRICING MORE AND
offer in our region is good enough: whether it meets MORE PEOPLE OUT OF HOME OWNERSHIP.
the needs of modern lifestyles; how we feel about the IT IS INCREASING DEPENDENCY ON A PRIVATE
RENTAL MARKET WHERE SIMILAR AFFORDABILITY
quality of the actual service offered by landlords.
PROBLEMS ARE BECOMING ENTRENCHED. RENTS
That is exactly why we commissioned this research. Unfortunately, ARE RISING FASTER THAN INCOMES IN MORE
it does find some problems: lots of people in our region are unhappy
AND MORE AREAS, AND WITH RISING PRESSURE
ON THE SECTOR, CONCERNS ARE FREQUENTLY
with their landlords, and we also uncover some real issues with
BEING RAISED OVER THE ACTUAL QUALITY
the way inflexible tenancies are preventing people from taking up
OF SERVICE ON OFFER FROM LANDLORDS.
new job opportunities. This has huge implications for our economy
– and it’s costing North West renters over £1,000 a year in lost
This research focuses on these issues, looking specifically at the North
wages. That’s an estimated £173.6m in earnings every year.
West of England, a region that has seen a rapid increase in renting in
recent years. It seeks to understand the rental market on offer to people:
But there are some good messages in here, too, on constructive ways whether landlords are offering a decent service in return for the rents they
forward for the rental offer to adapt to modern lifestyles. It shows charge and whether tenancies meet the needs of people’s lifestyles today.
big appetite for more flexible tenancies, for example, it allows people
to trade up or downsize, or even move locations, within a single tenancy
offer. Some people also like the idea of the longer-term or lifetime WE FOUND SOME VERY
tenancies that are more common in other European countries. CLEAR PROBLEMS:
The biggest picture this research points to, however, is a need to • First, the major underlying problem is the fact that our regional housing
develop more housing for rent – preferably affordable rent – and market is too reliant on a small group of private sector builders who
for this to be delivered with a much more professional rental offer focus on relatively high-value homes for sale that increasing numbers
that better meets modern lifestyles. And this is where I believe of people simply cannot afford. House prices in the region are relatively
high for the North of England, averaging at over £180,000, but there are
housing associations could come in and play a major new role.
some pockets where price rises have rocketed way faster than earnings:
Trafford, Salford and Manchester, for example, have experienced the fasted
We build homes where they’re needed – not where they’ll deliver
gains over the past decade, at 30%, 27% and 25% respectively.1
the highest investor return – and we manage them professionally,
and to a consistently high standard of quality. The challenge for • This has led increasing numbers of people in the North West to rely on the
the future, therefore, is how to really expand the amount of good private rented sector, especially as social housing has reduced, but similar issues
quality, professionally-managed rental housing our sector delivers. affect this sector. Not only do we have a shortage of homes to rent, but rents are
This means looking for imaginative ways to fund new development, high: equivalent to nearly a third (26.7%) of the gross average salary in the region.2
through pension funds, for example, and this report sets out some
pointers for the kind of thinking we will be bringing forward in future work.
1
Valuation Office Agency and Annual Survey of Hours and Earnings, Office for National Statistics, 2018
2
IBID
4 Creating more p
laces for people t o thrive and be recognised asa sector leading landlord Creating more p
laces for people t o thrive and be recognised asa sector leading landlord 5
• The second set of major problems arises from the fact that much of the available In terms of what the solution is to all of this, there is an urgent need for more
rented housing is held by a very fragmented market of ‘amateur landlords’, good rental stock – a well-known problem linked to the under-delivery of housing
where the quality of the service being offered is extremely variable. New polling nationally. Allied to this, the rental offer needs to improve radically if it is to meet
we carried out for this report showed one in six renting households3 - or 18% people’s needs.
- in the North West, equivalent to 205,818 households,4 believe they get a
poor landlord service. Rather than piecemeal policies trying to accelerate building rates or to improve
regulation affecting tenants, we believe something much simpler and more impactful
Renting can also be very insecure, as these landlords tend to want the
• would be to encourage a developer sector that can (a) challenge the dominance
flexibility to take back their asset if needed at fairly short notice. Our research of the handful of commercial volume builders who are simply failing to deliver,
shows widespread support for the idea of longer-term tenancies: 47% of renting and (b) provide a more professional management service than the preponderance
households polled in the North West – equivalent to 537,415 households - of amateur landlords in the market.
want a longer-term tenancy.5 83% of respondents say that “security” was
the main reason for this. This is where the housing association sector provides a simple and very
clear solution to improve radically the rental market on offer to people.
• R
enters are foregoing career progression because of rental insecurity.
Longer tenancies should not mean inflexible ones: renters in today’s labour Housing associations are increasingly developing, as well as managing housing,
market of more frequent job changing clearly need a tenure offer that is and they also tend to offer longer, much more secure tenancies than private
portable, allowing them to move to take new opportunities without fear of landlords. Because many also own different types of housing over several
excessive exit penalties or not securing a tenancy in the new location. Our different locations, we can also see a future where opportunities within portfolios
polling shows that 15% of renting households in the North West – equivalent for people to upscale, downsize, or even move geographically
to 171,515 households - have been forced to turn down a job opportunity could be created within a single tenancy.
because of worries over terms of their tenancy. This could include the fear
of costs associated with early termination, or loss of deposit. This has a The key is allowing housing associations to play a much bigger role in the housing
huge impact in terms of lost potential for the economy, as well individuals’ life market, with new policy thinking around how to attract investment from reliable
chances: the average loss of earnings is £1,012 a year (see more below).6 sources with a long-term outlook, such as pension funds. This way the sector
does not only rely on public funds or a restricted amount of debt finance.
While it may seem a poor choice to forego a career progression for the sake of,
for example, losing a short-term tenancy deposit, the figures indicate this may be This report therefore calls on all politicians to develop new thinking with the sector
a perfectly rational choice for many. The £1,012 benefit will come to around £800 on how to bring land and investors together with housing associations so that
after tax for the average basic rate taxpayer. The typical minimum deposit required development can start to happen at the speed and scale necessary to help
by a landlord is 4 – 6 weeks, which, based on average rental prices in the North tackle the housing crisis.
West, could cost between £530 - £800, plus any further exit penalties and fees.7
These costs have the potential to undermine the appeal of moving for work. Your Housing Group has been developing new ideas on this front and will soon be
publishing policy proposals in this space.
3
Polling commissioned by Your Housing Group from Populus: fieldwork undertaken January 2019
4
English Housing Survey 2017-2018 establishes there are 1,143,438 households renting in the North West; all percentages
established using this figure
5
Polling commissioned by Your Housing Group from Populus: fieldwork undertaken January 2019
6
Assuming the 171,515 working age renters in the North West who have been restricted from taking a new work opportunity
because of the terms of their tenancy are currently either employed full-time, employed part-time or unemployed (with the
split of these categories based upon numbers in the English Housing Survey) the model calculates what renters would have
gained in income increases from taking up a new work opportunity, i.e. full-time and part-time employees moving into new,
higher-paid roles and the unemployed moving into employment. Earning increase established using the following sources:
Resolution Foundation, August 2018, The growing ‘disloyalty bonus’ establishes typical pay bump; Public Health England,
October 2017, Movement into employment: Return on Investment Tool – demonstrates the typical income gains in income
from moving into employment to unemployment
7
Valuation Office Agency data establishes average monthly regional rent in the North West is £568; 4-6 weeks’ worth of rent at
this rate would cost £524-£786
6 Creating more p
laces for people t o thrive and be recognised asa sector leading landlord Creating more p
laces for people t o thrive and be recognised asa sector leading landlord 7
2. EXPERIENCE For instance, Oldham is the most difficult place to live in the region for average
OF RENTERS IN earners, despite affordable-seeming average rents (£551 vs £568 regional average
per month). This is because of the lower average earnings of local residents
THE NORTH WEST (£23,803 vs £25,538 regional average), plus a lower employment rate (67.4% vs
73.7%). ‘Affordability’ of rents is relative to where you live, and how much you earn.
HOUSING MARKET With more people in the North West renting than ever before, and rents
consuming a rising proportion of people’s incomes, it is vitally important
that we understand whether today’s rental offer meets people’s needs.
IT IS NOW WELL-UNDERSTOOD THAT BRITAIN’S
HOUSING MARKET IS IN CRISIS. WHILE THE FOCUS
IN DEBATES ON HOW TO TACKLE THIS TENDS TO BE
AROUND LOW HOUSEBUILDING AND RISING HOUSE
PRICES PUSHING PEOPLE AWAY FROM HOME OWNERSHIP,
THE EXPERIENCES OF THE EVER-GROWING NUMBERS
OF HOUSEHOLDS WHO ARE RENTING DESERVES
A GREAT DEAL MORE SCRUTINY.
With this in mind, we set out to explore the state of the rental market in the
North West region, from a perspective both of affordability of rents and
also the service people receive in return for the rents they pay.
To contextualise our analysis, it is worth setting out that North West has seen
house prices rise rapidly over recent years and with social housing in decline,
the result has been a rapidly-growing private rental sector. The number
of households renting in the North West has grown to 1,143,438.8
Rents in the North West are rising in relation to people’s incomes in the North of England.
Rents rose by 1.7% last year, whilst wages in the region remained largely static.
Previous analysis undertaken on behalf of Your Housing Group revealed
that ‘liveability’ and affordability within the region is highly variable.
8
Ministry of Housing, Communities, & Local Government, English Housing Survey 2017 to 2018: private rented sector;
Survey in question establishes that there are 1,143,438 households renting (via a variety of tenures) in the North West;
all equivalents of percentages generated using this figure
8 Creating more p
laces for people t o thrive and be recognised asa sector leading landlord Creating more p
laces for people t o thrive and be recognised asa sector leading landlord 9
This makes for a very fragmented market where the security of tenancies
PROBLEMS WITH THE and the service offered by landlords can vary wildly. Renters typically report
CURRENT RENTAL OFFER the following problems:
• P
oor quality accommodation: The English Housing Survey10 found that
One major feature of the private rental sector in this country is the 750,000 rented homes have at least one very serious hazard (such as exposed
preponderance of properties owned by landlords who rent out property wiring, mould, or vermin). Moreover, Citizens Advice research found that 41%
as a ‘sideline’: a source of supplementary income or trying to build up of renters say they are forced to wait an unreasonably long time for landlords
assets that can be used in retirement. 45% of private landlords own just to undertake repairs they are legally obliged to complete.11
one property, and 48% of England’s tenancies are drawn from the 17%
of landlords who own five or more properties. Only 4% of private landlords Precarious tenancies: Around 1 in 10 tenancies come to an end because the
•
became a landlord in order to let property as a full-time business.9 landlord has terminated it, typically through a ‘no-fault’ eviction.12 Tenancies
ended by landlords were the biggest cause of homelessness acceptances
in England in 2017, accounting for 28% of all local authority homelessness
acceptances.13 Citizen’s Advice research reveals renters who complain
about problems with their home are 46% more likely to be evicted.14
• B
ad service: new polling we commissioned for this report revealed that one in
six renting households in the North West – equivalent to 205,818 households15
- believe they get a poor service from their landlord.
• Inflexible tenancies limiting life chances: Our new poll for this report
uncovered that 15% of renting households in the North West – equivalent
to 171,515 households16 - have been restricted from taking up a job opportunity
due to inflexibility in the terms of their tenancy.
The fact that renters are losing out on the chance to take up new jobs merits
closer examination - the cost of these lost opportunities is borne by both
individual renters and the North-Western economy.
10
Ministry of Housing, Communities, & Local Government, English Housing Survey: Private rented sector, 2017-18
11
Citizens Advice, It’s broke, let’s fix it: Improving redress for private renters, Mette Isaksen, July 2017
12
University of York, Centre for Housing Policy, Vulnerability amongst Low-Income Households
in the Private Rented Sector in England, David Rhodes and Julie Rugg, 2018
13
IPPR, The Case for Reforming Private Renting: Interim Report, Darren Baxter and Luke Murphy, December 2018
14
Citizens Advice, Touch and go: how to protect private renters from retaliatory eviction in
England, Caroline Rogers, Mette Isaksen, and Beth Brindle, September 2018
15
Calculated from regional households data in Ministry of Housing, Communities, & Local Government, English Housing
Survey 2017 to 2018: private rented sector, July 2018. Survey in question establishes that there are 1,143,438 households
renting (via a variety of tenures) in the North West; all equivalents of percentages generated using this figure
9 16
Ministry of Housing, Communities, & Local Government, English Private Landlord Survey 2018, January 2019 IBID
10 Creating more p
laces for people t o thrive and be recognised asa sector leading landlord Creating more p
laces for people t o thrive and be recognised asa sector leading landlord 11
THE COST OF LOST OPPORTUNITY The £1,012 ‘new job benefit’ calculated will – for the average tax-payer – come
to around £800 after tax. However, those looking to move need to reckon with the
cost of paying a new deposit upfront whilst waiting for the return of their current one.
Secure tenancies should not mean inflexible ones: renters in today’s The latest private landlord survey revealed that for their last letting, 61% of agents took
labour market of more frequent job changing clearly need a tenancy a deposit of between four and six weeks’ rent.19 Based on the average rental prices
offer that is portable, allowing them to move to take new opportunities in the North West, this would set a job hunting renter back by circa. £530 - £800.20
without fear of excessive exit penalties or not securing a tenancy in
the new location. Renters looking to relocate for a job are forced to This, coupled with potential exit penalties and fees (which will not be banned
weigh up the hidden costs of lost opportunity; the cost of moving. as part of the Tenant Fees Act) could completely eradicate the potential financial
benefits of a new job. For many renters, these costs are just not feasible, and nullify
We undertook a quantitative modelling exercise to assess the financial the ‘new job benefit’ they could otherwise enjoy.
implications of the ‘opportunity cost’; exploring the typical employment
circumstances of a renter, and how these circumstances might change
if they weren’t constrained by the terms of their tenancy:
enters who are restricted from taking up a new job opportunity would,
• R
on average, lose out on an annual income increase of £1,012.17
ssuming that around 171,515 renters were restricted from taking up a new
• A
job, the total lost income for these renters would be £173.6m per year – that’s
£173.6m that could otherwise be spent in the North-Western economy.
To arrive at this figure, we looked at the typical employment circumstances
of a renter, and how these employment circumstances might change if they
were not restricted by their tenancy. Assuming that there are around 171,515
renters in the North West who have been restricted from taking a new work
opportunity because of the terms of their tenancy, and that they are of working
age, are currently either employed full-time, employed part-time or unemployed,
we then calculated what these renters would have gained in income increases
from taking up a new work opportunity.18
Naturally, if the earning potential of a new role outstrips the cost of leaving
a tenancy early, then the rational economic choice would be to take the job.
However, for many renters, those sums may simply not add up.
17
Resolution Foundation, August 2018, The Growing ‘disloyalty bonus’; Public Health England,
October 2017, Movement into employment: Return on Investment Tool
19
18 Ministry of Housing, Communities, & Local Government, English Private Landlord Survey 2018, January 2019
Earning increase established using the following sources: Resolution Foundation, August 2018, The growing ‘disloyalty
20
bonus’ establishes typical pay bump; Public Health England, October 2017, Movement into employment: Return on Valuation Office Agency data establishes average monthly regional rent in the North
Investment Tool – demonstrates the typical income gains in income from moving into employment to unemployment West is £568; 4-6 weeks’ worth of rent at this rate would cost £524-£786
12 Creating more p
laces for people t o thrive and be recognised asa sector leading landlord Creating more p
laces for people t o thrive and be recognised asa sector leading landlord 13
3. HOW CAN THE WHAT RENTERS WANT
RENTAL OFFER Our polling shows that many people support the idea of long-term tenancies:
BETTER SUIT 47% of renting households polled in the North West – equivalent to 537,415
households - want a longer-term tenancy. 83% of respondents say that
TENANTS’ NEEDS
“security” was the main reason for this.
AND LIFESTYLES?
People’s needs change with age. Our polling revealed that the “security” offered
by a longer tenancy – whilst popular with all age groups – was most important
for those between the ages of 55-64.
With more people from every age group renting, it’s time for a tenancy that
THE FACT THAT RENTERS ARE BECOMING AN EVER-
reflects the tenant’s needs at every stage in their life – from when they leave
GROWING PROPORTION OF HOUSEHOLDS UNDERLINES
home to when they begin to think about how they’d like to spend their old age.
THE FACT THAT RENTING SHOULD NOT BE SEEN TO BE
A POOR SUBSTITUTE FOR HOME OWNERSHIP. THERE CAN
In comparable European countries, the rental market offers options beyond
AND SHOULD BE PLENTY OF ADVANTAGES TO RENTING.
the typical short-term tenancy seen in the UK. Federal statistics from 2014
FOR INSTANCE, ONE OF THE GREAT ADVANTAGES OF
reveal that 54.6% of German households are comprised of tenants22, and longer
RENTING SHOULD BE FLEXIBILITY.
tenancies – even lifetime tenancies – are common. These long-term tenancies
give tenants more control and flexibility over where they live and the choices
Today’s tenants are more likely to have to move for work and education far more frequently that they make regarding their personal and employment opportunities.
than previous generations21 - making renting the more adaptable, flexible choice, rather than
owning a home that may need to be sold before the occupier can move. Older age groups A life-long “passporting” tenancy could be the solution. In offering every renter a
also need flexibility – potentially needing to downsize in later life, for example. lifelong tenancy, with the opportunity to transfer (or “passport”) it to other properties,
housing associations and professional landlords could offer tenants a rental offer
Tenancies should offer this flexibility, but have simply not kept up with the pace and way that adapts to meet their needs at every stage in life. A family of four have very
that people’s lifestyles are changing. different needs to the city-dwelling singleton, or the pensioner who wants to marry
independence with practical assistance. A lifelong “passporting” tenancy would
It’s time to think about how we can reduce the burdens and inflexibilities imposed upon deliver a home to suit each scenario – and at varying price points and tenures.
renters – measures that would help both individuals and our wider economy and society.
22
Housing Europe, the European Federation of Public, Cooperative and Social Housing, The State of Housing in the EU 2017,
21
Total Jobs survey of jobseekers, Half of Brits willing to relocate within the UK for work, July 2018 Alice Pittini, Gerald Koessi, Julien Dijol, Edit Lakatos, Laurent Ghekiere
14 Creating more p
laces for people t o thrive and be recognised asa sector leading landlord Creating more p
laces for people t o thrive and be recognised asa sector leading landlord 154. HOW CAN WE EXPANDING THE ROLE
OF HOUSING ASSOCIATIONS
OFFER A BETTER
RENTAL SERVICE? Housing associations have a pivotal role to play in raising the standards
of the UK’s rental offer. They have a proven track record on building
to demand, and delivering safe, secure, quality housing of all tenures.
As renting becomes the ‘new normal’, more people deserve to benefit
THE PICTURE OUR RESEARCH PAINTS IS VERY CLEAR: from a rental experience of this quality.
TENANTS WANT HOMES THAT ARE SAFE AND SECURE,
WITH SECURE TENANCIES THAT ALSO OFFER FLEXIBILITY. Politicians are increasingly recognising the role that housing associations can play
in building more housing and Government has pledged more money to the sector
to fund this. Public funding and support is always welcome, but in order to really
Tinkering around the edges of the private rented sector won’t deliver this. Clamping down on
tackle the housing crisis and deliver the homes Britain needs, we need new
the outdated legislation that allows for no-fault evictions, and legislating for higher minimum
policy thinking. Housing associations are eager to accelerate the building
safety standards could drive some improvements. However, tenants would still be effectively
of more affordable and social homes, and the introduction of investment from
reliant on the goodwill of their landlords to behave professionally and responsibly. A recent
reliable and long-term funding sources – such as pension funds – could really
survey of landlords found that “most (said) that they often learned about the regulations
unlock the potential of the sector to build at scale and speed.
governing the sector reactively, often when they were informed by a tenant.”23
However, building homes on a serious scale demands land. We need a much more
Given the scale of the issues at hand, it’s clear that piecemeal reform will not be enough
strategic approach to land assembly – working collaboratively with local authorities
to improve the private rental offer. It’s high time we began to think seriously about the role
to bring in multiple sites on which to build.
of professional landlords, such as housing associations, in ensuring that renters get the
homes and tenancies they deserve.
This points us to what the future could look like: a new model of housing delivery
and management that is not dependent on public funds.
Organisations like Your Housing Group own different types of housing in different
locations, and in future it could feasibly be much more common to see providers creating
new opportunities for tenants to upscale, downsize, or even move geographically – and all
within a single tenancy. We are currently looking into this and are already offering longer
tenancies across sections of our stock.
What’s more, housing associations are also increasingly innovating, offering added
services such as gardening and laundry.
Clearly, there is an urgent need for drastic change in the rental sector. For too long,
failure to build more homes has resulted in people from every kind of background forced
into an increasingly costly private rental sector that is not fit to accommodate their needs.
Tenancies are insecure – yet inflexible – prices escalating, and service levels poor.
23
IPPR, The Case for Reforming Private Renting: Interim Report, Darren Baxter and Luke Murphy, December 2018
16 Creating more p
laces for people t o thrive and be recognised asa sector leading landlord Creating more p
laces for people t o thrive and be recognised asa sector leading landlord 175. CONCLUSION:
A NEW MODEL OF
HOUSING DELIVERY
YOUR HOUSING GROUP HAS BEEN IN CONSULTATION
WITH POLICYMAKERS AND INDUSTRY FIGURES
AROUND WHAT A FUTURE MODEL OF EXPANDED
HOUSING ASSOCIATION DEVELOPMENT COULD LOOK
LIKE AND CRUCIALLY, HOW IT COULD BE FUNDED.
The ingredients we believe are needed are below:
• A funding pot comprising additional money for house building that debt-constrained
housing associations can access to build homes. This should be facilitated and regulated
(but not funded) by central government.
• An investment proposition – mix of risk and reward – which the fund can offer institutional
investors, delivering returns that suit the needs of pension funds.
• An opportunity for local authorities in England to generate cash from their land holdings
without having to sell it to private developers, thus reducing their reliance on central
government money and the antiquated grant formula mechanisms.
• Encouragement for the rapid innovation of modern methods of construction as the
means to grow both the capability and capacity for mass-manufacture of homes
at lower cost than traditional new build.
We will be coming forward with proposals outlining the above in more detail soon,
but welcome comments and suggestions from interested parties.
We are confident that the housing association sector can help tackle the crisis afflicting
our rental market today, offering the secure, flexible, and tenant-focussed service people
want from the rental sector. What we need is for policymakers to act to help bring this
about: this is our call to action for politicians of all parties.
18 Creating more p
laces for people t o thrive and be recognised asa sector leading landlord 19Your Housing Group 602 Aston Avenue Birchwood Warrington WA3 6ZN yourhousinggroup.co.uk @your_housing /yourhousing
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