Tackling Rental Market Problems in Small Towns

James Prentice identifies rental market problems as a source of housing shortages in small towns, and offers some solutions.

There are major problems within the UK rental market and they are no longer confined to inner-city areas. Large towns are now affected and now even deprived smaller towns that were once seen as less desirable have developed serious problems. 

One such town is Hastings, which has experienced a significant influx of people who often have themselves been victims of gentrification. Since the property market picked up after the slowdown period of 2010-2013, there has been a steady rise in people moving into the area from Brighton and London, often feeling financially compelled to sell modest properties only to find they can buy much better properties in cheaper Hastings. The pandemic has only exacerbated these trends.

These trends have increased demand in forgotten neglected areas like Hastings. Since 2010, when adjusted for inflation the average house price in the Hastings and St Leonards area has doubled from roughly £150,000 to £300,000. This has had a knock-on effect on the local rental market. Firstly, it has meant that landlords looking to move on have sold their properties to buyers looking to put down roots, thus taking rental properties off the market. Secondly, it has meant new buyers who are still renting their properties are paying higher mortgage costs, and therefore have increased rents to cover these additional costs. Indeed, this problem has recently been made considerably worse because the mini-budget caused interest rates to rise  higher than they otherwise would have.  

The rental market problem in small towns needs to be tackled as these areas are most vulnerable to rapid rises in housing costs. This is particularly the case in deprived coastal towns like Hastings and Margate as these areas have a low-wage economy and recent inflationary pressures will ensure that wages will not stay in line with increasing housing costs. This will increase poverty rates and will leave young families in rental accommodation particularly worse off. This will only entrench inequality and cause current problems to be passed on to the next generation. 

Additionally, this problem also needs to be tackled as it is threatening local council’s ability to fund themselves. For instance, Hastings Borough Council is currently spending £4 million more than it can afford largely due to problems within the local housing market. Due to a cost of living crisis coinciding with these market trends, the council for the first time now is seeking to house more than 1,000 residents in a borough that only has a population of 90,000 people. Due to the poor rental market, the council has been forced to move people from East Sussex to Kent, where often the council is paying very high rental costs just so it can house residents they are responsible for. Simply, these housing support costs are not sustainable and not dealing with the issue will cause more tax revenue to be used for housing support rather than productive investment. 

As this problem clearly needs to be tackled, what measures can be taken? I have four policy suggestions:

  1. Give Borough councils more funding and powers to build council homesBorough councils often do not have land and have to ask their senior County Council for permission to buy and build on land. Giving boroughs money and powers to take land off County Councils so they can build on brownfield sites could help increase affordable home stocks.
  2. Tax homes that are empty to encourage owners to rentDue to rising interest rates house prices have dipped, leaving sellers who bought at the peak of the market unwilling to sell. In Hastings, estate agents have taken to social media advising these sellers to rent and not leave their homes empty. Taxing these empty homes could  incentivise more owners to rent, thus increasing supply. Under this policy, owners of properties that have been empty for more than three months would be required to report it to the local council and failure to do so would result in fines. Revenue raised from this policy would go to local councils to help build more socially rented units. 
  3. Tougher rules on how many properties can be made into air B&B’s within a local area (local is defined as within a single council borough) - As  coastal areas become  increasingly desirable, those who can buy second homes on the coast are primarily using their second homes as Airbnb's rather than renting out to locals. Setting limits on how many homes can be listed as Airbnb's could limit the damage this phenomenon brings. 
  4. Financial incentives to sell privately owned property into the rental market - Tax breaks could be given to those who sell to buyers that will rent out their new property. This will  incentivise sales,  and therefore increase rental market capacity. 

Together, these suggestions can help address the crisis in housing supply in small towns, and thus help people to secure good, long-term housing.

James Prentice is a Labour and Fabian member in the Hastings & Rye area. He has recently finished a PhD in British politics at the University of Sussex, researching changes in voting behaviour since Brexit. 
His writing interests include trends in voting behaviour, inequality, institutional reform and the state of public services, as well as policy solutions to inequality. 
He regularly posts blogs on these subjects on his website https://www.capturepolitics.co.uk/blog, and tweets @JamesPrentice93
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