Literature review
An et al. (2016, p.384) carried out a survey which showed that ten percent of households within the United Kingdom rent privately. A primary reason would be due to the influence of sub-letting in which private tenancies have increased as compared to households that are rented privately. Of importance to note is that deregulation increased influencing the growth of the private rental sector which was proposed by the 1988 Housing Act; by 1997 assured tenancies were replaced by assured shortholds which became the ideal kind of occupancy (Crosby and Henneberry 2016, p.1430).
Fuerst et al. (2015, p.149) revealed that by 2000 21 percent of England’s housing consisted of social housing, 20 percent in Wales and 32 percent in Scotland. The table below shows the top Housing Associations and their representation in matters new social housing. The Peabody Trust and North British appear to be more active, but there seemingly is a decline in new building activities as well.
Table 1: Top UK Housing Associations and the Property Numbers
Association Units Association Units
North British
Guiness
Home
Peabody Trust
Anchor
Riverside
Sanctuary
London & Quadrant
Northern Counties

38,666
19,000
36,818
19,139
33,138
21,000
31,725
21,004
21,931
Warden
Hyde
Bromford
William Sutton
Focus
Notting Hill
Samuel Lewis
Harvest
Broomleigh
Bradford & Northern 11,350
18,000
11,584
15,900
12,000
15,000
12,083
14,267
12,500
14,000
Source: Gilbert (2016)
In 2001, there was a survey done on London’s residential development which indicated that there was a limited supply of new housing. Mainly the reason is that the planning regime in London was highly regulated and there were severe constraints on residential development (Gilbert 2016, p.175). At the same time, private renters seemed to move more as compared to households which were in the rest of the tenures; they moved 42 percent more (Valença 2015, p.110). Private renting remains to be the net exporter in relation to households in other tenures because the supposition is that private renting could be the transitional tenure that forms a lower rung with regards to social renting as well as owner occupation.
Alternately, private rental housing could provide a desirable neighbourhood and dwelling characteristics for the tenants that desire to be on social housing estates that are unpopular (Muldoon-Smith and Greenhalgh 2015, p.612). Importantly, the housing market in the United Kingdom is unique because there has been an increased trend of house prices going up by 2.5 percent yearly depending on income. In other words, compared to the other services and goods, housing has become more expensive with time especially concerning the resident’s income (Fuerst and Van de Wetering 2015, p.196). The chart below shows that UK experiences long-term house price increase as compared to the other European countries like Germany and France which were much lower.

Source: Bank for International Settlements
The frequent alterations within the housing market in the UK define the country’s economic life cycle (Crosby et al. 2016, p.363). As a result, the price of houses in the United Kingdom influences the country’s economy. Therefore, the housing market, as well as the effect on household spending, should be considered in interest rates decisions considering the impact on macroeconomic stability.
There have been numerous changes related to interest rates that have eventually influenced household spending both indirectly and directly. Once the interest rates reduce so does the mortgage financing for borrowers; meaning that there will be an increase in the current consumption of house renting and purchase (Fuerst et al. 2015, p.150). Once the interest rates reduce, there is more demand for housing only because they will have become cheaper (user cost), but the prices of the houses will increase.
Issues related to affordability have influenced demand and supply which shows a significant imbalance. However, if effective policy is instilled, then the market may become more balanced where supply and demand would be explored more keenly. Furthermore, policies that concentrate on a single side may become counter-productive and potentially inadequate (Valença 2015, p.109). A planning policy possesses a significant function when resolving the affordability problems; however, concern arises on the ability to reconcile the strategic settlements which balance the complicated priorities like environmental concerns and economic growth.
Housing supply influences the differentials of house prices especially among alternate areas that could lead to reduced mobility and availability of labour (An et al. 2016, p.380). Evidence shows that if the price differentials are high among regions, instigation of segmentation will occur in terms of the regional labour markets. Consequently, the homeowners based within a more top priced region could be reluctant to go to the lower priced region due to the fear of becoming priced out in case they desire to return or if they want lower return rates of a high user cost for the housing within the lower priced region (Bracke 2015, p.420). There have been observations that households which are within a more moderate priced region possess large credit hurdles that need to be cleared in case they want to move to a higher priced region although the expected return rate in terms of housing is high there. As a result, there is high unemployment mismatch as well as high unemployment at the national level which will have an otherwise permanent downward impact on the GDP level (Gilbert 2016, p.175).
Landlords who reside in high demand areas could acquire most of their returns from the capital appreciation that could lead to a rise in rents at a slower rate as compared to the house prices (Muldoon-Smith and Greenhalgh 2015, p.615). In case such a scenario occurs, the workers who are less skilled and from the low demand areas could have the ability to move to the higher demand areas in case expansion in supply diverts to rental housing. Bracke (2015, p.420) believes that the private rental sector plays a significant role in enhancing labour mobility that helps limit regional differentials within employment and unemployment rates. Nonetheless, mobility may be constrained if there are different kinds of housing. Lower housing costs may influence people to move mostly because of the quality of life an aspect that could be offset by the price expectations in future.
In the UK, the home ownership rates are high meaning inclusion of external and internal space, various physical attributes, and location. The chart below shows that the supply elasticity shifts when it comes to housing. The elasticises of land supply leads to houses being highly priced which may possess an immense impact on hose prices.

An et al. (2016, p.400) estimate that there will be more households that to garner accommodation every year. Need and demand regulate the future rental homes in the United Kingdom. The formation of households has changed the household size as well as the kind of housing which is in demand (Bright et al. 2015, p.56). The high household formation ratings are predicted to offer useful undersupply measure. There is the importance of measuring the quantity and needs of the housing so that an undersupply measure can be calculated (Crosby and Henneberry 2016, p.1430). However, in the UK the rise in incomes fails to place certainty with regards to how small households may need smaller housing.
Conversely, private rental housing could provide a positive neighborhood and dwelling characteristics for the tenants that desire to be on social housing estates that are unpopular (Muldoon-Smith and Greenhalgh 2015, p.612). The housing market in the United Kingdom is unique because there is an increased trend of house prices going up by 2.5 percent yearly depending on incomes. In other words, compared to the other services and goods, housing has become more expensive with time especially the resident’s income (Fuerst and Van de Wetering 2015, p.196). The chart below shows that UK experiences long-term house price increase as compared to the other European countries like Germany and France which were much lower.
Many houses are built annually in the United Kingdom and accounts for a percentage of the general housing stock. At the same time, new home sales represent 10 percent of the general transactions of the housing market. Most consumers prefer purchasing new homes as compared to the second-hand homes. As a result, the discretion of house builders’ has been limited regarding determining prices even though new homes ordinarily attract price premium in comparison with the second-hand houses within the same level (Valença 2015, p.112). About renting apartments in the UK, location is essential in regulating the price of rent which may also enhance the quality of the build as well as customer service. House builders mainly focus on finding areas in which people can live in which often excludes niche markets and the innovation and design concerns about the process of building because of lacking any significance (Fuerst et al. 2015, p.146).
There are many advantages related to housing development in the UK because of the increased private rental housing sector as well as the purchase of houses. Issues related to affordability have influenced demand and supply which shows a significant imbalance. However, if sufficient policy is instilled, then the market may become more balanced where supply and demand would be explored more keenly. Furthermore, plans that concentrate on a single side may become counter-productive and potentially inadequate (Valença 2015, p.109). Private renting remains to be the net exporter in relation to households in other tenures because the assumption is that private renting could be the transitional tenure that forms a lower rung with regards to social renting as well as owner occupation.

References
An, X., Deng, Y., Fisher, J.D. and Hu, M.R., 2016. Commercial real estate rental index: a dynamic panel data model estimation. Real Estate Economics, 44(2), pp.378-410.
Bracke, P., 2015. House prices and rents: Micro-evidence from a matched data set in Central London. Real Estate Economics, 43(2), pp.403-431.
Bright, S., Patrick, J., Thomas, B., Janda, K., Bailey, E., Dixon, T. and Wilkinson, S., 2015. The Evolution of ‘Greener’ Leasing Practices in Australia and England.
Crosby, N. and Henneberry, J., 2016. Financialisation, the valuation of investment property and the urban built environment in the UK. Urban Studies, 53(7), pp.1424-1441.
Crosby, N., Devaney, S. and Nanda, A., 2016. Which factors drive rental depreciation rates for office and industrial properties? Journal of Real Estate Research, 38(3), pp.359-392.
Fuerst, F. and Van de Wetering, J., 2015. How does environmental efficiency impact on the rents of commercial offices in the UK? Journal of Property Research, 32(3), pp.193-216.
Fuerst, F., McAllister, P., Nanda, A. and Wyatt, P., 2015. Does energy efficiency matter to home-buyers? An investigation of EPC ratings and transaction prices in England. Energy Economics, 48, pp.145-156.
Gilbert, A., 2016. Rental housing: The international experience. Habitat International, 54, pp.173-181.
Muldoon-Smith, K. and Greenhalgh, P., 2015. Passing the buck without the bucks: Some reflections on fiscal decentralisation and the Business Rate Retention Scheme in England. Local Economy, 30(6), pp.609-626.
Valença, M.M., 2015. Social rental housing in HK and the UK: Neoliberal policy divergence or the market in the making? Habitat International, 49, pp.107-114