Commons Select Committee PRS – Landlord and Local Authorities
The Commons Select Committee’s investigation into the Private Rental Sector has progressed further with another meeting on 25th March. In this meeting the Committee were primarily focused on landlords and the local authorities’ involvement in the PRS. One topic of discussion was the introduction of selective licensing for landlords in an effort to tackle criminal landlords; this scheme has recently been piloting in Newham.
These are our abbreviated notes of some of the points of discussion.
Witness hearing – Thatcher House, Monday 25 March 2013
Andrew Cunningham, Chief Executive, Grainger plc
Sir Robin Wales, Mayor, London Borough of Newham
Richard Lambert, Chief Executive, National Landlords Association
Why do you think the PRS has grown so rapidly in recent years? A change in the tenancy arrangements with the Assured Shorthold Tenancy or is it down to failing of other forms of tenure; no other alternative?
A.W: It is a mix of economic, social and cultural factors.
- There is a realisation that home ownership may not be an appropriate form of tenure for a large section of our population.
- This is exacerbated further by the issue of supply and demand where there simply aren’t enough properties.
R.L: Due to the financial collapse 5 years ago it is getting harder and harder for people to gain access to mortgages.
R.W: People buy property to make money.
- It’s financially beneficial to rent a property rather than selling it; take the asset increase and take the revenue.
Is there a difference between rogue landlords and criminal landlords?
R.W: They are the same. They are landlords that are looking to exploit and take advantage of other people.
- A pilot was conducted in little Ilford where 25% of landlords were criminal landlords renting sub-standard properties with tenants living in squalid conditions.
How suitable are the existing powers of local authorities?
R.L: If they are coordinated and used in an effective way, they are very suitable.
What are the benefits of licensing?
R.W: An issue at the moment is that we can use existing legislation but we don’t know where the landlords are.
- The benefit of licensing is that the landlords are forced to join otherwise the fines are substantial (up to a year’s rent).
- Allows us to use whatever enforcement options which work best.
Voluntary accreditation for landlords has been used in the past in areas such a Newham where only 10% of landlord signed up. How could that be the basis of an effective system?
R.L: Accreditation has often been seen as a method of making bad landlords better when in fact bad landlords will try and avoid that kind of engagement.
- What it is effective at doing is giving a way of helping the responsible landlords gain competence and knowledge.
R.W: We have had a voluntary accreditation scheme. 600 out of a known 15,000 signed up, and that is only the ones we know about.
- We know it does not work, as we have tried it.
Why do you think a Kitemark will work when we have heard evidence that it doesn’t work?
A.W: A concern is that the best regulating legislation is a mixture of carrot and stick. The previous accreditation was very stick with no incentive to join.
Whose responsibility is it to understand about the rights and responsibilities between the landlord and tenant?
R.L: It is the landlord’s responsibility.
- A major issue for the PRS is the landlords who are unaware of their duties and we should be looking at educating them.
A.W: One issue is making tenants aware of what they should get from a landlord. At the moment there is no published standard for this.
What evidence is there to introduce the licensing scheme across the borough?
R.W: When we asked PRS tenants ‘Should we introduce licensing?’ 76% percent responded ‘yes’.
- Little Ilford was licensed and there was a 75% reduction in the reporting of anti-social behaviour and the supply of PRS properties went up.
What happens to those who don’t register?
R.W: If you fail to register and we find you, you are subject to some very substantial fines. Some fines can be as hefty as a year’s rent.
HMO licensing: You seem to accept there is a need for a certain amount of regulation and review. What changes would you like to see?
R.L: It’s hard to know as we don’t know what effect mandatory HMO has had.
- There has not been an evaluation of the system we have in place. Without an objective analysis in place we cannot suggest change.
If you said there had to be a degree of regulation in place what would you suggest?
R.L: There is a huge amount of regulation for the PRS.
- Existing legislation needs to be enforced and more intelligence-led enforcements rather than reacting to problems.
You believe in greater regulation of letting agents. Do you think landlords should be regulated?
A.W: I believe sufficient existing regulations and enforcement procedures are available. The key is applying them, which comes back to enforcement; it’s the vulnerable that need protection.
- Regulating every landlord in the country is neither practical nor desirable.
Could the same argument be used on letting agents?
A.W: What we see is there is an issue with the lack of transparency about the fees. This is an area that needs to be fixed.
Do you think a local authority deciding to municipalise all the PRS could be a threat to landlords and existing organisations?
R.L: If the local authority comes in on the basis of the open market and competition there won’t be a problem.
- The only concern would be if the local authority used its power to manipulate the market and force sales.
- Who would oversee that as a regulator ensuring competition is free and fair?
A.W: We think one of the problems in the PRS is the lack of good quality competition.
- A lot of the issues of the PRS could be resolved by increasing supply and competition.