Why are so many young people living in privately-rented property? The common assumption is that, unless leading transient working lives, they rent out of necessity rather than choice, preferring owner-occupation but restricted financially.
But Kate Faulkner, founder of Property Checklists, has found more positive reasons for renting in a report commissioned by the TDS Charitable Foundation, whose goal is to raise the standards of private rented property management.
“The main contributing factors are – as is commonly understood – a lack of social housing provision, and house price growth outstripping wage increases for many, but that’s not the whole story,” says Ms Faulkner. “Property standards are now arguably higher than ever before and this increased quality has reduced the ‘need’ to buy. Good quality rented properties are often much cheaper and more easily accessible than purchasing the same, especially in the short to medium term.”
In general, this is a more realistic appraisal of the rental market, at odds with those who continually seem to find fault with our sector. Take the call for rents to be officially curtailed in “hot spots”, which has led me to some interesting conclusions by comparing the cost of property rental with other essentials and “standard luxuries”.
For my property benchmark I took data from a recent Citylets survey, which found the average rent for a two-bedroom flat in Glasgow was £768 per calendar month.
A car may straddle the divide between essential and luxury. In Scotland, there are a lot of new, mid-priced vehicles around, thanks to the emergence of “deferred payment” schemes – a euphemism for extended car rental. Typical monthly rental might be £200 plus annual insurance and servicing costs. To me, the flat rental (which includes white goods, furniture and furnishings, buildings insurance, maintenance and repairs) compares favourably with that of the (rapidly-depreciating) car. Ditto against groceries, with food and household items around £400 a month for the two persons who occupy our two-bedroom flat.
“Standard luxuries” are non-essentials but the little things that help make life worth living. Statistically, most adults enjoy an alcoholic drink and in Scotland this cannot be sold for less than 50 pence a unit. This is usually confined to supermarkets, with alcohol costing four times as much in pubs and bars. The recommended weekly intake is 21 units for men and 14 for women (i.e. 35 units for a couple). If, on a monthly basis, half of these units are consumed at home and the other half in bars, this gives a total bill of around £180. Does the flat rental seem excessive in comparison?
As for eating out, a three-course meal for two with an aperitif each and a shared bottle of wine in a mid-price restaurant is unlikely to give much change from £100.
These figures are not intended to claim rents are cheap, especially for those stuck on low incomes and for whom more social housing needs to be made available; simply that, pro rata, the cost of renting seems par for the course in terms of the overall consumer goods and services used by those in relatively secure and reasonably well-paid employment.
So, why calls for controls on the cost of rented housing but not on food? Oh, of course that’s been tried before…in the former Soviet Union where the Politburo’s artificial price caps led to masses of empty shelves in the supermarkets. True, no one starved, but choice was extremely limited and deadly dull.
If Scotland went down the road of rent controls the result would be similar. Cheaper rented housing, but fewer properties to rent. And where would this leave those young people unable to secure a mortgage but managing to live independently thanks to the private rented sector? Back to living with Mum and Dad, I suppose.
As the adage goes: be careful what you wish for.
- David Alexander, MD of DJ Alexander