Thirty years on from the 1988 Housing Act, the private rented sector is out of control

In 1988, Margaret Thatcher’s government introduced the Housing Act in a bid to expand the private rented sector in the United Kingdom. The act greatly shifted the power balance in favour of private landlords, through ending rent regulations and creating a new tenancy which allows landlords to evict tenants for no reason.

Thirty years on, its legacy is one of insecurity and homelessness.

Rising rents

Labour’s 1965 Rent Act introduced regulated tenancies and ‘fair rents,’ which were set by independent officers. Landlords were only permitted to increase rents every two years and had to have the permission of a rent officer.

The 1988 act drastically changed this system. It allowed landlords to charge whatever they like to let a property, allowing the market to determine the price.

Since then, rents started increasing and haven’t stopped. A 2017 study by the Institute for Fiscal Studies found that:

Relative to the general price level, the average (median) private rent paid in the mid 2010s was 53% higher than that in the mid-1990s in London and 29% higher in the rest of Britain.

Like a treadmill

Traditionally, renting privately was seen as the first rung on the housing ladder. However, the cost of renting now means that for many it is like a treadmill. People are struggling whilst going nowhere.

In 1988, less than one in ten households were renting privately. A report by the estate agency Knight Frank estimates that this figure is expected to rise to almost one in four by 2021. Therefore, it’s no surprise that millennials are four times more likely to be renting privately than baby boomers were at the age of 30.

Four out of ten of people forced into the private sector are spending over 30% of their income on rent. This means people simply can’t afford to save enough to stop renting, especially since the average deposit now costs 71% of a first-time buyer’s annual income

Additionally, council housing stock is now at an all time low. A report by the National Housing Federation estimated that private landlords received £9.3bn in housing benefit in 2015. If even half of this money was paid to local authorities, it would provide funds to build roughly 48,000 homes. Local authorities built 1,840 new council homes in 2016.

“No fault evictions”

As well as ending rent regulations, the 1988 act also created a new form of tenancy. The new assured shorthold tenancy differed hugely from the previous protected and statutory tenancies. The property website HomeLet describes how before 1988:

tenants essentially had the right to stay in a rented property indefinitely, passing the tenancy down to their relatives upon their death. When this happened, it became incredibly difficult for landlords to regain possession of their own properties.

But the new assured shorthold tenancy gave landlords the right to evict tenants without giving a reason. Landlords can now issue tenants with a Section 21 notice after only four months of a tenancy. The notice gives a tenant two months to find alternative accommodation.

Evictions from private tenancies account for 78% of the rise in homelessness since 2011. And it is no surprise that the number of families in temporary accommodation has risen by 64% in the same time frame. Local authorities simply do not have the resources to deal with the revolving door of private sector evictions.

No stability

The insecurity of perennial evictions is affecting many communities. Speaking on Question Time on 3 May, the shadow business secretary Chi Onwurah described how:

where you have owner occupiers, where you have people who are renting but with a long-term lease, the street looks better, the environment looks better … people who have to move every 6 months they can’t invest in their home.

This is backed up in a study commissioned by Generation Rent. It found that, compared to homeowners and people in more secure council tenancies, private renters are more likely to be stressed or anxious, less likely to know multiple people in their area and are less likely to feel their home looks the way they would like it to.

Political will

In the thirty years since the Housing Act, there has been very little legislative change around the private rented sector. The current government has repeatedly blocked bills to make rented homes “fit for human habitation”.

The Scottish parliament has now removed Section 21 evictions through the creation of the new private residential tenancy. But the threat of Section 21 evictions still looms large for tenants in England and Wales.

Playing catch up

In 2013, Kevin Gulliver, director at the Human City Institute wrote:

Thatcher’s housing legacy is one of tenure polarisation and growing inequality, worsening housing market affordability, housing supply shortfalls and a deepening housing crisis.

But five years down the road nothing has changed. Thatcher’s legislation is still causing misery for the ever increasing numbers of private renters. The combination of high rents and insecure tenancies is not a recipe for a fulfilling life.

The private rented sector has changed beyond recognition in the last 30 years. Legislation must now catch up.

Correction: This article was corrected on 8 May at 5.40pm to correct a typo. The number “4,800” was changed to “48,000”.

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Featured image via PaulMison/Flickr.