New statistics from the English Housing Survey show that the private rented sector remains the second largest tenure in England, with renting especially prevalent among young households.

This has led to the British Property Federation (BPF) calling for the next Government to embrace the ‘build to rent’ sector.

Growing rental sector

The survey found that in 2013-14 nearly 1 in 5 households (19% or 4.4 million) were rented privately. Private renting numbers have risen steadily from 18% in 2012-13 and 11% in 2003.

Of the rest in 2013-14, 17% (3.9 million) were in social housing and 63% (14.3 million) were owner occupiers.

The survey shows that households aged 25-34 are more likely to rent privately than buy.

In 2013-14, nearly half (48%) of households aged 25-34 were private rental properties. This has risen from 45% in 2012-13.

Over the past decade, the percentage of this age group in private rental has risen from 21% to 48%, while owner occupation has dropped from 59% to 36%.

Call for focused policies

The BPF says that an institutionally-funded ‘build to rent’ sector could be the answer, claiming it is the most effective way to boost the number of private rented sector homes in the UK.

While it has praised the Government for encouraging the build to rent sector, it has warned that unless momentum is maintained by any future Government the housing crisis will only get worse.

Stephanie McMahon, Head of Research of Strutt & Parker, said: “The UK private-rented sector is starting to build up a head of steam. We recently conducted some Property Futures research into the private rented/build-to-rent sector and it showed that investors still see PRS as a capital growth story and an income play, seemingly hedging their bets given they are conscious that many tenants still regard renting as a temporary state of affairs, with the UK aspiration for home ownership not likely to fall away. 62% of our survey respondents agreed that the majority of professional investors do not want a separate private-rented use class in the UK because they want to buy into further house price inflation – retaining the option to sell to owner-occupiers, or buy-to-let investors at short notice. 

"Scale will be key to delivering a profitable and professional private-rented sector.  For the sector to operate a sufficiently narrow margin between gross and net yields, the majority of investors will focus on individual blocks, or adjacent blocks, of a minimum 150 units.  It was felt that these economies of scale will enable sufficient onsite management of ongoing services, maintenance and re-letting.

"We believe that PRS will develop along more spartan lines in the UK than its American multi-family counterpart as private renting remains a cost not choice driven decision. The 65% of respondents that agreed envisage the UK developing a much less amenity rich rental model compared to the US as renters will want to find rent as cheap as possible, with the option to choose and pay for additional services as they are able to afford. For the sector to truly work some level of intervention is likely needed, this could be local authority enforced covenants as opposed to full planning use change.”

Melanie Leech, chief executive of the BPF says the UK is facing an acute housing crisis and a sea-change in the way the population lives.

She points to the build to rent sector as a solution as it offers attractive yields for institutional investors, along with high-quality accommodation for those who cannot afford to buy.

Key figures

The key findings from the 2013-14 report include: 

• Average weekly private rents were £281 in London and £145 outside of London.
• In London, the proportion of households in the private rented sector increased from 14% to 30% between 2003-04 and 2013-14.
• 67% of private renters had been in their current home for less than 3 years.
• 2.6 million households had moved into their current accommodation in the previous 12 months. The majority of moving households (59% or 1.5 million) were private renters, with 679,000 (26%) owner occupiers, and 360,000 (14%) social renters.
• Households buying with a mortgage and living outside of London declined from 43% in 2003-04 to 31% in 2013-14.
• The proportion of dwellings in the highest energy efficiency rating bands (A to C) increased from 2% in 1996 to 23% in 2013.
• In 2013 about a million (999,000) homes (4%) had problems with damp, compared with 2.6 million (13%) homes in 1996.