The Broken Private Rental Sector: A Barrier to Economic Growth

The UK's private rental sector is in disarray, with demand far outweighing supply. This article explores the consequences of this imbalance and argues that the next government must prioritize a functional housing market to support economic growth.

The Private Rental Sector: A Dysfunctional System

The UK’s private rental sector (PRS) is in a state of disarray. A recent experience by a friend of mine, who was searching for a three-bedroom rental home in the West Midlands, highlights the severity of the issue. Despite being financially secure, he struggled to find a suitable property, with homes being snatched up quickly and viewing slots being fully booked within hours of being listed.

This experience is not unique, and it’s a symptom of a larger problem. The PRS is plagued by a severe shortage of supply, which has led to a surge in demand. According to recent data from Zoopla, tenant demand is still running at twice the level of the pre-pandemic era, while available stock has decreased by a third.

The UK’s housing market is in need of a drastic overhaul.

The debate surrounding the PRS has often focused on whether there has been an exodus of homes from the sector. However, this misses the point. The real issue is that demand far outweighs supply, leading to rental inflation, reduced choice for tenants, and a barrier to economic growth.

A growing economy requires a flexible and transient housing provision. For instance, when a business opens a new office or manufacturing base, it needs temporary homes for employees who follow the employment opportunity. This is evident in the East Midlands, where new warehouses have led to an increase in demand for rental homes.

Rental homes are in high demand, particularly in areas with new business developments.

With the UK’s political parties all targeting economic growth, it’s essential to have a functioning housing market to support it. The PRS provides a home to one in five households and is the tenure of the working population. Its importance cannot be overlooked or diminished.

While home ownership is the ultimate goal for many households, we must not forget the right to a decent quality property at a reasonable price for those who want or need to rent a home. As the population is forecast to grow by 10% over the next 10 to 15 years, it’s imperative that we increase the supply of homes for all tenures.

The UK needs to increase its housing supply to meet growing demand.

Whoever is in power come 5 July must look at the country’s housing provision in the round. We need to retain and build a committed base of landlord investors who can fund the expansion of the PRS, help the country achieve economic growth, and provide a home to the increasing number of tenants who will use its services.