The UK needs almost 230,000 new private rented homes a year to meet government housing targets, according to a new report.
The report, by economics consultancy Capital Economics and commissioned by the National Residential Landlords Association, says government targets amount to a need for 340,000 new homes a year by the middle of the decade.
Capital Economics finds that if owner occupation and social housing continue at their 10-year average rate of growth, private rented sector supply would have to increase by 227,000 per year to meet government targets and an anticipated 1.8 million new households over the next 10 years.
It notes that “even if the other [housing] tenures doubled their rate of growth, 105,000 homes for private rental would be needed each year, which is well above current rates of growth.”
The projections come as government figures show the supply of private rented housing in England has fallen by almost 260,000 over the past five years.
Given that renting privately is the first tenure nearly all young people enter when they want or need to leave home or university, demand will only increase as the 15 to 24-year-old cohort in the population is forecast to grow between now and 2030 by 866,000 (11 per cent).
Modelling by Capital Economics suggests that without changes in tax or other policies, the private rented sector stock will decrease by around a further 540,000 properties over the next ten years.
The report sets out how, in order to meet targets for housing supply, the Treasury needs to encourage investment in the sector.
Greater investment in the sector would, it argues, support 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 further notes that, while 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, it notes, “remain the largest providers of private rental accommodation by some distance.”
Ben Beadle, chief executive of the National Residential Landlords Association, which commissioned the research said: “Today’s report highlights in stark detail the supply crisis now engulfing the sector.
“For all the efforts to support home ownership, 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.”
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. “