The Future of PRS: Will anyone still rent in 20 years?

It’s quite a question to ask, but we were asked: ‘will anyone still rent in 20 years?’.

The obvious retort was ‘yes, of course they will’ – but we thought it was worth a bit more consideration, in part because we wanted to expand on our of-the-cuff response, and to better examine the issue.

There is no doubt that the perception, especially in the press, is that being a landlord is becoming more and more difficult, while, in the same press, landlords themselves are being increasingly vilified and quitting in droves.

We have touched on these subjects elsewhere, especially concerning the perception of landlords in ‘Does the Media Treat Landlords Unfairly?’, but here we’ll approach this head-on.

So, drawing on our considerable experience as buy-to-let property professionals, let’s answer that question – will anyone still rent in 20 years?

Setting a starting point

Before we paint a future, let’s establish where we, and the private rented sector (PRS), are at present.

According to the BBC, there are now on average 25 renters chasing each rental property.

Zoopla delivers a more nuanced breakdown of the rental market. In short, rents continue to rise, but a  little more slowly. Demand is down, but still 51% above the five-year average and there is a persistent lack of available properties.

At their recent party conference, the Labour party announced their intention to oversee the building of 1.5 million new homes in the first five years of a future labour government.

Since this looks increasingly likely, this might be good news. However, 1.5 million over 5 years is 300,000 per year, which is the current new-build goal. More significantly, the party leader flagged an determination to overhaul planning laws.

That, more than any aspirations, could have a significant effect on addressing the chronic shortage of house building which has afflicted the UK for decades. But, we shall see.

The bottom line is that if Labour achieve power, and if they deliver on this promise, they will still be playing catch up with the country’s massive housing deficit.

To make that aspiration even more challenging, the UK population is projected to rise from 67 million to 74 million by 2060; house building has a herculean task ahead of it.

Peering into the future

If we assume that we are on the brink of a new era of unrestricted house building, will this actually demolish the PRS?

In a word – no.

There is a lurking assumption in much that is written about ‘generation-rent’, that they only rent because they cannot buy. While this is undoubtedly true for many, it is simply not true for all.

Some time ago we wrote about renting around the world ‘The Rental Market World Cup’ and while this was a little tongue-in-cheek, it was clear that while home ownership is a common goal, renting is viewed differently across the globe.

The UK has to some extent been burdened with the idea that ‘an Englishman’s home is his castle’, this was reinforced by the mass-sale of council properties starting with the Housing Act 1980.

Renting was portrayed as a bit ‘down-market’, which is an odd attitude, given the huge stocks of publicly owned rental properties which existed up to this point. However – moving on!

The fact is that renting suits many people. There are a lot of reasons for this so we’ll list a few of them:

• Flexibility. Students, for instance, generally don’t want to buy when they are only staying somewhere for a few years.
• Work. Where a contract may be limited, it doesn’t always make sense to buy.
• Cost. Despite rising rents, renting can still be far more economical than buying, especially during a period of rising interest rates.
• Maintenance costs. Tenants are not financially responsible for the upkeep of their homes, that lies with the landlord.
• Rapidly changing circumstances. A new family, uncertain employment status, the need to move for work are all reasons why not tying yourself to one property might be attractive.
• Aspiration. Owning a home is seen as aspirational, but not everyone aspires to the same goals! Your life goals may mean that tying yourself to a single property inhibits your pursuit of things that matter more, such as travelling.

The truth is that, whatever the reasons, people don’t rent solely because they cannot buy somewhere to live.

Advice from the property pros

Understanding why tenants choose to rent is key when looking at this question. So, WILL anyone still rent in 20 years? Yes, of course they will.

They’ll rent because the motivation to rent is not exclusively tied to the inability to buy a house. They’ll rent because there are many excellent reasons that renting is preferable to buying.

In 2021-2022 there were over two million university students in the UK. If no-one else needed rental accommodation, that’s a substantial market right there. As it stands just over one-third of UK homes are rental properties.

No amount of accelerated house building will change that in a hurry. Furthermore, although legislative changes like the Renters (Reform) Bill have stirred a hornet’s nest amongst landlords, their impact in broader society is different.

While it is demonstrable that landlords are treated badly by the press, over the medium term their reputation stands to be enhanced by better regulation as it will directly affect the ‘fly-by-night’ view which is sometimes prevalent.

In other words, the view of landlords, and of renting in general stands to improve, which is good for everyone involved.

In summary…

Rented properties aren’t going anywhere, because there will always be a market for them. Some tenants are motivated by simple financial considerations, others by more complex reasons.

None of that is likely to change any time soon, including within the next 20 years. The PRS makes much of the quality of the service it provides, and there is truth to this claim.

It delivers a service which is not provided elsewhere in the property market, and there is a persistent demand for that service.

Now that we’ve hopefully reassured you as to the long-term security of the rental market, if you would like to find out more about it and how you might invest in this future, please get in touch.

Our experience, skills and contacts make us ideally placed to help you take the first step in what can be an enormously rewarding journey.

Written by Chris Wood, MD & Founder of Portolio

Get in touch on 07812 164 842 or email [email protected]