Manage the rise in private rental sector

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JOHN HERON, MANAGING DIRECTOR, PARAGON MORTGAGES

The Paragon Group of Companies’ boost in pre-tax profits to £39.5m emphasises the strong market landlords are operating in.

The firm’s performance was driven by landlords, whose business is being determined by demand for rented accommodation, plus low interest rates.

Landlords have never experienced such tenant demand in the modern era, certainly since the birth of buy-to-let in the mid-1990s.

Private rentals dominated during the early 1900s but tailed off in the post-war years as the UK embarked on an ambitious house building programme with home ownership encouraged and incentivised by governments.

But we are now in the midst of a significant change in housing tenures. The proportion of households in social and owner-occupied housing is falling and private rentals are increasing.

This is not just a short-term blip caused by the downturn. It’s the result of socio-economic changes that affect the way we view the homes in which we live. Most people want to own their home, but do they want to do it in their early 20s? Increasingly, no.

Unless we the government, lenders, builders, intermediaries and investors manage this process effectively, rents could rise beyond acceptable levels and lead to people being priced out of the rental market.

To enable a smooth transition, our industry needs to supply the fuel to enable the private rented sector to grow.