Does the UK need a better regulated private market? A review of the system’s advantage and disadvantage in comparison to Germany

My supervisor and i have concluded that we write about the UK alone and make reference to German as a good practices, due to restricted data collection.

She has also arrange an interview for me with A2 dominion private rent department for Jan 2016 and i have been instructed to design the questionnaire.

Background
Shelter is a basic human need. Provision of quality and affordable shelter is a major indicator of economic development in a country. However, across Europe especially England, there has been a shelter crises brought about by the rising cost of buying homes and rent. The problem is extended by the lack of sufficient new building which has left many without hope of owning a home. In 2014, UK ranked second behind Monaco in house price per square meter (Hilber, 2015). House prices have been growing in the UK for the past 40 years making housing unaffordable to the vast majority, as the price of houses grew faster than most households’ income (Elsinga, 2015). Informed by this growth in house price, homeownership has continued to decline in Britain and Germany. However, the rate of fall of homeownership is more drastic in Britain than in Germany. The decline in home ownership in UK and Germany has been attributed to the poor planning system which is deemed to be inappropriate and inefficient in providing hosing to the growing population (Lersch, 2013). Housing construction has not matched the rate of population growth in UK. Although the number of new houses slumped down in 2007-2009 as a result of global financial crises, the root cause of the growing housing crises in UK is to be found on the housing and land policies in place in the region (Garratt, 2012). The existence of many taxes levied on land and houses such as; stamp duty land tax and bedroom tax are the causes of the ever rising cost of houses and rent in England.
Problem Statement
Housing affordability is a key concern for many households in UK and Germany. There has been acute slump in construction in England in the past seven years. In 2007-2008, construction in North East London slumped by 36%. Housing is subject to the law of demand and supply. New housing construction slumped in 2007-2008 as the demand for housing reduced resulting in reduction of supply of new houses. According to England Land Registry, average home prices have almost trebled since 1995. The value of homes in Britain has been rising faster than any homes in other major places in the world. House prices in UK have been growing by 2000% since 1975 which is higher than the house price growth in US and Germany (Hilber, 2015). The most affected group by the fast raising house prices are the young-first time home owners who are unable to put up with the high price of the houses. The affordability crises mainly affecting the new time homeowners has been made worse by the rising house price-to-earnings ratio. The house price- to- earnings ratio for first time buyers has increased by five folds across Britain by 2015 (Elsinga, 2015). Over 16.7% households in Britain rely on social housing for their housing needs (Garratt, 2012). However, social housing in Britain is poorly developed with failing policies that has resulting to over 1.3 million households on the waiting list. Proper development of this sector has the potential of addressing the housing crisis in Britain and Wales.
Aim of the study
The purpose of this paper is to examine the advantages and disadvantages of regulation of the private rented housing sector in both UK and Germany, with a particular focus on whether there is need for more regulation in the UK as the private rented housing sector emerges as a key player in the housing market. In particular, how does regulation affect the private rented sector as an exit route for homelessness for those who are either unwilling or unable to buy houses? Moreover the study will assess the effectiveness and the ability of social housing development as a means of addressing the housing crisis in UK
Study Objectives
The following objective will guide the study inquiry
” To identify laws regulating private rented sector in the UK and Germany.
” To evaluate the effects of regulation, in particular rental control, on the housing market in both countries.
” To evaluate the advantages of deregulation or regulation on the private sector as an exit route for homelessness in both countries.
” To evaluate the disadvantages of regulation or deregulation on the private rented sector as an exit route for homelessness in both countries.
Research questions
The following study questions will guide the research inquiry;
” Does the UK need a better regulated private rental market in terms of rent controls, protection of tenants and landlord access to their properties?
” What are the advantage and disadvantages of the UK system over that of Germany?

Rationale of the study
The private rented sector is viewed by the governments across Europe as an important element in the provision of housing services for those who are unable or unwilling to enter into home ownership, social housing or those at risk of becoming homeless. In both Germany and United Kingdom, various regulations have been developed to ensure that this important sector is operative (Elsinga, 2015). The private rented sector in the UK can best be described as a highly deregulated market where landlords have easier access to their properties as compared to Germany where access is restricted. The full-scale deregulation in the UK began with the Housing Act of 1988, which assured short tenancies. Later, the Housing Act (1996) assured short tenancies of six months (Lersch, 2013). The new regulation provided a new and radical relationship between tenants and their landlords, as landlords could access their properties more easily in case of defaults, had the power to change the rents after six months and could easily gain possession in case of arrears. As a result of these new changes, the percentage of regulated private rented sector fell from 60% in the 1988 to less than 8% today (Scanlon & Kochan, 2011).
In contrast, the German private rented market is highly regulated especially in terms of landlords’ access to their properties. Legal protection of tenants is strong and landlords cannot hike prices or terminate contracts. Rents are capped to local average rents (Fitzsimons, 2012). These key differences have played a key role in the development of the housing market in both countries, with private rental housing market accounting for around 51% of the housing market in Germany.
Study Design
A mixed method approach will be adopted by this research to inform data collection and analysis. This will involve use of qualitative tools of data collection such as interviews, and the use of quantitative research tools of data collection such questionnaires. Secondary and primary data will be gathered to examine the advantages and the disadvantages of the current UK and Germany systems. Literature on the advantages and disadvantages will be sourced from various databases including, Government publications and profit and non-profit publications. The review will examine data that is available publicly and therefore there are no ethical issues that should be taken account of. However, the chief investigator will ensure that data is interpreted correctly. In addition, questionnaires and interviews will be used to collect primary data from the housing market players. The participant of the study will include, department of housing senior employees, and contractors in both Germany and England markets.
Anticipated work schedule
The anticipated time schedule for completion of the research study has been estimated in the Ghatt chart below.
References
Elsinga, M. (2015). Changing Housing Systems and their Potential Impacts on Homelessness. European Journal of Homelessness , 15-36.
Fitzsimons, J., 2012. The German private rented sector: A holistic approach, s.l.: The Knowledge Center for Housing Economics.
Garratt, J. P. (2012). Evaluating UK housing policies to tackle housing affordability. International Journal of Housing Markets and Analysis, Vol. 5 Iss: 3, , 253 – 271.
Hilber, C. (2015). UK Housing and Planning Policies: the evidence from economic research. UK Policy Issues , 1-16.
Lersch, P., 2013. Residential relocations and their consequences. London: Springer Science & Business Media.
Scanlon, K. & Kochan, B., 2011. Towards a sustainable private rented sector: The lessons from other countries, London: LSE.

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