First Published 19 October 2016
The housing market collapse has increased demand for secure tenancies, says Nigel Parkinson
Homeownership has been promoted as a way of improving neighbourhood stability, boosting savings -and encouraging local democracy. However, the recent collapse of the housing market raises doubts about such claims.
Given that house prices have fallen 21 per cent since October 2014 and the number of repossessions is on the rise, the benefits of home ownership seem much less real than they appeared before the housing bubble burst.
Yet, for those outside the social rented sector, what are the alternatives? Why can’t the private rented sector meet the demand for secure homes?
Germany, with its high levels of rented accommodation and social stability, provides an example of a thriving rented sector that achieves the same social goals without the drawback of housing market boom and bust associated with high levels of home ownership.
In October 2015, an independent review of the private rented sector was published following the work of Julie Rugg and David Rhodes at York university. It recommended a national register of private landlords, written tenancy agreements, regulation of private sector lettings/management agents and plans for local letting agencies -but security of tenure was omitted.
And yet, if the private rented sector is to be part of the solution to the housing crisis, it will need to offer security of tenure. Landlords might see such a proposal as a threat. Yet it need not be. Even the British Property Federation has suggested longer security of tenure in exchange for tax concessions and rental guarantees.
Other countries -Ireland and Spain, for example -have increased security of tenure. Ireland raised security of tenure in 2004 and Spain the following year.
Both countries have experienced the same housing market boom and bust as in the UK. But increasing security of tenure in the private sector did not appear to slow the trend towards greater home ownership while the property market was rising.
Now their markets have crashed but, unlike the UK, their private rented sectors offer an alternative for those wanting security of tenure in the longer term but who may not want or be in a position to buy their own home. Perhaps it is time for the UK to follow suit.
Nigel Parkinson is managing solicitor at HHSE.