Building the new private rented sector: issues and prospects (England) - Commons Library Standard Note

Published 02 February 2015 | Standard notes SN07094

Amended 03 February 2015

Authors: Alex Bate

Topic: Housing, Housing supply, Private rented housing

This note sets out measures taken by the current Coalition Government, and policy proposals from those within the private rented sector, to increase the supply of privately rented properties in England.

Since 2012-13 private rental has been the second largest housing tenure in England behind owner occupation, overtaking social housing. In the context of this growth over the last 20 years, and in the context of a national shortage of housing stock, successive Governments have increasingly looked to the private rented sector (PRS) to play a greater role in providing more new build housing.

The Coalition Government has emphasised the importance of increasing institutional investment into the PRS to fund large-scale, professionally managed developments. In August 2012 the Montague review, Review of the barriers to institutional investment in private rented homes, was published. The Government accepted a number of its recommendations, which were announced in its Housing Stimulus Package in September 2012. These included a £200m Build to Rent fund (later increased to £1bn), a £3.5bn PRS housing guarantee and the establishment of a PRS taskforce to attract investment and share information on best practice.

Institutional PRS investors have called for additional measures to increase the attractiveness of investing in the sector. These range from reducing the requirements to provide affordable housing requirements in planning obligations, improving access to and affordability of land and a stable regulatory framework within which to operate.

Despite the Government’s focus on institutional investment, the majority of PRS properties in England are currently built, acquired and managed by individual, buy-to-let landlords. This note sets out the Government’s response to policy proposals from smaller landlords to help them boost the national supply of private rented housing, such as reform of Capital Gains Tax and Value Added Tax.

Housing associations and local authorities have also increasingly been looking to the private rented sector as a means of tackling local housing shortages and cross-subsidising reductions in central Government grant funding. This note also provides information on how these social landlords are looking to enter the private rented sector market.

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