Report commissioned by the private rental home owner of the former London 2012 Olympic and Paralympic Athlete's Village shows why so few families rent in London
Major cities studied: London, New York, Berlin and four Dutch cities
A combination of structural, economic and cultural factors are driving the behaviour of both landlords and tenants
MONDAY 21 JULY 2014
LONDON: A lifestyle choice for families? Private renting in London, New York, Berlin and The Randstad (Amsterdam, Rotterdam, The Hague and Utrecht) by Kath Scanlon, Research Fellow at the London School of Economics, highlights the significant differences in the structure of the private rental markets in these major cities that have led to vastly different numbers of families choosing to rent. The report concludes that the complex nature of housing systems and important differences in the economic incentives to both landlords and tenants have resulted in wildly different private rental sectors across the four cities investigated.
The report's key findings are:
- The near doubling of size of the private rented sector and the increase in house prices in London over the last 10 years means the conditions are now right for a larger number of families to rent in the capital
- Berlin and New York have a strong culture of families renting homes because many private tenants enjoy a security of tenure that offers similar benefits of owner occupation
- The interviews with 17 middle-income family tenants showed that they prioritised good schools for their children, parks and open space and a lively retail and cultural environment
- Strong local social networks were seen as crucial to attracting families to an area to rent although it was acknowledged that these can take a significant time to develop
- Tenants in London, and to a lesser extent New York, were worried about the lack of security afforded by short term leases and by poor maintenance of their rental homes
The report highlights that, in the majority of cases, renting is a choice made for economic reasons. Most respondents wanted to own their homes, but could not currently afford to purchase in the area they had chosen to live in and as a result, live in the private rented sector.
An interviewee in New York commented, "...even though prices are pretty good right now and mortgages are low, it's a question of maybe not having a down payment. Because everything requires a down payment and the down payment is typically 20%... without that substantial amount of money you can't buy."
The report shows that house prices in London and New York are very high relative to earnings and that this is a key driver in the choice to rent accommodation. In contrast, Berlin and The Randstad cities do not have such high prices, they have very similar structures to each other in the rental market and yet 90% of homes are rented in Berlin and only 8% in The Randstad cities.
The central conclusion of the report is that a combination of structural, economic and cultural factors are driving the behaviour of both landlords and tenants. While the high levels of families renting in Berlin and New York, the continued growing levels in London, and historically low levels of renting in The Randstad make sense today - these dynamics can change quickly. For instance, London's private rent sector has grown significantly over the last 15 years following the abolition of rental controls in 1988 and the increase in buy-to-let lending in the 1990s. This trend is likely to continue with further incentives to both landlords and tenants and the growth of institutionally-backed Private Rented Sector.
Derek Gorman, Chief Executive of Get Living London added, "We are particularly interested in the clear evidence that security of tenure and the benefits of a strong local neighbourhood network are critical determinants of rental satisfaction. These are the core elements that Get Living London offers private rent residents at East Village and some of the significant ways that we are changing renting in London for the better."
Get Living London, which commissioned the report, is the residential owner and rental management company that has created London's newest neighbourhood at East Village, the first legacy neighbourhood from the 2012 London Olympic and Paralympic Games. Get Living London offers a choice of 1, 2 and 3 bedroom apartments as well as 3 and 4 bedroom townhouses, designed by 16 of the world's leading architects. Its homes offer spacious open-plan layouts, large balconies and winter gardens. Get Living London offers three year tenancies with a resident-only break clause after six months and best in class service through a Management Office open 8am-8pm every weekday and at weekends.
Copies of the report are available to download at:www.getlivinglondon.com/residentialinvestment
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About the Report Authors:
The report was researched and written by London School of Economics, the leading social science institution in the world. The project was undertaken by Kathleen Scanlon, Professor Christine Whitehead and Dr Melissa Fernandez Arrigiota, who have widespread experience across housing policy and research into the private rented sector in the UK and internationally. They focus particularly on urban and housing issues, including housing finance and social housing provision, affordable housing trends in London and land use planning.