Mid Market Rent What is it and Who is it for?

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1 Mid Market Rent What is it and Who is it for?

2 Mid Market Rent: Housing needs and aspirations Context and MMR models What do current customers think? Wider public perception of MMR? Is there potential for MMR offer to a wider customer base? What strategic role does MMR have? Lessons learned? CIH/Wheatley Group, 2016 Authors: Anna Evans, Mandy Littlewood, Regina Serpa, David Ogilvie

3 MMR new supply to December MMR NHT [VALUE] TO END DEC

4 Units AHSP Completions by tenure 2000/01 to 2014/ RSL Council Affordable rent Affordable ownership

5 Mid market rent models MMR grant Short assured tenancy aligned to PRS RSLs and subsidiaries grant and private finance Subsidy rate of 46k (green), 44k Low and moderate incomes in employment Long term rent option in perpetuity Subsidiary so under the guise of SHR Majority of supply so far through this route

6 Mid market rent models National housing trust Scottish Government guarantee model Scottish Futures Trust + LAs + developer to create Limited Liability Partnership (LLP) to build Uses LA prudential borrowing to build LLP purchases the units from developer 70% of market value, 30% met by developer On sale repays loan + any calls on the SG guarantee Managing agents (often but not always RSLs) Let then sold 5-10 years later No guaranteed sale to tenant (first refusal)

7 Mid market rent models New and emerging models Over the last five years LAR Housing Trust charity with SG soft loans sponsored through Scottish Futures Trust LA Housing Revenue Account and General Fund models Scottish Government MMR - new offer call for proposals Moving towards less subsidy, more institutional investment and more to regulation through PRS rather than SHR

8 MMR customer opinion Lucky to have stumbled across it Quality rented housing for working people Value for Money Trade off between quality and affordability Not the cheapest Security of tenure real or institutional? 50% want to stay in MMR as a long term option 50% using it as a stepping stone to ownership Most coming from the PRS The best of all worlds

9 Wider public perception of MMR Telephone interviews with 100 households and 3 focus groups (20) Young working families (34%) Single people/couples in private renting/on the waiting list (30%) Older people (50+) looking to trade down/in housing need (36%) 4 LAs Edinburgh, Glasgow, West Dunbartonshire, West Lothian 11% with parents, 22% PRS, 24% owning, 43% SRS Modest income and housing need Projective techniques

10 Wider public perception housing options and aspirations? Private renting to social renting Longer commute to work Social renting to owning Sharing a property (not family) Living with parents wanting to own Owning to social renting Move to cheaper area Saving for ownership or shared ownership/equity

11 Wider public perception awareness and expectations Lack of awareness Key demand groups What should MMR be like? Barriers to MMR 86% of people surveyed had never heard of MMR 14% had heard of it but new nothing about it a move within social renting larger, better, new build wanting to move to social renting from the private rented sector and owning young people hoping to move from the parental home to owning 68% said a landlord who delivers good repairs and maintenance and deal with neighbour disputes Security of tenure - 62% Rents of depending on market Locational preferences 40% would not move area Preference for social renting and sitting tight

12 Housing scenarios Young family looking for larger accommodation waiting for SRS Young people leaving home who want to buy in the long term No brainer to move to MMR that might cost similar to PRS but better quality Mixed views Stay and save, or leave and rent Market for rent and save to mortgage product Older owners own property outright home too large and not suitable for needs Renting seen as a backward step More interest in more suitable ownership / equity options Niche for older MMR from older people who see benefits of management/suitable home.

13 A wider customer base for MMR? Family MMR in the right place / for the right price Where few alternatives in more affordable markets Rent of 850+ require 40k income to be affordable LCHO, or move further to find a more affordable option Older people Unlikely from ownership renting is a backward step Niche market from renters something more suitable and managed Young people with lower income unlikely to be affordable for income of less than 20k

14 What is the strategic role? Widening options and choice quality and affordability for moderate incomes type and size for families if can t access ownership / LCHO Tackling affordability in pressured markets Value for money vs affordable Increasing quality MMR at scale - Competition for PRS? Clarity through guidance.

15 Lessons learned Pricing and development viability LHA is too crude a tool for pricing Viability vs Affordability MMR is generally affordable except for larger properties Increasing rents risks affordability with public subsidy? Market for rent to buy models with option to continuing to rent Political/strategic support