PRS supply crisis – what’s the story?
The supply of homes for rent hasn’t been far from the headlines for a number of years now.
Figures spanning the last decade have seen the number of tenants looking for homes consistently outweighing supply, with some periods seeing dozens of households competing for each home to rent.
Despite this, recent figures from the Ministry of Housing, Communities and Local Government show that the private rented sector (PRS) in fact has grown year on year – with an extra 15,000 properties in the rental market in 2023/24.
So, what’s the story?
Is other data, from respected industry sources, wrong, misleading in some way? When it comes to the rented housing crisis are we worrying about nothing?
The picture, as is often the case, is slightly more nuanced.
The government data, covering the 2023/24 period and published in March this year, does indeed show that there were 4.9m private rented homes in England - 19% of the 25.6m homes in the country – up 15,000 on the previous year.
However – crucially – what the data also shows is that the rate of growth is slowing considerably.
To put this into context, statistics from the same survey in 2022/23, showed an additional 31,000 rental homes had been added to the total stock, almost double the 2023/24 figure. The rate of growth was also down by three quarters compared to 2020/21.
At the same time property platform Zoopla says there are currently an average of 12 renters competing for every home to let, with an analysis by Savills suggesting a million new homes to rent will be needed by 2031 to meet growing demand.
What this tells us, in basic terms, is that while supply isn’t going down, the rate of growth still isn’t enough to meet demand.
In short, the sector isn’t shrinking, it just isn’t growing fast enough.
What does this mean?
This short ‘myth busting’ exercise – while clearing up some of the confusion around the plethora of figures being bandied about – does not affect the core message we have been sharing with the Government and in the media of late: there are simply not enough rental homes to go round.
What are we expecting to happen next?
While we don’t have a crystal ball, the legislative change on the horizon, in the form of the Renters’ Rights Bill and the changes to Minimum Energy Efficiency Standards (MEES) is so extensive, it will inevitably have an impact.
It is difficult to quantify the impact of the Renters’ Rights Bill on supply but there are hard and fast figures when it comes to MEES.
There are 2.5 million rented homes in England that currently fall below the minimum EPC C standard the Government has pledged to introduce.
These homes will legally have to be removed from the market if they fail to reach the new standard by 2028 (for new tenancies) and 2030 (for existing ones).
While a proportion of these will, undoubtedly, have the works done in time, it is extremely unlikely they will all be able to meet these targets – whether that is due to a lack of funds to carry out the works, or the availability of tradespeople to physically carry them out.
(Let’s not forget recent figures show there is already a 166,000 shortfall in skilled tradespeople, a number set to hit 250,000 by 2030.)
The Government has pledged to get the country building, but this is going to take time.
In the meantime, the waiting list for social housing in England is the highest it has been since 2014, whilst just one in eight renters can afford to buy in the area in which they live, research suggests.
What do we want to see?
To tackle these issues we are calling for the introduction of positive taxation policies and a pragmatic approach to legislation change to encourage landlords to continue renting property in the sector and to encourage investment in new rental housing alongside all other tenures.
A robust and vibrant private rented sector is essential when it comes to the social and economic future of the country, so it is vital the Government acts now if the sector is to meet the demands of those looking to it for a home.
