iFamilies renting in key global cities want a secure tenancy, new research showsSignificant differences in the structure of the private rental markets in London, New York, Berlin and the Randstad cities in Holland have led to vastly different numbers of families choosing to rent, new research shows.
But what they all seek is a secure tenancy and well looked after homes. The complex nature of housing systems and important differences in the economic incentives to both landlords and tenants have resulted in wildly different private rental sectors across the cities, says a report from the London School of Economics.
It reveals that the near doubling of size of the private rented sector and the increase in house prices in London over the last 10 years means the conditions are now right for a larger number of families to rent in the UK’s capital city.
It also points out that Berlin and New York have a strong culture of families renting homes because many private tenants enjoy a security of tenure that offers similar benefits of owner occupation.
The research, conducted by research fellow Kath Scanlon, interviewed 17 middle income family tenants and shows that they prioritised good schools for their children, parks and open space and a lively retail and cultural environment.
Strong local social networks were seen as crucial to attracting families to an area to rent although it was acknowledged that these can take a significant time to develop.
Tenants in London, and to a lesser extent New York, were worried about the lack of security afforded by short term leases and by poor maintenance of their rental homes.
The report highlights that, in the majority of cases, renting is a choice made for economic reasons. Most respondents wanted to own their homes, but could not currently afford to purchase in the area they had chosen to live in and as a result, live in the private rented sector.
‘Even though prices are pretty good right now and mortgages are low, it’s a question of maybe not having a down payment. Because everything requires a down payment and the down payment is typically 20%. Without that substantial amount of money you can’t buy,’ said one interviewee from New York.
The report shows that house prices in London and New York are very high relative to earnings and that this is a key driver in the choice to rent accommodation. In contrast, Berlin and the Dutch cities do not have such high prices, they have very similar structures to each other in the rental market and yet 90% of homes are rented in Berlin and only 8% in the Randstad cities.
The central conclusion of the report is that a combination of structural, economic and cultural factors are driving the behaviour of both landlords and tenants. ‘While the high levels of families renting in Berlin and New York, the continued growing levels in London, and historically low levels of renting in the Randstad make sense today, these dynamics can change quickly,’ it says.
‘For instance, London’s private rent sector has grown significantly over the last 15 years following the abolition of rental controls in 1988 and the increase in buy to let lending in the 1990s. This trend is likely to continue with further incentives to both landlords and tenants and the growth of institutionally backed Private Rented Sector,’ it adds.
According to Derek Gorman, chief executive of Get Living London, which commissioned the report, it was particularly interesting that security of tenure and the benefits of a strong local neighbourhood network are critical determinants of rental satisfaction.
‘These are the core elements that Get Living London offers private rent residents at East Village and some of the significant ways that we are changing renting in London for the better,’ he said.
Get Living London is the residential owner and rental management company that has created London’s newest neighbourhood at East Village, the first legacy neighbourhood from the 2012 London Olympic and Paralympic Games.
Get Living London has a choice of apartments and town houses, designed by 16 of the world’s leading architects and it offers three year tenancies with a resident only break clause after six months.