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Monday, October 29, 2012

Private rental sector - small or large?

The private rental sector personifies the kind of debate we are having as a country.  Do we think we are best served by a small number of large scale institutions where there are undoubted economies of scale and benefits from a large focused organisation.  However, we know that bigger isn't always best.  Two recent examples have been the banks who grew to big to fail and the food and retail sector where large scale has often meant bland and uninteresting.

Successive governments have been convinced that the private rental sector will be 'saved' rejuvenated if only they could get large scale investment by institutions such as pension funds pouring in billions of pounds into purpose built rental accommodation.  Well how true is this?  The private rental sector has been built on an army of small landlords often with only a single property.  In many ways the private rental sector personifies the 'supply side miracle' that many of the current crop of Tory politicians espouse to get us out of our economic malaise.  When you deal with a small landlord with a handful of properties then you are dealing directly with a business owner.  They care about their property and their business.  The same cannot often be said for large businesses with departments, sections, team leaders and section heads.  Small is beautiful?  Well may be.  I welcome any additional investment in the private rental sector but the arrival of the promised billions of investment suggested by the Montague Report may be not the panacea that the politicians would suggest.

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1 comment:

Paul Barrett said...

I wouldn't be concerned about institutions investing millions in BTL.
Until the law on eviction has been changed to ensure a tenant may be removed by police once 2 months rent has been missed no institition will bother investing.
There has been 2.1 billion of losses to LL this year caused by tenant rent arrears, damge and theft.
With tenants being able to stay for sometime up til a year before being evicted; the game is not worth a candle to the institutions.
If the eviction law is changed in the case of rent arrears then watch out as the instituions will pile in.
Until that happens; which is NEVER, then the PRS will consist of small LL.
The LL business model is inherently flawed on the basis that your investment returns could be compromised by allowing a non-rent paying tenant to remain in your property for no payment until the law has resulted in them being evicted.
NO business in the UK operates on the basis of effectively providing a service for nothing and yet that is the PRS business model.