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Under the skin of the letting market

Here we share news and views on both the local letting market in & around Oxfordshire and all planned and recent legislation.


Commons Select Committee – Private Rental Sector


Finders Keepers has just been to listen to the first Commons Select Committee Witness session on the Private Rental Sector. We didn’t see David Cameron but we bumped (literally) into Nigel Lawson, here is an overview of what this Committee is doing… 

Context

A Commons Select Committee is investigating the Private Rental Sector (PRS) looking at how it could, and should be influenced by policy. It comprises:

  • The quality of private rental housing, and steps that can be taken to ensure that all housing in the sector is of an acceptable standard
  • Levels of rent within the PRS, including the possibility of rent control and the interaction between housing benefit and rents
  • Regulation of landlords, and steps that can be taken to deal with rogue landlords
  • Regulation of letting agents, including agents’ fees and charges
  • The regulation of houses in multiple occupation (HMOs), including the operation of discretionary licensing schemes imposed by a local authority for a category of HMO in its area
  • Tenancy agreements and the length and security of tenure
  • How local authorities are discharging their homelessness duty by being able to place homeless households in private sector housing.

Witness Hearing – Portcullis House, Monday 4th February 2013

Finders Keepers went to absorb the first witness session in front of the 11-person Select Committee whose members can be found here. These are our abbreviated notes of some of the points of discussion:

FIRST HALF : Witnesses

– Dr Tim Brown, Director, Centre for Comparative Housing Research, De Montfort University

– Professor Martin Partington CBE, QC, Emeritus Professor of Law, University of Bristol

– Dr Julie Rugg, Senior Research Fellow, Centre for Housing Policy, University of York

Are we seeing real structural change in the PRS?

TB: The PRS was 9-10% in 1990 and it is now approximately 17% of all housing. If the sales market picks up, the growth of the PRS will stall, but overall I agree with estimates that the PRS will be 20-25% of all housing by 2025.

  • The growth of families in the PRS is structural change, we estimate they represent ~25-33% of all tenants.

JR: Landlords unable to sell their rental properties have helped the recent growth of the PRS. I can foresee many smaller landlords having problems with rent arrears, and if that happens then PRS growth will be slowed.

MP: As sales prices stay out of reach it is inevitable that the PRS will grow. I see the PRS and social housing as one system. Councils could be more dynamically involved, eg. with their Pension Funds. One problem is that the Council of Mortgage Lenders wants it’s customers to have short-term leases so they can manage defaults and regain possession of the asset.

What is the quality of the housing/service like?

JR: We are obsessed with supply but the quality of the stock is a problem. The existing stock will deteriorate and landlords have little incentive to improve it.

  • If you increase standards it will often increase rent values – is this what we want?

MP: Most landlords are not ‘wilfully bad’ but many are hugely ignorant about their responsibilities to the tenant.

  • “The problem of ignorance cannot be overstated.”

TB: During the Montague Review we considered a kitemark scheme for ‘good property management and standards’ but we were concerned it would create more bureaucracy.

Should we regulate the sector and licence landlords?

JR: I support instant regulation with licensing for all landlords. The threat is that you can then lose your licence, like not wearing your seatbelt.

  • It would be £50 per landlord. The DCLG did the costings in 2009/2010 but then the new Government changed plans.
  • Local authorities are conflicted: if a ‘bad’ landlord takes people out of hostels and social housing then they’re helping the council
  • Local authorities are struggled to handle ‘low-end’ tenants in the PRS and social problems
  • Most property is held by ‘small’ amateur landlords. We know very little about their drivers and motivations.

MP: I support ‘Enhanced Self-Regulation’ – a landlord can comply by using a licensed agent. We need all agents to be regulated.

TB: Will regulation force out the good landlords who can’t be bothered with it?

  • During the Montague Review the Institutional Investors are very concerned about the negative ‘Rising Damp’ image of the industry

All: The negative view of the PRS is a real problem and does not reflect reality accurately.

Should we look abroad and learn from successful schemes, for example the Private Sector Social Supply Schemes?

TB: This scheme is common in Germany for example, and gives landlords incentives if they agree to house a particular tenant group long term.

  • But I worry about policy transfer, we need to start with our culture and work from there

Is the Assured Shorthold Tenancy fit for purpose? Do we need a statutory agreement?

JR: We know very little about why tenancies are ended. We need the PRS to remain flexible. “The flexibility is its [the PRS’s] strength”

  • The PRS is a market, you can’t have a market acting like a market and expect it to provide social housing

 

SECOND HALF

– Kay Boycott, Director of Communications, Policy and Campaigns, Shelter

– Cllr Tony Newman, Member of Environment and Housing Board, Local Government Association

– Jacky Peacock OBE, Secretary, National Private Tenants Organisation (NPTO)

– Alan Ward, Chair, Residential Landlords Association (RLA)

 Why has the PRS grown so much?

TN: The lack of new build housing and high deposits for mortgages has pushed people into the PRS.

Shelter: The lack of social housing is the main driver. 1 million families are now in the PRS.

RLA: There are 300,000 accidental landlords after the credit crunch. This is quite a volatile group – will they sell up? Many large corporate investors are put off by the returns.

If the PRS has such a bad reputation why are some of the satisfaction scores so high?

Shelter: Satisfaction does not mean delighted. People have very low expectations of the sector and some are too scared to complain for fear of losing their home.

  • The PRS is being asked to play a role it was never meant to play…but the level of standards is still not acceptable

RLA: There are 8.5 million people in the sector and Shelter say there were 85,000 complaints last year. That’s 1%. If you look at the English Housing Survey, owner-occupiers are only 92% satisfied! So you’ll always have some unhappy people.

What % of landlords are ‘rogue landlords?

Answers ranged from 1% to 50%. The point was made that ‘rogue’ should actually be defined as ‘criminal’.

Why aren’t we catching these rogue landlords?

TN: We need streamlined HMO powers and then we can improve standards.

RLA: It is hard to catch the criminal landlords who are very sophisticated with complex layers of fake companies.

Shelter: We need more bite. The fines need increasing.

NPTO: We need more housing officers. How is Lewisham meant to oversee 25,000 dwellings with only 3 housing officers?

Are Article 4 powers a help?

RLA: They are not. They mean you need planning permission to let to sharers if you’re now letting to a family. 35 local authorities are now using these powers – they create unnecessary red tape and are skewing the market by creating a shortage of property for sharers.

Should we cap application fees for tenants?

RLA: Reducing letting agents application fees in Scotland has only made rents go up, so it has served no use to the tenants at all.

  • We’d like all fees for landlords and tenants to be clear and explicit in the terms of business that we, the landlords, sign

Shelter: We would like the upfront fees for application to be built into the cost of the tenancy over the period of the tenancy.

Other points

Shelter: We support the Stable Rental Contract. We find that most tenants want predictability in terms of rent increases. Most landlords seem to work with CPI increases and that’s our thinking right now.

RLA: We believe in licensing agents but only self-accrediting landlords.