Supply is up - if not enough

The private rental sector is bigger than ever, yet still demand outstrips supply. Laudable measures to improve tenant energy costs and security, might not help.

In the decade to 2021, the number of private rental households in England grew by 28%, to almost five million (20% of the housing stock)*. Yet we still have an excess of demand and rents keep rising. Are there any signs that supply might grow to better balance demand? A few - but yet more new rules, might stifle it.

From 2028, all homes rented must have an Energy Performance Certificate (EPC) efficiency rating of C or above. Most will require expenditure of at least £2,000, often much more, to reach this standard. The fine for not having an EPC is going up too, by £5,000 to £30,000.

Less certain but potentially more serious is Michael Gove’s abolition of ‘no fault evictions’, proposed in his department’s white paper ‘A fairer private rented sector’ (see gov. uk). If passed, this would probably reverse growth in the private rental sector. That seems unlikely at present: the most vociferous objections to the paper have come from groups representing tenants, such as Shelter. But it does indicate the intended direction of travel.

More positively, we are now seeing the steady if slow return to the long-term market, of thousands of rural rentals which, during lockdown, switched to short-term (less than six months). Extra supply is also coming from landlords - especially those with cash - buying new stock, attracted by higher rents and a less bullish sales market. For landlords who do need to borrow, interest rates are much improved since the autumn and lenders are once again keen to lend, hence finance is much less of a barrier. Greater confidence in the stability of capital values and the potential for medium term growth, is helping, too. Will all of this be enough to balance the market? That seems unlikely. We might well, however, have passed the point of greatest extremity.

*English Housing Survey/ONS