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Kath Hulse , Colin Jones and Hal Pawson

Tenurial ‘competition’, maturation of housing systems and the private rented sector: An international reappraisal. Kath Hulse , Colin Jones and Hal Pawson. Introduction. Re-appraise the role of the PRS internationally

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Kath Hulse , Colin Jones and Hal Pawson

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  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 Kemenydistinguishes 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 • Kemeny’sexplanatory framework on the process from unitary to integrated

  7. Commentary • Kemeny’s 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 = Kemenymodel 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. 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.

  13. 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

  14. 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).

  15. 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

  16. 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

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