Regulating the private rental market in UK and India #housing
The private rental market is a critical one, from the perspective of citizens being able to access affordable homes. Despite ownership housing being the de facto option that policymakers the world over promote, an increasingly mobile human population and rising property prices have meant that rental housing is popular.
Of course, the issues in India and the UK are very different, but seeing as both nations are taking a re-look at rental housing policy, I thought it might be a good idea to compare, and learn.
In the UK, people can seek rental housing through Housing Associations which are private and not-for-profit bodies that manage a variety of housing stock. They are subject to government regulation. As Housing Councils (focused more on social housing) and Housing Associations were unable to meet demand, the private rental sector stepped in to provide rental homes. Now it represents about 10% of the total housing stock. This sector is also mildly regulated, in the sense that there is regulation that helps landlords recover rent from defaulting tenants, etc.
Today, rising homelessness (stats) and a slow economy are fueling a housing crisis of considerable proportions (1 million homes deficit, 2 million on social housing waiting lists) and a special committee of MPs has made recommendations to boost the private rental housing sector, focusing on simple tenancy agreements, transparency in leasing agent fees, etc.
Critics feel that the recommendations are lukewarm, stopping short of regulated rent increases that would truly help those in need of affordable housing (see here).
Here in India, we have another sort of problem. Over 60% of our affordable urban housing stock is in informal settlements, many of them illegal, many of them officially denoted as slums. Social housing for rent is also found in these areas, which aren’t really regulated in any fashion by building bye laws, leave alone rental laws. On the other land, our middle and high income rental sector has been through its ups and downs. Rent control and other laws have left landlords insecure and many prefer to leave their additional homes empty rather than rent it out, fearing they will be unable to evict tenants. Out of the 18 million new houses built between 2007-2012, owners of over 11 million units in India prefer not to let out the properties. A telling figure! The new rental laws under discussion hope to create watertight regulation so that developers are encouraged to build housing for rental purposes. Like the proposed changes in UK, the committee will address the role of rental management services. It even goes on to try and include provisions to encourage small size dormitory type housing for the poor.
However, I fear the new proposed laws are not looking at the current models by which private rentals in informal settlements work. Unless the proposed laws encourage, rather than ignore or discourage, informal private rentals, the urban poor are still going to be short of rental housing. And that is where the bulk of the housing demand is anyway. Besides private rentals, government agencies can also be mobilized to utilize under-used properties across the city to provide low-cost rentals and this also needs to be addressed as there is currently an unfortunate “free housing” mindset for dormitories as well!
Four factors denote a healthy rental market- longer term tenancies, protections from eviction, higher quality property and regulated rent increases. We need to ask, and so does the UK panel of MPs, whether our proposed laws or solutions achieve this. In addition to whatever Jerry Rao’s committee comes up with, we need in India an additional group working to ensure the above 4 conditions in the informal rentals market as well. Quality of housing especially is a tough one and directly determines the quality of life of tenants. In situations like slums, urban villages and unauthorized colonies, where tenants and landlords live side by side and share amenities, it isn’t just rental laws that will do the trick. In fact, local governments need to be pushed to provide, unconditionally, basic services to all housing. Further, tenure must be improved to allow landlords to access finance and build more and better quality rental units. Plus, technical assistance needs to be provided to ensure quality, in addition to regulations about light, ventilation, structural safety etc that would need to be followed if landlords expect incentives from the government going forward (it is a tricky situation considering most informal settlements evade tax though!).
Essentially, the problems of rental housing are linked to the larger issues in the housing sector. It is myopic to think that only addressing the low hanging fruit will solve the problem. While many middle income families might find it easier to rent, the current policy moves will not solve the issue for the urban poor, many of whom are migrants who need shorter term accommodation. We definitely need to look deeper and broader at who are tenants in the city and what are their housing choices before we create a policy that will truly boost affordable rental housing.