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A rental housing crunch

Roger Hollis's picture
Fri, 07/23/2010 - 00:00 -- Roger Hollis

Since the start of this blog, articles within the national business and property trade press have looked at the advantages that exist for institutions willing to invest in the private rented sector (PRS). But recent news has highlighted how essential the development of this sector is for the man-on-the-street.

According to the Association of Residential Letting Agents (ARLA), the dearth of available rental properties is worsening. 70 per cent of ARLA member offices have more tenants than available properties, up from 59% last quarter and just 24% in September 2009.

This points towards an impending, acute shortage of residential rental properties, especially in London and the south east, where demand remains highest. With a shortage of properties will undoubtedly also come a rise in rents.

As we all know, necessity is the mother of invention. Or, more accurately in this case, the mother of investment. Where there is demand, supply will follow, and forward-thinking firms will be looking at developing new blocks or purchasing existing ones that can fit into the institutional PRS model.

An added attraction will be the higher rents, which will bring yields closer to the levels needed by institutions to provide the income they need for such schemes to be viable.

However, if people are to stomach higher rents, then landlords need to provide a ‘turn-key’ solution. Many of the tenants currently sitting on ARLA members’ books will be leaving family homes, and as such have none of the homewares necessary to furnish and live in a flat.

In such a situation, furniture rental makes a lot of sense. Tenants have contemporary, stylish furniture; landlords have happy tenants; and both parties avoid considerable up-front costs.

New residential rental units are vital to meet the latent demand. But equally important are the ancillary services, without which a successful institutional PRS simply cannot function.