The survey by the Social Market Foundation (SMF), titled ‘Where Next for the Private Rented Sector’, found that four out of five tenants were happy renting.
In fact, 81% of renters said they were happy with their current property and 85% said they were satisfied with their landlord, with only 34% of renters expressing dissatisfaction with their status.
A total of 1,376 adults living in rented accommodation were polled.
Amy Norman, the report’s co-author and senior researcher at SMF, said the survey results showed that the most important concerns among those polled were not living conditions or landlords, but the long-term financial implications of being renters.
She said: “The disadvantage in renting is predominantly the financial implications that prevent renters from being able to save for a deposit or for other sorts of later life finances and who did not see themselves as ever buying a home.”
She said existing policies to improve renters’ experience, such as contract length, autonomy around home improvements and having pets, were essentially short-term and did not tackle the longer-term concerns that many renters had around their finances.
The SMF’s key recommendation is to enable renters to build wealth while remaining in the private rental sector. It suggested introducing a number of
innovative schemes, such as ‘deposit builder ISAs’ that offer a financial return on deposits, or ‘rentership’ models that offer tenants stakes in their building.
Norman went on: “While that person’s renting, the deposit that they pay before moving in will be drawn somewhere where it may benefit from government conditions that are slightly more beneficial and attractive than standard saving and interest rates.
“What that enables renters to do is to potentially build and accumulate some wealth off of that deposit that usually just sits and which they have very little control over.”
The renter could then add into that deposit holder or builder account and benefit from government protected savings, she explained.
The SMF’s other recommendation is to introduce a ‘rentership model’ akin to the investment market-based schemes that already exist in the US, she said.
Tenants could be offered a stake in the building with an option to buy a larger share and earn a return on their investment. That amount would then be paid out of the total rent collected by the landlord as the property appreciated and which could then be paid back to a renter or a tenant.
“This idea would work well for large portfolios built around where there’s much larger cash flow and the interest and the returns on the portfolio could be much bigger,” she added. “They would still enjoy the flexibility of being renters, while having the option to accumulate wealth in some form.”
Norman believed that the initiatives should be taken seriously, as SMF’s research shows that renters will be renting for longer periods of time while facing affordability challenges with homeownership.
According to campaign group Generation Rent, roughly 13 million people, or 20% of the population, rent from a private landlord in the UK. That translates to about five million households – more than twice the number compared to about 20 years ago. In London, the figure is 29%.
Norman said it was “crucial” that the needs and concerns of renters were addressed, particularly as the financial implications of starting to build wealth were happening at a later point in life than previous generations.
She stressed that although the recommendations were not intended to be implemented over the short term, she insisted that further progress could be
made if policymakers, developers and landlords could work together to benefit renters over the long term financially.
Mortgage Introducer requested a comment from the National Residential Landlords Association (NRLA) in response to the report’s findings.
An NRLA spokesperson said: “The Social Market Foundation’s research chimes with the English Housing Survey showing that 83% of private sector tenants are satisfied with their accommodation, a higher percentage than those in the social rented sector. While there are clearly challenges in the sector, it is important that we do not lose sight of the fact that a large majority of tenants have a good experience of private renting.
“When it comes to tenant finances, the number one problem remains a chronic shortage of homes for private rent driving rents upward. Without action by government to stimulate growth, anything else would amount to tinkering at the edges.”
