What can we learn from Germany’s private rented sector?
It may come as a surprise to some housing professionals that there are now more households living in the private rented sector (PRS) than in social housing. In England, the PRS is now the second largest sector after owner occupation. The PRS has more than doubled over the last 20 years, while social housing has halved since right to buy was introduced in the 1980s.
What won’t surprise you is that private tenants pay far more rent than social tenants - three times or more in many parts of London. They have virtually no security in assured shorthold tenancies (AST) and generally live in worse conditions.
The PRS is home to many who would have been offered social housing a generation ago. And many are trapped because they cannot afford to buy.
Our PRS is not fit to house large sections of our society for life and its fragility has been exposed by the current COVID crisis. Private tenants are more at risk of losing their home than those in other tenures. They have less security, pay a larger proportion of their income on housing and work in sectors most prone to job losses (e.g. hospitality and retail).
Last year, I received a Churchill Fellowship to find out what we can we learn from Germany which has the largest private rented sector (PRS) in Europe. Where twice as many rent – over 40% nationally, rising to over 70% in major cities.
Overall, Germany has a better PRS. ‘Better’ in the sense that it gives tenants greater security of tenure, more affordable rents, higher standards and a stronger voice to advocate for their rights and represent their interests. And ‘better’ as a sector that supports and incentivises good landlords for the long term, thus improving local housing provision and sense of community. Crucially, Germany also builds twice as many more homes, including affordable ones, as the UK.
Here are some of the things we can learn from German housing:
Data transparency – Everybody knows the average rents in their area as they are published and updated in a comprehensive local Rent Index (Mietspiegel). This gives landlords, tenants and local authorities good information and a more level playing field.
Excellent quality control – This information is used to help regulate rents effectively. It means rents in Berlin are typically 50% of equivalent lets in London.
A stronger voice for landlords and tenants – Tenants have greater access to advice and advocacy through a national network of self-funded tenants associations (Mieterverein), covering both private and social tenants. Tenants have more clout - politicians cannot afford to ignore them.
Perhaps surprisingly landlords are as supportive of the German rent regulation system as tenants. They find it provides transparency, encourages good tenants and more sustainable rental income. Landlords also get more support than their UK counterparts through tax incentives and subsidies.
Stable and secure tenancies – We all value a stable and secure home – never more so than in the current lockdown. Yet, most private tenants in England can be evicted for no reason, and this will apply after the ban. In contrast Germany, and most of the developed world (including Scotland since 2017), have secure private tenancies where the grounds for eviction are based on breaches of tenancy.
Building more, including affordable, housing – Since the end of World War 2, Germany (West and East) has built twice as many homes as the UK– 30 million compared to 16 million. Reasons for this include a more diverse, localised housebuilding industry; stronger, better- resourced local government and more effective of planning and land assembly systems.
All these factors help protect German tenants more in a post-COVID world and are things we can learn from and implement in the UK. When we come out of this national Coronavirus crisis we will need to rebuild a better Britain – a new normal.
The current crisis has exposed the unfairness and fragility of our current broken housing system. Take our NHS and other key workers. With an average wage of £25k pa a nurse would have to pay 84% of their take home pay to afford the average private rent in London.
Most economic and social changes occur after times of war and crisis. After 1945 Britain introduced massive changes, including the NHS and welfare system. After World War 1, the Government introduced the Wheatley Act, which led to extensive council house building programmes. Changes we have reason to be grateful for today.
Let’s make fixing Britain’s broken housing system and building homes fit for our new heroes and heroines a priority. So that it serves everybody fairly and establishes the building blocks to a healthier, happier and better-housed society.
Maureen Corcoran started her life in housing as a tenant/community activist in Waterloo, London. She has worked professionally in housing for over 30 years, and currently works as a London Blue Badge Guide, specialising in tours on housing, social history and the suffragettes.
See her recently published Churchill Fellowship report Private Rented Housing: a broken system in Britain? Lessons to help fix it from 3 cities in Germany here.