A MODEL OF THE FURNISHED RENTED HOUSING MARKET UNDER REGULATION*
| Date | 01 February 1982 |
| Published date | 01 February 1982 |
| DOI | http://doi.org/10.1111/j.1467-9485.1982.tb00433.x |
| Author | M. Ricketts |
Scolrish
Journal
of
Political
Economy
0
1982
Scottish Economic
Society
0036
9292/82/00010000 $02.00
A MODEL OF THE FURNISHED RENTED
HOUSING MARKET UNDER REGULATION*
M.
RICKETTS
University College at Buckinyham
I
INTRODUCTION
Since
1965
control over private sector rents has been exercised through a
system
of
Rent Officers, Rent Assessment Panels and (for the furnished sector)
Rent Tribunals. Under this system landlords or tenants of unfurnished
properties or landlord and tenant jointly, could apply to the Rent Officer to fix
a “fair rent” for the accommodation concerned. In the case of furnished
tenancies application could be made to Rent Tribunals, but these tribunals
had only limited powers to confer security
of
tenure on a tenant for specified
time periods. This situation was changed
by
the
1974
Rent Act which has
effectively abolished the distinction between furnished and unfurnished
accommodation, tenants of both varieties having security of tenure.
Analysis of the private rented market must therefore take account of the
existence of this regulatory process the impact of which is likely to be quite
complex. The system of rent regulation it should be noted, is not simply
equivalent to the old system of rent “control” applicable to the unfurnished
sector, and recently abolished. Under the rent “control” system all private
sector rents for accommodation between certain rateable value limits were
affected. This system has been analysed within a simple supply and demand
framework by a succession of writers (e.g. Friedman and Stigler,
1946;
Paish,
1950;
Macrae,
1960;
Phelps-Brown and Wiseman,
1964
;
Lindbeck,
1967).
The
inefficiencies and inequities involved have been explored by Johnson
(1
95
l),
Aaron
(1966),
Olsen
(1972)
amongst others. Indeed the case of rent control has
become
a
standard example
of
the application of elementary analysis in many
textbooks of microeconomics. More recent work has concentrated on the
impact of rent controls not merely on the numbers of dwelling units available
for letting but on the quality
of
those units as determined by the maintenance
policy of the landlord (e.g. Moorhouse,
1972;
Frankena,
1975
;
Kiefer,
1980).
Rent “regulation” however, as applied in the
U.K.,
has certain features
which have yet to be subjected
to
detailed analysis and which, it is argued
below, may play an important part in determining the operation of the
*
My thanks are due to Professor
A.
J.
Culyer, Professor
R.
A.
Cooper and Mr John
D.
Hey
for
helpful comments on an earlier draft of this paper. The author is, of course, responsible for all
remaining errors.
Date of receipt of final manuscript
:
25
February
1981.
1
1
2
M.
RICKETTS
furnished rented sector of the housing market. In particular, the impact on
a
particular landlord or tenant
of
rent regulation is uncertain. The rent becomes
registered only if a reference is made to the rent officer by one
of
the parties
concerned.
In the case of the unfurnished market, rent regulation can be seen as a
loosening of the old system of control. Because “fair” rents have been set
substantially above controlled rents a high proportion of applications have
inevitably come from landlords, while in an age of inflation reregistrations will
almost always be instigated by the landlord. In the case of furnished
accommodation on the other hand, the system of regulation can be seen
as
a
tightening up on a sector which had never been subject to the full rigours of
control. It is to the impact
of
regulation on the furnished market that this
paper is primarily addressed, although it should apply equally to the provision
of additional unfurnished accommodation.
Three characteristics
of
the furnished sector
of
the rented housing market
are of particular interest.
(1)
Households in this sector tend to be relatively young. The General
Household Survey
(GHS)
reports that over 50 per cent of heads of households
in furnished tenancies were under 30 years of age in 1971. Thirty-seven per cent
under 25 years of age.’ Evidence presented by Maclennan and McVean
(1
978)
from
a
sample survey
of
privately rented furnished properties
in
Glasgow
suggests that 72 per cent of household heads in the sector were aged less than
30 in 1976.
(2) Households in the sector exhibit a high level of mobility. Seventy-eight
per cent of heads of households in the
GHS
sample made at least one move
during the years 1966 to 1971.’ The West Midlands conurbation housing
survey (1966) showed that 85 per cent
of
tenants in the furnished sector of the
private market had moved within the previous three years.3 In London, the
Francis Committee estimated that 61 per cent of tenants had moved to their
accommodation within the preceding 18 months. Similarly, Maclennan and
McVean (1978) estimated that, in their sample taken in early 1976,90 per cent
of tenants had arrived since January 1973.
(3)
The Socio-economic group making the greatest use of the private
furnished sector consists of “intermediate and junior non-manual” workers.
33-9 per cent of households in the sector were recorded as being members of
this group by the
GHS.
This compares with 23-5 per cent in the owner-
occupied sector and 12.7 per cent in the Local Authority sector. Levels of
attainment in education were also relatively high, 42 per cent of heads
of
households having a qualification equivalent to or exceeding GCE
“0”
level
standard. Corresponding figures for the owner-occupied and Local Authority
sectors were 30.8 per cent and 6.4 per cent re~pectively.~ Once more the
Maclennan and McVean survey confirms these results. Sixty per cent of their
‘Table
5.10,
p.
96, GHS.
’Table
5.52,
p.
155,
GHS.
4Table
5.20,
p.
11
1,
GHS.
Quoted
Murie
et
at.
(1976), pp.
37-38.
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