* This piece is written jointly by Richard Rowntree (Managing Director, Paragon Bank) and Ben Beadle (Chief Executive of the National Residential Landlords Association) *

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Landlords and their role in the economy – and society more broadly – are often misunderstood, underestimated and certainly under-appreciated. 

They are unloved, unrecognised and unfashionable. 

Yet, consider the important role they play and the service they provide. 

Landlords are the second biggest housing provider in the UK, with one in five households calling the private rented sector home in England alone. And they are a significant provider to the public purse, the labour market and the broader economy.  

Along with the NRLA, we recently commissioned professional services firm PwC to investigate the economic contribution of small-to-medium sized landlords, those with up to 15 properties, to understand more about the value creation of this group. 

The findings reveal that SME landlords in England and Wales contribute an estimated £45 billion per year to the UK economy. That is roughly the size of the economic contribution of Kent and twice the size of the gross value added (GVA – the measure of economic contribution) of the advertising and marketing sector.

Regionally, across England and Wales, small and medium landlords in the PRS contribute approximately 2% of each region’s GVA.

That £45 billion figure does not include those landlords with 15 or more properties, nor does it fully capture the build-to-rent sector. Put simply, the PRS and the landlords who serve it are a significant sector of the economy as a whole.

The PwC report also highlights that small to medium-sized landlords support up to 390,000 jobs directly or through the supply chain that serves the sector, such as managing agents and maintenance workers. 

It showed that for every person employed directly within the sector itself, small and medium landlords support two further jobs across the supply chain and wider economy. 

Breaking that down, that’s 39,000 jobs in construction, 28,000 jobs in building maintenance and landscaping, 19,000 roles in public administration and 11,000 jobs in my own sector, financial services.  

This doesn’t include the labour fluidity and mobility more broadly facilitated by the PRS. The rental sector is the tenure of the working population, with Government data showing three-quarters of tenants are working, considerably more than in the owner-occupation tenure.

Given its economic importance, is enough being done in terms of progressive policy – both regulatory and fiscal – to encourage investment into the PRS? Clearly not. 

The cloud of the Renters Reform Bill, currently stalled in Parliament, hangs over the sector.  The removal of mortgage interest relief and, particularly, the introduction of a 3% Stamp Duty surcharge has slowed new investment. 

The number of house purchases with a buy-to-let mortgage last year was 55% lower than in 2015, the year before the surcharge was introduced, with southern regions of the country disproportionately impacted. 

PwC’s analysis of various scenarios reveals the potential scale of the impact of a contraction in the size of the PRS on landlords, tenants, and those whose jobs depend on a flourishing market. 

According to the report’s findings, a 10% reduction in the size of the sector could deprive the UK economy of £4.5bn of GVA. Moreover, a market contraction on this scale would mean that 39,000 jobs would need to be supported by alternative sources to prevent a rise in unemployment.

It would also mean fewer homes to rent. 

Given population growth estimates of 10% over the next 10 years and expected societal changes leading to greater demand for rental property, that should be a worrying prospect for any future Government.  

Conversely, an expansion of the sector, alongside policies that encourage increased housing supply, would result in a stronger economy, more jobs and further homes to rent. It’s time to stop demonising landlords, recognise the importance of the sector and implement policy that encourages its growth.