UK’s private rental sector – growing but not grown up

What can we learn from Germany?

One of the biggest changes in housing over the last 20 years has been the huge, unplanned growth of the private renting sector (PRS). But its unfettered growth has come at a price – which is paid for by some of our newly lauded key workers in the NHS and care sectors and the vulnerable – who are sacrificing their life chances, trapped in insecure, unstable, expensive accommodation.

Can Germany, which has the largest PRS in the EU, offer some lessons on a better way of doing things?

This is what I set out to explore last year when I got a Churchill Fellowship to carry out research on lessons we can learn from housing in Germany. The report Private Rented Housing: a broken system in Britain? Lessons to help fix it from 3 cities in Germany has just been published.

Can Germany, which has the largest PRS in the EU, offer some lessons on a better way of doing things? #redbrickblog

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The PRS has grown enormously in the UK. It has doubled to 4.7million – i.e. 1 in 5 households – over the last 20 years, and in England it now houses more tenants than the social housing sector. It is a diverse sector with accommodation ranging from high end to housing of last resort. It is no longer a rite of passage for the young and transient – it is a sector that millions will live in for life.

It houses those who are unable to afford to buy, including many key workers and those in ‘Generation Rent’, and many families who in previous years would have qualified for social housing. The difference is they can be charged four times as much for a private rent as a social rent in areas like London. Sometimes for a neighbouring flat on the same council estate! And unlike their neighbours who rent from a social landlord, private tenants in England have to live with the threat of losing their home on the whim of a landlord as they have Assured Shorthold Tenancies.

The PRS was never designed to fulfil such a major role in UK housing and it needs to change to meet the real needs of our communities.  

The picture is very different in Germany. Germany has the largest PRS in Europe – 40% of households rent and this rises to 70% in major cities. Renting is affordable and mainstreamed – not stigmatised.

Overall Germany has a better PRS. ‘Better’ in the sense that it gives tenants greater security of tenure, more affordable rents, higher standards and a stronger voice to advocate for their rights and represent their interests.  And it is ‘better’ as a sector that supports and incentivises good landlords for the long term, thus improving local housing provision and sense of community. Crucially, Germany’s local government is stronger and better resourced and this helps Germany to build twice as many homes, including affordable ones, as the UK.

Obviously we cannot transplant another country’s housing system onto our own. Not least because each country’s housing market has grown in different cultural, historical and political environments. However, I found 5 factors that offer some important and transferable lessons for the UK. These are:

• Stable and secure tenancies – We all value a stable and secure home – never more so than in the current lockdown. Yet, notwithstanding the current temporary ban, most private tenants in England can be evicted with 2 months notice for no reason, and this will apply after the ban. In contrast Germany, and most of the developed world, have secure, open ended tenancies where the grounds for eviction are based on breaking the rules eg rent arrears etc. Scotland introduced open ended tenancies in 2017 with no reported adverse effects on landlords or supply – so why not England?

• Tools for regulating the PRS – Rent levels are more affordable and stable largely because they are regulated. There is data transparency – everybody knows the average rent in their area as they are published in a comprehensive local Rent Index (Mietspiegel). This information is used to help regulate rents effectively. It means rents in Berlin are typically 50% of equivalent lets in London.

• A stronger voice for tenants –Tenants have greater access to advice and advocacy through a national network of self-funded tenants associations (Mieterverein). This also gives tenants a strong political voice and more power.

• Better support for landlords– One of the surprises in my research was that landlords were as supportive of the German rent regulation system as tenants. They find it provides transparency, encourages good tenants and a more stable long-term rental stream. The system also provides more incentives to good landlords through tax breaks and subsidies.

• Growing the supply of affordable housing – a strong local vision translated into building affordable homes and communities – To ensure the PRS works well it needs to be underpinned by an adequate supply of affordable housing. Local Government in Germany is better placed to drive this as it has more powers and is better resourced than councils in the UK. I looked at 3 cities in Germany and found that each had developed its own different, but effective, housing strategies to provide affordable housing and support mixed, vibrant communities in their local areas. The result – stronger neighbourhoods and overall more housing built. Since the end of the 2^nd World War Germany (West and East) has built twice as many homes – 30 million compared to 16 million in the UK.

These are all things we can learn from and implement in the UK.

Most economic and social changes occur after times of war and crisis. After 1945 Britain introduced massive changes, such as the NHS and welfare system. After the 1^st World War the Government introduced the Wheatley Act, which led to extensive council house building programmes. Changes we have reason to be grateful for today.

When we come out of this national Coronavirus crisis we will need to rebuild a better Britain – a new normal.

The current crisis has exposed the unfairness and fragility of our current broken housing system. We clap for the NHS, care and other key workers every week. But the average wage for a nurse is £25k pa. So with London rents averaging £1450 per month this would eat up 84% of their take home pay. They can get a handclap but they struggle to afford a decent home.

It’s good to see the G15 group of large housing associations joining together on the ‘Homes fit for Heroes’ initiative to tackle this. And good to see London’s Deputy Mayor Tom Copley convening a housing taskforce to tackle the challenges Covid-19 poses.

Let’s make fixing Britain’s broken housing system and building homes fit for our new heroes and heroines a priority.  So that it serves everybody fairly and establishes the building blocks to a healthier, happier and better-housed society.

To find out more and read the report – Private Rented Housing: a broken system in Britain? Lessons to help fix it from 3 cities in Germany click on https://www.morehousing.co.uk/

The report is also published by the Winston Churchill Memorial Trust and is available on https://www.wcmt.org.uk/fellows/reports/lessons-germany-prs