The standard of PRS accommodation has significantly improved

10:34 AM, 25th September 2019, About 5 years ago 7

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The standard of accommodation in the PRS has significantly improved in the last decade as the sector has expanded and professionalised. The proportion of homes in the PRS in England deemed non-decent by the ONS has fallen for ten consecutive years, decreasing to 24.5% from 44% in 2008.

In spite of the sector growing by 45% over the period, adding 1.5m homes, the number of non-decent homes has fallen in absolute terms down by 275,000. The latest English Housing Survey shows 84% of private renters were satisfied with their current accommodation.

Landlords’ spending on refurbishment has seen the quality of accommodation in the private rented sector (PRS) drastically improve in the last decade, according to the latest report Unlocking value: The role of refurbishment in buy to let by InterBay Commercial, part of specialist lending group OneSavings Bank.

Landlords’ commitment to refurbishing to improve properties has been a key factor in this improvement. A survey of more than 700 property investors, conducted for InterBay by research house Savanta, shows 70% of landlords who recently undertook a refurbishment did so to improve the property, be it its presentation or the quality of the accommodation for tenants. Meanwhile, 45% of landlords cited increasing a property’s capital or yield as their reasons to refurbish.

InterBay’s analysis shows that landlords typically spend £12,000 per refurbishment. This varies considerably on the type of refurbishment. Typical spending per heavy refurbishment (substantial works such as conversion, extensions and often requiring planning permission) on average stood at £40,000, compared to just £7,000 on a light refurbishment (typically including modernisation or redecoration).

Many landlords take a “little and often” approach to refurbishments, seeking to ensure they maintain rental income and the quality of the property, while a minority seek more significant and costly works to add value or convert a property. Indeed, just 18% of those who had recently refurbished a property had undertaken a heavy refurbishment, and of these, nearly two-thirds undertook the works to add value to the property. Overall, 28% of landlords spent less than £5,000 on their last refurbishment, and 43% spent less than £10,000. At the other end of the scale, just 13% spent more than £100,000.

Darrell Walker, Head of Sales, InterBay Commercial said:

“It may be an easy target for political point-scoring, but the private rented sector has been a success story since the financial crisis, catering for a growing proportion of the population that either cannot or chooses not to purchase a home. As the PRS has grown, it has also professionalised. As it has done so, the standard of accommodation for tenants has improved drastically too.

“Refurbishment has been central to this improvement. It is a win-win for tenants and landlords. Tenants see better quality accommodation, while landlords improve the rent they receive and maximise the value of the property. And with interest rates still bumping along the bottom, those borrowing to support refurbishment can access historically cheap funding to enable improvement works.

“Nonetheless, continued investment in the sector is not a foregone conclusion, and it must be supported rather than undermined. Landlords have been buffeted by the headwinds of policy change since 2015, and costs have risen for investors. Should this rate of change continue, it will weigh on landlords’ decisions to spend more on their portfolios, and risks undermining a decade of progress.“

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Comments

Paul Essex

12:40 PM, 25th September 2019, About 5 years ago

I am not convinced this is a win/win situation. Yes there has been significant improvements BUT low cost rented property is vanishing.
Take student accommodation, when my kids went to uni the rental properties they had were pretty poor, but at the same time were cheap. With the regulation burden over the last few years all those cheap rentals have all gone.

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Old Mrs Landlord

16:46 PM, 25th September 2019, About 5 years ago

Paul is right, and students are not the only ones affected - LHA rates have not risen since ten years ago and many tenants who depend on them have been priced out of the sector because the basic accommodation they could afford has been upgraded and now commands a higher rent.

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Mike D

20:23 PM, 25th September 2019, About 5 years ago

You have to make profit to invest in refurbishment.
This last 4 yrs, everything has been against that ability to invest and refurbish.
Taxation, legislation, and agent's fees. All deteriorate the chance of profit, now is the time that this stops.

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Whiteskifreak Surrey

7:59 AM, 26th September 2019, About 5 years ago

Reply to the comment left by Mike D at 25/09/2019 - 20:23
Absolutely, Mike. We planned a complete refurbishment of a rather tired (but still clean and perfectly usable) kitchen and attaching it to the decent dining area. With S24 that became impossible, we are only half through that and can see our profit going South... We do something every year (we rent to students, so have a break in summer) - redecoration, new flooring, replacing furniture when damaged, etc - so the house is still presentable and easy to rent. But that kitchen project will have to wait... or possibly will not be done even before we eventually sell.
I am actually surprised learning how much is being spent on refurbishment - people must have an enormous profit to spend the sums quoted. It looks in general as if S24 did not put landlords off improvements, something that was quoted as one of consequences of introducing it...

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moneymanager

10:14 AM, 28th September 2019, About 5 years ago

The deepest "refurb" we have done was a former R2B still ived in by the former tenant, no c/h, a kitchen from the ark although it did have the orignal quarry tiled sills.

We stripped everything, all water, all elecs, old loft insulation even the doors and frames. Not having allowed for the subsiding concrete steps down from the road we counted ourselves lucky on coming out even although a nice young income rich capital poor couple had a quality home returned to the nations housing stock. With the SDLT surcharge and elevated building costs what's the possibility of a repeat?

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Marie

11:04 AM, 28th September 2019, About 5 years ago

Reply to the comment left by Paul Essex at 25/09/2019 - 12:40
Yes totally agree. But I think the student accommodation provided by landlords is still cheaper than the commercial accommodation for students. I had a look at Chapter Portobello, a student housing provider, as an applicant was living in their accommodation and could not believe the prices they are charging. Why is nobody complaining about excessive rent being charged to students by these companies?
At the end of the day the PRS is driven by market forces and in London there is an excess of supply, so tenants will find the best property for the price they can afford. If your property is not up to standard they will not take it. If they can only afford something cheap the property will be of a lesser standard, but then it is serving a purpose. You get what you pay for as with everything in life.

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Marie

11:05 AM, 28th September 2019, About 5 years ago

Reply to the comment left by moneymanager at 28/09/2019 - 10:14
I would say zero.

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