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Resolution Foundation proposes a 'de-risking' of PRS

Tuesday 24 April 2018

The Resolution Foundation have released a report for the Intergenerational Commission which outlines an action plan for addressing housing challenges faced by millennials.

The 54 page detailed report, entitled Home Improvements; aims to tackle the housing crisis from the perspective of younger generations, by making a number of alternative policy suggestions for Government to consider. The report comes in light of evidence which shows that one third of millennials (those born between 1980 and 1996) will never own their own home.

As well as ratcheting up housing supply they say that measures must be put in place for 'de-risking' the private rented sector. 

Their series of proposals come from a number of different angles, and have resulted in a three stage plan, the first stage and most urgent of which is to overhaul the Private Rented Sector (PRS).   

Their main arguments for the PRS are focused around security of tenure, rent stablisation, and an overhaul of the benefits system.

Security of tenure
The thinktank argues that with many more families now in the private rented sector, up from 0.6 million in 2003, to 1.8 million in 2016, longer standard tenancy agreements would bring increased security and allow families to build their lives and plan for the future things such as schooling.

They acknowledge that although "Landlords have legitimate concerns about longer tenancies...these pale into insignificance in comparison with the needs of renters" saying that even the introduction of the Model Tenancy in 2014, hasn't had any discernible effect on average tenancy length. They make a case for England and Wales to follow Scotland's lead by introducing indeterminate tenancies, with fair and well defined options available to landlords if they need to break the lease, for example if they want to sell, or the tenants breaches conditions.  

Rent stablisation
As well as improved security of tenure, they argue that renters should be protected from excessive rental increases by introducing what they call 'light-touch' rent stabilisation, limiting rent increases to CPI inflation once every three-years. Landlords would need to give tenants six months notice of rent rises. 

They question why, when so many other countries around the world successfully use some form of rent stablisation measures, England and Wales remain the 'outliers'. 

However, they acknowledge the challenges of communicating any changes to tenancy law and rent setting policy, arguing that unlike Scotland and Wales, there is no comprehensive record of who owns rental properties. 

The need for benefits overhaul
Housing benefit increases for low income renters and families are needed. Rules are more stringent than they once were, and benefits are proportionally a lot less than they used to be, citing an example that Housing Benefit for 25 year-old non-working renters only covers 55 per cent of their housing costs, compared to 77 per cent for generation X families (the previous generation to the millennials). Housing benefit levels do not reflect real rents. The Government should reduce the age at which the shared accommodation rate applies from 35 to 30, and also re-link Local Housing Allowance to rents. 


Agreeing with ARLA Propertymark, the Resolution Foundation, would like to see a housing tribunal established, which would be more effective, cheaper and speedier than the current County Court, and are pleased that the Government have consulted on this. They argue that the new tribunal should have the power to adjudicate over possession applications and rent rises. 

Taking the lead from Scotland, landlords in England should be made to register with their local authority so that the authority can get a full picture of the local rental market, be able to communicate with them easily, and be able to identify and take action against rogue landlords who were not abiding by the rules.

Three stage process

Dealing with the PRS is stage one of a proposed three-stage process. The thinktank argued that 40% of millennials will still be renting into their 40's, and they want to see the Government make it easier for this generation to buy their own homes.

In their report they say: "In the medium term, it means taking action to rebalance housing demand rather than simply stoking it, levelling the playing field between old and young rather than pushing up prices further. And over the longer term, it means accepting it will be a long haul to increase supply, and that both the private and public sector need to build more homes."

Here is a summary of some of their policy suggestions to bring about this change:

  • Make Help to Buy only available to those with household incomes of less than £60,000, or individuals with incomes less than £50,000
  • Lower most stamp duty rates while increasing the premium paid by purchasers of additional properties by leaving rates for them unchanged
  • Rates of stamp duty on first properties should be halved
  • City and city-region mayors should be given the authority to limit residential property purchases in housing hot-spots to those resident in the UK
  • Introduce reforms to capital gains tax to incentivise owners of additional properties to sell 
  • Support the development of the BTR sector by exempting institutional investors who build or buy Build to Rent properties
    within five years of building from the 3 per cent surcharge on stamp duty land tax. 
  • Disincentivise those who live abroad from buying UK property
  • Increasing stamp duty by a further 3% for people residing overseas
  • Replacing Council Tax with a system that more accurately reflects the current value of a person's home. 

Read the full report