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Meeting the Housing Challenge: The Role of the Private Rented Sector Economic and Social Context 17...
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Transcript of Meeting the Housing Challenge: The Role of the Private Rented Sector Economic and Social Context 17...
Meeting the Housing Challenge: The Role of the
Private Rented Sector
Economic and Social Context
17th August 2011
Historic and recent trends
Historic decline in PRS has started to reverse in past 2 decades
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1918 1939 1953 1961 1971 1981 1991 2001 2009
PRS Owner Social
England & Wales Scotland
Sources: DCLG, Scottish Government
Households under 35 increasingly in PRS
Tenure split for households with head of household under 35
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
PRS Owner Social Source: Scottish Household Survey
BTL fuelled growth in PRS, but hit by credit crunch
Buy-to-Let Gross Advances for House Purchases in the UK
0
1
2
3
4
5
6
7
Q4 20
06
Q1 20
07
Q2 20
07
Q3 20
07
Q4 20
07
Q1 20
08
Q2 20
08
Q3 20
08
Q4 20
08
Q1 20
09
Q2 20
09
Q3 20
09
Q4 20
09
Q1 20
10
Q2 20
10
Q3 20
10
Q4 20
10
Q1 20
11
£bn
Source: CML
Half of PRS tenants move within 2 years – need for longer tenancies?
Years lived at current address
0%
10%
20%
30%
40%
50%
60%
0 - 1 1 - 2 2 - 3 3 - 5 5 - 10 10+
PRS Owner Social Source: Scottish Household Survey
Prospects for Sector
(Real) house prices gradually unwinding, limiting capital growth
Average house prices
£0
£30,000
£60,000
£90,000
£120,000
£150,000
£180,000
£210,000
1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010
Scotland nominal Scotland real (2010 prices) UK real (2010 prices)
Sources: Nationwide (House prices); ONS (RPI)
Housing Benefit reforms may pressure parts of PRS
• 470,000 HB claimant households in Scotland (July 2010) – 86,000 (18%) in PRS
• Estimated impact of reforms:– Capping LHA weekly rates at £250 (1 bed), £290 (2 bed), £340
(3 bed), £400 (4 bed), no 5 bed rate– Setting LHA to 30th percentile– Removal of £15 excess
In total will affect almost 55,000 households who will lose an average of £10 per week.
• Further reforms– Uprating by CPI rather than market rents– Extend shared room rate to 35 years – around 7,500 affected
(mainly Edinburgh and Glasgow)
But FTB deposit barriers likely to keep PRS demand high
Affordability measures for first-time buyers in Scotland
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Deposit as % of income
Interest payments as % of income
Source: CML
• Despite lower expected capital growth & Housing Benefit changes, rental yields potentially attractive compared to other investments– 10-year UK government bonds: 2.5%– FTSE 100: 1.0% over 1-year period– Rental yield: 6.6% (Glasgow postcode G31; source
FT Money)
Meaning rental yields relatively attractive
Challenges
Lower satisfaction than in owner sector, especially where children
Satisfaction for households with and without children
0%
10%
20%
30%
40%
50%
60%
70%
no children children no children children no children children
Owner-occupier Private rent Social rent
Very satisfied Fairly satisfied Neither satisfied nor dissatisfied Fairly dissatisfied Very dissatisfied
Source: Scottish Household Survey
Significant energy-efficiency improvements required
Energy efficiency - Banded NHER scores by tenure (2009)
-
10
20
30
40
50
60
70
80
PRS Owner Social
%
Poor (0-2) Moderate (3-6) Good (7-10) Source: Scottish Household Condition Survey
Final point: Scotland’s PRS still has room to expand!
Relating housing tenure shares - selected countries
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Hungary
Scotland
Netherlands
England
Ireland
Denmark
Austria
France
Sweden
Germany
PRS Owner Social