Private Renting After the Global Financial Crisis

Abstract

Analyses of the impact of the Global Financial Crisis (GFC) on housing have largely focused on subprime mortgages and homeownership. By contrast, the impact of the financial crisis on the private rented sector has received much less attention. This paper helps to address that gap by examining the impact of the GFC on private renting in Britain. In recent years, the private rented sector (PRS) in Britain has grown in size after many years of decline; and the formal rules and informal practices that characterize this tenure have also changed significantly. This transformation began during the 1990s but the pace of change increased from the turn of the century and accelerated still further during the GFC. Drawing on an historical institutional perspective, it shows that the changes to private renting over this period were shaped not only by domestic events but also by developments in the international political economy.

Keywords::

• Private renting
• private landlords
• private tenants
• Buy-to-Let
• Generation Rent
• Global Financial Crisis
• historical institutionalism

Acknowledgement

Thanks are due to Alex Schwartz and the anonymous referees for their helpful comments on the first draft of the paper.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

¹ One exception is Sprigings (2013), who examines the relationship between the decline of homeownership and the growth of private renting. He predicts that owner-occupation in the UK is on its way to becoming a minority tenure again. In contrast, Whitehead (2011, p. 126) argues that ‘although owner-occupation rates may fall for some time, the fundamentals of tenure choice point to continued demand for owner-occupation, even in a more uncertain world.’

² A good example here is rent controls, which typically redistribute income from landlords to tenants, are often politically contested, and which ‘rogue’ landlords may seek to avoid or evade in various ways. Landlords' organizations often campaign to have rent controls removed or made less stringent while tenants' groups may mobilize to defend existing rent controls or campaign for rent controls to be introduced.

³ In a seminal article, Hall & Taylor (1986) distinguished between three main varieties of institutionalism—rational, sociological and historical—though others types have also been identified.

⁴ Streeck & Thelen (2005) identified ‘exhaustion’—the gradual break down or withering away of an institution—as a fifth endogenous process that can generate gradual, transformative change, but it was not mentioned in Mahoney & Thelen (2010).

⁵ Hacker (2005) who developed the concept in his analysis of US social welfare refers to ‘drift’ and ‘policy drift’ interchangeably.

⁶ Other sources of finance in 1993/1994 included inheritance (15 per cent), gifts (6 per cent) and the acquisition of organizations had happened to have some lettings (4 per cent).

⁷ It was also because the government took action to limit arrears and repossessions, for example, by temporarily dropping the two-year maximum entitlement to Support for Mortgage Interest paid to out-of-work owner-occupiers. Likewise, lenders were careful to pursue a policy of forbearance towards homeowners who were in difficulty with their mortgage repayments. None of these easements were made available to distressed landlords.

⁸ The Conservative-Liberal Democrat coalition government introduced HtB in 2013, a scheme that uses public loan guarantees and equity loans to enable owner-occupiers to obtain mortgages with loan-to-value ratios as high as 95 per cent.