Commons Select Committee – Rental Caps & Private Rented Sector Growth
The Commons Select Committee’s investigation into the Private Rental Sector has progressed further with another meeting on 15th May. In this meeting the Committee spoke to Councillors about rent cap, the rural PRS, licensing, tenancy length and the growth of the PRS.
Witness Hearing – Wednesday 15th May
- Councillor Tony Ball, District Councils’ Network
- Mr Harry Cotterell, President, Country Land and Business Association
- Councillor Sarah Hayward, Leader, London Borough of Camden
The PRS is growing significantly. It is the one growing area of housing tenure in the country. What is driving the growth, as far as you are concerned?
H.C: In the rural areas it is fair to say that it is not growing. The difficulty is two major barriers.
- Taxation – the tax system is very unfavourable to residential landlords, both on income and capital
- Planning – the NPPF has only recently come into play and we hope that it will deliver significant gains in the rented housing sector
S.H: In Camden, the sector is growing. We have gone up by 10% of our housing stock between census.
- lack of availability of mortgages has increased demand
- rent inflation has been dramatic, providing incentives for people who have property to let it out
- high demand of student population vs families fuels growth
T.B: According to the Census the PRS has increased by 88% in the last 10 years. The sector is growing, perhaps not in rural areas.
- the availability of finance and getting a deposit together
- access to social affordable housing is driving the PRS
If the economic circumstances change and the economy starts to grow again, given these economic factors that have been highlighted as resulting in the sector increasing over the last few years, do you then believe the sector will stop growing or even shrink in size?
T.B: If the private housing sector picks up again it would be an attractive option for landlords to get some capital back if they are not getting the rental values they were expecting.
S.H: There is always going to be a demand form students, young professionals, and what have you, as well as families.
Do you think the idea of having a licensing system is an effective way of improving standards in the PRS?
T.B: Absolutely, the District Councils’ Network very much supports some kind of licensing/accreditation.
- It is in the interest of good landlords
- accreditation/licensing has to be good for both public and landlord
H.C: The concerns about licensing are that it is bound to be a huge scheme, if it is done nationally.
Should it be a national scheme or should you be given discretion to develop local schemes of licensing?
T.B: It is not “one size fits all”; the issues are not the same up and down the country.
- discretion to react to local factors
- a structure and perhaps a commitment – this is about protection of the public – we can all go forward with that ethos and let local authorities build on that
S.H: There needs to be some local discretion.
- helpful if there is some form of national standard and some common principles around accreditation which can be built upon.
We have heard a number of times that local authorities have the powers they need to deal with criminal landlords, rogue landlord, but then we hear that local authorities are unable or unwilling to use those powers. Is that a fair comment?
T.B: I think it is, because local authorities at the moment are in the position of reacting. They cannot be proactive so once they get the information or complaints they react to that.
- the small fines or whatever are dished out or the penalties imposed do not cover the cost or the action that is required
S.H: The problem is not with us bringing prosecutions; it is with tenants coming forward with the evidence to help us take those prosecutions and deal with bad practice.
Do you welcome the Government’s proposal to require letting agents to belong to an approved redress scheme and what issues would you think that the Government should consider before any implementation of such a scheme?
S.H: There should be an approved register for letting agents, but the Governments should also outlaw things like double charging and signing on fees.
T.B: I do not think there should be too much of a difference between a private landlord and letting agents when it comes to licensing.
Should agents’ fees to tenants be made illegal, as they have been in Scotland?
S.H: Yes, I think so. The tenant needs a house.
- the landlord should factor in the costs of letting the property in their overall charges
- fees to tenants should absolutely be outlawed and certainly signing on fees for agents
In Germany the tenancies are indefinite and rent increases are determined by reference to a local rent index. Can you see that system working in the UK?
H.C: Any control on rent is going to impact on supply, because its going to make landlords less inclined to rent.
- the alternative is always to stop renting and to sell and move on
- you need to have as much freedom as you possibly can, both in terms of contract and in terms of setting the rent, to enable the sector to thrive
Sarah, I know you mentioned earlier that you appear to be quite keen on the idea of rent capping. Why are you interfering in the free market?
S.H: Rents are being pushed up by a range of factors, including properties being left empty.
- there is a market failure in Camden, people in middle income bands are pushed out of Camden
- to live in Camden you have to be either very rich or very poor
Your interference in the free markets will, will it not, discourage investors from providing the flats and apartments that are required to meet supply. Investors will not want to invest in a sector where the rents are capped, will they?
S.H: The private rented sector does not just exist for investors’ profit. It also exists to meet a housing demand
To increase supply you need private investors, the money will not come from anywhere else. If you put a cap on rents investors will not want to invest in it because they will not get a return. This will reduce the supply.
S.H: It depends on how you administer the cap and what sort of cap
- you could have variable rates
H.C: If you introduce any form of rent capping, you will kill the PRS in a very short time