The One Per Cent Housing Trap

Columns are the author’s own opinion and do not necessarily reflect the views of Onward.

Corner Case Study: Kayleigh, Guildford

“With whatever can’t be fixed by me. This is no way to live. There needs to be rules and regulations NOW, not ten years from now.”

“At this stage we’ve waited long enough for landlords to comply with current appropriate habitation laws so 2035 is definitely too far. I had rising mould for two years and no one took it seriously, by 2035 many tenants could have long term health conditions from such mould exposure.”

Kayleigh lives the one per cent housing trap. For years her home was riddled with mould, and every request for repairs was ignored. She is not alone. When vacancy is this low, landlords have neither the time nor the incentive to repair. The system is permanently at full stretch: tenants locked in, landlords trapped in patch and relet, homes never renewed. Kayleigh’s story is the lived reality of a market with no room to repair.

Executive Summary

Britain’s housing market is broken, not because there are too many empty homes, but because there are too few. Just one per cent of homes are vacant long term, the lowest slack in housing supply in living memory. This paper argues that the real crisis is one of undersupply, but that we have been measuring it the wrong way. Instead of counting homes, we should be tracking vacancy: the clearest sign of whether the market has enough slack for repairs, decency, and tenant choice. With no margin for voids, landlords have neither time nor incentive to fix damp, mould, boilers, or insulation.¹ Families now pay the price in decay and danger. By 2023, landlords’ running costs had swallowed nearly half of rental income, leaving no cushion for repairs and making constant occupation the only way to stay afloat.

Back in 2014, Housing Minister Brandon Lewis rebuffed MPs who blamed empty homes for the crisis.² He was right: empty homes were at record lows even back then. A decade later, vacancy halved again, and with it, housing standards. This is no coincidence: low vacancy means no maintenance. Yet instead of recognising vacancy as the missing piece, the debate has drifted towards over regulation. Campaigners such as the Renter’s Reform Coalition rage at the Government plans to delay applying the Decent Homes Standard to the Private Rented Sector until 2035 or 2037, demanding 2030 instead. But this is completely the wrong medicine.

Extending the Decent Homes Standard (DHS) to millions of private tenancies sounds tough, but it adds rules without solving the structural constraint. At one per cent vacancy, landlords cannot decant, cannot refurbish, and cannot comply with the DHS. Regulation without slack is regulation designed to fail. The result is not higher standards, but more bureaucracy, more registers, and more disputes, while tenants remain in the same low quality homes. Successive Governments have missed the point entirely.

1. England’s vanishing vacancy

As of October 2024, there were two hundred sixty-four thousand eight hundred eighty-four long term vacant homes (six months or more) in England, out of twenty-five point six million dwellings, a rate of one per cent.³ That is far below the level needed to sustain repairs. By comparison, in the 1990s England’s vacancy rate was closer to three per cent.⁴ London alone has nearly thirty-eight thousand long term empty homes, about one per cent of its stock, concentrated unevenly across boroughs.

2. What vacancy means for maintenance

Average private tenancies last 4.6 years.⁵ With one per cent vacancy, that equates to just seventeen to eighteen void days per tenancy. With 1.6 per cent vacancy, voids rise to about twenty-five days; with 2.3 to 2.5 per cent, voids reach thirty-four to forty-two days.⁶ Research shows these additional weeks matter: at seventeen days, landlords can repaint and relet; at thirty-four to forty-two days, they can renew boilers, replace kitchens, and install insulation. Without vacancy, the housing system grinds to a halt.⁷

3. The economic case: natural vacancy and breakeven thresholds

Rosen and Smith’s “natural vacancy” model shows rental markets cannot clear at zero vacancy; a positive rate is required for rents and quality to adjust.⁸ Gabriel and Nothaft confirm that vacancy duration, not just incidence, is what allows capital works.⁹ The IMF’s study of Switzerland formalises a “breakeven vacancy rate”: the level needed for landlords to sustain maintenance given rents, prices, and financing. In Britain, with vacancy stuck at one per cent, we are well below the breakeven point.¹⁰

4. Lessons from Switzerland

Swiss authorities treat any vacancy below one per cent as a housing shortage.¹¹ National vacancy there is around 1.8 per cent, with several cantons at 2 per cent or more, and far from collapse, these regions enjoy healthier stock and more tenant choice. Crucially, as interest rates fell and housing values rose, the IMF found the breakeven vacancy threshold actually increased. Landlords needed more, not less, vacancy to justify investment in stock. Britain is running a housing system at half the vacancy of Switzerland. It is no wonder our standards lag and cases like Kayleigh’s are widespread.

5. The Government’s Misdiagnosis: A fundamental misunderstanding

Rose Grayston and Toby Lloyd diagnose poor housing as “underinvestment.” That critique applies, at best, to council and housing association stock where social rents barely ever cover debt costs or maintenance.¹² But when it comes to private renting, they misapply the same logic: more rules, more registers, more regulation. The PRS Commission Report (2024), to which Grayston contributed, calls for an annually updated Decent Homes Standard enforced through a National Landlords Register.¹³ But rules alone cannot create voids. Without vacancy, landlords cannot repair, even if required by law. And by ignoring vacancy, Lloyd and Grayston miss the structural constraint that drives decay.

6. What Britain Thinks

One in five privately rented homes in England fail the Decent Homes Standard¹⁴. 3.6 million renters live with mould or damp.¹⁵ Nearly nine in ten renters want homes made “decent” by 2026, not 2035.¹⁶ Six in ten renters admit they accept poor quality homes because “there’s nothing else available.”¹⁷ Two thirds of renters say they cannot move to escape bad housing due to lack of supply.¹⁸ Almost eight in ten voters believe Britain faces a national housing shortage.¹⁹ Fifty-five per cent of adults support new development in their local area, only one third oppose.²⁰ Most supporters of new homes stay silent in planning, leaving opposition to dominate. Over seventy per cent of Conservative voters support housebuilding when linked to higher standards.²¹ Seven in ten voters think politicians have “no clear plan” on housing quality. And sadly, the voters are correct.²²

7. Conclusion

Kayleigh’s story is a reminder of the human cost of poor housing. The Renter’s Reform Coalition demands more rules; the government’s advisers call for more money. Both miss the point.

At one per cent vacancy, landlords patch and relet. At 2 to 2.5 per cent vacancy, landlords can upgrade and renew. The only path to safe, decent homes is through a coherent policy on supply. The one and a half million homes target is not a solution, it is a floor. The centre right must go further. Britain needs two to three million new homes to restore a healthy vacancy buffer, create the slack for repairs, and make decent living standards a reality.

Two million homes (one and a half million plus five hundred thousand extra): lifts vacancy toward 1.6 per cent, about twenty-five void days, supports basic repairs and stabilises the market.

Three million homes (one and a half million plus one and a half million extra): lifts vacancy toward 2.3 to 2.5 per cent, about thirty-four to forty-two void days, enables full preventive maintenance and improvements, transforming the market. And ultimately transforming lives.

Addendum: Housing Market Breakeven Vacancy Rate Explained

The housing market breakeven vacancy rate is defined as the percentage of empty homes at which costs and incomes are equal, with neither profit nor loss. The breakeven vacancy rate equation is as follows:

Interest costs + operating expenses + taxes and fees = property appreciation + rent price × (100% – vacancy rate)

The costs are represented on the left hand side of the equation relevant to real estate investment in simple terms. The right hand side of the equation represents sources of income, both property appreciation in terms of price (capital appreciation) and rental income. If the actual vacancy rate falls below the breakeven vacancy rate, then investing in real estate (read maintenance and upgrades) is profitable.

In contrast, if the actual vacancy rate is above the breakeven rate investing becomes loss making. To note, actual vacancy rates are bounded by zero and one hundred per cent. However, the breakeven vacancy rate can be negative or above one hundred per cent. Interest rates were found to be one of the biggest drivers of landlords tolerating more vacancy.

If house prices appreciate, the value of owning a home (capital gains) becomes more attractive, which means landlords are more willing to accept vacancy. Since appreciation helps offset the cost implications of vacant periods.

The behavioural effect on landlords of severely constrained housing supply is that landlords become asset holders first, housing providers second. With tenants queuing out the door they have no competitive incentive to upgrade kitchens, fix damp and mould, or repair kitchens.

They can relet even poor quality homes instantly because demand far outstrips supply. The opportunity cost of repair (lost rent) feels higher than the reputational cost of poor quality.

The lesson from Switzerland is that low vacancy rates in combination with strong asset appreciation creates perverse incentives. Landlords therefore rationally tolerate decay and wait for capital gain.

1. Hansard, HC Deb 14 March 1967 vol 743 c243, Empty Houses. Lord Mellish: “a margin of vacant houses is always required to facilitate mobility and the smooth working of the market.” ↩︎
2. Hansard, HC Deb 18 November 2014 vol 588, Housing Market (London). Brandon Lewis (Housing Minister) states vacancy at two per cent for first time ever. ↩︎
3. Dwelling Stock Estimates, England: 31 March 2024 — 264,884 long term vacant (six months or more) on 7 Oct 2024; one per cent of stock. ↩︎
4. Savills, Can vacant dwellings provide a solution to housing supply? (2023) — vacancy in 1990s closer to three per cent. ↩︎
5. English Housing Survey 2023–24, Private Renters: average tenancy length four point six years.Ipsos, Trust and Competence on Housing Policy, February 2024. ↩︎
6. Author’s calculation: vacancy % × 365 × tenancy length = void days per tenancy. ↩︎
7. Goodlord, Rental Index (Mar 2025); Propertymark, Void Period Data (2024–25). ↩︎
8. Rosen, K. & Smith, L., The Price Adjustment Process for Rental Housing and the Natural Vacancy Rate, AER (1983). ↩︎
9. Gabriel, S. & Nothaft, F., Rental Housing Markets, the Incidence and Duration of Vacancy, USC Lusk Working Paper (1999). ↩︎
10. IMF, Switzerland: Selected Issues, Housing Market Breakeven Vacancy Rate (2021). ↩︎
11. Swiss Federal Office for Housing, Vacancy statistics (2024): national about one point zero eight per cent; Jura, Solothurn, Ticino above two per cent. ↩︎
12. Hansard, HC Deb 11 May 1950 vol 475 c1327, Controlled Houses (Maintenance). Aneurin Bevan on rents funding “repairs and voids.” ↩︎
13. Private Rented Sector Commission, Improving the Private Rented Sector: Final Report (Propertymark, May 2024). The report finds twenty-one per cent of PRS homes are non decent and twelve per cent contain Category 1 hazards, with some regions seeing nearly forty per cent non decency. ↩︎
14. DLUHC, English Housing Survey Headline Report, 2022–23 (July 2023). ↩︎
15. Shelter/YouGov, The Rent Trap: Quality and Choice in Private Renting, 2023. ↩︎
16. Opinium poll for Renters’ Reform Coalition, press release (2023). ↩︎
17. Resolution Foundation, Housing Outlook 2023: Trapped Renters, 2023. ↩︎
18. Generation Rent, Polling on Decent Homes Standard, September 2024. ↩︎
19. Ipsos Issues Index, Public Perceptions of Housing Shortage, October 2023. ↩︎
20. Public First, The Quiet Yes: Understanding Attitudes to Development (August 2025). ↩︎
21. Onward, The Politics of Housing: Conservative Voters and Housebuilding, 2022. ↩︎
22. Ipsos, Trust and Competence on Housing Policy, February 2024. ↩︎