Landlords spending more than £899m per year on improving newly acquired properties before renting them out to tenants has led to the quality of accommodation in the private rental sector dramatically improving over the last 10-15 years. The Office for National Statistics states that the number of homes considered non-decent in the private rental sector has fallen from 44% in 2008 to 24.5% in 2018 and this is despite 1.5million homes being added to the rental stock in that period.
Key Drivers of Improvement
Much of the improvement in the standards has come from the addition of newer and improved properties entering the rental market rather than improvements made to older rental properties. The provision of buy-to-let finance has clearly driven this growth in new stock, particularly as finance providers will not lend against poor quality homes.
Better quality accommodation leads to better yield (higher rental income) and increases the capital value of the property. The average rental period has also been increasing as tenants look for stability. Tenants are no longer predominantly the under 30s, as there has been significant growth in older groups – especially the 55-64 year-olds. All of this drives up the demand for better quality rental property, so a win-win for tenants and landlords alike.
Generally speaking, the private rental sector has seen the demise of unscrupulous landlords and an increase in professionalism within the sector with buy to let landlords looking to attract high-quality tenants by providing better standard properties, thus achieving greater financial returns. A budget refurbishment of around £7,000 will lead to an increase in capital value of £9,000, whilst a more substantial investment of £40,000+ can lead to a nearly £100,000 increase in property values.
Technology has also played an important role in the improvement of rental properties over the last 10 years. New software developments offering mobile apps now provide a host of features, allowing landlords to keep close control of their portfolio. The provision of a property inspection app such as that developed by the property management software specialists at InventoryBase, enables landlords and tenants to ensure any issues can be dealt with quickly and efficiently by allowing a live stream property inspection to take place remotely.
Landlords can see how well their properties are being cared for by their tenants on a regular basis and capture a wide variety of data without even entering the premises, ensuring properties are maintained to the highest standard.
Health, Safety and Energy Efficiency are the Biggest Issues
Health and Safety
The Housing Health and Safety Rating System is a risk-based assessment that identifies hazards in homes and determines their possible effects on the health and safety of the people living there, particularly vulnerable people. The most serious hazards are called Category 1 hazards and where these are found in a home, it will fail to meet the statutory minimum standard for housing in England. The number of private rental sector homes with a Category 1 hazard has fallen 39%. since 2009.
The latest figures show that 13.2% of total private rental stock have a Category 1 hazard, down from 28.2% in 2009. The owner-occupied sector, by comparison, has recorded a fall of 21.5% of stock to 10.3% over the same period. Looking at other frequently found issues with properties, 6.7% of homes in the private rental sector report issues with damp. This is a significant fall from 2009 when 15.4% of sector properties reported damp issues.
Energy Efficiency
The UK became the first major economy to legislate for net-zero greenhouse gas emissions in June 2019. This means that the UK has to bring all greenhouse gas emissions to net-zero by 2050. It is notable that homes are still responsible for 15% of UK greenhouse gas emissions.
Private rental properties are among the least energy efficient in the domestic housing stock. It is estimated that excess costs of more than £6billion in energy bills were incurred in 2018. Stricter legislation has been a key factor in forcing landlords to upgrade their properties with regard to energy efficiency. EPC’s ratings F and G were first made illegal and subsequently, E became the minimum required standard. There is growing pressure to bring standards up even further to match those of new build homes.
Research has found that properties currently at EPC C rating were worth around 5% more than those currently at EPC D rating. There is an ever-increasing body of evidence linking a property’s energy performance and its value. In turn, tenants benefit from increased levels of comfort, better health and lower energy bills.
The Government’s Standard Assessment Procedure which defines the rating of properties indicates that the private rental sector has surpassed owner-occupied homes, although it still falls behind properties in the social housing sector. When looking at the Energy Performance Rating, the private sector has made significant improvements over the past 10 years. Nearly four out of 10 homes (38.3%) in the PRS now have an EPC of C or above, equating to 1.8 million properties, compared to just 13.5% in 2009. This is higher than the owner-occupied sector, which sits at 35.6%, but below social housing at 61%.
Still More to Do?
Undoubtedly, great strides have been made in the improvement to the Nation’s private rental property portfolio. Over 1 million homes in this sector are still considered non-decent. Clearly, this is still unacceptable, and the good news is that the Government is keen to address this issue and a series of major recommendations for improving standards even further is soon to be released.
Perhaps even more significant is the fact that, overall, tenants are becoming happier with their rental properties with 6 out of 10 reporting that even though they do not own the property, it feels like home.
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