A brief history of the buy-to-let market

A brief history of the buy-to-let market


Housing tenure in England & Wales has changed dramatically over the 20th century, with private renters representing three quarters of households in the 1920s. The private rented sector or PRS now accounts for 18.5% of households from a low of 8.7% in 1986.

Historical Housing Tenure from 1918 to 2013 (England & Wales)

Historical Housing Tenure of England & Wales

Source: DCLG http://www.communities.gov.uk/documents/housing/xls/table-104.xls

Right-to-buy was passed into legislation by the 1980 Housing Act, which allowed secure tenants of councils and some housing associations the right to acquire the property they rented at a discount to open market value. Since 1980 1.9m [1] homes have been acquired via this means, equating to c.8% of total housing stock in England & Wales.

The 1988 Housing Act abolished rent regulation for new leases signed from 1989 onwards, where previously statute apposed limits on rent increases. Landlords were permitted to charge full market rents with the relationship governed by lease contract not statute. The 1988 Act also created the possibility of fixed-term ‘assured shorthold tenancies’. These came with a minimum term of six months, after which the landlord was free to evict the tenant on two months’ notice without reason.

Enabling landlords to charge a full market rent, together with a reduction in security of tenure increased investment in to the sector and lay the foundations for the growth within the PRS. The ability of banks to reclaim property, terminate leases and sell the property on the open market with vacant possession enabled buy-to-let mortgages to be priced on terms similar to owner occupation mortgages.

Since 1986 the buy-to-let sector has doubled in size and has recently overtaken the social rented sector (SRS) for the first time since the early 1960s, ending 50 years as the minor housing tenure. Since 2006, the number of households in the PRS has increased by over 50%, a rate of 8% per annum. The PRS sector now totals c.4.3 million homes.

Please read on to understand how yields have changed over time.


[1] Gov.uk Table 671: Social Housing Sales: Annual Right to Buy Sales for England: 1980-81 to 2013-14