What Next for the Private Rented Sector?
- Rental sector faces multiple threats to its long-term viability
- Fewer landlords leading to greater inequality
- Pre-validation checks and guarantor services essential to support both landlords and tenants
The private rented sector is under threat. After years of tax changes that make it less appealing to be a landlord, the Renters’ Reform Bill is now causing many landlords of houses in multiple occupation (HMOs) to worry about the future by abolishing section 21 evictions. Then there is the cost-of-living crisis, which means many landlords are facing rising mortgage rates at the same time as uncertainty over rental income is increasing.
The result of the changes over the past few years has been a fall of nearly 50% in the number of properties available to rent. Propertymark reports that approximately 30 properties were available to rent per estate agent branch in March 2019, whereas by March 2022 that figure had dropped to just 15.6. In London the figures are even more dramatic, with Chestersons reporting a drop of 38% in the number of available rental properties between July 2021 and July 2022, while tenant enquiries increased by 60% over the same period.
From the renters’ perspective, the diminishing number of landlords is making for fierce competition when it comes to finding somewhere to live. According to UK rental guarantor service Housing Hand, this is leading to heightened inequality in the rental sector, with tenants who can offer to pay rent upfront gaining a distinct advantage when it comes to securing their desired property.
All this comes at a time when the Centre for Economics & Business Research projects that 407,000 families – equating to nearly one in ten tenant households in England – will fall into rent arrears this year as the cost-of-living crisis continues to ratchet up the pressure. That’s a 31% increase compared to the number of households who got behind on their rent during the first year of the pandemic.
Graham Hayward, Chief Operating Officer, Housing Hand: “At a time when the private rented sector is facing threats to its longevity from multiple directions, it is important that we do all we can to support both landlords and tenants. The private rented sector is a valuable resource that needs careful attention if we are to preserve it. This is why services such as pre-validation checks and rental guarantor services are so important.”
Housing Hand is supporting renters to access accommodation while also providing landlords with the assurance that their rent will be paid. The company provides rental guarantor services that guarantee the tenant’s rent for the whole of their tenancy, providing peace of mind to both parties.
“By providing a bit of reassurance and support for all parties, we hope to remove some of the stress from the rental process…”
To level the playing field in terms of access to rental homes, meanwhile, Housing Hand is working with Canopy to support renters who don’t meet traditional referencing requirements. While renters usually have to earn 2.5 to 3 times the annual rental amount in order to be eligible to rent a home, with Housing Hand, they need just 1.5 times net earnings to qualify. Housing Hand then serves as the individual’s rent guarantor.
Meanwhile, Housing Hand has invested in new technology and processes to speed up the pre-validation element of its service. This means that renters have gone from waiting 48 hours for pre-validation checks to complete to just 48 seconds. Again, this is supporting more equitable access to rental properties.
James Maguire, Head of Sales and Business Development, Housing Hand: “There’s no denying just how tough the rental sector feels for both tenants and landlords right now. By providing a bit of reassurance and support for all parties, we hope to remove some of the stress from the rental process, as well as delivering peace of mind for renters and landlords alike.”
PropTech sector wants to help deliver Housing and Planning ambitions
Press Release: In the summer the DLUHC Digital Planning team held a virtual Roundtable event to connect senior DLUHC officials with a wide range of voices to help the Property Technology (PropTech) sector understand the government’s levelling up agenda and discuss where their insights, experience and solutions could help.
The roundtable was attended by PropTech entrepreneurs as well as influential individuals from the housing industry, public sector, and venture capital investors. Areas of discussion aligned with the core pillars of social change that DLUHC is looking to deliver through programmes of work such as the Levelling Up and Regeneration Bill. This article highlights some of the key takeaways from the event, as we acknowledge the important role that PropTech can play in modernising and reforming the planning system, and improving the productivity of wider housing and planning markets.
PropTech and the Levelling Up Missions
In our ongoing work to engage and support PropTech, we recognise there are many ways that innovative approaches can inform the department’s aims across planning, community engagement, regeneration, home ownership, private rental sector, social housing, sustainability and beyond.
At the event, the group explored how the PropTech sector’s expertise and capabilities can help us deliver against levelling up missions, while also looking at barriers that need to be addressed for greater value to be unlocked.
Emran Mian, Director General at DLUHC, shared opening remarks about the Department’s levelling up agenda, upcoming legislative changes and how PropTech might look to support place shaping, both in terms of broader master planning and delivery of development on the ground.
With Faisal Butt, Founder & CEO of Pi Labs facilitating the discussion, the group were able to dive into the following questions in the context of DLUHC’s broader vision:
- To accelerate the delivery of the levelling up missions to be delivered by 2030: where does the sector see their insights and expertise benefitting DLUHC’s approach?
- What are the barriers on both the supply and demand sides of the sector and is PropTech being fully leveraged in these areas?
- How can the government enable the continuous value of PropTech to be unlocked and scaled?
Faisal’s introduction highlighted the breadth of the PropTech sector, with innovative products and business models addressing a broad range of problems: from digitising planning, to enabling community engagement, tackling housing affordability and helping the industry reach net zero.
We learnt that between Q1 2019 and Q1 2022 there was £47 billion of global venture capital investment in PropTech startups (of which circa £3.5 billion has been in the UK). The technology sector is growing, but there is still a long way to go to see digital change across housing and planning in the way that other industries like financial services have been transformed.
Proptech and Property News in association with Estate Agent Networking.
Andrew Stanton is the founder of Proptech-PR, a consultancy for Founders of Proptechs looking to grow and exit, using his influence from decades of industry experience. Separately he is a consultant to some of the biggest names in global real estate, advising on sales and acquisitions, market positioning, and operations. He is also the founder of Proptech-X Proptech & Property News, where his insights, connections and detailed analysis and commentary on proptech and real estate are second to none.