Facts about the private rented sector (PRS)

2.1m properties or 10% of the total housing stock 75% is owned by individuals and half of all PRS landlords own fewer than eight properties 18% of PRS tenants live in hosing that is deemed to be 'unfit' The sector houses 800,000n single people, 500,000 childless couples and 490,000 single parents or couples with children Source: Private Rented Sector Commission

The commission believes a change in tax treatment would not only improve housing quality, but help stem some volatility in the sector by encouraging people to make a longer-term commitment.

The report comes at a time when thousands of people have been piling into buy-to-let investments because of poor stock market returns.

Private investors

The group believes the private rented sector is not prepared for a massive growth in demand.

It warns that by 2021 there will be around 3.8m new households, including 1.4m who could be housed by the private rented sector.

One of the main problems, according to the commission, is that the private rented sector is too easily seen as a "cottage industry".

Individual investors inevitably compare the returns they see from renting with the returns they could achieve by selling the same property for owner-occupation

Commission's report

This is because about 75% of the sector is owned by individual investors with little or no housing management experience.

This could be changed by introducing a range of tax incentives and changing the tax treatment of income from rented properties.

Under the current system, rental income is taxed as investment rather than business income.

For example, there could be favourable treatment of management expenses, and rollover relief from capital gains tax.

By making the industry more "professional", these incentives would improve housing stock and stability in the sector - and encourage long-term responsibility, the commission believes.

The report said: "Individual investors inevitably compare the returns they see from renting with the returns they could achieve by selling the same property for owner-occupation."

Fit and proper managers

Thousands of vulnerable people live in the private rented housing, and the commission believes that it is vital to improve their accommodation�s standards.

Another idea suggested by the report is a requirement by law for anyone managing a property to be a "fit and proper person".

This should be defined in an approved management code of practice and included in tenancy contracts.

If landlords fail to comply, they should be sanctioned to attend proper training or be obliged to pass day-to-day running to a competent managing agent.

Alastair Jackson, Shelter's Director of Policy aid: "Demand for housing the private rented sector is already high and is set to increase.

"It is vital that all those involved in the private rented sector including the government, recognise its importance in housing provision and commit themselves to take on board the Commission's recommendations."