Some of the biggest names in the trade, lending and advisory sectors have produced a report outlining the vast significance that private renting has for the UK economy.
The report says small and medium-sized private landlords - with 15 or fewer properties - support over 390,000 jobs, both directly and in the wider economy.
The research - from the National Residential Landlords Association, Paragon Bank and the PwC business consultancy - also shows how the private rental sector in England and Wales makes a gross value added (GVA) contribution of £45 billion to the UK economy. The report’s conclusions indicate that the private rental sector across the two countries supports over 390,000 jobs throughout the sector’s supply chain and the wider economy – a figure which underlines the social as well as economic importance of the market.
The research, carried out by PwC, examines annual revenue for small and medium sized landlords using regional data on the overall size of the private rental sector, as well as estimated revenue per rental property.
The analysis of various scenarios reveals the likely scale of the impact of a contraction in the size of the private rented sector on landlords, tenants, and those whose jobs depend on a flourishing private rented sector.
According to the report’s findings, a 10% reduction in the size of the sector could deprive the UK economy of £4.5 billion of GVA. Moreover, a market contraction on this scale would mean that 39,000 jobs would need to be supported by alternative sources in order to prevent a rise in unemployment.
By contrast, should the sector grow by 10% it is estimated that the GVA supported by the private rental market could increase by £4.5 billion, whilst those whose employment is supported by the PRS would also rise by approximately 39,000.
A statement from the NRLA says that this report underlines how crucial it is that, at a time of chronic supply issues across the private rented sector, all stakeholder groups take into account the sector’s wider importance to landlords and tenants.
Responding to the conclusions, Ben Beadle - chief executive at the NRLA - said “what this report makes clear is how the private rented sector plays a pivotal role in providing high-quality employment, as well as desperately needed private rented accommodation, across the UK. These findings also underline how further growth could help the PRS to underpin a significant number of additional jobs over the coming years. We hope that this report provides a platform for further discussion about what steps can be taken to make this happen.”
Paragon Bank managing director of Mortgages Richard Rowntree said “landlords make a significant contribution to the economy and job creation directly, as this report highlights, but also through facilitating labour mobility. The PRS has the highest proportion of tenants in employment compared to other tenures and provides economic fluidity, enabling the workforce and companies to quickly adapt to changes in demand.”
Finally James Bailey, UK housing leader at PwC UK, said “around 80% of the estimated 4.8 million properties in the private rented sector in England and Wales are provided by landlords with fewer than 15 properties. We estimate that this segment of the market contributes £45 billion of value to the wider economy each year. The scale of this footprint demonstrates the significance of the sector in the economy as a whole.”
RICS Warning: rents still rising as landlords quit lettings sector
A new market snapshot from the Royal Institution of Chartered Surveyors shows tenant demand rising but at a rather more modest pace than previously.
At the same time, however, it says landlord instructions are still dwindling, meaning RICS members anticipate rents moving higher over the coming months - albeit at a slower rate.
Simon Rubinsohn, RICS’ chief economist, commented “there are signs that the relentless upward trend in private rents is losing momentum but fresh demand is still comfortably outstripping supply in this area which suggests there is unlikely to any significant relief for tenants. Indeed, feedback from respondents to the survey continue to highlight the challenges in the sector resulting from a whole host of measures introduced in recent years.”
In the sales market today’s RICS survey shows a more upbeat picture than was the case for most of last year.
Near outlook is still cautious, in part due to the suspicion that the recent easing in mortgage rates is likely to stall on the back of ongoing uncertainty about the timing and speed of interest rate reductions.
At the UK level, new buyer enquiries stayed positive for the second successive month (+6% net balance) showing a continued upwards trend in buyer demand. Looking at regions across the UK, most have now shown a recovery in buyer interest over the last two months.
Agreed sales were flat in February (-3% net balance) and although this is less positive than in January it still signals a stronger trend in sales than was evident in most of the last 12 months (average net balance of -22%). Looking ahead, the sales expectations for the near term are positive, and sales activity is expected to gain further momentum over the coming year (net balance +42%) In addition, respondents across all UK regions/countries foresee residential sales activity picking up over the longer-term time horizon.
One notable element in the February survey was a solid rise being reported in new instructions to sell. The latest net balance of +21% represents the strongest reading since October 2020, in contrast to the continuously negative picture cited throughout 2023.
Average stock levels on estate agents books now sit at 42 properties, the highest since February 2021, with respondents noting an increase in market appraisals over the month relative to the same period last year. House prices still point to a downward trend across the UK as a whole, but this is stabilising with the February figure the least negative since October 2022.
In London, the turnaround in the price indicator is slightly more pronounced.
Looking ahead, a net balance of +36% of respondents across England and Wales now envisage house prices returning to growth at the 12-month time horizon.
Rubinsohn added “whether the increase in stock coming back to the market will be sustained is likely to be a critical factor in explaining how things play out over the balance of the year especially with new build likely to remain constrained. Significantly, the rise in the number of appraisals taking place points in the right direction, and the government will be hoping that this trend is given a boost by the change to CGT announced in the Budget [encouraging landlords to sell].”