Published: 21 Sept 2012 by Shelter

It’s not news to readers of this blog that we’re concerned about how private renting is working for people with no other options open to them.

Some 8.5 million people now rent from a private landlord – more than live in social housing. People on average incomes who would have been able to buy a home a decade ago will take a lot longer to realise that aspiration.

Over the last year we’ve looked at how renting is working – in particular for the one million families who rent. We’ve also looked at how renting works in other countries and what we can learn from their experience. And we’ve sought to understand how landlords’ business models work.

Our first conclusion was clear: something must be done. We found deep and alarmingly widespread concerns about key aspects of renting – whether the landlord would end the tenancy before people were ready to move, whether there would be an unaffordable rent increase, whether they could make their house a home. These concerns were shared across the sector, but were particularly prevalent among older renters, Londoners, and families with children.

We came across some surprising findings too: for instance, landlords are not as well served as you’d think by the status quo of short tenancies. Most would benefit from a steadier long-term income that rose more gently and predictably, as well as cutting out the hassle factor of churning tenancies and all the costs and management that involves.

So, the private rented sector is a problem – but what to do? We need a solution that makes renting better – more stable and predictable – and one that can be brought in quickly. This means working with the market we have, rather than the market we might want in an ideal world.

Rent caps were off the table – they may sound appealing to some, but in a market where demand outstrips supply (as it does in most parts of the country), fixing rent levels would encourage landlords to discriminate on person rather than price, possibly freezing out the people most in need of an affordable, stable home.

But longer tenancies with predictable rent increases – like those that are completely normal in France, Spain and many other countries – would allow renters the chance to have a proper, settled home, while also helping to improve landlords’ returns. The current legal framework can offer rental contracts that give landlords and renters a better balance between stability and flexibility.

Sounds good, so how to make better renting happen? The analysis in our new report published today found that landlords and renters aren’t aware of what’s possible, so the first step would be creating a better rental product that both parties could understand and trust.

We worked out what that should look like and called it the Stable Rental Contract.

The Stable Rental Contract would:

• give renters five years in their home where they cannot be evicted without good reasons
• have rents that would rise by inflation for the duration of the contract
• contain break clauses that meant renters weren’t ‘locked in’ for the whole five years if their circumstances changed
• contain a break clause allowing landlords to sell the home if they needed to.

It should be accompanied by measures to make landlords feel more confident that they could end tenancies where there were serious rent arrears or anti-social behaviour. We also recognise that changing conventional patterns of behaviour is difficult – so we’ve outlined a package of tax reforms that would nudge landlords to offer the Stable Rental Contract.

As more and more people become frustrated that they are stuck renting when they’d rather buy, there is a strong case for giving renters the stability that people need to put down roots and make their house a proper home.

We think the Stable Rental Contract could do just that.