Families renting in key global cities want a secure tenancy
2015-04-21
Significant differences in the structure of the private rental markets in London, New York and Berlin 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 conditions 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. London’s private rent sector has grown significantly over the last 15 years following the increase in buy to let lending in the 1990s. This trend is likely to continue with the growth of institutionally backed Private Rented Sector. 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 interviewed 17 middle income family tenants and shows that they prioritized good schools for their children, parks and open space and a lively retail and cultural environment.
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 compared to earnings. And that is the key driver of 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 Dutch cities.
The central conclusion of the report is that a combination of structural, economic and cultural factors is driving the behavior of both landlords and tenants.
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 neighborhood network are critical determinants of rental satisfaction.
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