Building more homes where they are needed rather than encouraging more landlords into the private rented sector is the solution to preventing surging rents, according to pro-renter group Generation Rent.
The pressure group’s analysis found that building new homes is key to curbing steep rent increases, and that “simply encouraging landlords to buy up existing homes will do nothing to make homes more affordable”.
The study, which analysed ONS (Office for National Statistics) rent data, found that metropolitan areas that built more homes in relation to their population since 2015 are more likely to have seen rent affordability improve.
Generation Rent explained that areas where building “failed to outpace the local population” saw rents rising faster than incomes, urging the government to prioritise building social homes to help “those worst hit by the housing crisis”.
The study found that between 2015 and 2023, 70 of 91 urban areas in England saw houses built at a faster rate than the local population grew. Of these areas, 42 saw rent become more affordable – meaning rent as a proportion of average local salary fell.
Among the 16 areas which saw the housing stock fall as a proportion of the population in the same period, just one area saw rent affordability improve.
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From this data, the study found that an increase of 20 homes per 1,000 people reduced rent as a proportion of average income by 2.8 percentage points.
In contrast, the data also showed that there was no relationship between rent affordability and the proportional size of the private rented sector, which Generation Rent said “casts doubt on the claims of some that encouraging landlords to buy more properties would help” with the affordability of rent.
The organisation also highlighted that while the study found housebuilding was a key factor in making rents more affordable, much of the new housing stock must be social housing in order to “ease the housing crisis for people experiencing the worst conditions”.
“The evidence of the last eight years shows a clear relationship between housebuilding and affordability,” Dan Wilson Craw, deputy chief executive of Generation Rent, told the Big Issue.
“Importantly, the evidence shows that it’s the building that matters, not tenure. Simply encouraging landlords to buy up existing homes will do nothing to make homes more affordable.”
He added: “Policymakers must also recognise that it still takes a lot of building to make a difference to affordability.
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“As well as building homes, with an emphasis on more social housing, we need to make sure people on low incomes can access decent homes. That means making sure local housing allowance keeps pace with market rents, and scrapping measures that make poverty worse, like the benefit cap.”
Commenting on Labour’s proposed Renter’s Rights Bill, Wilson Craw added that the legislation is “an opportunity to both protect people in their homes by limiting in-tenancy rent increases to the lower of wage growth or consumer price inflation, and help people start tenancies by regulating requirements for guarantors and multiple months’ rent up front, which see many people on low incomes being rejected by landlords and letting agents.”
Landlords, however, have claimed that other issues have been a factor in the lack of affordable housing, like high taxes on landlords and growing costs for the sector.
“The only way to improve the affordability of rented housing is by addressing the root causes of higher rents,” Ben Beadle, chief executive of the National Residential Landlords Association, told the Big Issue. “As the Bank of England and the Institute for Fiscal Studies (IFS) have noted, this is a result of growing costs on the sector, including high taxes, and a lack of supply to meet demand.”
He added: “Based on current levels of demand, Rightmove suggests that around 120,000 more rental properties are needed to bring rent growth back to more normal levels of around 2% a year.”
A study by IFS also found that the location of new houses is also crucial in order to meet the demand for affordable homes. The study found that while growth in the number of houses in England has kept pace with growth in the adult population since the mid-1990s, the homes have not been built in areas with the highest demand.
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It found that between 1996 and 2021, the adult population in England grew by 20%, while the total number of properties grew by 21%. However, in London, the adult population grew by 29% but the number of properties only grew by 23%.
The study found that if supply had grown in London at the same rate as in the rest of England, house prices in the English capital would have risen by £21,000 less between 1996 and 2021.
The Labour government has made a bold promise of delivering 1.5 million homes in five years, with deputy prime minister Angela Rayner laying out a commitment to introduce mandatory housing targets for local authorities to build up to 370,000 homes a year. Rayner said the party will lay out its spending plans at the next fiscal event.
Alongside these housing targets, campaigners have urged the government to set a social housing target, with housing charity Shelter stating that 90,000 social homes are needed every year for the next decade to make up for years of under-delivery.
“The government has said it will bring forward details of future public investment in affordable housing at the next spending review. The scale of that funding will be key to whether we see a significant increase in the delivery of affordable homes over the coming parliament,” Cara Pacitti, senior economist at the Resolution Foundation, said.
