Tenurial

1
Tenurial competition, maturation of housing
systems and the private rented sector An
international reappraisal

• Kath Hulse, Colin Jones and Hal Pawson

2
Introduction

• Re-appraise the role of the PRS internationally
• Broader issues - nature of tenurial competition
  and the maturation of housing systems
• Key theoretical perspectives
• Case studies of a small number of countries in
  Europe and Australasia
• Role of governments in relation to the PRS

3
Unitary and Dual Markets

• Kemeny dichotomy
• The unitary rental market in countries like
  Germany contrasted with dual rental systems in
  Anglo Saxon countries
• In unitary markets, governments take part in the
  construction and continual maintenance of
  markets and PRS regulated/supported to compete
  equally with cost renting in the social housing
  sector
• In dual system PRS is unfettered, unregulated
  and effectively protected from competition by
  residualised social housing
• In unitary market two tenures, rental and home
  ownership, whereas in dual markets rental split
  into two, ie three tenures

4
Unitary and Integrated Markets

• Later paper Kemeny distinguishes between unitary
  and integrated rental markets
• Integrated market - renting has developed to a
  point that they can compete without the
  regulation of PRS
• Process sees gradual relaxation of rent control
  and regulation of the private rented sector
• Social cost housing is not only competitive with
  PRS but also offers wide market coverage

5
Underlying Dynamic

• This work is primarily theoretical with key
  concept is maturation
• Process is common to all housing in which
  purchasers incur debt, including owner occupiers
  as well as owners of rental property
• Over time real value of outstanding debt on a
  dwelling decreases, even with modest long term
  inflation.
• In this way attractive older properties in the
  social housing stock can generate surpluses to
  cross-subsidise newer housing, providing they can
  be retained by social landlords

6
Process of Change

• Eventually rents necessary to cover costs will
  fall, enabling cost renting to compete with
  private landlords on equivalent terms without
  subsidies or legislation preventing competition
• Integrated housing system - social housing is
  competitive with the PRS, offers wide market
  coverage - alternative to home ownership
• Kemenys explanatory framework on the process
  from unitary to integrated

7
Commentary

• Kemenys ideas - comparisons of dual/ unitary
  systems, or change from unitary to integrated
  systems
• Implicitly assumed dual systems steady state/
  not dynamic, fossilised by govt policy settings
• Dual systems are changing

8
Kemeny and PRS

• The PRS is a bit player - only differentials in
  rent levels between private and social rented
  sectors relevant
• Other characteristics of the PRS are disregarded,
  such as housing type and size, quality and
  location, as well as profile of households living
  in the sector
• PRS in dual system is focused on temporary
  renters transient stage on a path to social
  housing or owner occupation
• PRS is only a staging post between the central
  dual pillars of the tenure system
• But dual rental systems has identified long term
  renters in the PRS

9
Hypothesis

• Major contention Kemeny model underplays the
  current nature of tenurial competition and
  position of the PRS
• Changes to socio-economic-political system and
  labour market support this view
• Welfare systems have changed - state sought to
  roll back responsibilities including
  privatisation of housing and creation of a new
  pattern of rights and responsibilities
• Particularly important to those identified as
  having dual systems
• Repositioning of state - expand role of the
  private sector in provision of housing for low
  income households

10
Implications

• Dual rental markets cannot be in a stationary
  state
• Influenced by functioning of economy, role of the
  state, and the choices and aspirations of
  households
• Changing role not simply constrained to liberal
  welfare regimes
• No longer stark distinction dual versus unitary
  systems
• PRS not simply a consequence of the national
  social housing model but are shaped by household
  preferences and trans-national imperatives
• Demographic trends /flexible labour
  markets/geographic mobility contributed to a
  greater demand for PRS in all countries -
  increased investment in PRS

11
Empirical Analysis

• Use dichotomy between dual and unitary rental
  systems
• Reviews international evidence on both the recent
  dynamics of change affecting the PRS and
  government policies towards the sector
• Investment in PRS supply/property upgrading
• Access to the PRS for low income households

12
Country Kemeny classification Private renting households as of all households Private renting households as of all households Private renting households as of all households
Country Kemeny classification Circa 1990 Circa 2000 2006
Australia Dual 20 23 24
Denmark Unitary 26 18 17
Ireland Dual 8 11 X
Netherlands Unitary 12 11 11
Sweden Unitary 19 22 21
UK Dual 10 10 11
13
Policies toward PRS investment/supplyDual
Systems

• Expansion of private rental in dual countries has
  stemmed almost entirely from small investor
  activity following 1980s deregulation which
  removed rent control and drastically diluted
  security of tenure
• In Australia, small investor activity has also
  been incentivised by various tax incentives
• PRS stock in these countries is predominantly
  single family rather than multi-unit
  accommodation.

14
Policies toward PRS investment/supplyUnitary
Systems

• Unitary markets -long term rent regulation of PRS
  and security of tenure, and sector has
  predominantly old and small properties, much of
  it multi-unit buildings
• Regulation has gradually begun to ease in all
  three countries
• Rents on dwellings constructed after 1991 in
  Denmark are exempt from rent control.
• In 2004 Dutch government announced a quarter of
  the private rented sector was to be gradually
  deregulated 

15
Comparative Roles

• In policy terms major differences toward PRS but
  it is unclear what the consequences are for
  characteristics of tenants
• Long term private renters are becoming more
  prevalent in dual markets
• In UK - 1988 to 2004 the percentage of young
  people aged 25-29 that are private renters rose
  from 16 to 31 (Andrew, 2006).

16
Promotion of PRS and access for low income
households

• Unitary market countries have not been identified
  beyond general strategies to promote the sector
  via deregulation and subsidies including rent
  allowances.
• Explicit policies in dual markets - Australia
  and Ireland as having been particularly active in
  recent years in this sphere.
• Hybrid schemes targeted at the lower end of
  market offering subsidies to private landlords

17
Conclusions

• Changes to PRS can be related to revisions in the
  role of state and developments in the labour
  market
• Focusing on PRS has highlighted the limitations
  of the dual/unitary dichotomy
• No distinct differences in the size of PRS in two
  market types although differences in the
  characteristics of the housing stock, size of
  landlords and tenants.
• PRS is growing in dual markets - declining in the
  unitary markets.
• Part of the reason is the deregulation of the PRS
  in dual markets but unitary markets are
  interestingly now following
• Governments in both types of markets are now set
  on stimulating investment in PRS although
  governments in dual markets are leading the way
  with specific measures