The Council of Mortgage Lenders (CML) has added its support to the recently published Rugg review on private renting.

The review stated that small landlords deliver real value to the private rented sector by achieving lower costs than institutional providers and offering a service that is at least as likely to promote tenant satisfaction.

The CML believes this helps dispel some of the myths about the private rented sector and injects an element of common sense into the policy debate.

The review, written by Julie Rugg and David Rhodes, of York University’s centre for housing studies, argues for a policy approach that concentrates “on helping good landlords of all sizes to expand their portfolios.”

It also calls specifically for measures to encourage small landlords “since the larger landlords generally grow through portfolio acquisition.”

Many smaller landlords are in a strong financial position, with a majority having low loan-to-value ratios and many having unmortgaged properties. They also often “sweat equity” into property by failing to pass on the costs of managing it. Larger landlords, by contrast, often recover these costs in higher rental charges. “Satisfaction levels are not necessarily higher amongst tenants of larger landlords,” the review says.

The review identifies tenants benefiting from private renting in a wide variety of different circumstances, including as young professionals, students, high-income renters, immigrants and those needing temporary accommodation. The authors say they want to see private renting emerge from its current status as a marginal, poorly regarded “third” option, where it sits behind owner-occupation and social renting.

It acknowledges that buy to let lending has made a significant contribution to the sector, with an increase in the proportion of smaller landlords. It correctly identifies, however, that a significant proportion of buy-to-let borrowing in recent times has been remortgaging, with existing landlords re-financing their portfolios. The report makes six broad policy recommendations, including:

1. government initiatives to ‘grow’ the business of letting, partly by encouraging good, smaller landlords to expand their portfolios and move into the sector full-time;
2. the development of a sound evidence base underpinning policy development;
3. more work to improve understanding of the management of rented housing;
4. progress toward equalising the rental choice, so that private renting is viewed equally by households that would normally look to the social sector for long-term housing;
5. a 'light touch', but effective, approach to the licensing of landlords, ensuring there is redress against those who abuse their position;
6. no need for comprehensive reform of existing tenancy frameworks, which would work more effectively if the other recommendations (above) were also implemented.

A statement from the CML said: “We welcome the review’s conclusion that, while it is desirable to encourage institutional investment, this cannot replace the need for tax and other incentives to make private renting a desirable and profitable business for all types of landlord.

“We also agree that, by and large, existing tenancy arrangements are fit for purpose, and that other avenues should be explored to address the specific reasons why some tenancies fail.

“Overall, we believe the authors have produced an excellent and ground-breaking review. In particular, the call for a sound evidence base for developing policy is long overdue. We would, however, want to study carefully the proposal to license landlords as we are not convinced that the benefits outweigh the costs.

“We also applaud the authors for taking an empirical approach to addressing specific problems, rather than joining in calls for significantly enhanced regulation. Too often, this is an expensive option that fails to address the real issues.”