A new report has identified that around 85,000 new rental homes are needed every year in the capital in order to reach government housing targets.
The report, which was commissioned by the NRLA (National Residential Landlords Association) and created by Capital Economics, an economics consultancy firm, identifies the serious shortage of properties available in the London rental market.
This supply deficit is based on the government’s set target of the number of homes that need to be built to meet the rental demand in London. Currently, in order to reach levels of demand, that target is set at 340,000 homes per year to be built across the UK by 2025.
The Capital Economics report shows that if social rental properties and residences occupied by the owner continue to grow at an average rate over the next decade, then the private rental market will require an additional 227,000 properties annually to reach government targets.
This increase in property supply is also vital to meet the levels of the expected number of new households across the UK, which are currently predicted to be around 1.8 million. The capital alone would need an extra 83,000 new properties available for rent over the coming 10 years.
Government data shows that the supply of available private rental accommodation in London has fallen by 85,000 over the last five years. This shortage in supply is particularly challenging for the younger generation, either leaving home for the first time or needing accommodation for educational purposes. With this figure expected to increase by 12% (120,000) in the years up to 2030, finding accommodation for the 15–24-year-old age group may be problematic.
Research consultancy BVA BDRC provided additional data that suggests that in central London, in the last quarter of 2021, almost three-quarters of landlords saw a marked increase in the demand for rental homes. This figure indicates an increase of 54% from the previous report for Q3 2021.
The report from Capital Economics suggests that in order to meet the supply targets, the Treasury needs to find ways to encourage investment in the rental housing sector and sets out a number of ways in which they can do this.
The report advises an increase in the number of new home builds and encourages investors and developers to make use of unused commercial property by converting it into residential homes. It also pointed out that it would be beneficial for short-term leases to be turned into long-term lets, as well as ensuring that empty properties are upgraded to a standard where they are habitable and can be put back onto the rental market.
The chief executive of the NRLA, Ben Beadle, explains: “As the demand for private rental properties picks up following the pandemic, renters across the capital will struggle to find the homes they need and want. For all the efforts to support homeownership, the private rented sector has a vital role to play in housing so many Londoners.”
“The analysis demonstrates the folly of the mayor’s calls for rent controls in the capital, a policy that would serve only to freeze investment in the very homes renters need.