The Changing Scale and Role of Private Renting in the UK and - - PowerPoint PPT Presentation

City Futures Research Centre

The Changing Scale and Role of Private Renting in the UK and Australia

Hal Pawson, City Futures Research Centre, UNSW

• Draws on

– Chapter in UK Housing Review 2011/ 12 – review of recent UK research plus original secondary data analysis – Ongoing Australian research led by Kath Hulse and Terry Burke, Swinburne University

• Covers:

– Comparability of UK and Australia – Sector growth dynamics and geography – Changing role of the PRS – Conclusions and research agendas

Presentation overview

• Both countries exemplify the ‘liberal model’
• f PRS regulation:

– No standard expectation for security of tenure beyond 6 months – Market rents

• Ownership structures dominated by small-

scale investors

• Some significant differences - Australian

PRS:

– set within system where public housing only 5% – stock predominantly houses not flats – no heritage of ex-RTB property – taxation policy settings more favourable than in UK – lacks underpinning equivalent to UK Housing Benefit system: greater concerns on affordability

The PRS in the UK and Australia: how comparable?

• Private renting about to become

predominant in UK – recent growth 9% p.a.

• With home ownership falling since

2005, PRS the only expanding housing sector

• Supply side – weak recovery in BTL

investment 2009-11 but only up to a third of 2007 peak

• Growing ‘rent not to sell’ component –

22% of PRS properties in England acquired as landlord’s main home

Growth dynamics

• UK PRS still at lower end of

international scale

• Australia’s PRS continues to expand

but recently at less than half UK rate

• Recent supply growth due to:

– continuing investor activity – investor lending remains at high levels – ‘rent not to sell’ motivations – 29% of Australia’s rental property owners also renters themselves

• Common factors recently boosting

demand in both countries:

– Migration – esp foreign students as well as migrant workers – Flatlining or falling home ownership

• Similarity in the increasing predominance
• f ‘mum and dad investors’

International PRS scale and growth rate comparison

• Excluding London, PRS revival in

England inversely correlated with 1991 scale of provision

• District level analysis for 1991-2001

period shows similar pattern

• Indications of substitution for social

rent

• In Australia lower rent properties

increasingly concentrated in outer suburbs

• Polarisation of Melbourne’s inner-outer

area rent differential

• Recent extra twist through foreign

student demand for inner metropolitan property?

Geographical growth patterns

• Estimated avg value of UK

investor-purchased homes in 2011

• £153k
• Just below UK all-dwellings house

price norm for 2010

• Suggests gross rental rate of

return – 5.4% (9% in 2002)

• Australian investor activity targeted

further upmarket

– incentivised by negative gearing rules – tax advantages apparently outweigh rental rate of return attraction of cheaper properties

PRS investment targeting

• Britain’s PRS accommodating a

growing % of every income cohort

• Now houses 20% of lowest

income cohort

• PRS therefore ‘playing an

enlarged role in housing the poorest’

• But proportionate growth larger for

higher income cohorts

• PRS therefore ‘going upmarket’
• No directly comparable Aus data

but by implication, PRS also housing growing % of low income hhs

Changing role of the PRS (1)

• Growing representation of

family households in England’s PRS

– % of all renters up from 22% to 30% – Absolute number more than doubled over 10 years to 2010

• Smaller recent increases - %

and absolute - in family households in Australia’s PRS

Changing role of the PRS (2)

• Growing representation of

‘middle age’ cohorts in Australia’s PRS

• % of 35-44 year olds nearly

doubled to 28% from 1990- 2010

• Suggests more households

constrained (or choosing) to live in PRS for longer periods

• Cohort effect may lead to rising

numbers of older renters

Changing role of the PRS (3)

Percentage of each cohort living in Australia’s PRS, 1990 - 2009-10

• Growing number of ‘long term

renters’ in England’s PRS

• Renters with tenancies >5

years up by 9% in 10 years to 2010

• 1 in 6 private renting families

living in PRS for >5 years

• Figures are underestimates

because reflect duration of current tenancy not time in sector

Changing role of the PRS (4)

Conclusions and research agendas

UK Australia

Agendas

Investor motivations – esp institutional investors

* *

Rental affordability

*

PRS suitability for low income/disadvantaged hhs

* *

Regulation of property condition and management

*

Consequences of welfare reform

*

Key sources

Census (5-yearly in Aus)

* *

Rental Bond Board statistics

*

Valuation Office Agency

*

Govt-commissioned landlord and tenant surveys

* *

Tax records

*

Overwhelmingly similar sector dynamics but some contrasts in research agendas reflecting contrasting institutional/policy frameworks...

• Hulse, K., et al (forthcoming 2012) The Australian Private Rental

Sector: Changes and Challenges; AHURI positioning paper; Melbourne: AHURI

• Pawson, H. (2012) The changing scale and role of private renting

in the UK housing market; in: Pawson, H. & Wilcox, S. (eds) UK Housing Review 2011/12; Coventry: CIH

References