Should We Move To Longer Leases?

With or without the stricter lending guidelines announced by the Financial Services Authority, the trend within the UK of moving gently away from home ownership towards renting is likely to continue apace.

The stubbornly high cost of houses for sale and now depressed incomes for those working in the private and public sector alike are combining to make property purchase tough. With no capital gains from homes likely in the next few years at least, owning your own home may not even be that desirable.

But one aspect of an increasingly large and attractive lettings sector given little attention is the duration of leases. The UK is dominated by what some call periodic leases, typically short-term of six or 12 months, after which a landlord may easily decide to hike rents to an unexpected degree, or sell the property leaving the tenant high and dry.

Is there not an argument to move to a kind of tenancy-at-will rental sector, with safeguards for tenants and landlords alike, which might just encourage the much longer-term tenancies that would make renting more attractive still to many people?

Imagine a typical 60-year-old individual or couple, perhaps wanting to realise the value of the home they own. They may be drawn to rent but they would no doubt be unwilling to face the prospect of moving from rental accommodation every one or two years in their later lives - yet they might be attracted to the idea if they could have, say, a 10 year tenure.

The ripple effect in the rest of the housing market and wider economy would be obvious as the older couple would release a large home to be purchased and then have substantial equity to use in general spending and rent to a landlord.

Likewise a young couple, now deferring having a family because they live in a rented flat with little guarantee of long-term security, could get on with their lives if they knew they had, say, five or 10 year rented tenures.

There would have to be safeguards, of course, and opt-out provisions. But to gradually shift the rented sector to longer-term tenancies would create some of the security now missing from many individuals‘ and families‘ living choices.

It might upset the most hard-nosed landlords and lettings agents, and cause consternation with hard-pressed estate agents seeing their transaction levels fall further, but the greater good would be more people living the lives they want.

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