Market signals and disrepair in privately rented housing

Despite recent improvements, private rented housing in England is in a worse state of repair than dwellings in other tenures. This has been attributed to a number of factors, including rent control and regulation, tax and subsidy policy, and falling effective demand. In the post-war period governments tried to achieve improvements by several means, including grant aid, enforcing standards, and transferring dwellings to the social rented sector. Since 1988 government policy has been designed to revive private rented housing and rents have been deregulated. Government policy makes it clear that landlords are primarily responsible for undertaking repairs and maintaining standards. It is assumed that market rents will provide sufficient incentives for landlords to carry out maintenance and do improvements. The evidence presented in this paper shows, however, that market rents are not strongly related to the state of repair of dwellings in the deregulated sector and also that the dwellings in the poorest condition are owned by landlords primarily seeking a commercial return on their investments. This suggests that conditions are not likely to improve under the current policy framework which seeks to increase the proportion of dwellings owned by investment oriented landlords, so long as market rents are not related to the state of repair of private rented dwellings.