Massive growth and a sea-change in its structure lie ahead for the private rented sector, said housing minister Mark Prisk in a major speech.
Speaking at the Law Society, London, he emphasised just how transformational the new build-to-rent industry will be for the entire housing market.
He said: “For too long, our housing markets have been dysfunctional. For much of the past two decades, we have been consistently building half of what we needed, year on year.
“The result has been a serious imbalance between supply and demand, and while this has led to potential opportunities for investors, there are significant social consequences too.
“So as a government, we’ve had to step back and adopt a new, comprehensive approach to the problem. An approach which reaches across all tenures – owner-occupied, affordable, and private rented – understands the relationship between the three, and seeks to address the deep dysfunctionality in supply and demand.”
Prisk went on: “Over the last decade, the rented sector has become increasingly important in addressing people’s housing needs. The sector now houses 3.8 million households. Mobile patterns of work and reduced mortgage availability have made renting a more realistic choice for many more people, and the effect has been a strong rise in demand over the last decade.
“So far, this rising demand has been met principally by individual landlords, who have been responsible for adding approximately 1.5 million new homes to the sector over the past decade. But there is real potential to go further, and particularly to bring new players into the market.
“Put simply, we want a bigger and better private rented sector, a sector in which large scale and experienced institutional investors can help the market not simply grow, but also to mature.
“Small-scale individual landlords operate around the world, but in many countries, such as the US, Germany and Switzerland, institutional investment in the private rented sector is much stronger and more established than it is here. Evidence from those markets shows that where institutional investment is stronger, costs are driven down and the sector becomes more professional, with a longer-term perspective.
“That’s what we want to encourage here. It’s a change which has the potential to underpin sustained growth of the entire private rented sector, and offer beneficial changes to the market as a whole.”
Prisk also used his speech to announced a new private rented sector taskforce. This will be led by Andrew Stanford, former head of Cluttons Residential. Other members are Julian D’Arcy, a former chairman of Knight Frank, chartered surveyor Joanna Embley, Tacey Hartley of Grainger, and Dominic Martin of EC Harris.
Prisk said: “The role of the taskforce will be to connect investors with opportunities for long-term investment in the sector and help to break down actual and perceived barriers to entry. They will work with the sector to kickstart the delivery of innovative, high-quality and large-scale rented projects.
“And they will bring developers, management bodies and institutional investors together to help you get the most from both the private rented sector Housing Guarantees and the Build to Rent Fund.”
Prisk concluded: “We believe that the private rented sector is a vital part of a functioning housing market, and we want it to get bigger and better.
“A sector in which supply keeps pace with demand, large investors play an increasing role, and government policy is set for the long term.
“Only in this way will private rented housing fully realise its potential alongside other tenures. It’s why we’ve introduced Build to Rent and our Housing Guarantees.
“Our interventions are radical and significant. And that’s because this is a long-term commitment, not a short-term fix.
“Success will not be easy or quick. There will be further obstacles along the way. After all, this is an untested market.
“But working together, I believe we can rebalance our housing markets, and so provide the right type and quality of homes for the next generation.”
See also today’s blog.