Introduction

The purpose of this chapter is to examine the evidence in England about the extent to which landlords respond to market signals when spending on repairs and improvements. The majority of this housing sector is now within the deregulated sub-sector and hence it is the market that sets rents for most dwellings, not the rent officer. In the past, grants have been available from local authorities to help fund improvements and repairs. Except in very limited circumstances, this is no longer the case. The government's view is that market rents should provide the resources for landlords to undertake maintenance and to make improvements. Conditions are thus now much more dependent than in the past upon the extent to which market signals (rents and capital values) provide incentives to landlords to undertake the work that is needed and also upon their willingness and ability to act upon these. Although local authorities have powers to enforce repairs, the successful use of these powers depends upon the market generating returns and the resources for landlords to respond.

The evidence is summarised in five sections:

• • the policy framework, before and after rent deregulation;

• • evidence about changing conditions;

• • the extent to which spending on repairs and improvements is related to landlords’ characteristics;

• • the relationship between rents, capital values, investment returns, and conditions; and

• • policy implications of this evidence.

Policy before and after deregulation

Until rent deregulation in 1989, post-war policy about conditions was framed within a context of rent control and regulation and the general acceptance that the private rented sector would continue to decline. The aims were to protect the health and safety of existing tenants, accepting implicitly that significant improvements would primarily result from the transfer of dwellings to other tenures.

Policy was directed towards achieving improvements through the statutory enforcement of repairs and other standards, the payment of grant aid to assist landlords with the costs of major repairs and (latterly) improvements, and with the purchase of the worst housing by local authorities and housing associations. These measures were needed because the majority of the sector was subject to rent regulation making it difficult for landlords to finance repairs and improvements.