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A FUTURE TENANT STANDARD Research into the private rented sector from a tenant perspective. December 2023

In association with

FOREWORD A thriving private rented sector plays an essential role in life in the UK, with one in five of us renting homes from private landlords. The pressures on landlords are much commented on in this environment, while demand continues to outstrip supply. This is a sector that despite the challenges, will continue to grow as increased numbers of people will need to rent whether through choice or circumstance. Yet how the private rented sector grows and performs matters. Last year, our seminal research - the Landlord Leaders report identified a positive shift in the industry towards increased professionalisation. An increased wave of landlords focused on their societal impact and the tenant experience. And we looked at how we, and the industry, could change to better support that change. This year, we’ve looked at renting from the other way - speaking to tenants from all walks of life - to understand who they are, what matters to them today and where the industry best serves them today and looking forward. We’ve learnt not just how we can better work with our broker and landlord community, but also some new perspectives on how we can support more tenants on their journey to homeownership. I am delighted to share those findings with you in this playbook and hope it provides you with both the inspiration and information needed to act in support of making the choice to rent a more positive one for landlords and tenants in order sustain a healthy rental market. Jon Hall Group Managing Director, Mortgages & Savings, OSB Group 2

WHAT THIS PLAYBOOK FEATURES. INTRODUCTION....................................................5 THE TENANT EXPERIENCE.....................................8 LOCATION, LOCATION, LOCATION.......................10 SHORTAGE OF RENTAL STOCK.............................12 THE LURE OF HOMEOWNERSHIP IS STRONG........14 CASE STUDIES......................................................16 THE FINANCIAL BALANCING ACT..........................18 STANDARD OF SERVICE........................................20 VALUE IN RELATIONSHIPS.....................................22 LANDLORD LEADERS COMMUNITY.......................26

I In response to the seminal Landlord Leaders research published in 2022, OSB Group has made a number of commitments, including creating an opportunity for the industry to come together and drive positive change. The Landlord Leaders Community was launched in 2023 and recently met to discuss the findings of this research. You’ll find their perspectives shared throughout. Jon Hall Group Managing Director, Mortgages & Savings, OSB Group

INTRODUCTION A Future Tenant Standard sets out OSB Group’s understanding and learnings about the world of private renters. For the most part, people continue to rent as a step on the way to buying a house, or because they may never be able to afford to buy a property. But the demographics, reasons and experiences around renting are far more complex.

Our Landlord Leaders Community believes there is a happy middle ground - where professional landlords provide the best quality properties and service they can for the price they are being paid, and where tenants ascribe the right level of value to that service. But, in a world where our homes have such high emotional value, translating that rational thinking into practicalities is not always so easy.

This research shows that the biggest upside of renting is location, with tenants far more likely than homeowners to live where they want. It also shows that for the most part, landlords are living their tenant-centric promises, providing homes that are well kitted out and offer a positive lived experience.

Against a backdrop of economic uncertainty and the Renters Reform Bill looming on the horizon, we continue to work to support both professional landlords and those on their professionalisation journey to achieve the ambitions that we heard about in our Landlord Leaders research - and to support brokers and would-be borrowers in securing property ownership.

Where we find challenge is primarily around service - with a gap between what tenants believe they deserve and how they feel they are supported. At points, this is exacerbated by a lack of relationship with their landlord; by cost of living pressures on both sides, and by what tenants perceive as a service standard not aligning with what is delivered.

Neil Richardson Chief Sustainability Officer, OSB Group

LOCATION, LOCATION, LOCATION. Renting gives tenants freedom to live in their preferred location:

78% 54%

say they feel at home.

say they live in the area they want to.

8% say they don’t.

QUALITY OF RENTAL PROPERTIES. Quality of rental properties generally meet expectations and tenants are satisfied with:

74%

60%

58%

52%

Security of property

Quality of fixtures and fittings

Energy efficiency of property

Quality of furniture

Quality of white goods

SHORTAGE OF RENTAL STOCK. Lack of supply impacts tenant experience:

34% had difficulty finding their home

73% have felt the impact of the lack of supply 6

BUT FINANCIALLY, IT FEELS OUT OF REACH.

THE LURE OF HOMEOWNERSHIP. The lure of homeownership is strong and those who want to buy feel it will give them: A greater feeling of security compared to renting

84%

48% do not think they will ever be able to afford to buy.

79%

More pride in their home

A home which better suits their personal tastes

71% of tenants say they are frightened by the size of borrowing required to buy.

82%

STANDARD OF SERVICE. While some tenants are happy with the level of service they get from their landlord, there is some room for improvement:

69%

62%

59%

37%

are happy with the speed of response from their landlord

are happy with repairs

have experienced rule breaches

20%

18%

say their say the poor quality say there have landlord has of the property been rules broken cut corners on has impacted their on the safety of repairs health their property

VALUE IN RELATIONSHIPS.

82%

of those dealing directly with the landlord say they are treated fairly.

76% 72%

of private tenants dealing directly with their landlord say they believe their landlord cares about the level of service they receive.

say they trust their landlord when dealing directly. 7

THE TENANT EXPERIENCE. Over the past year, rent prices have been on an upward trajectory. According to data from the Office for National Statistics (ONS), monthly rent costs saw an increase of 5.5% in the 12 months leading up to August 2023, a slight uptick from the 5.3% recorded in the 12 months to July.1 This pattern is partly driven by growing demand for accommodation, with experts expecting to see the cost of renting rise by another 5% over the next 12 months.2 Right now, the rental market is characterised by challenging conditions for both tenants and landlords. Macro-level factors like the imbalance between supply and demand; inflation; the cost of living; geopolitical tensions; and the ever-evolving legislative landscape have a huge influence on the market - but they are mostly factors which landlords and tenants cannot influence. Our research therefore scrutinises those aspects that landlords can influence, identifying the areas where tenants best reap the rewards of the rental market.

Office for National Statistics Index of Private Housing Rental Prices, UK: August 2023 https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/indexofprivatehousingrentalprices/august2023

RICS September 2023 UK Residential Market Survey https://www.rics.org/news-insights/market-surveys/uk-residential-market-survey

It has been an absolute privilege to conduct this research on such an important topic, at a time of great challenge for both landlords and tenants. Sure enough, our research highlights some of those challenges. Almost a third of renters in our survey were finding it difficult to pay their rent. A minority of tenants feel on the receiving end of poor practice from landlords, such as cutting corners on repairs. However, our research also sheds light on the positives of the renter experience which include a sense of flexibility and greater choice of location. Some of those positives really surprised us, such as four out of five renters reporting that they ‘feel at home’ in their property (a higher figure than the recent home buyers in our survey). Paul Flatters CEO & Co-Founder, Trajectory

LOCATION, LOCATION, LOCATION. With prospective first time buyers finding themselves priced out of the areas they want to live3, renting gives tenants the opportunity to call more desirable areas home. More than half (54%) of private renters agree they are living in their preferred location, while just 8% said they feel they are unhappy with the place they live.

The research also found that the majority of tenants are happy with the quality of their home. From the level of security, to the quality of fixtures and fittings, the majority of renters are satisfied with how their property is kitted out.

QUALITY OF RENTAL PROPERTIES. Private renters are happy with the quality of their properties.

74%

60%

58%

52%

Security of property

Quality of fixtures and fittings

Energy efficiency of property

Quality of furniture

Quality of white goods

Post Office Priced Out Report - More than a third of homes sold last year were in areas where the average home was unaffordable for first time buyers https://www.postoffice.co.uk/mortgages/priced-out-report

LOCATION IS KEY.

78% say they feel at home.

54% say they live in the area they want to.

8% say they don’t.

SHORTAGE OF RENTAL STOCK. Professional landlords are intentionally creating positive experiences, but this requires hard work amidst all of the challenges the sector is facing. Almost three quarters (73%) of renters say they have felt the impact of the shortage of rental stock, with more than a third (34%) having difficulty finding their existing home.

The private rented sector is housing the nation. It’s the second largest tenure outside of owner occupied. We need to look at landlords as housing providers. Timothy Douglas Head of Policy and Campaigns, Propertymark

Our tenants are much more worried about us selling their home than rent increases. James Lomax Operations Director, Crown Oak Holdings 12

I would love to move in the next few years... I’ve been ferociously looking online for flats. I’ve had to come to terms with the fact I’ll have to stay here for as long as possible, everything’s more expensive, I’m going to have to increase my rent by another £200. Anonymous Tenant, aged 29, London

34%

73%

had difficulty finding their home.

have felt the impact of the lack of supply.

THE LURE OF HOMEOWNERSH IS STRONG. The majority of renters are also facing the prospect of trying to get onto the housing ladder and the set of financial challenges this brings. Only 26% of tenants say that they’d prefer to be renting today, and this drops to 15% when they were asked about where they’d like to be living in 10 years’ time.

The majority (77%) feel that homeownership would create a greater emotional connection to a property than renting, and 79% feel like it would bring them a stronger sense of pride.

Why do renters want to get onto the housing ladder? 84% Greater feeling of security compared to renting 82% To create a home which better suits their personal tastes 79% More pride in their home 78% Good financial investment 47% More engagement in their local community

Buyers remorse?

HIP

Not everyone who has bought a house in the last 18 months is comfortable with the move away from renting. The current economic environment is likely to have impacted this, but homeownership may not be for everyone and it is a decision that needs to be carefully thought through.

61%

of recent mortgagors say ownership restricts the areas they can afford to live in.

60%

of recent mortgagors report ownership to be less flexible than renting.

31%

of those moved from renting to mortgaging within the last 18 months say they would right now prefer to be renting.

Homeownership is seen as the pinnacle, and renting is seen as a second class tenure… but, lots of people rent and they want to rent. It’s great for them. Ronnell Reffell Manager, Mortgages Policy, UK Finance

Paul Flatters CEO & Co-Founder, Trajectory

CASE STUDIES. Georgia, tenant

Positives on renting

Age: 25

Past rental experience: I had rented by myself for three years, I moved out in the middle of Covid, so it was a crazy experience, I don’t regret that at all, that was an amazing experience, I needed that time.

Relationship status: Single Current living situation: Now living with parents in Chester after three years in a rented apartment in Chester. She likes Chester and would like to continue living there. Employment status: Works full time. Has had many jobs (hospitality, art gallery) and has recently worked in an estate agency. Currently working for a holiday letting business. About Georgia: She would like to own a property by the time she is 30 but worries about being in debt.

On rental increase: The letting agent called me a year in advance about a rent increase. I think they wanted to raise it by £50 but I questioned it and we negotiated. Along with the landlord, we agreed on a £10 per month increase which I was happy about and I know they’d rather keep good tenants. When I look back at my private renting days, the experience helped me become the person I am today so I don’t have any regrets. Quality of rental property: It was brand-new, it was fresh, I knew there weren’t going to be any issues with boilers and things like that ... it was a good space, it had parking ... it was in an ideal location for me.

Chris, tenant Age: 46 Relationship status: Previously divorced. Has a partner and one child. Current living situation: Just moved from London to Lymington. Wanted to bring his child up away from London. Employment status: Primary school headteacher. Has been a teacher for 18 years. He’s just been promoted to a new role as a trouble-shooting headteacher who takes on failing schools and helps them improve. About Chris: He would love to build his own house one day but enjoys the flexibility and freedom that renting brings.

Renting provides peace of mind On rental increase: If the boiler breaks it’s not my problem, that’s a £1,500 problem ... I just have to make a phone call and I get a new one. It’s someone else’s issue to fix - you just don’t have to consider that at all. I don’t have to worry about interest rates although my rent can increase. My rental contract states the small amount it can increase to so it means we can budget more easily as we are locked-in. On landlords: Everything we’ve asked our landlord for, has been delivered on. He seems great and the house was in really good nick when we moved in as it had been repainted and well looked after. I think I’ve been quite lucky and never had any huge problems as most of the landlords have been relatively easy to deal with. I do think there’s a danger of “landlord bashing” but at the end of the day we are renting someone’s house. You need to consider both sides of the situation from a tenant and landlord perspective. 17

THE FINANCIAL BALANCING ACT. Nearly half (48%) of the tenants polled fear they will never be able to afford to buy a property, and 71% say they are frightened by the size of borrowing required. Exacerbating this, almost a third (29%) say they are currently struggling with their monthly rent payments, 15% feel like the amount of rent they pay does not represent fair market value, and 16% have experienced what they perceive to be unreasonable rent rises.

We are acutely aware of the affordability issues that continue to impact so many with the Private Rented Sector. Once compounded with energy cost increases and wider inflationary pressures, this has effectively immured many tenants, with renting moving from being a lifestyle choice, or stepping stone towards homeownership, slowly evolving into a situation with limited options. Matthew Rowne Co-Director, The Buy to Let Broker

of tenants frightened borrowing r

s say they are d by the size of required to buy.

48% of tenants would like to own their own home at some point in the future but do not think they will ever be able to afford to.

It’s daunting, but I still wouldn’t let it put me off trying to better myself; it would be a great achievement to own your own home... it’s achievable. Delena Tenant, aged 44, Manchester

STANDARD OF SERVICE. While the cost of living, rate of inflation and shortage of rental accommodation are things that landlords cannot control, the level of service given to tenants is something that professional landlords are striving to improve across the industry. Almost three quarters (69%) of private renters are happy with the speed of response they have from their landlords to queries, dropping to 58% for those in social housing. However, 64% say they have experienced rule breaches, including unreasonable financial demands and discrimination in their time as a tenant. More than a third (37%) say that their landlord has cut corners on repairs and 20% say the poor quality of their property has impacted their health.

69%

62%

64%

37%

20%

13%

are happy with the speed of response from their landlord

are happy with repairs

have experienced rule breaches

say their landlord has cut corners on repairs

say the poor quality of the property has impacted their health

say there have been rules broken on the safety of their property

…the landlord came round and he said; “I just ignored your e-mails because I didn’t know what you were talking about.” They just denied everything. They basically behave as if they are doing me a favour even though I’m paying them a grand a month. Section 21 is a thing that looms over me, I can just see it happening any day. Anonymous Tenant, aged 29, London

I just stand in disbelief at some of the things I’ve been told… Tenants are too scared to mention maintenance, too afraid to be evicted. Nick Reynolds Chair, The National Federation of Tenant Management Organisations

Customer service, cleanliness and maintenance are really the things which stack up to experience in a rental property. Sam Scott Fresh Property Group

VALUE IN RELATIONSHIPS. Where landlords and tenants have direct relationships, the experience is significantly better. Nearly half (47%) of private renters deal exclusively with their landlord, and of those, 83% are happy with the level of contact they have from their landlord. This has a huge impact on their outlook, with 76% of those who deal directly with their landlord feeling like their landlord cares about the level of service they receive, compared to just 49% who live in a property managed by a letting agent. More than eight in 10 (82%) feel like they are treated fairly, compared to 52% who deal with an agent, and 72% trust their landlord.

47%

29%

24%

of tenants deal exclusively with their landlord

deal with an agency

deal with both

. Landlords are more likely to be perceived as fair if they have a direct relationship:

82%

Those who have relationships with their landlords feel like they care:

Trust is more prevalent when tenants and landlords have a direct relationship:

of those dealing directly with the landlord say they are treated fairly compared to 52% who go through an agent.

76%

72%

of private tenants dealing directly with their landlord say they believe their landlord cares about the level of service they receive compared to 49% who deal with an agent.

say they trust their landlord when dealing directly, compared to 43% dealing through an agent.

I’m happy renting here, we’ve got a good rental agreement, we’ve got a good relationship with the landlord and the management company. The landlord has always said that if we ever get to a point where we do have financial backing, we’ve got first refusal on the house. Liam Tenant, aged 29, Wrexham

There are rogue landlords and rogue tenants, but there’s a big chunk in the middle who are just trying to do their best by all concerned. James Lomax Operations Director, Crown Oak Holdings

The key is having a good relationship with tenants. After all, we’re providing them with their home. Suzanne Smith A landlord and lawyer who runs The Independent Landlord blog

If your access to your landlord is reduced, you miss the positive human connection. You need to aggregate all of the positives to create that feeling of security, liking where you live, feeling like you’re at home. Jon Hall Group Managing Director, Savings & Mortgages, OSB Group

LANDLORD LEADERS COMMUNITY. Our mission Following the launch of OSB Group’s seminal Landlord Leaders research, it made a commitment to create opportunities for the industry to come together to drive positive change. The Landlord Leaders Community launched in June 2023, and following the group’s first meeting, outlined four key areas of focus and vision for what is needed for each to succeed:

Education and Training

Communication

¥ Establish comprehensive educational programmes and guides for landlords to increase awareness of their rights, responsibilities, and best practices in the industry, especially around sustainability.

¥ Encourage clearer communication between tenants and landlords.

¥ Collaborate with industry associations, government bodies, and educational institutions to develop and deliver training courses and workshops tailored to the needs of stakeholders. ¥ Encourage ongoing professional development within the industry to ensure that professionals remain updated with the latest trends, regulations, and best practices. ¥ Signpost resources for stakeholders to use for best practice and guidance. ¥ Encourage disparate sections of the industry to increase cross-education and better understanding of their roles within the sector, and externally to the public and media. 26

¥ Promote the use of digital platforms and applications to facilitate efficient communication, such as dedicated online portals or mobile apps. ¥ Work towards the implementation of a standardised communication system between landlords, tenants, and relevant stakeholders to ensure clear and timely exchange of information. ¥ Communicate the economic benefits of a thriving private rented sector to the public.

Collaboration

Positive industry perception

¥ Encourage collaborative efforts between landlords, tenants, and other stakeholders for a more seamless rental experience and to foster a sense of understanding, responsibility and community spirit within the sector.

¥ Promote a more positive view of the private rental industry by highlighting success stories, best practices, and positive contributions made by landlords and tenants.

¥ Facilitate the establishment of landlord forums to enable open dialogue and cooperation in addressing common concerns.

¥ Engage with media outlets and community organisations to counter negative stereotypes and misconceptions.

METHODOLOGY OSB Group worked with Trajectory Partnership to survey 1,500 renters, 500 recent home buyers and 500 future renters (currently living with parents about to sell), online during July 2023. The sample’s private/ social tenure and income was representative of the national average The sample was divided into seven statistically distinct segments using a twostep cluster analysis, based on property priorities, property emotions and landlord relations measures, derived from factor analysis. Five in depth interviews were conducted with priority segments.

REFERENCES 1

Office for National Statistics Index of Private Housing Rental Prices, UK: August 2023 https://www.ons.gov.uk/economy/ inflationandpriceindices/bulletins/ indexofprivatehousingrentalprices/ august2023

RICS September 2023 UK Residential Market Survey https://www.rics.org/news-insights/marketsurveys/uk-residential-market-survey

In association with

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