Some 230,000 new private rented homes need to be added to the sector per year in order to meet government housing targets across the UK, a report by economic consultancy Capital Economics has found.
These new homes need to compensate for losses, as private rented stock is set to decrease by 540,000 properties over the next 10 years, unless the government makes a tax change or alters another aspect of its housing policy.
Supply of private rented housing in England has fallen by almost 260,000 over the past five years, as changes like the loss of mortgage tax relief and the stamp duty surcharge have driven landlords out of the sector.
The consultancy forecast that the 15-24 cohort in the population will grow between now and 2030 by 866,000 (11%), creating more renters.
Ben Beadle, chief executive of the National Residential Landlords Association, said: “Today’s report highlights in stark detail the supply crisis now engulfing the sector. For all the efforts to support homeownership, the private rented sector has a vitally important role to play in helping the Government to achieve its housing objectives.
“Without urgent action, the increasing number of people looking for affordable housing will be the ones to struggle as they face less choice and higher rents as supply dries up.”
The report said the Treasury needs to encourage investment in the sector to meet housing supply targets.
This means there needs to be more support for the provision of new housing through a combination of an increased rate of new builds; the switching of commercial property to residential use; the switching of stock from short term to long term lets and bringing empty homes back into use.
The report notes that, whilst some of the demand for new rental properties will be met through build to rent schemes, this remains a small portion of the market.
Individual landlords “remain the largest providers of private rental accommodation by some distance.”
Andrew Evans, managing economist for Capital Economics, said: “The private rented sector, which is predominantly supported by private individual investors, has a key role to play in addressing housing need in the UK.
“However, the stock of homes for private rent has fallen in recent years, driven partly by a series of policy changes. Without further changes, that supply could fall by over half a million more over the next decade.
“Even with increased provision of affordable housing and higher rates of owner occupation, both of which are important, our research shows that significant additional investment is needed by landlords in the private rented sector.”