On your commute home from work this evening, remember this: behind one out of every five front doors you pass will be a family, couple or individual renting their house privately, writes David Smith-Milne of PlaceFirst.
Behind another one will be a family, couple or individual renting their home socially. The other three will be lucky enough to own theirs. In the UK, 20% of all households now rent their home privately.
Just 15 years ago, your commute would have been very different. Just one out of every 10 front doors would have been a private renter, three would have been social renters and the rest would be home owners.
So, here’s a question: is this massive shift in the landscape of our housing market one driven by changing patterns of household formation? Is it driven by changing lifestyle choices? Are our technology-enabled, globalised lives creating opportunities for us all to live differently and more flexibly than our parents did? Or is it really about something else?
There is absolutely no denying that some of the growth of the private rental sector can be attributed to transitioning lifestyle patterns, especially among young professionals. Behaviours have shifted; graduates and those at the start of their careers are undoubtedly more flexible than ever and not being tied to a mortgage or one place is an important part of that. Migration has increased massively. Divorce rates have also risen. But if you really distil the data and unpick what is actually driving most of the real and underlying demand for privately rented accommodation, there’s one clear conclusion: lack of choice.
Today’s Generation Rent is, in the main, renting not because it wants to, but because it has to. And today’s Generation Rent does not quite look the way you think it might. Far from being a swarming mass of young trendy urbanites and professionals, it is made up largely of families with children. In the last 10 years alone, more than one million more families with children have taken up tenure in the private rented sector to meet their housing needs. Families with kids now represent by far the biggest sub-sector of this growing market.
So why then is all the development focus on city centre apartment blocks? And if families are the principal driver of demand across the PRS sector, why do most of our city centres – which are seeing nearly all the growth of specialist PRS apartment blocks – continue to lack any of the very basic infrastructure, such as swings, roundabouts, football pitches, let alone schools, that allow families to settle and put down roots in a neighbourhood?
There is a message in this that is difficult for a lot of us, including the government, to take on board: families are renting now more than ever before not through choice, but because they are trapped in a housing market that is failing them. We have a dysfunctional housing market where ownership is now substantially beyond the reach of many. PRS growth is a direct outcome of a housing market which throughout the noughties we now know could only work with mortgage instruments that were so distorted that they nearly brought down capitalism across the globe.
You would think that with such exponential levels of growth in this sub-sector that we would see a sharp surge in market activity aimed at families, but we haven’t. You would think that the government might try to intervene, to enable or facilitate a market-led response. The government might argue that it has, but in reality, build-to-rent funding, subsidised bond instruments and a glut of home ownership incentive instruments aimed at first time buyers have done little more than mask over the core and underlying issue: wages for most people have grown at a rate that has been persistently slower than house prices.
If the PRS sector is to genuinely form a part of this country’s long-term housing model and play a role in addressing our housing crisis, those involved in it need to get much better at planning, delivering and managing it. Indeed, if the sector is here to stay, then everyone involved needs to get more serious, do their homework and start delivering actual value for those who need it the most. Perhaps this means less excitement about how tall the next PRS apartment block or how funky the residents’ party room might be, and more emphasis on how we can create places and real homes that provide stability, security and a long-term choice for those who have been let down by us all in one way or another over the last 20 years.
- David Smith-Milne is managing director at PlaceFirst