House of Commons Communities and Local Government Committee
The Private Rented Sector
First Report of Session 2013–14
Volume II Oral and written evidence
Additional written evidence is contained in Volume III, available on the Committee website at www.parliament.uk/clgcom
Ordered by the House of Commons to be printed 8 July 2013
HC 50-II (Incorporating HC 953-i, ii, iii, iv, v, Session 2912-13) Published on 15 July 2013 by authority of the House of Commons London: The Stationery Office Limited £23.50
The Communities and Local Government Committee
The Communities and Local Government Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Department for Communities and Local Government.
Current membership Mr Clive Betts MP (Labour, Sheffield South-East) (Chair) Bob Blackman MP (Conservative, Harrow East) Simon Danczuk MP Rochdale (Labour, Rochdale) Mrs Mary Glindon MP (Labour, North Tyneside) David Heyes MP (Labour, Ashton under Lyne) James Morris MP (Conservative, Halesowen and Rowley Regis) Mark Pawsey MP (Conservative, Rugby) John Pugh MP (Liberal Democrat, Southport) Andy Sawford MP (Labour, Corby) John Stevenson MP (Conservative, Carlisle) Heather Wheeler MP (Conservative, South Derbyshire)
Bill Esterson MP (Labour, Sefton Central) was also a member of the Committee during this inquiry.
Powers The committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the internet via www.parliament.uk.
Publication The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the internet at www.parliament.uk/parliament.uk/clg. A list of Reports of the Committee in the present Parliament is at the back of this volume.
The Reports of the Committee, the formal minutes relating to that report, oral evidence taken and some or all written evidence are available in a printed volume.
Additional written evidence may be published on the internet only.
Committee staff The current staff of the Committee are Glenn McKee (Clerk), Sarah Heath (Second Clerk), Stephen Habberley (Inquiry Manager), Kevin Maddison (Committee Specialist), Emma McIntosh (Senior Committee Assistant), Mandy Sullivan (Committee Assistant), Stewart McIlvenna, (Committee Support Assistant) and David Foster (Media Officer).
Contacts All correspondence should be addressed to the Clerk of the Communities and Local Government Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 1234; the Committee’s email address is [email protected]
Witnesses
Monday 4 February 2013 Page
Dr Tim Brown, Director, Centre for Comparative Housing Research, De Montfort University, Professor Martin Partington CBE QC, Emeritus Professor of Law, University of Bristol and Dr Julie Rugg, Senior Research Fellow, Centre for Housing Policy, University of York Ev 1
Kay Boycott, Director of Communications, Policy and Campaigns, Shelter, Cllr Tony Newman, Member of Environment and Housing Board, Local Government Association (LGA), Jacky Peacock OBE, Secretary, National Private Tenants Organisation (NPTO) and Alan Ward, Chair, Residential Landlords Association (RLA) Ev 10
Monday 11 February 2013
Sir Adrian Montague CBE, leader of review of the barriers to institutional investment in private rented homes Ev 21
Monday 4 March 2013
Geoff Fimister, Senior Policy Adviser, Citizens’ Advice, Mark Hayward, Managing Director, NAEA representing the Association of Residential Letting Agents, Caroline Kenny, UK Association of Letting Agents Executive, UK Association of Letting Agents and Jason Freeman, Legal Director, Goods and Consumer Group, Office of Fair Trading Ev 28
Peter Bolton-King, Global Residential Director, Royal Institution of Chartered Surveyors, Christopher Hamer, the Property Ombudsman, Louisa Darian, Senior Policy Adviser, Which? Ev 38
Monday 11 March 2013
Cllr Simon Blackburn, Leader, Blackpool Borough Council, Tom Gilchrist, Service Manager, Private Housing Sector, Bristol City Council and Cllr Jonathan Glanz, Cabinet Member for Housing and Property, Westminster City Council Ev 45
Monday 25 March 2013
Andrew Cunningham, Chief Executive, Grainger plc, Richard Lambert, Chief Executive Officer, National Landlords Association and Sir Robin Wales, Mayor, London Borough of Newham Ev 56
Monday 8 May 2013
Richard Blakeway, Deputy Mayor for Housing, Land and Property, Greater London Authority, Stuart Corbyn, Chairman, Qatari Diar Delancey, East Village Operations and Neil Hadden, Chief Executive, Genesis Housing Association Ev 70
Ian Fletcher, Director of Policy (Real Estate), British Property Federation, Paul Smee, Director General, Council of Mortgage Lenders and Nigel Terrington, Chief Executive, Paragon Group of Companies Ev 79
Monday 13 May 2013
Ruth Abbott, Housing Standards and Adaptations Manager, City of York Council, David Shepherd, Assistant Director, Housing, Employment and Skills, City of Bradford Metropolitan District Council and John Statham, Head of Housing Partnerships, Leeds City Council Ev 87
Irfan Ahmed, Director, East Midlands Property Owners, Liam Burns, President, National Union of Students and Dr Richard Tyler, Co-ordinator, National HMO Lobby Ev 97
Wednesday 15 May 2013
Cllr Tony Ball, District Councils’ Network, Harry Cotterell, President, Country Land and Business Association and Cllr Sarah Hayward, Leader, London Borough of Camden Ev 105
Monday 20 May 2013
Mark Prisk MP, Minister for Housing, Department for Communities and Local Government Ev 113
List of written evidence
(published in Volume II on the Committee’s website www.parliament.uk/clgcom)
Page Association of Residential Lettings Agents Ev 163, Ev 176, Ev 177 Blackpool Borough Council Ev 211 Bristol City Council Ev 214, Ev 216, Ev 218 British Property Federation Ev 243 Dr Tim Brown Ev 124 Citizens Advice Ev 155, Ev 160 City of Bradford Metropolitan District Council Ev 258, Ev 262 City of York Council Ev 256 Council of Mortgage Lenders Ev 249, Ev 253 Country Land and Business Association Ev 289 Delancey Real Estate Investment Management Ltd Ev 239, Ev 242 Department for Communities and Local Government Ev 298, Ev 304 District Councils’ Network Ev 287 East Midlands Property Owners Ev 270, Ev 273 Genesis Housing Association Ev 242 Grainger plc Ev 221
Greater London Authority Ev 238 Leeds City Council Ev 264, Ev 268 Local Government Association Ev 142, Ev 145 London Borough of Camden Ev 294, Ev 298 London Borough of Newham Ev 232, Ev 236, Ev 237 National HMO Lobby Ev 280 National Landlords Association Ev 224, Ev 228 National Private Tenants Organisation Ev 145 National Union of Students Ev 273, Ev 276 Office of Fair Trading Ev 178, Ev 183 Paragon Group of Companies Ev 253 Professor Martin Partington Ev 127 The Property Ombudsman Ev 194, Ev 202 Residential Landlords Association Ev 151 Royal Institution of Chartered Surveyors Ev 187, Ev 191 Dr Julie Rugg Ev 131 Shelter Ev 133, Ev 138, Ev 141 Westminster City Council Ev 219 UK Association of Letting Agents Ev 160, Ev 305 Which? Ev 204, Ev 208, Ev 209
List of additional written evidence
(published in Volume III on the Committee’s website www.parliament.uk/clgcom)
Advertising Standards Authority Ev w329 Alice Ashworth Ev w168 All-Party Parliamentary Party on Carbon Monoxide Ev w318 Association of Greater Manchester Authorities Ev w235 Association of Tenancy Relations Officers Ev w195 Barristers of Arden Chambers Ev w121 Lorraine Barter Ev w15 Dr Stephen Battersby, Pro-Housing Alliance Ev w84 Simon Beasley Ev w8 Iain Beaton Ev w52 Bespoke Property Consultants Ev w345 Birmingham City Council Ev w280 Blackburn with Darwen Borough Council on behalf of Pennine Lancashire Local Authorities Ev w74 Judy Bowie-Britton Ev w256 Bradford District Tenants and Residents Federation Ev w44 Brent Private Tenants’ Rights Group Ev w88 Broadway Homelessness and Support Ev w153 Building and Social Housing Foundation Ev w250
David Burrell Ev w129 Calderdale Metropolitan Borough Council Ev w65 Cambridge Centre for Housing and Planning Research Ev w295 Central Association of Agricultural Valuers Ev w117 Centrepoint Ev w228 Chartered Institute of Environmental Health Ev w131 Chartered Institute of Housing Ev w282 Communications Workers Union Ev w125 Oliver Cornes Ev w50 Cornwall Residential Landlords Association Ev w100 Crisis Ev w273 Jonathan Davis Ev w45 Decent and Safe Housing Project Ev w198 Digs Ev w162 The Dispute Service Ltd Ev w62 Tracey Dunn Ev w178 Electrical Safety Council Ev w297, Ev w290 Sir Henry Elwes Ev w36 Essential Living Ev w232 David Evans Ev w20 Judy Evans Ev w25 Evolve Property Training Ev w38 Finders Keepers Ev w21 Fizzy Living Ev w315 Michael Foreman Ev w167 Friends of the Earth and Association for Conservation of Energy Ev w324 Barrie George Ev w80 Luke Gidney Ev w29 Tom Glancz Ev w78 Steve Gracey Ev w6 Andrew Grant Ev w88 Haringey Council Ev w223 Hastings Borough Council Ev w202 Graham Heather Ev w54 Herts Young Homeless Ev w149 David Holliday Ev w268 Home Counties Property Ev w53 HouseLet Direct Ev w268 Housing for the 99% Ev w189 Housing Law Practitioners Association Ev w92 Housing Voice Ev w128 Graham Howell Ev w290 Investment Property Forum Ev w157 Greg Jones, FARLA Ev w26 Gerald Kennedy Ev w193
Kirklees Private Landlords Association Ev w10, Ev w14 KIS Lettings Group Ev w66 Roy Kitchen Ev w49 The Land Registry Ev w238 The LandlordZONE Ev w300 Nick Lane Ev w192 Law Society of England and Wales Ev w317 Duncan Layne Ev w40 Matthew Leese Ev w329 Letting Training Centre Ev w291 Marta Lijoi Ev w169 Liverpool City Council Ev w178 Local Government Information Unit Ev w333 London Borough of Enfield Ev w214 London Borough of Hackney Ev w259 Lucking Estates Ltd Ev w24 Brian Lund Ev w33 Mansfield District Council Ev w103 Robert May, Addjuvare Ev w330 Stewart Morris Ev w17 Allan Murray Ev w71 National Approved Letting Scheme Ev w219 National Housing Federation Ev w265 Netrent Ev w54 Newcastle City Council Ev w184 Nicholas Nicol Ev w28 Darren Norris Ev w247 North West Housing Practitioners Association Ev w247 Northampton Borough Council Ev w109 Norwich City Council Ev w187 Nottingham Action Group on HMOs Ev w146 Nottingham City Council Ev w305 Places for People Ev w176 Rainham Residential Lettings Ev w107 Owen Raybould Ev w346 Colin Read Ev w161 Reads Davies Estate Agents and Valuers Ev w182 Rent Sub-Committee of Millbank Residents’ Association Ev w244 Melissa Robertson Ev w7 Royal Borough of Kensington and Chelsea Ev w309, Ev w315 SAFEagent Steering Group Ev w239 The Salvation Army Homelessness Services Ev w135 Save the Children UK Ev w112 Secured by Design Ev w152 Sheffield City Council Ev w110
Tessa Shepperson Ev w57 Simon Shinerock Ev w1 Sliced Bread Consulting & Personal Finance Research Centre Ev w173 Wayland Smith Ev w2 SpareRoom Ev w96 James Spencer Ev w41 Stockton-on-Tees Borough Council Ev w241 Stonewall Housing Ev w69 Storer and Ashby Residents’ Group Ev w279 Thanet District Council Ev w141 Carl Thomas Ev w320 Sue Thompson Ev w31 Jacqueline Thornton Ev w342 University of Nottingham Students’ Union Ev w230 University of Sussex Students’ Union Ev w137 Victoria Roberts Vukmanovic Ev w141 Catherine Walls Ev w52 Daniela Wagner, Member of the Bundestag Ev w346 Mark Walton Ev w62 Colin Wardle Ev w171 Julie Warren Ev w5 Andrew Wernick Ev w108 E J Wilamowski Ev w81 Sarah Wild Ev w49 Keith Williams Ev w45 Wrekin Landlords Association Ev w9 Bob Young Ev w120 The Young Group Ev w277 [***name redacted***] Ev w81
List of unprinted written evidence
The following memoranda have been reported to the House, but to save printing costs they have not been printed and copies have been placed in the House of Commons Library, where they may be inspected by Members. Other copies are in the Parliamentary Archives, and are available to the public for inspection. Requests for inspection should be addressed to The Parliamentary Archives, Houses of Parliament, London SW1A 0PW (tel. 020 7219 3074). Opening hours are from 9.30 am to 5.00 pm on Mondays to Fridays.
Hazel Speed
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Communities and Local Government Committee: Evidence Ev 1
Oral evidence
Taken before the Communities and Local Government Committee on Monday 4 February 2013
Members present: Mr Clive Betts (Chair)
Bob Blackman John Pugh Simon Danczuk Andy Sawford James Morris John Stevenson Mark Pawsey Heather Wheeler ______
Examination of Witnesses
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, and Dr Julie Rugg, Senior Research Fellow, Centre for Housing Policy, University of York, gave evidence.
Q1 Chair: Welcome, everyone, to our first evidence sector might level off or even decline from the current session of the inquiry into the private rented sector. 17% of households. However, I think it is unlikely, Before we begin taking evidence, members of the in the next five or six years, that the owner-occupied Committee will want to place on record any interests housing market is going to go back to where it was in they have that are relevant to this inquiry. To begin the middle part of the last decade. There have been a with, I will say I have one flat that I rent out, which number of forecasts suggesting that, by 2020, maybe is in the Register of Members’ Interests. 20% or 25% of households will be in the private John Stevenson: I have three flats that are in the rented sector, in which case it represents a fairly Register of Members’ Interests. fundamental change in tenure in this country, Simon Danczuk: My wife has a small interest in a compared with, say, 1990, which was the low point rented property. for the private rented sector with about 9% or 10%. Andy Sawford: I have interests as both a tenant of a Dr Rugg: That is fair to say, but it is a very rented property and a landlord—a small interest. complicated picture out there at the moment and there Bob Blackman: I am the joint owner of six are lots of factors that are very difficult to take into buy-to-let properties. account. There is a proportion of the sector that is landlords unable to sell property, so they are letting Q2 Chair: We place that on record so that you see them out at the moment. When the mortgage market the interests we have—it is quite important. revives, we will see some reduction there, but there is Can we begin by asking you to say who you are and not evidence that that is a huge part of the market. A the organisation, if any, that you represent? counter that will run against that to some degree is Dr Brown: Dr Tim Brown from the Centre for how the smaller landlords can accommodate possible Comparative Housing Research at De Montfort rent arrears incidents, which might go up if rents are University in Leicester. going up. The smaller landlords might find it is getting Dr Rugg: Dr Julie Rugg from the Centre for Housing to be too difficult to manage one or two properties. If Policy at York University. they are falling into rent arrears too often, their job Professor Partington: I am Martin Partington. I was conditions are perhaps not as stable as they were. We Law Commissioner for England and Wales in 2001 to are going to see some flurries around the edges of 2005. I currently chair the board of the Dispute Service which is one of the four organisations offering change. It is quite difficult to judge at the moment but, tenancy deposit protection in England and Wales. overall, I think that Tim is right—I do not think we will see a substantial shift back to the position we Q3 Chair: Thank you very much for coming to give were in, unless there are more substantive evidence to us. The private rented sector is clearly a interventions. growing sector—growing in numbers and growing in Professor Partington: The only thing I would want to the percentage of housing that it represents. Should add, and this may be more wishful thinking than the this be seen as a long-term structural change, or just reality of what is likely to happen, is that if one thinks something that is responding to particular of the thing from the affordability argument, one of circumstances that then might revert back in the the difficulties about the owner-occupied sector is that future? there seems to be at least some indication that limits Dr Brown: I would suggest that some quite big have been reached on the proportion of the population changes have been under way and are going to that are going to be able to purchase their property. In continue to happen to the housing market. It might that context, the importance of the development of the be argued that, if the owner-occupied housing market rented sector, whether it is the private rented sector or becomes more buoyant again and there is more the social rented sector, taken together becomes even investment in affordable housing, the private rented more important. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG01 Source: /MILES/PKU/INPUT/027272/027272_o001_michelle_130204 HC 953-i PRS CORRECTED transcript.xml
Ev 2 Communities and Local Government Committee: Evidence
4 February 2013 Dr Tim Brown, Professor Martin Partington CBE QC and Dr Julie Rugg
One of the pleas that I keep trying to make is that we second key issue is balance that is affordable. It is should not see the private rented sector in isolation new property supply that is affordable. I am not sure from the social rented sector. It does seem to me that the private rented sector, as a market, really wants to the two things need to be seen together. For example, deliver affordable housing. many housing associations are now building Dr Brown: Really developing Julie’s point, the city I accommodation to rent at market rents or near market live in, which is Coventry, and the city I work in, rents, as well as at affordable rents. There needs to which is Leicester, have both have seen a huge rise in be much more fluidity between the different sectors, institutional investment in purpose-built student including local authorities. They tend to be housing. In many respects, that is a good thing— pigeon-holed over there, but they could be much more improving the conditions students live in—but it has dynamically involved in the development of new left a large number of inner-city, small vacant, property for rent, which might actually do something terraced properties that are empty and remain empty to bring down the very substantial numbers of those for long periods of time. It poses major challenges, who are looking for a decent home. not just for the local authority but for the communities in which those properties are located. Simply putting Q4 Chair: That leads me on to the next question in a lot of supply without thinking about the about the differences within the private rented sector implications can pose major challenges for and the extent to which growth in recent years may neighbourhoods and the local authority about how be a bit accidental—people who really would like to they react to those changes. have sold but cannot, and end up renting a property out—as opposed to what might happen with a more Q5 Chair: Before we come on to the next set of structured change in the sector. On that point, with questions, can I just ask why that is? Is it because housing associations moving in, do we see them the landlords there have got used to students paying taking a bigger role in providing houses at market reasonably high rents and, now that they have gone, rents, maybe alongside institutional investment in the they are over-ambitious in what they are asking and private sector itself? Are those sorts of changes likely people do not want to pay it? to happen in the next 10 years, do you think? Dr Brown: Yes, that is right. Of course, landlords may Professor Partington: If I can come back, as I have have relied on the fact that they would be housing started it, I think that they could happen. Probably four students rather than a family. They have there has to be some leadership from Government to borrowed money for a mortgage on that basis and they encourage it to happen. To me, the interesting now have a major problem. recommendation that came out last summer was the Dr Rugg: The exact contrary is happening in York, idea, for example, that local authority pension funds where there is over-demand for accommodation. What might be used as a new source of investment. One we are saying is that the private rented sector is so of the structural problems with the current buy-to-let different in so many places. Institutional investment is market is that the Council of Mortgage Lenders very not a good for everywhere, in every circumstance, for much wants money to be lent short term so that, if every part of the private rented sector market. something happens, they can get the properties back within a relatively short term. That does not encourage Q6 James Morris: It is fair to say that the private the longer-term landlordism that I think is necessary, rented sector has got a kind of reputational problem. given the sort of demographics of the population, and I just wanted to explore what that reputational is also sensible in terms of driving up standards. It is problem was because, Dr Brown, you have made through that that you will get standards, rather than new regulations, for example. some comments in your submission that we were not living in the days of “Rising Damp”, but yet we still Chair: We will come back to long-term rents in due course. had problems about the perception of the private Dr Rugg: The question is predicated on the rented sector. Can you just clear up what your actual assumption that more supply is good. We have view is? become a little obsessed with supply and have to Dr Brown: I happen to have been a member of the re-engage with the notion of balance, because more Montague review last year and I was very impressed supply is not necessarily a good thing for the private by the evidence from a number of local authorities, rented sector. For example, in York, we have a new including leaders of councils in a number of cities, institutional investor in student housing, which you where they made the point that you cannot separate would have thought would have brought a lot of good out issues around the existing private rented sector— new properties to the sector and released some street sometimes referred to as some of the “challenges”; properties, but actually the impact it has had is of sometimes referred to as “beds in sheds” issues— driving up rents in York for those properties, because because that gives an image or perception to the rest it has set a new high ceiling for shared properties in of the community about some of the problems. the area. One of the things we have to think about is what we Q7 James Morris: Is it true, in terms of the extent want this sector to bring. Okay, we might want it to of overcrowding and non-decency? Is it a perception bring supply overall, but it is not necessarily bringing or is it a reality? affordable supply and it might not be supply that is Dr Brown: It is a reality to some extent, bearing in flexible enough to meet the needs that we want for it. mind that 40% of private rented housing in 2009 did The key issue here is not supply; it is balance. The not meet the basic decent homes standards, so there cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG01 Source: /MILES/PKU/INPUT/027272/027272_o001_michelle_130204 HC 953-i PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 3
4 February 2013 Dr Tim Brown, Professor Martin Partington CBE QC and Dr Julie Rugg are clearly some issues there about the state of the into account different markets and different levels of stock. scale? Dr Rugg: You are right that the state of the stock is Dr Brown: One of the issues about regulation is that an issue. There is new stock coming to the sector but, there are clearly issues that we need to address now, for some landlords at the very bottom end of the such as beds in sheds, but we also have to think about, sector, limits in local housing allowance do restrict with regulation in the long term, what the sector looks their ability to re-invest in their stock, so the existing like in four or five years’ time. One of the trends in stock is not ever going to get better. We might see the past 10 or 15 years has been the growth of families new stock coming to the market, but the existing living in the private rented sector, which is now stock, which was in play 10 years ago, is going to somewhere between 25% and 33% of households. deteriorate because it is quite hard for landlords to That is quite a new thing, and those households want re-invest in that property—“hard” being financially a longer tenancy and want to put down their roots in difficult. Also, why would they bother at the bottom the community. They do not want to be moving their end of the sector, because they are getting the tenants kids between schools every six or twelve months. We still? I would not say which percentage of those was have to think, if we are thinking about regulation, which. It is impossible to say, but I think there are about not just the issues now, but where the private disincentives at the bottom of the sector to improve rented sector is going to be in five or six years’ time, quality. otherwise we are going to be looking at yesterday’s Professor Partington: When we were doing the work problems today. at the Law Commission and consulting very widely— we held roadshows up and down the country and so Q10 Andy Sawford: I want to start with a question forth, and I went to large numbers of events—I have to Dr Rugg and then go on to Professor Partington, to say that my overall impression was that, if there because in your evidence to the Committee it appears was a problem, it was a problem of ignorant landlords you have a very different view of what would be who did not know what their rights and effective regulation. First, Dr Rugg, you have argued, responsibilities were rather than wilfully bad particularly in your 2008 report but also the evidence landlords. In some cases, there are going to be severe to us, the benefits of a nationally administered economic disincentives for landlords to do very much licensing scheme. What would you see as the benefits about their property. Indeed, at the bottom end of the of that and, in particular, could you comment on why market, there will be frankly some tenants who like you think that the local schemes adopted both in the fact that they have a cheap place to rent. Newham and in Northern Ireland are not succeeding A much greater problem, which was one of the key where your idea will, as it were? issues that we were trying to do something about, was Dr Rugg: Regulation can have lots of different that many landlords did not really know what they purposes and, in doing the review, like yourselves, we were doing. That is particularly the case at the had lots of people talking to us about what they moment when, as we have just been hearing, quite a thought would be effective regulation. Lots of lot of landlords have come into the market—they are landlords do not like regulation because it is very sometimes called accidental landlords—but they are front-ended. There are lots and lots of rules and still operating in a market about which they know very hurdles you have to get over, and you have to little. We were trying to create a context in which they demonstrate that you are proving that you are doing a would have some basic information and both sides thing. You pay a lot of money to the local authority would know. We thought that that would address some and then you are regulated. In some instances, it is the of the reputational issues that undoubtedly exist— case that local authorities see that as a way of raising unfairly in my view, having seen many cases. revenue, because they can charge x amount for an HMO licence, but actually never really go and inspect Q8 James Morris: There are strong arguments and the property. That is one thing that landlords get quite strong moves towards wanting to regulate the sector upset about. more with quality standards and various other issues. What you have to think about is actually not so much Is there not a danger that if we over-regulate the the regulation, but how it is monitored, how it is private rented sector market, that might stop managed and what you want the outcome to be. That institutional investors or other investment money is where the debate tends not to happen. You can set coming into the sector and provide a disincentive? Dr in play a very strong regulatory framework that is Brown, I think you have argued for a regulatory impossible to manage, because there are no system. environmental health officers out there to do it. What Dr Brown: We heard evidence as part of the is the point of having a very heavy regulatory Montague review that a number of institutional framework that requires lots of hurdles? That was my investors were concerned if there was no political principal concern: that actually what we should do is consensus over the future of the private rented sector regulate every landlord instantly. You have six months in terms of regulation. That was seen as a disincentive to get on board, you register, we give you a number to invest. and then you are instantly registered. But, if you do anything wrong, you stop being registered, because Q9 James Morris: Does that argue against then environmental health officers have an incentive something you have been arguing for, which is a to go and seek the people who are doing wrong things, single regulatory system that covers the whole of the rather than patting on the back everybody who is private rented sector, which does not necessarily take doing the right thing, because that is a waste of cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG01 Source: /MILES/PKU/INPUT/027272/027272_o001_michelle_130204 HC 953-i PRS CORRECTED transcript.xml
Ev 4 Communities and Local Government Committee: Evidence
4 February 2013 Dr Tim Brown, Professor Martin Partington CBE QC and Dr Julie Rugg resource. They are just simply not resourced to do Q15 Andy Sawford: You must have worked out how that. it might cost to carry out this role effectively. Dr Rugg: DCLG worked out how much it would cost, Q11 Andy Sawford: What would the incentive be and it did not see the cost as being excessively for environmental health officers? onerous. It thought the system was quite feasible, but Dr Rugg: Because they then can target the bad by the time it had finished reporting on the feasibility, landlord, rather than spending six appointments a day there was a change of Government and the idea was going to look at a landlord who he knows is a good shelved, so it was not pursued with the detail that landlord because he has to go through the whole would have been helpful. licensing system, as opposed to dealing with a landlord who is much more problematic, and he Q16 Andy Sawford: Why would you not consider knows is a bad landlord, because he is not coming to Newham’s move a step forward, albeit it is at a the framework. What we have to do is to encourage localised level? The same principles apply as you are local authorities to aim their attention at the bad describing. landlords much more effectively—by assuming that Dr Rugg: It is a strange-looking system, because there is nothing embedded within the system that looks at the sector is good, and then aiming at the bad how they deal with the landlords that have then landlords—rather than assuming that the whole sector stopped being landlords. There is an awful lot about is bad and the whole thing has to be regulated. what landlords should pay to be part of the system. I am not sure if the local authority has in play a huge Q12 Andy Sawford: How will they fairly target their phalanx of environmental health officers to go out and activities so as to avoid making assumptions about examine all the properties in Newham, which is a very certain types of landlords or properties and so as to poor area. It is a terribly poor area that needs a whole deal fairly with the landlords? What form of redress lot of environmental health officer input into dealing would there be if a landlord felt that they—if this is with those landlords. If it is anything like somewhere as light touch as you describe—had not been dealt such as Scotland, Northern Ireland, which has got a with fairly or properly? new system, or the Republic of Ireland, which Dr Rugg: Every local authority environmental health introduced a licensing system, essentially they have a officer you speak to will tell you who the bad very big room full of an awful lot of documents that landlords are. They could name six landlords they nobody has the time or resource to process. know, and if they had enough time and resources, and if they were convinced that the punishment that could Q17 Andy Sawford: Professor Partington, the Law be offered to those landlords was worth their while, Commission has a different view. You have argued for they would go and deal with those landlords, but the enhanced self-regulation. framework for dealing with those landlords is more Professor Partington: When we started, our opening complicated. Say you have a bad landlord in an area position in our first consultation paper was a with absolutely shocking property and 50 tenancies, compulsory registration scheme not a million miles all of whom would suddenly become homeless if they from that being proposed by Dr Rugg. However, in dealt with that bad landlord, because that landlord is the light of the evidence we received, we came to the going around taking people out of hostels to conclusion that, if it was going to be a really effective accommodate them in his HMOs. The local authority form of regulation, so that there were sufficient staff is a little bit conflicted about how to deal with that to do the sorts of things that would need to be done, landlord, so we want to think about supporting as has been just sketched out, it could not be as cheap frameworks for management systems to take over as was being posited. control of those properties while we sort out what to It was on that basis that we thought that a sensible first do with the situation. Local authorities are stymied step would be to do what we ultimately recommended, about how to deal with bad landlords, because they which was enhanced self-regulation, which was a do not know how to deal with their tenants. combination of regulation of the letting market, because an awful lot of the actual running of rented Q13 Andy Sawford: How much would it cost for a accommodation is done by agents, not directly by landlords. Landlords themselves could comply with landlord to be registered? What would be the fee? this system, either by using a regulated or licensed Dr Rugg: I am talking a tiny amount—£20, £30 or agent, or by themselves getting an accreditation £50. through a local authority accreditation scheme. It Andy Sawford: A week, a month or a year? would be through one or other of those mechanisms Dr Rugg: A year. that the local authority would begin to acquire the information they would have about the rental sector Q14 Andy Sawford: What would be the total budget in their area. of this regulator? What current good example would you base this on, in terms of a light-touch regulator Q18 Andy Sawford: How do you propose within doing such a significant role that would be funded by that system that the worst landlords will be tackled? a levy of that amount? The Law Commission itself is often cited as a good Dr Rugg: What it does is set in play a system that example of self-regulation, but frequently allows the local authorities to do the work that they self-regulation fails at the margins with those whose need to do to sit behind it. practices are, frankly, the worst. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG01 Source: /MILES/PKU/INPUT/027272/027272_o001_michelle_130204 HC 953-i PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 5
4 February 2013 Dr Tim Brown, Professor Martin Partington CBE QC and Dr Julie Rugg
Professor Partington: We had some preliminary improve those properties, if they were minded to. It discussions with the OFT about whether some sort of might be that new regulation would make them think, industry standard could be created. I am not sure that “Well, actually I can’t be bothered with this. I’ll sell anything can happen unless the whole of the rental it to another landlord,” and that new landlord then agent sector of the market is regulated. At the thinks, “Actually, I am going to get a better quality of moment, as you know, it is a voluntary thing and large rent. I am going to improve it.” numbers of agents fall outside any professional We don’t know what the play of decisions is among network whatsoever. We felt that, if there was small landlords. We have spent a lot of time thinking compulsory letting agent regulation, the industry itself about institutional investors. The majority of our would have codes of practice that would deal with sector sits with private landlords; we do not have a those agents who were letting the side down and clue what they think about anything, really. We need raising the reputational problems that still bedevil the more understanding about what the economic drivers market disproportionately, because those are always for those landlords are, how mortgaged their the stories that get into the press and on to TV properties are and, most importantly, what percentage programmes and so on. That is the way we thought of them are thinking, “I have to pay a mortgage on we would do it, and it would be a reasonable ask for my rented property, but actually I have just lost my those landlords who wanted to let for themselves and job and the tenant is in rent arrears. How am I going have nothing to do with agents to have some to square this one?” We have to understand more of accreditation. Through that, if tenants started the sector than just how these big players work. We complaining, the local authority would have a handle have to understand the economics at a much more on them because they would have met them at the micro level. accreditation sessions. Who knows whether that would work or not, but we thought it was a more Q20 John Stevenson: I am just concerned that you sensible and more credible alternative to start with. are assuming a great deal of knowledge and understanding of a landlord. Some people are what I Q19 Andy Sawford: To varying degrees, both would call a “casual landlord”, maybe renting a approaches would aim to improve standards, property to a friend, and you are expecting them to particularly at the bottom end of the market. We have register. They might not even know that they are had evidence from the Council of Mortgage Lenders meant to register. saying that there is a risk that, in trying to improve Dr Rugg: Exactly. quality at the bottom end, you actually drive up rental John Stevenson: Do you not think that would create prices. At a time when people are finding it more a problem in itself, in that there would be an awful lot difficult, in an economic context, to meet their rent, of landlords out there who would not have a clue clearly there could be some consequence if rental about the regulation and would assume that they did prices are pushed up. Do you recognise that criticism not need to do anything? and how would you answer it? That is for any of the Dr Rugg: That is part of the problem. We have a lot panel; Dr Brown, you have been quiet for a little of people who are landlords and do not even realise while. that they are landlords and they have responsibilities. Dr Brown: Clearly, one of the crucial issues is dealing with the poor-quality accommodation and rogue Q21 John Stevenson: How would your regulation landlord issues at the bottom of the market. There is work, then? plenty of evidence—for example from the Chartered Dr Rugg: It is a very simple, smart system. In my Institute of Environmental Health—about the mind, I often equate it to seatbelts—clunk, click. relationship between poor-quality property in the Drivers are not stopped at every single point to see if private rented sector, poor health and low educational they have their seatbelts on but, if they are found attainment, so it is clearly an issue that has to be without their seatbelt, there is difficulty and word soon addressed. The issue will be whether, by bringing in gets round. The biggest thing that you can do to push regulation, you will force out reasonable landlords as forward in the sector is to say that local housing well as getting rid of rogue landlords. It is getting that allowance claims will not be processed unless there is balance that is going to be the issue at the bottom end a landlord licence number. That is a really big way of of the market. In the Montague review, there was getting through to people, especially at the bottom end really strong evidence that institutional investors were of the market. I am not saying every landlord will be concerned about this “Rising Damp” image. It is often on board tomorrow but, through the taxation system— a misconception about what the sector is, but it is a if they are paying their taxes, which they should be— very powerful image and it is something that we have and all these other systems, there are lots of ways you to address. can inform people that they are indeed landlords. Dr Rugg: If people tell each other enough that there Professor Partington: Could I just add a comment to is a bad reputation about something, then there is a that? I think you are going back to this question that bad reputation about something, as opposed to if they I raised earlier about ignorance versus wilful actually address the issues. With property quality at malevolence. For sure, there are some malevolent the bottom of the sector, we do not know enough landlords out there but they are, I think, a small about the economics of private renting at the bottom minority. The problem with ignorance cannot be of the market. There is going to be a proportion of overstated, and one of the things that we were trying properties that are not rented and are not mortgaged, to do was to create a form of tenancy agreement that so the landlord actually would have flexibility to was written in plain English, which would be a cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG01 Source: /MILES/PKU/INPUT/027272/027272_o001_michelle_130204 HC 953-i PRS CORRECTED transcript.xml
Ev 6 Communities and Local Government Committee: Evidence
4 February 2013 Dr Tim Brown, Professor Martin Partington CBE QC and Dr Julie Rugg document both for landlords and for tenants about Q25 Mark Pawsey: What would your views be what their mutual rights and responsibilities were. The about implementing a scheme such as that in previous Government were minded, I think, to take England? those parts of our recommendations and develop Dr Brown: I worry sometimes about us doing policy them. Unfortunately, they lapsed with the change of transfer—grabbing an idea in one country and Government, but I hope that that has not been thinking we can just transfer it here straightforwardly. forgotten entirely, because I do think that these Economic, social, environmental and cultural things problems of landlord ignorance—I agree with you— are different. What I think is important is that it can hardly be overstated. actually gives us some food for thought—something I Dr Rugg: I would just quickly say that registering as sometimes call “shock therapy” for my students, a landlord on the system would then give you access where it challenges us on what we might do going to tenancy agreements, lots of tenancy regulation and forward. other places you could get information. It would become a single port of call for anyone with an Q26 Mark Pawsey: Is it the existence of those inquiry about renting. It is useful to get people on schemes that has enabled the private rented sectors to board to see that that is where the information is. be bigger in other areas? I know that ours has grown Dr Brown: It is also worth saying that a lot of local very substantially, and you have spoken to us about authorities working through private landlord forums the growth from 9% to 17% between 1990 and today. have, over the past decade, done a lot of really good Could we grow the sector more if we were to implement some of these? work to try to take on board and challenge some of Dr Brown: We could do with those sorts of incentives these ignorance issues through publicity. I am thinking and that is happening in some countries. It is not a of towns and cities such as Stoke-on-Trent and Hull, simple picture, because in Germany it is actually which have done an awful lot to start to overcome this declining, that sort of system, but it is increasing in issue, but then it does become an issue of priorities Australia. It is different patterns in different countries, and funding to decide how much of a priority that is but it is something we ought to consider and debate. against other things in the housing sector. Q27 Mark Pawsey: Any sector that is unregulated Q22 Mark Pawsey: The Committee is quite keen to very rarely says, “Yes, give me the regulation.” Do understand what happens in other countries, and I you think that the regulation has worked and that know, Dr Brown, that you have done some work and landlords, if offered that kind of scheme in the UK, submitted some evidence to DCLG about the private would take it up? sector social supply schemes. Can I sum those up as Dr Brown: I think some would, and it ought to be being incentives for landlords in exchange for some piloted or prototyped to see if it would work. I suspect kind of regulation? How does that happen in the there might well be some issues with the Treasury countries where it exists? over taxation. Dr Brown: Every country is different and has different systems. In federal systems of government, Q28 Mark Pawsey: I was going to ask you why you such as in Germany and the United States, it varies think it has not happened here. enormously within the country. If one talks about a Dr Brown: Certainly in the work we did for the model for the United States, that is very misleading, Department for Communities and Local Government because what happens in New York is very different three years ago, we got fairly short shrift from the from what happens in Washington, and so on. We do Treasury over taxation incentive changes, and I have to be careful about it, but it is very much about personally believe that that is the major obstacle at the taxation incentives for landlords—not just moment to being innovative around this sort of institutional landlords, because they are taken up by approach. small landlords as well—where they get taxation incentives in exchange for agreeing, for a certain Q29 Mark Pawsey: Do any of our other witnesses period of time, which depends on the system, that they have anything to say about private rented social will house a particular client group, at a particular rent supply? level, with some sort of control over rent increases. Professor Partington: We certainly recognise that, if there was to be a new approach to regulation, incentives would have to be put in place. They could Q23 Mark Pawsey: Importantly, is this a voluntary be incentives involving preferable access to housing agreement on the part of the landlord or is this benefit, preferable access to the courts, tax incentives something that applies to all tenancies within that or whatever. We did not go into the details of that particular state of a federal body? because, as the Law Commission, we try to steer away Dr Brown: It is not a comprehensive system that from party political issues, or issues that might covers every landlord, but it is very much local. become party political, but we undoubtedly recognised that that would be necessary. Q24 Mark Pawsey: The landlord would choose to The other thing I would say is that in our opt in. framework—particularly going back to my hobby Dr Brown: Yes, but it is built into the culture so that, horse, which is seeing the social and private rented in some countries, it has become a natural traditional sector, in a sense, as part of a global whole—we did way of carrying out development. seek in that context that partnerships between local cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG01 Source: /MILES/PKU/INPUT/027272/027272_o001_michelle_130204 HC 953-i PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 7
4 February 2013 Dr Tim Brown, Professor Martin Partington CBE QC and Dr Julie Rugg authorities and the private rented sector could be Q33 Bob Blackman: Can you give us some practical created. I do not know whether they would, in fact, examples of what the impact has been of what you but our legal infrastructure that we were offering describe as legal and political constraints? What could would certainly have provided for that to create the we suggest, for example, that the Government could kinds of incentives and the kinds of relationships do to combat them? between local authorities and private landlords that Professor Partington: All I can tell you is what life perhaps do not exist at the moment. was like when I was trying to do the project. The then Dr Rugg: My slight concern is it sounds a little like Minister, Nick Raynsford, commissioned the work temporary housing schemes, which operated across from us and he was working with the social rented London, which were hugely expensive and actually side of the house, as it were. Years went on, and created a whole expectation amongst landlords that, Housing Ministers came and went like water down the in order even to think about housing somebody on drain—that might be slightly unfair, but they did come local housing allowance or housing benefit, £1,000 and go with extraordinary regularity. There was a would be offered by the local authority before he got point at which we suddenly discovered, without any out of bed, practically. These types of schemes are consultation with us, that we were going to be very varied. As Tim is right in saying, these countries masterminded by the private sector side of what was are very varied, particularly in terms of their welfare then still the ODPM. This had the effect that the structures. interest that existed among civil servants for the work that we were doing and the contribution that we might Q30 Mark Pawsey: Is there anything we have to make to overall global social policy became, from my learn from these schemes that you are aware of? perspective, a narrower one about whether what we Dr Rugg: We have to learn from our own schemes were recommending might or might not facilitate the and how they have worked here. Our own schemes private rented sector. are in our own context. We spend a lot of time looking Frankly, once we had got to this stage, civil servants abroad without fully understanding what is going on started saying things to us like, “Hmm, this is all very here. We have to learn what has worked here and what difficult,” or “I don’t think we’re going to make much has not worked here, and then we can think about how progress unless you get political engagement by to expand out from what we have. Certainly I agree Ministers.” My difficulty was, because Ministers were with Tim—sometimes a good idea can be expanded, coming and going every eight or nine months, you and we can think, “Yes, let’s think about that idea,” know that the shorthand is that if civil servants tell but a lot of investment has been given into going you “You have to get political engagement,” they have around the world and seeing what other people do. no interest in taking it forwards themselves. That is They all do not have very large private rented sectors; where I got slightly hacked off about the process that a lot of these places, such as Germany, have the same we were going through. rate of small landlordism as we have. I have to say I went to the retirement party of one of the civil servants who had been leading for DCLG, and he took me aside at the end and said, “Do you Q31 Mark Pawsey: Do they have the problems? know, Martin? I do feel a bit guilty that I didn’t really Dr Rugg: We do not know. From my perspective, yes; push the Law Commission stuff as hard as I might you can have lots of studies that tell you what the have done.” My heart did sink, but I then perked up regulatory and legal frameworks are for renting, but I every time I went to Cardiff and officials in the Welsh have not seen, for example, how long a tenancy is. Government kept on saying things like, “This is Who brings a tenancy to an end in Germany? What frightfully good. We cannot understand why they are are rent arrears like in Germany? I really do not know, not doing it in Whitehall.” I live to fight another day, because that information is not routinely collected. and I am not an embittered old Law Commissioner. I do think that what we were trying to do required a bit Q32 Bob Blackman: Professor Partington, if I could of imagination and input and, for whatever reason, start with you, in your written evidence, you have we lost the political impetus through the way it was given us quite a lot of detail about the legal and managed within the Department, as we were going political constraints that exist on the sector. Can you through the work. give us some examples of what that has meant and how it has impacted the sector, and what changes you Q34 Bob Blackman: Dr Brown, you were part of would like to see that would benefit the sector as a the Montague review, as you said. Did you consider result? legislative changes and, if so, what did you conclude? Professor Partington: The most important message Dr Brown: We did have quite a lengthy discussion on that I was trying to get across was this idea that we setting up a kite mark scheme to profile good-quality should not see the council and the social sector over private renting, in terms of management and quality there, and the private rented sector over there. I do of accommodation, as a way of attempting to believe really quite passionately that renting is part of challenge this misperception about the private rented the housing market and that, if the social side of that sector. The issue, which is the reason I believe it was market and the private rented side can be encouraged not included in our recommendations, was whether to work together, it will be for the benefit of the third that would be a voluntary scheme, whether it would of the population or whatever it is who now rents in create another bureaucratic system, or whether it that market. That would be my primary answer to would just create another system of quality control? your question. We left it as an issue and we are hoping that the new cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG01 Source: /MILES/PKU/INPUT/027272/027272_o001_michelle_130204 HC 953-i PRS CORRECTED transcript.xml
Ev 8 Communities and Local Government Committee: Evidence
4 February 2013 Dr Tim Brown, Professor Martin Partington CBE QC and Dr Julie Rugg task force that the Department for Communities and report, as I understand it, those constraints change— Local Government is setting up to take forward good the balance changes. practice and advice on institutional investment will I remain of the view that to get that there has to be a consider that. It, in a sense, was trying to create a new tipping point to deal with some of these reputational brand—a new image—for the private rented sector. issues. It might be that we could, in theory, do what Maybe that might be something worth thinking about. we want to do with the existing framework, but a new legislative settlement would reassure that sector of the Q35 Bob Blackman: Dr Rugg, I will just make one investment market that the Government were in it for comment. I completely agree with you about what the long term. It would have to go forward on a happened with temporary housing in London. Having cross-party basis, and that was one of the things that lived through it, it was institutionalised poverty. That we achieved. We got a very high degree of buy-in is the only way to describe it. Do you have any from all the political parties for the work that we comments? were doing. Dr Rugg: It is just very quickly to say that the sector has grown massively, despite these constraints that we Q38 Chair: I have one point to see whether there are all being quite upset about. We are looking in the really is a difference. Dr Rugg, you are talking about wrong place. Looking at all these regulatory the registration of all landlords. If we pursued the line frameworks and how we can free them up to grow the that Professor Partington was suggesting about having sector, the sector is growing. It is growing as we are regulation of the agents who manage properties, and talking. These things are irrelevant at the moment. then merely deal with landlords who choose to What we have to think about are issues for the tenants manage themselves through a regulatory framework about their security and their affordability, because or registration, would not that be satisfactory? there are too many tenants for the number of Dr Rugg: You run into all sorts of definition properties, in a sense, which means that it is very difficulties, because some letting agents are landlords. difficult. If there was a kite mark, the tenants would It is easier just to deal with everybody the same, in not be looking for the kite mark; they would be my view. looking for something they can afford. In some areas, Chair: There is a difference then. that is getting to be very difficult indeed. Q39 John Stevenson: Just talking about the tenancy agreement itself, and the assured shorthold tenancy Q36 Bob Blackman: Do you think there should be primarily, do you think that the present arrangements any legislative changes? are fit for purpose, or do you think we should have a Dr Rugg: It is a very big question. statutory tenancy agreement that would be the Bob Blackman: It is a very big question, but are you industry norm? able to give answers to the question as a witness? Professor Partington: We absolutely clearly adopted Dr Rugg: Okay, just to focus on the regulation, I think the view that there should be a statutory minimum that the compulsory regulation of landlords would still would be the industry norm but, having said that, we carry substantial benefits, yes. did not think that every tenancy agreement had to be Professor Partington: I just wanted to add something. a six-month one. On the contrary, we said you could Undoubtedly the market has been a great success, but have five-year ones or you could have 15-year ones. as I think we were saying at the beginning of this You could have them until the children leave home session, it is still the case that an awful lot of the and go to school or whatever. They could be used with market is provided by people who are in it, for great flexibility. The key point, from our point of view, whatever reason, for the short term, not least driven was that there should be a document that explained, by the terms and conditions of the CML. I suppose in plain language, what the mutual rights and the line that I would take is that it is still worth trying responsibilities were. My experience of seeing to get new forms of investment into it that are more tenancy agreements is that they are still provided for institutional investment. tenants in what I would call legalese. They are not easy for people to understand. They are often Q37 Bob Blackman: Sorry, can I just clarify? Are inaccurate and they certainly do not reflect the you saying that the landlords are in it for the short protections that Parliament has already prescribed in term, or that they are being driven to short-term historical legislation. From my point of view, they are tenancies? That is a very important point. not fit for purpose and they are part of the problem. Professor Partington: I personally think that there is an element of both. Some landlords probably went Q40 John Stevenson: You foresee that the best way into it for the short term at a time when house prices forward is for Parliament actually to prescribe a set were rising. Many of them are probably stuck in it for lease that is used in the industry. a longer term than they may have thought they were. Professor Partington: That was certainly a major part There is this structural problem in that, because the of our recommendations, and I would not resile from Council of Mortgage Lenders wants to be able to that five years down the track. ensure that if they default, they can get the property Dr Rugg: Looking at the AST and tenancy lengths— back fairly quickly, you therefore cannot let for more I have argued this in the past—is deflecting attention than a year and so on. That is a problem, whereas if from what the problem is. The problem is why you had institutional investment, pension funds and tenancies come to an end in a way that is satisfactory the like, as was being suggested in the Montague neither to the tenant nor the landlord. We have limited cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG01 Source: /MILES/PKU/INPUT/027272/027272_o001_michelle_130204 HC 953-i PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 9
4 February 2013 Dr Tim Brown, Professor Martin Partington CBE QC and Dr Julie Rugg information about that; we need a lot more in the private rented sector are mobile and will want information. We are beginning to understand that, to move regularly. actually, 75% of tenancies are ended by the tenant, but then we do not know what that means. Are they ended Q44 John Stevenson: The present arrangements do by the tenant because they have fallen into arrears and give the potential for somebody to have a five-year they have ended the tenancy, or have they ended the assured shorthold tenancy, which would give them tenancy and are quite happy to move on? We kind of security if they had a landlord who was willing to do not quite know. Unless we are very clear about grant them that. why tenancies come to an end, the length of the Dr Brown: Yes. tenancy is immaterial, in a sense. You could go to Dr Rugg: There are assured shorthold tenancies Germany and all these places with different tenancy available. People can offer those if they want to. What structures and ask them, “Actually, could you tell us we have to do is look at that bit of the market and what happens with the tenancies in real life? How say, “Why are they offering them in that part of the long are tenancies? Who moves? How quickly? What market, but not in other parts of the market?” There is going on?” are bits of the market where we could maybe start encouraging landlords who want long-term tenants to Q41 John Stevenson: From what you are saying, gather together, and let them badge themselves there has been no research as to the reasons why slightly differently from landlords who really only tenants give up their tenancies. You are saying that want short-term tenants. The market is very immature 75% of tenancies are brought to an end by the tenant, in getting a good link between what people want and rather than the landlord. what the market is supplying. Dr Rugg: It was the latest evidence that demonstrated that. The market is very different. A lot of students Q45 John Stevenson: You have commented that the only want it for a term. A lot of people are in the market is very immature. Is that not therefore an sector because they are between jobs or they are argument for actually doing very little at this moment moving from house to house. There are lots of in time to allow it to develop and mature? different reasons why people move on. Dr Rugg: There are arguments in favour of that. It is a market. We have to let it mature but, at the same Q42 John Stevenson: You could argue that actually time as thinking we should let it get on with itself, we that is a sign of success, in terms of the present are also larding on top of it lots of intentions that the arrangements. market should not really have. The big concern about Dr Rugg: The sector has remarkable flexibility and families and private renting is that a lot of these that is its strength. It can be remarkably flexible. families should be in social housing. We are expecting Anything that ties people to a single set of principles the market to deliver social housing at the same time means the sector stops being as flexible as it needs to as being an open market where you can charge market be, so we have to be a little concerned. I am absolutely rent. You cannot have both. in agreement with Martin on the issue that we need to be very clear about what tenancy agreements are Q46 Simon Danczuk: Just a brief question: how about, but also landlords and tenants need to be very much are banks restricting the growth of the private straight with each other. A landlord might think, rented sector, in terms of offering mortgages for “Actually, I only want a tenant for six months, buy-to-let and things? We see that in terms of owner- because I am hoping to sell,” or “I am just out of the occupation. How much are banks playing a part in country for six months.” He should tell the tenant that, dampening down the potential growth of the private but they are not, and tenants are entering into a rented sector, or are they not? tenancy thinking, “I might settle here for a few years,” Dr Rugg: Some landlords would argue that they and then finding they are not. would be expanding their portfolios if they had access to further mortgage finance. To go back to the point Q43 John Stevenson: In terms of the actual tenancy about rent arrears, some landlords might be thinking agreement, are you in agreement that it should be a little carefully at the moment about whether that is statutorily prescribed? a good idea or not. If they have had a bad experience Dr Rugg: We need to think a little more about what of rent arrears and they are not really sure of the area is happening with the sector at the moment. We are that they are in, and if the house prices do not look rushing into, “This is a good thing; this is a bad like they are going up and yields do not look as good, thing,” without thinking what is the problem we want the decision to expand your portfolio, if you are a to solve and what is the best way of doing it. small landlord, is a very difficult decision to make. Dr Brown: I will not go over the same ground. All I Certainly there would be more options if those would want to do is point out that, with the increasing mortgages were more readily available, but I am not number of families who are in the private rented sure if landlords would be automatically rushing sector looking for long-term accommodation, we have forward to do it. to be forward-looking and thinking about the length Dr Brown: There is some evidence that there are more of tenancy and what the nature of the tenancy is, if buy-to-let mortgage schemes available than there were that is going to become—and I think it is going to two or three years ago, but I do not see a large take-up become—a much bigger part of the private rented of that. Certainly in the reports of mortgage lenders, sector. In a sense, what we have at the moment is there is not a huge take-up of that and I think that is based around the issue or a picture that people living because of the reasons Julie said—landlords cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG01 Source: /MILES/PKU/INPUT/027272/027272_o001_michelle_130204 HC 953-i PRS CORRECTED transcript.xml
Ev 10 Communities and Local Government Committee: Evidence
4 February 2013 Dr Tim Brown, Professor Martin Partington CBE QC and Dr Julie Rugg themselves are thinking, “What is the picture?” at on two things that could improve the sector—this is what is quite an uncertain and unclear time in terms to each of you—what would those two things be? of rent and rent arrears. Dr Brown: I do not want to go on about it, but I do think that doing something about the misperception of Q47 Simon Danczuk: Is there a shift towards the image of the sector would be really crucial. owner-occupiers privately renting out properties Dr Rugg: I would change the broad rental market because they are in negative equity but they want to areas, because the local housing allowance rates move on? They are renting out properties perhaps simply do not reflect what is happening in the market. informally or in a different way? Professor Partington: I would go for two things. One Dr Brown: Yes, it is another part of what is happening is get a grip on the documentation. Get a plain to the sector. Unlike owner-occupation or the social language tenancy agreement on the books so that rented sector, we always have to remember it is such everybody can use them and sing from the same song a diverse sector in terms of who is providing and who sheet. The other would be to regulate agents. Get the needs or is going into that sector. It is often like lots letting agents regulated fully, rather than just putting of very small sub-sectors that we bring together, when all the regulatory burden on the 40% or so who are they are actually quite separate functioning systems. signed up to ARLA or RICS. Chair: Thank you very much indeed for coming to Q48 John Pugh: Can I also declare an interest as a give evidence this afternoon. It is very much tenant in London? Just very quickly, if you had to pick appreciated.
Examination of Witnesses
Witnesses: Kay Boycott, Director of Communications, Policy and Campaigns, Shelter, Councillor Tony Newman, Member of Environment and Housing Board, Local Government Association, Jacky Peacock OBE, Secretary, National Private Tenants Organisation, and Alan Ward, Chair, Residential Landlords Association, gave evidence.
Q49 Chair: Good afternoon and welcome. Thank access the housing market, so the private rented sector you very much for coming to give evidence. Could is therefore where many people are currently heading. you just say who you are and the organisation you We also have concerns, which you may, Chair, come represent to start off with, please? on to later, around what I heard being discussed in the Jacky Peacock: I am Jacky Peacock from the piece of evidence we were just listening to around National Private Tenants Organisation. My day job is what is happening now in terms of some of the actually running the Brent Private Tenants Rights practices, such as with the letting agents. Hugely Group. exorbitant fees are being charged out there that are Kay Boycott: Kay Boycott from Shelter. now making the private rented sector, for many people Alan Ward: Alan Ward from the Residential who previously perhaps could not afford to get on to Landlords Association and a working landlord. the home ownership market, equally inaccessible. Councillor Newman: Councillor Tony Newman, Yesterday—anecdotally, but as a fact—I was being representing the Local Government Association and told about people having to find £3,000 upfront for a member of the Environment and Housing Board. two-bedroom property in Croydon, which is the borough I am from, because they were being asked Q50 Chair: Thank you for coming. If you do find for £350 in admin fees and another £100 in reserve yourselves in agreement with one of the other fees, etc, all of which was non-returnable. There is witnesses, please say so, but you do not have to repeat another issue going on there in terms of what is exactly what they have said. We can then get on and happening with the private rented sector in some parts cover more of the subject areas, so that would be of the country, and the difficulty in accessing that from helpful. an affordability point of view. The private rented sector has been growing in recent Kay Boycott: If I were to add to that, the work that years. Do you think that is a norm, or is it a product Shelter has commissioned, in terms of the growth of of the particular circumstances we are in the tenure, suggests that even on all sorts of different economically? Will this all change and the sector start economic scenarios the sector is going to grow for to shrink again, if we get back to a more normal some of the reasons that have been said. We have seen position when the housing market picks up? long-term trends in terms of the numbers of people on Councillor Newman: To take that head on, if you look housing benefit in the sector, which shows the at the reduction in the supply of new homes coming pressure in terms of a lack of social housing and a forward at the moment, there is something going on growth in the lower-income groups who are now with the private rented sector becoming, rather than accessing the sector. At the higher end, there are perhaps a short-term alternative for many people, part difficulties in terms of being able to save for a deposit of what might have to be a long-term solution, whilst also paying rents, which take up a large amount because there is a reduction in supply. There is a lot of household income, meaning that you are seeing the of evidence that mortgages are harder to come by. The long-term decline in home ownership. average deposit required is now £26,000, so there is a We see that the sector is going to grow, most notably lot of pressure. It is very hard for many people to in terms of families with children. In fact, there are cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG01 Source: /MILES/PKU/INPUT/027272/027272_o001_michelle_130204 HC 953-i PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 11
4 February 2013 Kay Boycott, Councillor Tony Newman, Jacky Peacock OBE and Alan Ward now over a million families with children in the Q51 Chair: We discussed earlier the issue of the private rented sector. It is the fastest-growing segment reputation of the private rented sector, which often is and it has doubled in the last five years. It is important not very good. “Rising Damp” has been mentioned as to note that the growth is here to stay. It is partly something people often think about when the sector is because of the market changes and particularly to do mentioned. On the other hand, when surveys are done, with the recessionary environment, but actually some satisfaction levels are very high. How do we square of those trends were there before we saw the credit that? crunch. Kay Boycott: With satisfaction surveys, “Are you Alan Ward: It is the most accessible form of housing, satisfied?” is different from “Are you delighted?” for the reasons that my colleagues have said: home When you ask people, they cannot imagine anything ownership is difficult to afford and it is expensive to different from the rental market they have. When you get into. Notwithstanding Kay’s comments about the have an overheated rental market, you are literally family market growth, the under-35s are still 50% of chasing lots of different properties. A lot of the stories the market and we have a considerable shortfall every we hear are that you take what you can get. Are you year in the number of properties available. There is a satisfied with that? “Do I have a roof over my head? 100,000 shortfall in actual construction. Yes, I have.” You can then delve deeper with people It may be worthwhile looking at how the PRS has and ask them questions such as, “Would you like this? developed. It began in 1997 with the introduction of Would you like that?” For example, when we the buy-to-let product but, at the same time, a lot of surveyed families and talked about more stability, the individuals felt that their pensions were a poor ability to know that you were not going to be evicted investment because of the Government’s policy at that so that your children could stay in a school for a time to take away tax credits, so they were looking school year and the ability to put down roots in your for alternative forms of investment. It may be the local community and make that home your home, the numbers got much bigger at that point. conflux of those two things: an investment product, in other words buy-to-let funding, and then the growth It is a very immature market, as we heard before. It is almost the equivalent of the telecoms market, where that came about in the property market that produced there were very limited providers, and you got a a million homes in the private rented sector in that fixed-line phone and you knew that it would take a first decade. while to come. It is almost that the private rented Why it will continue growing? Mention has already sector has not evolved to an extent where tenants have been made of accidental landlords. There are people a sense of what could be, given that on average they who, since 2007, have found themselves unable to sell are paying £9,500 a year for this service. properties, or perhaps inherited properties and did not Jacky Peacock: My feeling is that tenants do have want to sell them in that market. There is an estimate very low expectations of the private rented sector. I of about 300,000 who are accidental landlords. am not denying there are some private rented tenants Professor Partington spoke earlier about the changes where, if the tenant is satisfied, they are probably going forward. He was not confident that the market justified in being satisfied. I was visiting a property would actually grow. You have to look at those this morning for example, having seen the tenant on 300,000 as potentially quite a volatile group, as Friday. It was only when I went there I found that she landlords are going to face maintenance and had not thought to mention this enormous crack going refurbishment costs somewhere down the line. Rental right down the corner of the wall, for example. That properties require constant investment, and I am sure is just part and parcel of private renting. we are going to come back to that on standards. At a point at which those accidental landlords find they Q52 Chair: I suppose you have a different view, Mr need to spend money that they have not got, they may Ward. well withdraw from the market, so you may find a Alan Ward: I think the phrase is, “They would say balance. that, wouldn’t they?” People do not go to Shelter or Growth in the market will probably come from to tenants’ organisations to say, “I’ve got a good corporate investment, and that is a relatively recent landlord.” On the scale of things, there are 8.5 million innovation, although it has some of its own problems, people living in the private rented sector, and Shelter’s not least because of the levels of return. Perhaps, figure is, I think, 85,000 complaints in a year, so that again, you might like to come back to that one. is 1%. I am not suggesting that that is all of them— Jacky Peacock: It clearly is growing at a rate of knots there are probably others—but the other figure is the at the present time, and I cannot see that turning 85% satisfaction figure from the English Housing around very quickly. I am tempted to say it is, in part Survey, which says that tenants are fairly or very at least, up to you and your colleagues. If you are satisfied with their tenancy. Interestingly, owner- going to increase the supply of social housing and if occupiers are only 92% satisfied, and they have the you are going to regulate the banks in the sort of way solution in their own hands. There is always going that will release more borrowing to make it easier for to be a rump of dissatisfied occupiers, one way or people to buy homes, we could see some stemming of the other. the demand in the private rented sector. If you are Isn’t this part of the problem? The vast majority of minded to introduce some form of regulation at least the legislation and the regulation are predicated on to drive out the very worst landlords, that obviously the problems, but they are applied to the majority of will affect the market as well. compliant landlords. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG01 Source: /MILES/PKU/INPUT/027272/027272_o001_michelle_130204 HC 953-i PRS CORRECTED transcript.xml
Ev 12 Communities and Local Government Committee: Evidence
4 February 2013 Kay Boycott, Councillor Tony Newman, Jacky Peacock OBE and Alan Ward
Q53 Chair: We may come on to that in detail in a Councillor Newman: You also have to look at the second. thing that everybody has alluded to: the pressure is Decent homes standards were used as a measure for only going to grow. There has been a 30% increase in whether properties were decent to live in. It was the private rented sector since 2005. In boroughs like probably reasonably successful in the social housing Newham, I am aware of recent exercises where 1,800 sector. Is it really applicable to the private housing families were found living in little more than garages sector, or is the quality of management very often and sheds, so it is being exploited as well, although I more important, or as important, as the actual physical am not suggesting that that is by the many decent quality of the dwelling? landlords there are out there. With the pressures there Alan Ward: It is all of that, Mr Chairman. The private are in some areas, there is a huge potential for the rented sector, for a start, has the oldest stock. Some real exploitation of people. It is making sure that local 40% of it is pre-1919, so we are dealing with some authorities and others have the necessary powers to pretty ancient stuff. We have not had the benefit of the tackle that. There is an issue about where we are going £40 billion that has been invested in the social sector if that 30% increase was the same over the next five for improvements, as well. We have improved. The years, given what we have heard about some of the EHS again says that reported damp conditions have conditions already. improved from 21% in 2001 to 13% in 2010. There are opportunities for improvements with the green Q54 Simon Danczuk: Let me start by conducting a deal but, if you look at the figures on the cost to make quick survey. We will start with you, Jacky, and move homes decent within the private rented sector, the along. What percentage of landlords would you average cost is £6,000, and the cost for all sectors is estimate to be rogue landlords? £5,500. That is indicative, I suggest, that the problems Jacky Peacock: As has been pointed out, tenants tend are more serious within the private rented sector. to come to us if they do not have very good landlords. For the landlord, the improvement costs come straight off the bottom line. You do not get any allowances, Q55 Simon Danczuk: I was looking for your best not least until the property is sold, and then when it is estimate, as a quick survey. sold we still get taxed through capital gains. If a Jacky Peacock: Based on my personal experience, I landlord wants to sell a property to re-invest, we suffer would say 50% are—this may sound high. There was a debate earlier about ignorance versus rogue. The from 20% to 28% capital gains tax. The RLA has problem is that it pays to be ignorant, and therefore I argued for a long time that there should be rollover do not think there is this great dividing line between tax relief if a landlord wants to change markets, and so-called rogues. Rogues these days, I have noticed, move within the market to re-invest and use that have become almost the definition of people who are money to best advantage. It is a factor of the private renting without— sector that a landlord buys a property and tends to Simon Danczuk: Do you want me to come back to make improvements and to spend at that time, and you? then has a programme of ongoing improvement for Jacky Peacock: Every week, we see vast numbers maybe five to 10 years. That is my experience every week of people renting the most atrocious slums anyway. with high fire risks and no management, and being Kay Boycott: One of the things that I should say charged a fortune for the rent. If the tenant dares to upfront is that the private rented sector and landlords complain, they are thrown out. That is my definition are having to play a role that they were never expected of a rogue landlord. to play. They are being asked to house an increasing Simon Danczuk: That is the definition. number of people and people in more vulnerable Jacky Peacock: They are not this tiny percentage they circumstances. I do not think we can sit here and think are often portrayed as. it is acceptable for that number of properties and that number of people to be living below decent homes Q56 Simon Danczuk: Jacky, do you want to give me standards. We are talking here about thermal comfort; a percentage that you think are rogue landlords? we are talking about damp; we are talking about gas Jacky Peacock: I would say it is probably getting on safety. Regardless of who is paying for it, that is not for 50%. an acceptable place to be. Kay Boycott: When we talk about rogue landlords, we We asked on Thursday for people to give us their talk about people who are wilfully disregarding the stories to feed into the inquiry, as well as all the other law and the most egregious crimes. In that case, I can evidence, and 13% of properties being affected by only talk from the tenant’s point of view. Last year, damp is many hundreds of thousands of people. Some there were 85,000 complaints. As Alan has already of those stories are all about the health consequences said, that will not be the full amount. What we cannot of damp, and also some of the consequences that talk about is what the multiplier effect is, but at least people felt, in overheated rental markets, when they 85,000 people are affected. In terms of breaking the complained that actually there was going to be some law, one of the things that we do know is that with sort of consequence for that and were very concerned tenancy deposits, for example, there is a gap between about where they would go. It is very important to the number of tenancy deposits protected and the understand the landlord’s business model, but is it actual number of tenancy deposits that there should right that this number of properties are below decent be, which is about 1 million. That is breaking a law, homes standards? It feels to us at Shelter that Decent and whether you think that is rogue behaviour is a Homes Standards are appropriate. different thing. That is where you start to get into this cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG01 Source: /MILES/PKU/INPUT/027272/027272_o001_michelle_130204 HC 953-i PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 13
4 February 2013 Kay Boycott, Councillor Tony Newman, Jacky Peacock OBE and Alan Ward grey area. If there are no tenancy deposits, is there a Q60 Simon Danczuk: In terms of enforcement, what gas safety certificate? Are repairs done on time? do you think, Alan? Could they do more to tackle rogue landlords? Q57 Simon Danczuk: Kay, what do you think is the Alan Ward: I most certainly do. The EHOs I have percentage of rogue landlords? spoken to say that it is the most difficult criminal landlords who they cannot really touch. They hide Kay Boycott: I tried to work it out. It would be 85,000 behind limited companies, they change directors, they over about 8 million. shift property around within partnerships, families or whatever, and they are very slippery. The process, Q58 Simon Danczuk: Alan, what percentage of before they can even begin to prosecute them, is that landlords do you think are rogue landlords? they go to their legal department and get Alan Ward: I am happy to adopt Shelter’s figures on cross-charged for it, so they are reluctant even to take that. There is another figure that they quote, which is advice. They would rather go for the low-hanging fruit the 1,400 criminal prosecutions in the year. I prefer and prosecute a landlord for not having a licence, the term “criminal landlords”; “rogue” is a bit Del because they can tick a box and add a statistic. Boy—they are a bit dodgy but they are quite Kay Boycott: There are some good examples out agreeable. It is the criminals who I really think are the there. In the work that we have been doing with local bad ones, and I would put the figure of landlords who authorities over the last two years, we have seen some are wilfully criminal at 0.1%. There are those who are waking up to this and putting in some quite innovative naïve and can be persuaded to mend their ways. solutions. It would be good if that best practice was Councillor Newman: I do not like the sound of the spread. They are things like using the Proceeds of ones who are a bit dodgy, myself. I will stick with Crime Act to get at prolific rogue landlords, using Shelter’s figures, but I would just say you could have some of the planning regulations as well, and also one landlord who is in charge of maybe only two or having teams with the police and fire officers to have three properties that are homes in multiple occupation, a monitoring and intervention multidisciplinary team. Actually, this is all about resources. We are also seeing and you would then have an awful lot of people local authorities cut back on resources at a time when suffering as a result of that one landlord. I started off we think resources should be going in. There is a lot my contribution by saying you may have a perfectly to go at, but it is about the will and all about making reasonable landlord, but it could be the agent ripping examples. If people are slippery and they think they people off before the people even get into the can get away with it, they will carry on. It is only by property. doing this and publicising it that we will eradicate these rogue landlords. Q59 Simon Danczuk: Okay, let me move on. Councillor Newman: On that specific point, we have Councillor Newman, you are the weakest link—not had local authorities complaining that, with potential you personally, but local government—according to fines of up to £95,000, they have seen fines of only the Residential Landlords Association, because it says £3,000 when a court case has been pursued. There is it is not a lack of powers, but the willingness and an issue with the attitude of magistrates, in some ability of local authorities to enforce their existing cases. powers. Is that a fair reflection of what is going on? Jacky Peacock: I just wanted to say that we have Councillor Newman: I do not think that is a fair started doing some fairly low-key research just trying reflection. I can list some of the authorities taking a to identify in each local authority the number of proactive role in this—Oxford, Newham, Harrow and enforcement officers they have, compared with the others. I would, from a local government perspective, size of the private rented sector. For example, bring it back to the key driver of many of the Lewisham has three officers to inspect and enforce pressures that the private rented sector is facing, 25,000 homes, which means that, every year, each officer ought to be expecting to inspect 8,333 homes. which is supply. Local government has made it very That is one of the worst examples. Richmond has clear indeed, in terms of prudential borrowing caps, three and half officers for 17,000 homes. Sutton has that if they were lifted, we could deliver another two and a half officers for 14,000 homes. Tower 60,000 affordable homes to rent under the banner of Hamlets has six officers for 32,000 homes. You can local government. I would take that head on and say see that, with the kind of regulation that we have at no. I think local government would want some the moment, officers are having to go out, find fault streamlining of powers actually around the definition and then enforce, which in itself, even if it is just one of houses in multiple occupation and one or two other property, probably could be two or three weeks’ work, areas, which would make life simpler for us in terms if you have a reluctant landlord. It is just a drop in the of tackling rogue or criminal landlords. The thing we ocean. Effectively, there is no enforcement by local would be arguing for most strongly, here today and authorities. elsewhere, is that we have got to unlock supply in the private rented sector, whether that is through Q61 Simon Danczuk: I am conscious of time, so let institutional investment or other channels, or us keep it brief. Kay, you talked in your submission prudential borrowing caps on local government, and about retaliatory eviction and also about sentencing, we actually have to see a significant increase in supply which Tony picked up on there. Do you have anything because otherwise this problem is only going to get to add? Is it widespread? Are landlords retaliating worse. and evicting? cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG01 Source: /MILES/PKU/INPUT/027272/027272_o001_michelle_130204 HC 953-i PRS CORRECTED transcript.xml
Ev 14 Communities and Local Government Committee: Evidence
4 February 2013 Kay Boycott, Councillor Tony Newman, Jacky Peacock OBE and Alan Ward
Kay Boycott: It is always hard; these are people who top is not the solution. Equally, something that had are frightened. In some ways for a tenant, it is much real bite might actually be successful. easier to quit the property and move on than it is to Alan Ward: Bad landlords do not register, do they? I take a landlord to court. We do have a real problem am afraid I agree with Shelter again. The solution, we in getting tenants to take that case on. We do think believe, is to have a scheme of self-regulation and that, in terms of the fines available, it is also quite accreditation, but to have that on a national standard. hard for the councils to put that amount of money in As Kay has already said, if you have separate schemes when tenants might actually back out, because of their in different boroughs, you have to register and become fear, and if you are not going to get a big fine at the accredited with each one. We need to be uniform. The end of it. The whole thing needs looking at. RLA has been working with ANUK—the Councillor Newman: I must come back on what Accreditation Network UK—to create some uniform Jacky said, because there are councils such as Oxford standards on this. A bit of the steam has gone out of that have licensing schemes for HMOs. This is about accreditation with local authorities, simply because of trying to prevent the problem. There are other resources, cutbacks and so forth, but we believe that approaches. It was challenging with some of the a national scheme would benefit. landlords down there, but they are now working very What we also want to do is to take this accreditation closely together so that you have a licensing scheme. away from local government, a bit like building There is a small fee involved, but people then work control. Building regulations are enforced by in partnership, which is a far better way of doing it independent organisations. The building regs are set than waiting until something has fallen into disrepair by the local authority, but for the implementation of and then trying to chase the issue. them, if you build a new house, for example—as I have done recently—that building regulations Q62 Heather Wheeler: I am interested in whether approval is done by an independent body. The same we could quickly skip down the panel on whether you could apply to accreditation. That would then release think there should be a national licensing scheme or the resources within local authorities to focus on the whether we should go for a local one. Jacky, what do bad landlords. you reckon? Councillor Newman: I would think that we still want Jacky Peacock: Personally, I think there is a lot to be to see the emphasis on local schemes, perhaps with said for a national scheme, because it does mean you some national guidance or national standards sitting then have consistency. The problem with licensing, as behind them. I would say the role should still be with it has been drafted, is that it is still down to local local authorities in terms of accreditation. authorities actually having to check that people are doing what they need to be doing. When we started Q63 Chair: Just one point, Mr Ward: you say you do campaigning for licensing, what we had in mind was not want a national scheme because the bad landlords something that was very similar to what you have for are not going to register. Why should a bad landlord cars. Most of us drive cars, and do we find it really register for a self-regulated scheme? onerous to get an MOT? Do we think it is an Alan Ward: They probably would not. outrageous bureaucratic regulation to pass a driving test before you actually get behind the wheel, or that Q64 Chair: So what is the point of it? when you buy your road tax somebody checks that Alan Ward: It takes the cost away from local you have your insurance, that you are competent to government, because it would be an administrative drive and that your car is roadworthy? That is all we process. The accreditation scheme would have are asking for; it is not that difficult. Millions of additional value. All the landlord licence is going to people have cars. They do not regard it as some big do is to give you a name and a number. Variations on bureaucratic thing. it ask for property details as well but, in essence, it is With online facilities these days, it is quick and easy. only a name and a number. An accreditation scheme All the local authority has to do is have proactive is more than that, because it requires the landlord to teams that go out inspecting regularly just to ensure sign up to confirm that their properties are safe, legal that people are not defrauding the system, rather than and secure—there are three basic elements within it— relying on tenants to complain. As Kay has just said, so that they are compliant with regulation. If they are if you have a shorthold tenancy and the landlord is not, they are still subject to local government going to throw you out if you complain, you do not enforcement, so accreditation is more than just complain to the local authority or anybody else. licensing. If the bad landlord does not sign up, they Kay Boycott: Simply layering a national licensing are therefore outside of the accreditation scheme and scheme over all the tools that are already available is subject to enforcement. not really going to work. What you need is for the whole system to have some bite to it. The bigger Q65 Chair: They would be subject to enforcement question is how that is going to be enforced and how anyway. I am not quite sure— it is going to be much more rigorous. If it was a Alan Ward: Yes, indeed they would be, but a lot of replacement, for example, for lots of the different local government time is spent counting beans on schemes—which if you are a landlord operating in registration schemes, licensing and so forth. It does different local authority areas inevitably will layer on not add anything. When I have spoken to Manchester more complexity and will reduce your margin, which City Council, it has admitted that it has dropped its reduces your margin for repairs—that is not selective licensing scheme, because all it was doing necessarily going to help. Putting something else on was getting landlords to pay to get an officer to issue cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG01 Source: /MILES/PKU/INPUT/027272/027272_o001_michelle_130204 HC 953-i PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 15
4 February 2013 Kay Boycott, Councillor Tony Newman, Jacky Peacock OBE and Alan Ward a licence. It was not doing anything for the tenants or Q69 Bob Blackman: Also in your written evidence, the conditions of the property. you refer to the article 4 directives. You say that there Jacky Peacock: I went to one of these training courses are disincentives to applying these. Could you just for accreditation, and 10 landlords walked in that explain for the benefit of the Committee what the room. During that time, it was very clear that they disincentives are for local authorities? were not professional. They really did not have any Councillor Newman: There would be a cost involved, idea what they were doing, but they did sign a piece but also it is possible that somebody could be of paper saying that they would do this, that and the operating a series of HMOs and it takes some time to other. They signed to say that they had attended this become aware of it. It is straying slightly off here but course and they walked out with their accreditation. I if we are going to have more of a licensing scheme in have to say the brightest one there was very proud to place, HMOs need to be integral to that, rather than declare that he kept a book in which he wrote down something where local authorities, as I was saying every single thing that his tenants put down the earlier, are waiting until the damage is done and lavatory. He was the best of that bunch. They all running around trying to close the worst practices. We ended up at the end of that being accredited, and would rather be in a position of working with the best frankly I was not convinced. landlords to put the right HMOs or other properties in place. Q66 Bob Blackman: Turning to the issue of houses in multiple occupation, Councillor Newman, the LGA Q70 Bob Blackman: Mr Ward, you want to see in its written evidence has given us some views that article 4 directives done away with so that many local the legislation needs changes. It needs either needs to authorities will not have this. If you had your way, be less prescriptive, or definitions need to be changed. would we not see HMOs spreading out all over the Can you be clear what the LGA wants changed in place, uncontrolled by local authorities? the legislation? Alan Ward: Can I clarify this definition of HMO? Councillor Newman: We would like to see it Councillor Newman is referring to small HMOs under simplified. We would like to see it so that if somebody article 4, which are properties occupied by between was bringing into use a house in multiple occupation, three and six people. He is right the planning they would have to advise the local authority of that requirement for those is not charged for. There is a and work with the local authority. You can have a statutory requirement to license an HMO with five or situation at the moment where somebody could have more people occupying property on three or more a house in multiple occupation as a landlord but, for floors. It is slightly more complicated than that, but whatever reason—rogue, criminal or otherwise—it that is the essence of it. That is a licensable HMO and could be closed down overnight, yet if they owned local authorities do charge a licence fee for that. It another one next door, they could open that up as a varies from probably as low as £400 to as much as house in multiple occupation. We want to see some £1,600 or £1,700, and that is a local discretion. simplification of the powers—I think they are called Article 4 is a special case and this came about 10 the article 4 powers. years ago with a lobby group. “Studentification” was Bob Blackman: I will come on to that in a minute. the term. It was concern from some residents about Councillor Newman: Have you got the written the growth of student accommodation in certain cities. evidence there? What happened in October 2010 was that this Bob Blackman: Yes. Government modified a measure from the previous Government that gave local authorities discretion Councillor Newman: The local authority at the about using article 4 directions, and this means that a moment cannot actually levy a fee for even the basics. family house is class 3 use, whereas a shared house We keep hearing that we are bean counters, but we with three, four or five people in it is class 4. In order cannot actually levy a fee to count the beans in some for me to rent a family house—class 3—to a group of of these cases. three nurses or three young people not related to each other, for example, I have to go and get planning Q67 Bob Blackman: Do you think there should be a permission. It is not going to work. If I already have fee for the registration? a shared house with a group of four or five people in Councillor Newman: Yes, we absolutely do, and it—not a statutorily licensed one—I am unable to rent make that a more formal process. that to a family because I would lose my entitlement to rent it to sharers. That virtually freezes the market Q68 Bob Blackman: Is there a problem with for shared houses. consistency in how local authorities apply the rules There are 35 or so local authorities that have that exist already, meaning that landlords, and implemented article 4, and it is detrimental to the particularly larger-scale landlords, who may cross a shared market for young people. Typically, when they number of boundaries in boroughs or councils across leave university, burdened by debt, they want to share the country may experience different regimes, a house. They have been doing it while they are at uni depending on where their properties are. and they want to go on with that, because it is the Councillor Newman: I think that is probably a fair most economical form of renting for them. Those comment. I would accept there needs to be a greater houses are going to become harder to find, and it is consistency, but we would argue we need some extra frankly a piece of social engineering by some local tools to make that work. authorities, trying to get sharers to move into cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG01 Source: /MILES/PKU/INPUT/027272/027272_o001_michelle_130204 HC 953-i PRS CORRECTED transcript.xml
Ev 16 Communities and Local Government Committee: Evidence
4 February 2013 Kay Boycott, Councillor Tony Newman, Jacky Peacock OBE and Alan Ward residential areas. That is not going to be popular interfere with the present set-up. For example, Shelter either. is going for the stable rental contract. I have a question, Kay, on this one. Do you not think that your Q71 Bob Blackman: That is your objection. That suggestions are actually fundamentally flawed for a helps qualify the position. Jacky, how big a problem number of reasons? For example, the landlord can are HMOs in the housing market? break the contract if he or she sells. The risk there is Jacky Peacock: I think they are a significant problem that people can engineer that by transferring to a but, to be honest, I do not think that we see a clear spouse or another member of the family, and it also dividing line of HMOs’ bad management and real interferes with people who are accidental landlords problems, and other accommodation. We see it across who want to rent it out for only a few months or a the board, unfortunately, with very poor conditions. year or so, because they are trying to sell or are having to move away because of a job. Do you not think that, Q72 Bob Blackman: Just clarify, because you have by interfering in the market, you are actually going to obviously given us some strong evidence about the upset what appears to be a success? position of landlords. The landlords who let HMOs— Kay Boycott: No solution is going to be perfect, and so shared properties not with families, but a group of we have thought long and hard about the exceptions. sharers—are no worse than those who let to families, If you are prepared to go to the lengths of actually for example. transferring through the Land Registry to a spouse and Jacky Peacock: Managing an HMO is more difficult adding all that cost in, that is quite an extreme so, if you are not a professional landlord, you are measure, and I do not think we would see that likely to mess it up even more if you have the happening in the majority of circumstances. common parts to look after and keep clean, compared with self-contained flats. As I say, I cannot emphasise Q75 John Stevenson: You could see it by somebody enough that we need to see improved management just changing trustees, for example, which I know is and decent minimum physical standards for properties a Land Registry change but, nevertheless, a very easy across the board. We have probably made a mistake one to do. by just seeing HMOs as the problem; it is across the Kay Boycott: Some landlords are limited companies, board. Also, it is much harder to regulate. Depending so it would be changing all that. That is quite extreme, on the number of people living in the property, you but it might happen—no system is perfect. One of could have a licence for an HMO one day, but it the things that we are advocating is that stable rental would not be one the next day because somebody has contracts work already. The assured shorthold tenancy left. It may be again the day after. It is impossible to would allow that to happen. Actually, this is more police and impossible to operate. It would be so much about the cultural barriers to longer-term tenancies. better just to have a basic standard. Going back to my The work that we have done with landlords would car analogy, if you are driving a heavy-goods vehicle, suggest that, actually in the long run, given that capital you have to pass a stiffer driving test. Nevertheless, it appreciation is no longer going to be such a big part of should be in principle the same regulation for any the investment, longer-term tenancies would be better private rented home. financially for landlords.
Q73 Bob Blackman: Kay, how big a problem is Q76 John Stevenson: How would you deal with overcrowding in the private rented sector, particularly what I call the accidental landlord—somebody who is in HMOs? moving their job to a different part of the country and Kay Boycott: It is impossible to push it down to that cannot sell their house, but wants to rent it out just in level. Some 5.6% of private rented homes were the short term with a view to selling? overcrowded in the last period, so one in 20 will be Kay Boycott: This is a very disparate market. We overcrowded. In terms of the HMO thing, we have propose that this is a tenancy that could be used right to remember in all of this, when we talk about the now to cope with a certain segment of the market. If composition of the sector, that only 6% of renters are it was deemed that, actually, it was preferable for the in full-time education. Although things like whole market to go to longer-term tenancies with studentification has been important in some areas, predictable rents, that is a slightly different situation. there is a lack of evaluation of a lot of these schemes. What we are advocating is that it becomes a more Many boroughs need to understand the dynamics of normal contract that offers particularly this their local needs, and need both shared housing for predictability of rent rises to the tenant, with some young people and for families in rented safeguards on both sides. If it is better for the landlord accommodation. Our view on all this is broadly to have that longer-term assurance that the rent is neutral. Actually, it is up to the local plan and using going to be there, they are not going to have the cost the powers there. of voids and changing tenancies.
Q74 John Stevenson: My questions are really aimed Q77 John Stevenson: How would you establish your at Kay and Jacky. It has been argued that assured initial rent, because I notice you are suggesting it shorthold tenancies and assured tenancies combined increases by inflation? with market rents have transformed the private rented Kay Boycott: At the moment, there are many people sector. They have obviously increased in the last few paying market rents. If you start with the market rent, years and would appear to be increasing. Both of you what seems to be important to people when we talk to have come up with suggestions on starting maybe to them is the predictability of it. At this point, income cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG01 Source: /MILES/PKU/INPUT/027272/027272_o001_michelle_130204 HC 953-i PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 17
4 February 2013 Kay Boycott, Councillor Tony Newman, Jacky Peacock OBE and Alan Ward shock is one of the most difficult things for people to Kay Boycott: With the changes that are coming in cope with. If you can plan your finances, particularly terms of homelessness legislation, there are likely to your family finances, so that you know how that will be more homeless families discharged into the private rise—and we have looked at that in terms of CPI rented sector. Local authorities have some which, having spoken to landlords, seems to be the responsibilities about that, so they will need to do best index to go against—that is what people are after. minimum two-year tenancies, to assess suitability and People are after predictability. They want to be able to assess affordability, so there is quite a lot of to plan their financial future and their children’s difference in terms of that. Whether the market will future, in terms of knowing that they are going to be be able to react to that is quite tricky at the moment, in the same place. given that, for example, lenders may put in place restrictions in terms of the sorts of tenants who are Q78 John Stevenson: Jacky, you actually go a little allowed in properties that have a mortgage. For bit further with your new model of rent determination. example, they may put restrictions on letting to people How do you foresee that working? on welfare, for which it is likely that homeless Jacky Peacock: It is partly because we were looking families will have some sort of assistance. There is at what exists now, and that structure does exist now, going to be a big change in terms of families coming so it would not be a question of having to tweak it or in. invent some new method of regulating rents. I must just add that, last year, we ran, perhaps to some Q82 Mark Pawsey: In principle, you do not see any surprise, a joint conference with the National objection to the private rented sector meeting the Landlords Association, and we did ask how it felt needs of the homeless. about longer-term tenancies and why it did not let Kay Boycott: Our experience in terms of those who such tenancies. To a person, they said, “Well, we’ve have become homeless is that they are likely to be never thought about it. Nobody’s suggested it.” Since vulnerable for some time afterwards. A more stable we did suggest it, they went away to think about it. home and a longer-term tenancy would be better. They could not see any real reason against it and, indeed, did feel that that would be an incentive to Q83 Mark Pawsey: But it can do something. Jacky, stabilise. you feel completely the opposite to that, because you are saying that families must not be forced to accept Q79 John Stevenson: Bringing it back to rents, your private rented sector accommodation. Why? Why can suggestion is to interfere with the market rent. the private rented sector not fulfil that need? Jacky Peacock: In the context of the enormous Jacky Peacock: It is demonstrable that it does not and demand that we are seeing now and the huge it would be hard to see how it could. A private owner imbalance, yes. does not want to have that additional role. They are running a business, for goodness’ sake. Q80 John Stevenson: Do you think that that is the right approach? You are sort of accepting that Q84 Mark Pawsey: In which case, Councillor landlords have to have a return, but you are Newman, why is the LGA putting homeless families determining what that return should be. Different in the private rented sector? landlords will invest different amounts of money in Councillor Newman: Local authorities have a duty to their properties. Some will do it to a higher spec, homeless families and do not necessarily object. I which means they might need a better return to pay think that is the way you are phrasing the question. for that, and some might do it at the cheaper end. To answer the question, to disagree with Jacky, it can Jacky Peacock: I accept that, in normal markets, you play a role, but this gets us into a much wider let supply and demand dictate the price that the discussion than we have been having in the last hour, supplier is paying, but I do think that, when you are in terms of conditions of the private rented sector, talking about people’s housing, it is a unique sort of security of tenants and if the landlords will welcome market, because people need a roof over their head. it. In principle, if you have an expanded private rented Whatever else they can do without, they need to live sector that is of a good quality, the principle of somewhere. If there is no choice but the private rented discharge into the private rented sector is not sector, it is not a question of “Well, this is too high; I something local government has as a fundamental am not going to rent anywhere.” What else are they issue. going to do? What we are seeing with rents at the escalating level that they are at the moment is a rapid Q85 Mark Pawsey: Local government is routinely increase in overcrowding, which is going to be placing people in the private rented sector. increased far more when the welfare benefit cuts come Councillor Newman: It is an option but, by definition, in, because we are already seeing people downsizing if the private rented sector is under the pressure it is, and we are going to see families grossly overcrowded it is not going to be an option in the long term. in the future. Q86 Mark Pawsey: So the question arises: where? Q81 Mark Pawsey: Kay, you said earlier that the That is the big issue now. The LGA has said, “Where private sector is today playing a role it was never placements out of area are necessary, councils will expected to play. Does that role extend to providing take a responsible approach.” Councillor Newman, housing for the homeless? what is a responsible approach? cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG01 Source: /MILES/PKU/INPUT/027272/027272_o001_michelle_130204 HC 953-i PRS CORRECTED transcript.xml
Ev 18 Communities and Local Government Committee: Evidence
4 February 2013 Kay Boycott, Councillor Tony Newman, Jacky Peacock OBE and Alan Ward
Councillor Newman: I think a responsible approach are desperate and you do not have anywhere to go, should preferably be housing people within the area and you have to receive a court order in order to get or community that they are from, if at all possible, or assistance, I think it would be very difficult to resist near it, if otherwise. In an area like London, the local that. authorities are hopefully working in partnership together to exchange information, if there are other Q92 Mark Pawsey: If a family had been previously options. All this has to be seen within the context of made homeless because they had not paid the rent, ever-increasing supply. In two years’ time, we could does not that justify Mr Ward’s concerns about having be going over the same discussions, only more a tenant in that category on a subsequent occasion? dramatically, because there will be less supply if that Kay Boycott: I was talking about the specific point. is not addressed. In terms of taking on homeless families, the Shelter position is very much that, if you have become Q87 Mark Pawsey: Are councils routinely able to homeless, you should have a stable home. We are not fulfil that need locally? getting to the availability of affordable housing or Councillor Newman: No. Councils are often being social housing. Private renting is not going to be the forced to put people—I can speak about the London optimum place for homeless families to go to. We borough of Croydon. There are huge pressures there. have been following homeless families who have been The current administration there and the chief placed in the private rented sector over the last two executive went public in the last week and declared a years, in a longitudinal study. We are just reporting on housing crisis, because the private rented sector was phase 3. If you have just become homeless, a study full. Sadly, some of it has appeared in “Newsnight” in recently in Hackney shows that if you are in receipt the last three months for being in an appalling state of housing benefit, only 0.6% of properties are and there are massive pressures on the private rented available to you at a point you could afford. You are sector. A choice would be a fine thing. There is not not going to have your pick of properties. We have actually a choice. There is such a fundamental examples of families moving into properties that do shortage of housing in some places. The private rented not have a fridge for the first six weeks and all the sector is one option but, for many local authorities, accompanying things. This is not an optimum there is not a choice. situation for everybody. The question is right back to asking the private rented sector to play a role it is not Q88 Mark Pawsey: Mr Ward, are private landlords designed to play. Private landlords cannot be expected happy to accept as tenants people who were to pay for those— previously homeless? Alan Ward: As a landlord, I would be asking why that Q93 Mark Pawsey: Would you want local tenant is homeless. Was it because of non-payment of rent? If so, I am not going to be very attracted authorities to deal with the issue more effectively than towards them. they currently are? Kay Boycott: Absolutely. We will get back to the root Q89 Mark Pawsey: Can I talk to you about the cause of lack of supply, on which I am sure you will non-payment of rent, because some landlords are have an inquiry in due course. For local authorities, it suggesting that local authorities are encouraging is unlawful for them to place homeless families out tenants—this is perhaps an issue for you, Councillor of area if it is going to cause substantial disruption, Newman—to remain in private rented properties including education, family ties and everything. If rather longer than they should have been? They are there is no social housing and no private rented sector advising them to stay in place until court action for at a level of housing benefit for that family, we are in eviction has been commenced. Why are local a Catch-22 situation. The point is very well made that, authorities giving that advice? unless something is done, we will be back here in two Councillor Newman: I have asked for evidence of years’ time and all that will have happened is that that and I have not been provided with any. everything has pointed the wrong way.
Q90 Mark Pawsey: We were given some by one Q94 Heather Wheeler: We have mentioned letting landlord, Steve Gracey, in his advice to the agents quite a lot in today’s evidence. I am just Committee. I was just wondering, Mr Ward, what interested, Mr Ward, that you are very keen to have impact that advice from local authorities is having licensing and regulation for letting agencies, but you upon private landlords. will not join in regulation for private landlords. How Alan Ward: It increases the landlord’s losses if they do you square that? are not getting their rent paid, so they are going to Alan Ward: Two thirds of tenancies are actually have to take legal action, which again is not speedy. initiated and/or managed by letting agents. Landlords Even the so-called “accelerated process” can take up are just as likely to suffer from a criminal or to eight months if you have a devious tenant. fraudulent agent as a tenant is. It is a good starting point. We are really supporting the flow within the Q91 Mark Pawsey: Do any of our witnesses feel that marketplace. All the legitimate agents are supporting that advice from local authorities is justified? legislation. We feel that that would be a good thing. Kay Boycott: There is an anomaly here, which is that As regards the licensing of landlords, we just feel it to be eligible for assistance, homeless families is too big a task to impose on local authorities or some actually have to have received a court order. If you central body, because it would be an additional cost cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG01 Source: /MILES/PKU/INPUT/027272/027272_o001_michelle_130204 HC 953-i PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 19
4 February 2013 Kay Boycott, Councillor Tony Newman, Jacky Peacock OBE and Alan Ward and those costs are inevitably then reflected back on tenants need advice on how to exercise what few to rents. powers they have, even now, legal aid and other local authority cuts mean that there is a decreasing amount Q95 Heather Wheeler: I am just going to zip of advice and support available for private tenants. I through this quickly. In Scotland, it is illegal for would agree that having powers is the first stage, and letting fees to be charged. Do you think that should knowing how to exercise them and getting support happen in other parts of the United Kingdom, all the and advice are also needed, particularly for more way down? I have one final question for Councillor vulnerable people. Newman, in a minute. Jacky Peacock: Yes, I do. Q100 John Pugh: What about tenant information Kay Boycott: We are currently looking at the entire packs? Home information packs were not a roaring market, but it is fair to say that we want to make sure success. that there is no immediate disruption to the market. Jacky Peacock: Every help they can have. If you have What we are finding from tenants is actually there is a professional landlord, and certainly with social a big thing of, “Do I want lots of upfront unknown landlords, when you move in you get a little tenants’ fees, or would I potentially like those fees added into handbook. We frequently find really basic things—the the cost of renting, so at least I know what they are?” landlord has not even left the manual for how to work We are currently looking at what would be best for tenants, but also what would be better for landlords. the boiler, and then he wonders why his plumber is Alan Ward: My colleagues in Scotland tell me that being called out because the heating is not working. there is already evidence that rents are being increased The tenant has probably never been shown how to to reflect the charges being made by agents. What adjust the thermostat. It is just really basic things there is definitely a case for is greater clarity of the like that. fees being charged by agents to landlords and tenants. Q101 John Pugh: Do the others have any views on Q96 Heather Wheeler: Councillor Newman, I know the panels or packs? that my council does it in South Derbyshire. Do you Kay Boycott: I think that increasing the level of think councils should become letting agents? education in the entire market will help their rights Councillor Newman: I see absolutely no reason why and responsibilities. I want to pick up on the whole not. Some of the advantages are that it can be very thing about an amateur landlord, though, and the idea responsive to a local market and local need. I do not that landlords do not know. If you are receiving, on think we should pretend it is going to be the long-term average, £9,500 a year in terms of income, answer, but absolutely, where appropriate, and it is presumably you have talked to your mortgage lender working well. I actually think more will in response about the impact that will have on your mortgage. to some of the issues you have been discussing today. Presumably you are talking to the tax people or you are working out how you are going to do that on your Q97 Chair: Just one point, Mr Ward. You talk about tax return. You can Google within 30 seconds and find the clarity of the fees. How would you ensure that out what your rights and responsibilities are, in terms that happened? of decent homes standards, gas safety, tenancy Alan Ward: They should publish them on their terms deposits and the basics of a written contract. I do not and conditions. When I, as a landlord, commission an buy that actually tenants should be educated first to agent to market my property, I should have a list of go against the landlords who are not meeting what the fees—some do. are actually fairly minimum statutory requirements. It should be the landlords who do it. I am afraid, for Q98 Chair: It would be included within the £9,500 a year, that you can spend 10 minutes on regulatory environment that you want to see. This Google educating yourself. I do not buy that there are would be one of the requirements. 3,000 people who are not doing that every year. Alan Ward: Yes. I want to see the list of charges to me, but also what he is going to charge the tenant. That is not done. The tenant should also see what is Q102 John Pugh: Councillor Newman, clearly a lot being paid by me. of councils have forums through which they consult private landlords about the situation that confronts Q99 John Pugh: This is a question for Jacky really. them, the role of the council and so on. I am familiar We are talking about the tenant panels, and we are with one in my own area, for example. How talking also, if you recommend tenant panels, of a effectively do councils consult private tenants, if at very disparate sector, aren’t we really? Tenant panels all? would be different things in different places. Do you Councillor Newman: A number of councils have got think they can be effective? private rented tenant forums of different types and Jacky Peacock: Yes. I do not understand what is they are reasonably effective. The challenge with them behind your question. is, like many other issues in this discussion, that the John Pugh: It is this issue of the variety of the private landlords you might want to be attending are not rented sector. Would not that make tenant panels less there, because it is a voluntary set-up. You can have effective? some conversation with perhaps the best landlords Jacky Peacock: I do not see why. One thing I do have because, by definition, they are in attendance with concerns about is the fact that, at the very time when some of the private rented tenants. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG01 Source: /MILES/PKU/INPUT/027272/027272_o001_michelle_130204 HC 953-i PRS CORRECTED transcript.xml
Ev 20 Communities and Local Government Committee: Evidence
4 February 2013 Kay Boycott, Councillor Tony Newman, Jacky Peacock OBE and Alan Ward
Q103 John Pugh: The question is more about how pressures they will be reporting or otherwise, in terms councils get a feeling for the situation of the private of their area. It is coming through a whole variety of tenants in their area and what they confront in the way channels a feeling for what is happening out there, but of private landlords. a lot of it is actually people presenting themselves, Councillor Newman: Some of that is through their either at a council or a surgery, saying that they do councillors and MPs, I would suggest, in terms of not have anywhere to live. casework and pressure. Some of it is through if a Chair: Thank you all very much indeed for coming council has an active housing department and the and giving evidence to us. It is appreciated. That brings us to an end of the public session. cobber Pack: U PL: COE1 [SO] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG02 Source: /MILES/PKU/INPUT/027272/027272_o002_michelle_130211 HC 953-ii PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 21
Monday 11 February 2013
Members present: Mr Clive Betts (Chair)
Simon Danczuk Andy Sawford James Morris John Stevenson Mark Pawsey Heather Wheeler John Pugh ______
Examination of Witness
Witness: Sir Adrian Montague CBE, Leader of the Review of the Barriers to Institutional Investment in Private Rented Homes, gave evidence.
Q104 Chair: Good afternoon. We continue now with 10 properties. So although the small landlord has the second evidence session of the inquiry into the stepped in to assure some of the growth, we are still private rented sector. For the sake of our records, behind on the new homes we need. I think that the could you identify yourself, Sir Adrian, and the proposition is that we have been relatively short of capacity in which you are here this afternoon? new build for rent on a substantial scale, and there is Sir Adrian Montague: I am Adrian Montague. I am an opportunity for the institutions to meet that demand here, I think, as the leader of the review into private and mobilise fresh sources of capital. rented homes. Q107 Chair: Perhaps in general terms you could tell Q105 Chair: I think that is just about right. Thank us whether you think this is a challenge—something you very much for coming this afternoon; you are that is going to be worthwhile doing? It is a big issue most welcome. To make sure we are completely in now, housing policy in this country, which needs a compliance with the rules of the House, we ought as resolution. members to declare any interests that we have. First Sir Adrian Montague: It is a big issue. Clearly there of all, I have one flat, which I rent out privately; that is great demand for rental properties. It is not all over is declared in the Register of Members’ Interests. the country; I think it is a little localised in big Simon Danczuk: My wife has a small interest in a conurbations, and I am not sure the market is keeping private rented property. up. The challenge is to try to see rented properties in Andy Sawford: I have a small interest in a private a slightly new way. We were conscious when we did rented property. the review that on the continent and in the United States, the rented sector plays a very important part. Q106 Chair: Those are our interests, and you have a A lot of the properties in those areas are held by big particular interest in the review that you carried out, institutions, and it seemed natural to explore to what which you have come to talk to us about this extent this shortage that we are facing could be afternoon. Sir Adrian, in your review you identified, addressed by mobilising new sources of capital, as I probably fairly obviously, that individual landlords say, and the institutional investors in particular. with small portfolios had driven the growth in the private rented sector in recent years and improved the Q108 Chair: You thought there was a major need for quality. If that is the case, and it sounds like a good some significant policy changes, and that was borne news story, what is the problem that we need to out. address, and why do we need large institutions to invest if the small landlords are doing it anyway? Sir Adrian Montague: Yes. We saw an awful lot of Sir Adrian Montague: Perhaps I could start by saying people; I think we had over 60 responses to the call that I think the Committee does not usually sit at this for evidence, and we probably had 40 meetings with hour, and I am very grateful for the consideration interested parties. We saw people from right across shown in accommodating me now. It is very kind of the spectrum; we saw financial institutions, we saw you all. To turn to your question, I think that we need housing associations, we saw developers, and we saw more houses. We need more houses. The statistic in planning authorities. There was a widespread measure my report was that in 2009–10 we built 115,000 new of agreement that this would be a welcome initiative. homes, but the estimated demand for new households increases by about twice that number through to 2033, Q109 Mark Pawsey: Sir Adrian, I think you said that so we are simply not building enough homes. More institutions are not minded to invest in the kinds of people are renting. We have probably got twice as volumes that you have just been speaking about, many people renting now as 20 or 30 years ago, and because the return is not there, and you therefore said they are staying longer in rented properties, partly that the Government should provide incentives to because of the economic climate but also because the support institutional models. That is pretty hard on way we are looking at rented properties is starting to the small, independent private landlords that we took change. As you rightly say, I think a lot of this growth evidence from in our earlier sessions, each of whom has been accommodated by small landlords. Again, a has one, two, three or four properties. Why should statistic is that only 1% of landlords own more than institutional people get a subsidy and not those cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG02 Source: /MILES/PKU/INPUT/027272/027272_o002_michelle_130211 HC 953-ii PRS CORRECTED transcript.xml
Ev 22 Communities and Local Government Committee: Evidence
11 February 2013 Sir Adrian Montague CBE smaller individuals? When does one morph into initiative of the sort that is quite common in areas of another? Where is the cut-off point? need. If you think about the green sector, you have a Sir Adrian Montague: Most of the large financial lot of kick-start initiatives there. It is not a subsidy institutions are looking for developments of scale, so intended to prefer, in an enduring way, any I think they would say that 100-plus units was the sort institutional investor. It is simply recognising that the of level that they needed to see to make the market is immature and needs encouragement to investments worthwhile. I was quite careful in the develop. report not to suggest any enduring subsidy, because I think that this is an area where a market must stand Q112 Mark Pawsey: In response to your review, the on its own two feet. In cases where there has been a Government has introduced the £200 million build-to- failure of the market to gain momentum, it seemed to let fund and the £10 billion housing guarantee. Have me legitimate to suggest that the Government might you got a view about how effective those measures give it a kick-start. are likely to be in achieving the objectives that you set out to achieve? Q110 Mark Pawsey: Would you see that support or Sir Adrian Montague: They respond very well to part those incentives going with an entire development? of the rationale for the incentives. They are more Policy tends to be more to support individuals. Is there focused on the developers of private rented not a dilemma? How would you make certain that that accommodation, rather than the institutions that will subsidy or support would end up benefiting those on be the long-term owners, because I think they are seen the lowest incomes? as construction phase support, with a view to the Sir Adrian Montague: That takes us into how private completed developments being sold into institutional rented schemes fit in the market, because obviously ownership when the construction phase has been over the years the affordable housing sector has completed. There is not an enduring subsidy to the rightly received a great deal of Government attention, financial institutions. and I think that its place needs to be assured and it needs to continue to prosper. However, the private Q113 Mark Pawsey: How long should we wait rented sector, whilst it may take some of the strain before judging whether or not those schemes are a off affordable housing, also extends to many different success, in your view? layers in the market apart from affordable housing. Sir Adrian Montague: I think a reasonable period We are conscious that when planning authorities look would be 18 months or two years. at private rented schemes, they may look at them for a number of different reasons. In some cases they may Q114 Chair: I understand why you have given see poor private rented stock in their area, and they qualified support to the £200 million build-to-let fund, may see PRS schemes as a way of improving the which is about trying to stimulate a market—trying to quality of the stock. They may see pressure on rented get examples going that others can then follow. as people who move into rented accommodation However, you were absolutely categorical in your aspire over time to move into owner occupation, and review when you talked about being urged to get the so PRS schemes can provide a bridge to owner Government to provide guarantees of different kinds occupation. as a way of stimulating the market. You said, “We do I think in some of the areas of the planning authorities not advocate guarantees of any of these descriptions we spoke to, they saw it as part of an inward as they tend to distort the market.” That is pretty investment strategy. I mentioned Hull in the report. categorical, yet £10 billion is hardly a kick-start, is it? Hull has ambitious plans to develop the environs of It is a massive great wodge of money, and you are Hull as a centre for servicing North Sea wind turbines. quite happy for that to act as a guarantee. Although I do not think they would qualify for Sir Adrian Montague: I was not concerned with the affordable housing, there will be a new cadre of policy decision to implement the housing guarantee professional technicians and workers involved in the scheme. I conducted the review; I have not had the North Sea, who are perhaps not going to be in the responsibility of implementing it. I think that was town long enough to justify buying. here is a variety motivated by the desire to stimulate the flow of of motives that people might adopt. funding into the sector, beyond what might be achieved by the build-to-let scheme. I think Q111 Mark Pawsey: But the question is why the reasonable men can differ on the desirability of group of people you have just described should guarantees. receive effectively a public subsidy through this incentive. In the existing social housing scheme, Q115 Chair: Right. So you would rather it was done people demonstrate need and then receive an another way? allocation. I am worried that this is a bit of a broad- Sir Adrian Montague: I think it is a step in the right brush approach rather than targeting scarce resources direction; it may be a bound in the right direction at particular needs. rather than the modest step I was envisaging. Sir Adrian Montague: My view is that it is not a subsidy. If the Government and councils think that the Q116 Chair: I am still not quite sure whether or not private rented sector is worth developing—our view you are in favour of guarantees now. You have got was that it would be worth developing—then there is me confused. a difficulty in getting the market moving. Again, I Sir Adrian Montague: I think what we are faced with envisage not an enduring subsidy but a kick-start is both a shortage of homes and a need to stimulate cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG02 Source: /MILES/PKU/INPUT/027272/027272_o002_michelle_130211 HC 953-ii PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 23
11 February 2013 Sir Adrian Montague CBE the economy. Had there just been a build-to-let fund, it Q121 Simon Danczuk: Just a final quick question. would have done most of the job. A guarantee scheme You mentioned earlier there were about 60 offering the opportunity to raise finance at cheap rates submissions and quite extensive involvement. Did you on the back of a Government guarantee ought to have or your committee meet anybody, as MPs do on a much more impetus than the quite modest incentives weekly basis, who lived their life out in that sort of that I thought it was sensible to recommend. poorer private rented sector? Sir Adrian Montague: I suppose we saw NGOs who Q117 Simon Danczuk: What comfort does your were conducting studies into that sort of market. We review offer those living at the bottom end of the spoke to a lot of housing associations, and we spoke private rented market, in poor quality, overcrowded to councillors. It is fair to say that no one came accommodation? forward to talk to the review specifically who had the Sir Adrian Montague: I do not think the focus of the problem of living in low quality accommodation. review was on the certain need to improve standards for the stock as a whole. We were concerned more to Q122 Andy Sawford: Your report said that investors try to raise the average level of stock by were attracted by the stability of the regulatory commissioning new units of an undoubtedly high framework, and you went on to set out how the character, so we did not focus on improvements at the relatively stable environment of the past 20 years was lower end at all. It was a net increase of the stock of something that they generally found attractive. You high quality that we thought was necessary. are looking for a different environment with longer tenancies, and this Committee has heard evidence that Q118 Simon Danczuk: Your report said that “for the average request is for covenants of 15 to 20 years housing benefit claimants, a material increase in rental on land to ensure it remains as private rented housing. stock in areas of high demand could make a real Given that you are looking for that kind of difference to their ability to access good quality environment and index-linked rents, would that not accommodation”. inevitably create change in the regulatory Sir Adrian Montague: I think it will, but what will environment? happen is that it will to some extent take the pressure Sir Adrian Montague: I do not think there needs to off affordable housing. The PRS sector will extend be a change in the regulatory environment. There used over quite a wide range of accommodation and rents. to be institutional investment in residential As the housing associations are finding, at the lower accommodation in the past. I think that the policies of end of the rent spectrum, there is a bit of overlap the 1970s and 1980s, which envisaged quite significant rent controls and restrictions on the between affordable housing and the lower end of PRS, opportunity to regain occupation for landlords, caused and then there will also be more elaborate, more quite a lot of damage to institutional confidence in this extensive accommodation available under PRS as asset class. However, from the late 1980s onwards, well. PRS, in my view, sits just on top of affordable the scene was entirely transformed. Institutions now housing, and the net addition to the total rental stock have the confidence to invest again, but I do not think will take some pressure off affordable housing as well. there is any need for structural changes in the market or increased regulation to make that possible. Indeed, Q119 Simon Danczuk: So your review was bothered I think it is probably best that there should be about those at the bottom end of the private rented specifically no change to the existing regulatory sector? structure. Sir Adrian Montague: Absolutely. Q123 Andy Sawford: How do you propose to ensure Q120 Simon Danczuk: Was it Dr Tim Brown who that longer tenancies are introduced? said this whole debate around institutional investment Sir Adrian Montague: If we move into the planning has “diverted attention away from the issues of quality side, I think that PRS regimes, PRS developments, of the existing private rented stock and its find it a challenge to compete for land against owner regulation”? What do you say to that? occupiers, because I think that the values of sales of Sir Adrian Montague: I do not think we attributed PRS developments to institutions have tended to be responsibility for any particular statement to any weaker than the values of sales for owner occupiers. individual. One of the opportunities open to councillors is to try Simon Danczuk: No, that is what he said. He is to encourage PRS schemes by saying that they will quoted as having said that. either modify or limit affordable housing requirements Sir Adrian Montague: Could you give me the in relation to that scheme. I am not suggesting that is reference? an automatic or universal response; it is a function of Andy Sawford: To us. the balance that a planning authority is trying to Simon Danczuk: To us, in evidence. achieve in home ownership occupation across its area. Sir Adrian Montague: Oh, I see. Yes. That is However, if in order to get the balance right they want probably correct, because the narrow focus of the to increase private rented schemes and modify Section report is to increase the stock of higher quality 106 affordable housing requirements for that plot of accommodation. As I said, I think that will have land, it would be fair for the authorities to say, “If we beneficial knock-on effects on the low quality stock at are helping a PRS scheme with its viability by the lower end of the private sector, but this is not a modifying 106 affordable housing requirements, we report that is specifically directed at that problem. want to make sure it is a scheme that remains in rental cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG02 Source: /MILES/PKU/INPUT/027272/027272_o002_michelle_130211 HC 953-ii PRS CORRECTED transcript.xml
Ev 24 Communities and Local Government Committee: Evidence
11 February 2013 Sir Adrian Montague CBE occupation.” What we specifically do not want is for are you going to enforce those standards? Does the a developer to feel he is free to sell the development Government get involved? into owner occupation within a short period after Sir Adrian Montague: We had a really long debate completion. Locking it up in rental tenure for a long about this, because there were both proponents and period of time would be a legitimate condition to opponents of the kitemark. I think that the proponents, attach to a planning consent. in the way you suggested, saw this as a sort of I think it is material to add that from the institutions’ benchmark of quality for the new private rented sector perspective, we received a range of opinions, but developments. I think in this country we have always many institutions said they would have no difficulty tended to regard, in a sort of popular way, renting as keeping PRS developments in rental tenure for 10, 20 a short-term option. Many young professionals rent on or even 30 years. That I think is the security that a their way to owner occupation. Some middle-income council needs to have if it is going to waive 106 families rent for a longer period of time. However, affordable housing requirements in relation to a the natural state has always been thought to be owner particular development, and I think it provides tenants occupation, and I think that increasingly people are with a long-term perspective of occupation. starting to question that. People are seeing benefits— flexibility benefits—in not being tied to an asset that Q124 Andy Sawford: That pre-empts my question, perhaps does not automatically appreciate in the way which I guess you knew, which is whether you could we have been used to over the last 20 years. There are see any difficulty with tying up—you have called it merits to renting, and I think that the proponents of “locking in”—property for, say, 20 years. It is a this saw it as a way of establishing a sort of new class problem further down the line, for example, if the of rented accommodation. rental market changes, could you have significant Now, the antis were desperately down on yet another parts of estates lying empty for periods of time Government-administered piece of bureaucracy, as because of the rental market? It could be localised they would have seen it, and the difficulties of trying around demand for rental property in an area, or it to reconcile, under Government leadership, all of could be a more general issue around the condition of these opinions. Many of the professional developers the economy, house prices and so on. You said no, but of housing, for owner occupation and for PRS, said, I am surprised by your confidence in that. “Look, it’s our brand, which is what we sell on. We Sir Adrian Montague: From the perspective of an don’t need a kitemark. People understand the brand, owning institution, I think you want as little disruption and know where they can turn for that.” So we came to the rent-roll as you can achieve. Tenants who stay to a satisfactory middle ground. You smile, but I think for year after year after year and pay a decent market it is a satisfactory middle ground. We made the rate are exactly what an institutional owner would proposition that there needed to be a clearer definition want, because voids—the need to replace tenants— of common standards. Encouragingly, people are disrupt the flow of income. From an institution’s moving that way; the trade associations, the perspective, the longer a tenant stays, the happier he professional institutions and some of the councils are is. Most of the large insurance companies we spoke moving that way. We may come on to the task force to were at pains to emphasise that it is the stability of that I suggested. I see one of the functions of this task the rent-roll that will be an attractive feature to them force being to stimulate that debate and draw together in this sort of project; it gives more prospect. common practice. What is the expression—10 times From the tenant’s perspective, if you go to the United better a volunteer than a pressed man? I cannot States, the professional lessors of these apartment remember, but if we can get there through a voluntary blocks will give you variable lease terms—certainly association, a coming together of people who see the six months, certainly 12 months, and often longer. We merit of really high standards, then that will be even did consider whether there was any attraction or merit more powerful than the bureaucracy surrounding the in mandating a longer term for a PRS development. kitemark scheme. In the end, I think the institutions persuaded us that it was probably an unnecessary elaboration, because Q126 Heather Wheeler: A couple of thoughts on they have a very clear interest in maintaining a tenant that. Isn’t it still going to be bureaucratic? It just won’t as long as he wishes to stay there, providing he pays be the Government doing it. So I am not terribly sure his rent and observes his covenants. There is a de how you enforce it. The one that slightly gets me is facto longer term security of tenure. Does that answer that this is almost something going forward, but that the question? is really unfair on other landlords who have perfectly Andy Sawford: Yes. good properties. They are just not going to be classed Sir Adrian Montague: It is a fairly grudging yes, but as that at all, are they? I will take it. Sir Adrian Montague: I think all of this lies in the Andy Sawford: It answers the question of how you definition of what the common standards will see it. represent. They need not necessarily be limited to new build, because you may have had buildings put up in Q125 Heather Wheeler: Although you are not the last two or three years that meet all the proper particularly using the term “kitemark”, I am really standards, or buildings that have been refurbished interested in your idea that there almost ought to be a from prior use that also do so. What I would higher standard, so the punter knows what they are encourage the task force to do is to look at this going to get, and in effect they are therefore realising broadly. I used to be in the Treasury, and I conducted that it is an institution that has paid for that. How a similar exercise 15 years ago, when we were trying cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG02 Source: /MILES/PKU/INPUT/027272/027272_o002_michelle_130211 HC 953-ii PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 25
11 February 2013 Sir Adrian Montague CBE to coalesce the PFI industry around common contract development activity. Perhaps they did one or two terms and common standards. We found there was a developments in the past and have been sitting on great willingness to contribute to the findings and those developments. One of the challenges for the collective norms, because everyone realised that it sector as a whole is how to take advantage of all the guaranteed a quicker process and common standards. value that housing associations created in the past, and I hope that the task force will find the same thing in use it as a platform for moving towards more market relation to this area as well. rent. You have to find some way of stimulating the activity in the associations that perhaps have not done Q127 Simon Danczuk: Your review talked of very much over the years. investors’ concerns about the shallow pool of management expertise. Could you say a little bit more Q131 Chair: Do you see a role for housing about that, and what the concerns were? associations, and maybe even councils, actually taking Sir Adrian Montague: I think there are two areas in over the function of being management contractors, which an embryonic industry like this will need to and taking over the management—not necessarily the develop more expertise over time. The first area is development or even the ownership—of blocks, around planning authorities, and those concerned with because of the expertise they have had in the public sector side of these developments, because I management? do not think it is in the everyday business of planning Sir Adrian Montague: Again, it is a very varied authorities to engage in joint venture or sales pattern out there, because you have had council discussions, and I think they need support in that area. ALMOs over the past few years, some of whom have That will be another function of this task force I been very good in developing tenant propositions— envisage. The other area where a lot of work is needed really first class. Some of them have subcontracted the is in raising the general standards of property repairs and maintenance to the private sector, some of management, and to try to reduce the costs as well. them have kept it in-house, and some who contracted it out are bringing it back in-house. I think that the Q128 Simon Danczuk: Of what, sorry? authorities, again, are absolutely at the core of this Sir Adrian Montague: Property management. Those new initiative, because it is their policies that drive are the two particular areas where skills and the need for PRS. Perhaps in a place like London, experience need to be developed for this market to where there is such a big market, PRS will develop a flourish. momentum of its own, but if you go out into the provincial centres, I think there needs to be a very Q129 Simon Danczuk: A supplementary question is strong partnership between the councils and the around housing associations: do they have some of private sector. Some of the big councils in those skills that you are talking about? Birmingham and Manchester, for example, are Sir Adrian Montague: From their base in affordable becoming very active sponsors of new housing housing, housing associations have started to move schemes with a PRS component, and that is all to the into market-rent developments, PRS by any other good. This is not just the province of the private name. They have significant advantages. They will be sector; it really does need to be done in partnership core contributors to this sector as it grows. They have between the two sectors. a very efficient funding model on the back of the investments that the Government has made in the past. Q132 Mark Pawsey: Can I ask you about making They raise money very cheaply in capital markets. land available for introducing investment into the They are used to maintaining good relationships with private rented sector? You said a few moments ago their tenants, because that is really what a housing that the sector finds it difficult to compete for land association is all about, and they have quite effective versus owner occupiers, with the owner occupier procedures for managing the assets. I think the always able to outbid. You have therefore suggested housing associations will be absolutely at the heart of that there might be some sale of public land at less this initiative. They will be a necessary player, but than full value to stimulate it. Is there not a broad not sufficient in their own right, because they cannot principle that when the state, at whatever level, themselves develop enough new stock to fill the gap. disposes of its assets, it gets a fair market price for There need to be new players in this market, but the them? Why do you want to bin or trash that in this housing associations will be a fundamental part of instance? the process. Sir Adrian Montague: I think it is right to say I flirted with the idea, but there were red and amber lights Q130 Simon Danczuk: Could the Government not flashing all over the place, so what I eventually said have done more with housing associations to stimulate was that perhaps the Government would look at a that aspect of housing associations’ work? controlled experiment. Can I give you an example? If Sir Adrian Montague: Housing associations are a you look at the basis on which the best-value rules broad church. There are some very large associations operate, I think you are quite right to say that they that are run in an extremely professional way. You narrowly focus on the cash or the financial value may have heard from some of them; we certainly did generally of a transaction. What they have not done during the review, and they are already making very generally is look at any economic value that flows effective steps towards developing market-rent from a particular proposition. I think there are propositions. Do not forget that there are lots of very probably generations of Treasury civil servants small associations as well, which do not have a big turning in their grave when I say this. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG02 Source: /MILES/PKU/INPUT/027272/027272_o002_michelle_130211 HC 953-ii PRS CORRECTED transcript.xml
Ev 26 Communities and Local Government Committee: Evidence
11 February 2013 Sir Adrian Montague CBE
Chair: Carry on. force in the Treasury. This was in the days before PFI Sir Adrian Montague: It seems to me that there is at achieved the notoriety that it has recently acquired. least the opportunity in a limited and controlled This was in 1997, 1998, and the mandate was to manner to consider whether the economic value that stimulate the flow of PFI transactions to standardise flows from a PRS development might form part of the them in order to improve the transaction times and planning authority’s equation. deliver more predictable results, and to work very closely with public sector authorities to hold their Q133 Mark Pawsey: But are there not all sorts of hand through the process. In addition to trying to very, very good causes with a similar claim? sponsor common standards for management, I think Sir Adrian Montague: You are flashing the same red that a task force would have substantially that lights to me as I was receiving during the review, but mandate. I am an unrepentant sinner in this regard. Q138 James Morris: Because Government lacks Q134 Mark Pawsey: If it is worth a pilot and a trial, capacity to do it in its current form? have any pilots started? How close is Government to Sir Adrian Montague: If you look at the skills you or getting a pilot under way? I would expect a task force to have, I think it is Sir Adrian Montague: As I say, I have not been institutional investment, development finance, land- involved with the implementation of my report, but I use planning, property management, and the ability think one of the intended objectives of the build-to- to broker deals. Now, I know that civil servants are rent fund is to create and stimulate the pilots coming renaissance men, but they do not necessarily have forward. I think that the HCA will be managing that training in these areas. process. Q139 James Morris: With respect to the other Q135 Mark Pawsey: On planning, you also said questions we have been asking, the remit of this task earlier that the waiving of the affordable housing force seems to be focusing on stimulating institutional requirements might stimulate institutional funding in schemes, but should it not also be looking more the private rented sector. Many of us have seen the broadly at the private rented sector? benefits of the mixed developments that have taken Sir Adrian Montague: Yes, I think it should. It ought place. Is it worth putting on one side all of those to do that as well. I do not think it is a quango, benefits? Is the goal of getting institutional investment because it is intended to be a task force with a limited worth losing the benefits of mixed developments? life of two years. It again comes back to the idea of Sir Adrian Montague: Definitely not. Definitely not, trying to kick start the process. but I do not think the two objectives are mutually exclusive. First of all, it is very difficult to produce a Q140 James Morris: What does success look like template of values, because land values differ and the after two years? affordable housing targets differ. The mix differs Sir Adrian Montague: within affordable housing, so it is quite complicated Success would look like some to come up with a single rule of thumb. However, it common contractual framework that people would is quite clear that you can run combinations of the refer to as a benchmark for how to structure these mix and the proportion of housing under the transactions. You would see strong pilot projects affordable housing requirements in a way that helps coming through, where you would have institutional PRS without detracting from either owner occupier or buyers lined up to take them, and you would see a affordable housing. flourishing resale market.
Q136 Mark Pawsey: Of course the Government is Q141 James Morris: It also seems to have as part of already talking about relaxing affordable housing. Did its remit “to promote a standardisation of the they get their idea from you? process—including a statement of expected Sir Adrian Montague: No, I do not think so. I think standards—and of forms of contract”. Are you talking that was entirely spontaneous. about transactions, or are you talking about standard forms of tenancy agreement? Q137 James Morris: One of the central Sir Adrian Montague: It might be tenancy recommendations of your report was about creating a agreements. task force. Is this some kind of new quango that you James Morris: So it might get down to that level are proposing? of detail? Sir Adrian Montague: The provenance of these ideas Sir Adrian Montague: Yes, because getting an is quite widespread from the review group, but I am initiative like this working is really a case of capturing afraid I have to hold my hand up to this one. the detail, and you have to become a master of James Morris: It was your idea? process. You have to drive these things through very Sir Adrian Montague: It was my idea. What I think effectively; you need to be on top of the detail. you find on the border between the public sector and the private sector are a lot of challenges for public Q142 James Morris: But there is a vast difference sector bodies in transacting on commercial terms. It is between this being about stimulating transactions and an experience and confidence issue, largely. I then meddling—if that is the right word—in the mentioned my time in the Treasury earlier on, talking minutiae of standard terms and conditions for tenants. to Mrs Wheeler, and I ran something called a PFI task Sir Adrian Montague: No, I do not accept that. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG02 Source: /MILES/PKU/INPUT/027272/027272_o002_michelle_130211 HC 953-ii PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 27
11 February 2013 Sir Adrian Montague CBE
Q143 James Morris: Is there no contradiction there? you were promised at the beginning that you would Sir Adrian Montague: What tends to happen is that have the opportunity to make a short statement before in the early days of a market no one has a sort of we began, so to try to compensate for that, is there intuitive sense of what good looks like in relation to anything you would like to add to the evidence you a transaction. You have all sorts of haggles between have given so far? Are there any issues that we have lawyers, and if you are able to standardise the process, not picked up on that you think it would be helpful and standardise the contract terms, you have a point for us to understand better? of reference. You take the time out of it, you take the Sir Adrian Montague: No, I do not think there is any cost out of it, and you just make things move more need for me to deal with anything where there is any quickly, but that requires some detailed engineering lack of understanding on the part of the Committee. I on the part of somebody like the task force. think you have given me a good run for my money this afternoon. Thank you very much indeed. Q144 Chair: Sir Adrian, thank you very much for Chair: Thank you for coming this afternoon. coming this afternoon. I apologise; I understand that cobber Pack: U PL: COE1 [SE] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG03 Source: /MILES/PKU/INPUT/027272/027272_o003_michelle_130304 HC 953-iii PRS CORRECTED transcript.xml
Ev 28 Communities and Local Government Committee: Evidence
Monday 4 March 2013
Members present: Mr Clive Betts (Chair)
Simon Danczuk John Pugh Mrs Mary Glindon Andy Sawford James Morris John Stevenson Mark Pawsey Heather Wheeler ______
Examination of Witnesses
Witnesses: Mark Hayward, Managing Director, National Association of Estate Agents, representing the Association of Residential Letting Agents, Jason Freeman, Legal Director, Goods and Consumer Group, Office of Fair Trading, Geoff Fimister, Social Policy Officer, Citizens Advice, and Caroline Kenny, Executive, UK Association of Letting Agents, gave evidence.
Q145 Chair: Good afternoon, everyone, and Geoff Fimister: Obviously, people come to Citizens welcome to our third evidence session on private Advice bureaux for advice because they have rented sector housing. Before we start with your problems. They do not come to tell us that things are evidence, I am going to ask Members of the going swimmingly. Obviously, we see the problems, Committee to put on the record publicly any specific and we see quite a lot of problems from the private interests they have with regard to this inquiry. I have rented sector. It is obviously a very important sector one flat that I rent out privately, which is recorded in and is growing impressively. This makes it all the the Register of Members’ Financial Interests. more important that we try to address the problem. At John Pugh: I have a tenancy in London. the moment, the big issue is probably around rent Heather Wheeler: I have a tenancy in London. levels and affordability. The developments in housing Simon Danczuk: Three properties that I have a share benefit and rising rents are creating gaps and in are rented out. problems, but we have a steady stream of other issues Andy Sawford: My wife has a small interest in a as well, such as the condition of properties and issues private rented property. around letting agents. John Stevenson: I have a small interest in a private Jason Freeman: We looked at a number of rented property and a tenancy in London. complaints from 2011. We looked at about 4,000 Mrs Glindon: I have a tenancy in London and my complaints, so we have some idea of where we think there are problems and where people are complaining husband is a councillor on North Tyneside Council. about problems. It is fair to say there are many people who are not complaining. It would be wrong to Q146 Chair: You are all most welcome. For the sake extrapolate, from looking at complaints, that the of our records, could I ask you to say who you are whole market is not working well. However, we see and which organisation you represent? Perhaps we problems around people not having easy access to could move down the table. redress. Perhaps there are areas of law that exist that Geoff Fimister: I am Geoff Fimister. I am a Social are not being enforced, or professionals in the sector Policy Officer with Citizens Advice. are not necessarily aware of how the law should apply Jason Freeman: I am Jason Freeman. I am a Legal in day-to-day situations. Director in the Goods and Consumer Group at the We think there is a problem around the level of Office of Fair Trading. I was the project director of customer engagement, i.e. landlords and tenants not our recent report on the lettings market. being sufficiently aware of their rights and Mark Hayward: I am Mark Hayward. I am the responsibilities, and not being engaged with Managing Director of the National Association of complying with their obligations and demanding Estate Agents. I am representing ARLA here. their rights. Caroline Kenny: I am Caroline Kenny, the Executive Mark Hayward: We would agree on the redress issue. at the UK Association of Letting Agents. Unfortunately, letting agents are not compelled to join or be regulated by a redress scheme as estate agents Q147 Chair: Thank you very much. If comments are are. Therefore, the redress is probably down to the made that you agree with, you do not have to repeat Trading Standards Institute, who are sadly them. There are four of you on the panel; it will take understaffed at the moment. quite a long time to get through it if that is what I do not think people are necessarily aware of the happens. You can say, “I agree with what somebody regulations and the rights they have. Of course, this is has said.” If you disagree, we are happy to hear those driven by an imbalance in supply and demand, with alternative views as well. far greater demand than supply. The first issue is to Do you think, in general terms, the private rented secure the property; they then start worrying about the market is functioning well in this country? If you have other issues that will come forward after they have a quick suggestion as to how things might be secured it. improved, what would be the one thing you would put Caroline Kenny: I would agree there is an issue. We your finger on to say that we could do better? need to look at raising standards within the industry, cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG03 Source: /MILES/PKU/INPUT/027272/027272_o003_michelle_130304 HC 953-iii PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 29
4 March 2013 Mark Hayward, Jason Freeman, Geoff Fimister and Caroline Kenny although we need to put it in proportion. After all, public indemnity insurance and adhere to our code of there are 3.8 million households within the PRS at the practice. The rogue agents have none of that. They moment. I know the Property Ombudsman received are not sufficiently policed. I do not think Trading over 8,000 complaints, but if you put that in Standards feel that letting agents come under their proportion, it is 0.2% of those households. We need focus necessarily. to look at the context. There is great difficulty out there in dealing with rogue agents. We all see the headlines, but there does Q148 Chair: I did not get many suggestions for not seem to be much happening to bring them into improvements; we will probably come back to that line. Of course, anybody can be a letting agent. later on. Mr Fimister, you referred to Citizens Advice Caroline Kenny: Likewise, in the UK Association of and the very large number of enquiries you get every Letting Agents all of our members are covered by year about the private rented sector, and what some of client-money protection. They abide by a very similar those complaints were. Do you have a breakdown of code of practice. There is a commitment to how those complaints divide? There may be professional development; there is a thorough complaints about the state of the property and, complaints process with independent redress; and they obviously, there may be some complaints that refer to are all required to display and produce in writing their several issues. How many apply to the agent and their fees—there is a requirement for the transparency of practices, and how many are about the landlord, if you fees. can separate that out? However, I would echo what Mark said: there is an Geoff Fimister: If you leave aside the benefit issues, issue around enforcement. There is not enough which is a very big area, and you look at the rest of enforcement of existing regulations, as they stand at the issues around the private rented sector, it is quite the moment. a wide spread. It is quite diverse. We are looking at issues around the condition of properties, the Q151 Chair: To each of you, what proportion of availability of properties, and issues around tenancy letting agents throughout the country do you represent deposit protection, for example. Letting agents, as a as an organisation? How many of your members did separate category, are probably not a huge proportion, you expel last year because they did things you did but you find letting agents coming into other areas as not accept? well. A letting agent may be involved in other Mark Hayward: We have about 6,500 members. Our questions around repairs, maintenance and so forth. members will create or handle in excess of 600,000 There is quite a broad spread in terms of the categories tenancies in a year. I do not have the figure for the of issues relating to private rented sector housing. It number of people we expelled. We do expel people is when you look over at the benefits and affordability and we have a very strict disciplinary code. We have side of it that the numbers are clearly focused. laypeople on our disciplinary committee, to make sure justice is seen to be done. Even if we expel them, Q149 Chair: We will come to the issue of tenants on however, they can continue to practise as a letting benefits later on. Is the number of complaints going agent. up or is it holding steady? Geoff Fimister: That is an interesting question. We Q152 Chair: Perhaps you could get that figure and have trouble identifying trends at the moment, let us have it. because our statistical system is obviously based on Mark Hayward: Yes. We publicise that we have the number of people coming in with enquiries and expelled them; we put things in the local paper. There the number of enquiries they have. The problem, of is, however, nothing to stop them continuing. course, in looking at trends at the moment is that the Chair: The figure would be helpful. number of advice outlets is actually going down Caroline Kenny: UKALA actually relaunched last because of funding reductions—particularly in terms year. Although we were established in 2002, we of funding from local authorities. relaunched in September last year in response to the Comparing year on year does not tell you anything increasing significance of the PRS in the market. At very clear about a trend. What is striking is that in the moment, we have roughly 10 agents joining us a spite of the reduction in advice outlets, we are finding week. Our membership number stands at 250 at the that housing enquiries are holding fairly steady, and moment. We are processing 70 applications. We are benefit enquiries are going up. pleased with the way that membership has been taken up. At this moment in time, we have not actually Q150 Chair: Mark Hayward and Caroline Kenny, expelled any agents. There has been just a handful of you represent the good guys, don’t you? I mean the complaints, which have been of a fairly non-serious, people who do not cause problems for anybody—the service-level nature. people who are responsible and well behaved. You never have any difficulty with any of your members. Q153 John Stevenson: I would like to pick up on What do you do to find out about the activities of the your fees and charges. Can I start with you, Jason? In bad guys? We are never going to get them sitting in your review, your sample said 30% were complaints front of us to give evidence. about fees and charges. Could you give some Mark Hayward: You are not going to get rogue agents examples of exactly what you mean by complaints sitting in front of you. They are not members of either about fees and charges? of our organisations. Our members have to qualify Jason Freeman: Yes, indeed. Mainly, the complaints technically; they must have client-money protection, were around what we would call drip pricing, when a cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG03 Source: /MILES/PKU/INPUT/027272/027272_o003_michelle_130304 HC 953-iii PRS CORRECTED transcript.xml
Ev 30 Communities and Local Government Committee: Evidence
4 March 2013 Mark Hayward, Jason Freeman, Geoff Fimister and Caroline Kenny tenant is going into a transaction. They are interested One of the things we think would be of benefit in this in a property; they might see it in the newspaper or market would be for agents’ fees, which tenants are on the internet, and they want to rent it, so off they going to be charged, to be much more transparent and go. Until they sign the lease, the charges they then to be presented in a clear and accessible way— have to pay in order to get the lease will be revealed perhaps through a tariff of charges—at the earliest throughout the process. We call that phenomenon possible stage in the transaction, so the tenant can see drip pricing. how much the transaction is actually going to cost The effect tends to be that people become increasingly them. committed to the transaction psychologically, if you like. They do not have the opportunity to appraise the Q156 John Stevenson: Mark, your organisation whole cost of the letting at the time they are going to believes in transparency and demonstrating how much compare properties. They might compare based on the it is going to cost either the landlord or the tenant, but level of rent or the amount of security deposit they if you go to some of the websites of your members, it need to pay, but they would not factor in the many is not transparent. What can you do about that? other fees that they might need to pay. That is one Mark Hayward: At the moment, we are going through area—drip pricing. a very large education process with our members. I The other area that the complaints focus on am speaking at a number of events to educate them. specifically is around holding deposits: “What is this This is particularly about the transparency of the fees deposit for? How will I get it refunded? In what but also, more importantly, about them declaring the circumstances will it be refunded? It has not been level of their fees at the earliest opportunity. refunded. Why is that? Is there some reason for that?” You will be aware of the Consumer Protection from There seems to be quite a lot of uncertainty around Unfair Trading Regulations 2008, which very clearly what holding deposits are for and how people are state that anything that would affect someone’s going to get them back. transactional decision—fees would affect their transactional decision—needs to be declared at the Q154 John Stevenson: The logical thing, if you are earliest opportunity. Probably, this would be before a tenant looking for a property, is to say to the letting viewing. The problem is that people rent and buy agent, “What are your charges? What will I be properties with their heart, to start with; the head only kicks in at a later stage. charged by you for you to perform your job?” Why do people not do that? Unfortunately, if you have an imbalance of supply and demand, there are a lot of people chasing property Jason Freeman: One of the things we identified is thinking, “I don’t want to know; I’ve secured the that people are not necessarily as engaged on the fees property,” before they even think about or look at as we would like them to be. They are not necessarily the charges. as engaged on their rights and responsibilities as we would like them to be. Q157 John Stevenson: How would you like to see Ordinary people who are trying to rent a property are charges structured? Would they be fixed fees or entering a complex legal transaction, which is a percentages? necessity. People are not necessarily approaching it as Mark Hayward: There must be charges for credit a businessman would approach a commercial referencing and inventories, etc. They need to be transaction; they do not get legal advice and so on. made very clear at the beginning as an actual amount of money, not a percentage, so that people really know Q155 John Stevenson: Can I interrupt? If you were how much it is going to cost to get into a property. going along to, say, a solicitor or you were getting Caroline Kenny: My observations would be that a lot some work done on a house, you would obviously ask of the charges levied on tenants can be quite variable: for a quote to know exactly how much you were going for example, the inventory fee. An inventory check-in to be charged before you went down the road of fee charged to a tenant for a one-bedroom property entering into a transaction. Why should it be would be significantly less than if he were entering something different for rented property? into a three-bedroom furnished house, for example. Jason Freeman: One of the things we would like to There are restrictions as to what the letting agent can see is information being made more accessible to actually disclose to the prospective tenant until the people. For example, if you are looking for properties offer is put forward, because you need to assess each on the internet, which many tenants would be doing individual case. at the early stages of looking for a property, one This applies to referencing fees as well. Depending question you could ask is how easy it is for them at on the tenant themselves, there may be a guarantor’s that stage, when they are comparing properties, to find reference fee requested in addition to a tenant’s out how much it would actually cost them to move reference fee. We agree, and it is in our code of into that property. practice, that tenants should be provided with a We will probably find that it is quite difficult for a written breakdown of the fees. This is prior to the tenant, at that stage, to get information. The question offer being accepted, when the actual fees can be then is at what stage they should be given the assessed. information. Many agents would give the information With regard to landlords’ fees, every agent usually has at the viewing stage, but it may perhaps be too late their own standard percentage fee they will charge, for people to properly shop around. It is a practicality; but an agent may negotiate on that fee—dependent on when are they going to be given the information? market conditions and the number of agents that are cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG03 Source: /MILES/PKU/INPUT/027272/027272_o003_michelle_130304 HC 953-iii PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 31
4 March 2013 Mark Hayward, Jason Freeman, Geoff Fimister and Caroline Kenny going to carry out a market appraisal. There are some Mark Hayward: As Caroline said, the fees will vary complexities involved in that process as well. sometimes from property to property.
Q158 John Stevenson: Out of interest, do you think Q162 Simon Danczuk: I will stop you there. I do not agents should even be charging a tenant for the accept that. You could provide examples of fees for a inventory? Should that not be a charge allocated to standard one-bedroom flat or a two-bedroom flat. You the landlord? could have a formula. There are lots of different Caroline Kenny: Usually, the charge is split between services that are bought and purchased for which fees the landlord and the tenant. The landlord is and costs can be readily identifiable on a website. responsible for the inventory-make, which is the Why do you not make it a compulsory aspect of master document that can be used and reused for membership of your organisation that your members subsequent tenancies. The check-in and the check-out put it on their website? charges are usually split between the parties. This is Mark Hayward: We ask them to be completely because both parties benefit from that process. transparent about fees, but I certainly take that comment on board. It is where it is on the website, because there is a lot of information on a lot of our Q159 John Stevenson: Do you think tenants should members’ websites that people will not drill down to. be charged fees in the first place? Secondly, do you They will just see the property and the rent, and that think the fees and charges—not necessarily the is all they want to know. “Is it available? I need to amount, but the disclosure and the transparency— see it.” should be underpinned by legislation? Geoff Fimister: Yes, the last substantial piece of work Q163 Simon Danczuk: You are blaming the tenant. we did on this in terms of research was back in 2009, when we produced the Let down report, which drew Mark Hayward: I am not blaming the tenant. on evidence from bureaux and also a specific survey. Fees and charges, lack of transparency, unexpected Q164 Simon Danczuk: You are saying they will not fees and their high levels were among the main drill down and find it on the website. Your members themes of that report in terms of issues that affected can design a website that is very explicit, transparent tenants. and clearly shows the costs and fees that tenants will Certainly, the conclusion we drew was that fees pay. I am asking why you do not do this. Why do you should generally be levied on the landlord, rather than not say to us today that you will make it compulsory on the tenant, and then reflected in the rent. That for your members to do it? would make it a far more transparent process. It would Mark Hayward: I cannot say that I will make it also mean there would be some ability, on the part of compulsory, because it is not down purely to me. I the tenant, to receive some help towards the cost will certainly take that back and we will discuss it through housing benefit. Of course, since 2009 that fully. What I am saying, though, is that because of the has become somewhat more restricted. We would like climate with lettings at the moment, the urgency to to see some sort of regulatory framework, of which secure a property is such that people will not read the this would be an aspect. small print. Simon Danczuk: Do not make it small print; that is the point. Q160 John Stevenson: Should that cover private Mark Hayward: Even if it is bold, compelling and landlords as well as letting agents? specific, they will not necessarily see it. Geoff Fimister: In terms of formal positions that we have taken in the past, we have proposed the Q165 Simon Danczuk: This sounds like an excuse regulation of letting agents. In the context of the much to me. Caroline, what is your view? higher profile the private rented sector has had in Caroline Kenny: I cannot give you that commitment recent years and some of the work we have done more here and now. In terms of tenants’ fees, there should recently, we think there are strong arguments for a be one non-variable element to the tariff of fees, wider regulatory framework for private landlords in which would remain constant. That should be the general. administration fee relating to the drawing-up of the It was interesting to read the transcript of one of your tenancy agreement. In principle and in theory, as far previous sessions. I think it was Professor Partington as tenants’ fees are concerned, there is an element that who made an interesting point. He said that if letting agents could perhaps display on their website, but agents were effectively regulated, then it would only other fees will be more complex and would need to be necessary to look at regulation of those private be calculated according to individual circumstances. landlords who were not signed up with a regulated letting agent. I thought that was an interesting point. Q166 Chair: Could you explain that? It runs completely counter to the argument about having Q161 Simon Danczuk: I have a quick supplementary upfront transparency of fees. You are saying that two question to Mark and Caroline. Of these complaints, different tenants will get charged different amounts the greatest proportion is about letting agents’ charges for the inventory. and fees. Why do your members not put their fees on Caroline Kenny: Yes, because inventory costs relate their website, so that it is very transparent? to the size of the property. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG03 Source: /MILES/PKU/INPUT/027272/027272_o003_michelle_130304 HC 953-iii PRS CORRECTED transcript.xml
Ev 32 Communities and Local Government Committee: Evidence
4 March 2013 Mark Hayward, Jason Freeman, Geoff Fimister and Caroline Kenny
Q167 Chair: But you are advertising a property with In terms of rogue agents, I would go back to the other a rent; why can you not say at the beginning, “This is mention of the enforcement of existing regulation. what it is going to cost for the inventory to be done Enforcement is the issue there. for that property”? Caroline Kenny: I suppose you could do that, but in Q171 Heather Wheeler: I understand. Jason, if I terms of the practical day-to-day running of an could finish with you please, we have talked a little agency, properties become available and are rented bit today about redress; is it really an important issue? sometimes within 24 hours. As an agency, it would be Is a decent quality home of greater importance to quite onerous to do that. tenants, perhaps, than a couple of hundred pounds’ worth of compensation? Jason Freeman: The advantage of redress is around Q168 Simon Danczuk: That is what you get paid being able to sort out problems as they arise. To some for; that is why you are an agent. That is what the fee extent there is redress already built into the system is for. around tenancy deposit protection. There are going to Caroline Kenny: I note that comment, but when you be certain issues that can be resolved at that stage. On are calculating a particular fee relating to one the whole, for what it does, that works well, does it property, you may have up to 50 properties that you not? It is a useful system. are advertising at that time. They are rented so quickly The downside of it is that you have to resolve the because of market conditions that it may be quite dispute at a time when the tenant perhaps needs the onerous for agents to do that, to be honest with you. money to get the next property. It is a stressful Chair: You manage, however, to find the rent for experience. It would be better if things could be those properties and advertise that. Anyway, maybe resolved during the life of the tenancy rather than at you can go away and have a think about that one. points of crunch. There is a good reason for getting Caroline Kenny: I certainly will. things sorted out. If you can resolve problems with your home, it is a more enjoyable experience all round. Q169 Heather Wheeler: Mark, ARLA favours Redress is an important aspect. Having looked at compulsory control of letting agents. Could you give this—and we looked at the complaints—it is one of us a broad outline of what you think this control the areas where we felt that the Government could would look like? Is your call for compulsory control certainly think about whether legislation would be a a sign that self-regulation has failed? good idea. It is important, of course, to bear in mind Mark Hayward: No, I do not think self-regulation has all of the potential downsides in terms of cost and failed as far as our members are concerned. They have precisely how the system would work, but we felt the to go through considerable hoops to become a idea of there being a redress system that is accessible member and stay a member. However, it is not a level to everybody would be an area where there could be playing field. As we know, nearly half the letting some real change delivered. agents in this country are not members of any professional body; therefore, they do not fall under a Q172 Andy Sawford: I want to explore some issues redress scheme. Our members do. However, we need around tenure and security of tenure. We have an overarching regulator—preferably someone like conflicting evidence from witnesses, and I want to ask the Property Ombudsman—who could, on behalf of a little bit about why you have different views. Geoff, the professional organisations involved in lettings, Citizens Advice tells us you support the Whitty invoke and supervise a redress scheme, as they do for inquiry’s recommendation that we move towards 24 estate agents. months as the norm for tenancies. Why is that? Geoff Fimister: We were quite closely involved in the Q170 Heather Wheeler: That is an interesting Whitty inquiry, giving evidence to it and discussing answer; thank you very much. Caroline, if I could those issues. As I said, we obviously tend to see come to you next please, you are opposed to a central situations where there are problems. One of the problems is around security of tenure. With assured regulator and instead favour a series of minimum shorthold tenancies, the balance of power is very standards. How do you think that would work? What much against the tenant in the sense that they can be would happen to agents who refuse to abide by those moved on quite easily. standards? That is a problem anyway, but as the nature of the Caroline Kenny: Yes, we have a slightly different private rented sector changes and there are more and position there. We do not believe a central regulator more families and children involved—there are all the is essential to ensure standards are met. UKALA issues around support networks, schooling and so members and those of other trade bodies obviously forth—the idea of a very insecure tenancy form abide by the minimum standards that I outlined earlier becomes more and more problematic. and already provide those reassurances to consumers. We said that we supported the Whitty inquiry’s two If there were a central database—supported by the years as very much a step in the right direction. Of Government, consumer groups and industry bodies, course, Shelter have also done a lot of work on this. and searchable by consumers—that listed all the They are proposing a five-year model, which, as far self-regulating agents, this would provide the best as I can see, would be better than two years from a incentive, in our opinion, for non-regulated agents to tenant’s point of view. Shelter have done a lot of work join a professional trade body. on how that might be incentivised; clearly, there are cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG03 Source: /MILES/PKU/INPUT/027272/027272_o003_michelle_130304 HC 953-iii PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 33
4 March 2013 Mark Hayward, Jason Freeman, Geoff Fimister and Caroline Kenny lots of issues, because landlords may have perfectly Caroline Kenny: No, but a trained letting agent good reasons to want short tenancies. should know they have to listen to the requirements Andy Sawford: Tenants also might want short of the tenants. If the tenants are requesting a longer tenancies, like students. tenancy and the landlord does not have this restriction Geoff Fimister: Indeed, that is right. from their mortgage provider, the agent should be the facilitator and try to achieve the tenant’s request, if it Q173 Andy Sawford: What I cannot understand is is suitable for the landlord to release the property for what the mechanism would be. If there is an aspiration a longer duration. to move towards 24-month tenancies, what would be the mechanism to realise that aspiration? Would you Q178 Andy Sawford: Would the question be asked favour legislation? by default by an agent, “Does the length of tenure the Geoff Fimister: We have not done the detailed work landlord is offering suit you and your circumstances, on this that Shelter have, but in the discussions we or do you wish to negotiate?” have had internally, and also in Shelter’s deliberations Caroline Kenny: It should be asked by a proper and the Whitty report deliberations, the idea of trying letting agent who abides by our code of practice. I to tackle the question through tax incentives and was a letting agent—prior to this position—for 10 positive support of that kind seems, certainly, to be years, and that was common practice. You are the the first step. I think I am right in saying Shelter would facilitator and negotiator; it is up to you to get the see a longer-term objective as being a move towards terms agreed. some sort of regulated arrangement. Q179 Andy Sawford: One issue that has been raised Q174 Andy Sawford: The regulation would with us—this is connected to tenants having security underpin this shift to longer-term tenancies. in their relationship with their landlord—is this worry Geoff Fimister: It could. It may be that incentives of retaliatory evictions. Would you care to comment could achieve it without regulation; that is a debatable on the extent to which you see that as a problem and point. But if we had a regulatory framework, it would what you could do to mitigate that? Would, frankly, a be a relatively straightforward matter to say, “The longer tenancy give the tenant greater confidence that tenancy normally would be two years and landlords could apply for a different term if they had a good they could raise complaints or issues with their reason to do so.” landlord and not face a retaliatory eviction? Geoff Fimister: Certainly, a longer tenancy would help in that respect. We did some specific work a few Q175 Andy Sawford: RICS tell us that the average years ago, in 2007, on retaliatory evictions. It is a tenancy is around 18 months. UKALA say that 66% fairly persistent theme that comes into bureaux. There of tenants are there for longer than two years. There are a couple of examples in the written evidence we is not really a problem with this, is there? The exception could become the shorter tenancy, rather gave. One claimant was required to withdraw his than that being the norm. housing benefit claim under threat of eviction. Caroline Kenny: The initial term may have been Another tenant had to drop a request to have a radiator agreed as a shorter term, but obviously tenancies can fixed in a cold room. It is that kind of problem that roll over to periodic tenancies, resulting in longer does keep coming in. tenancies. Q180 Andy Sawford: The tenant had to drop the Q176 Andy Sawford: Would it be fine if the norm request because he or she was expressly warned they were to shift to longer tenancies, for all the good might be evicted. reasons that Lord Whitty and the CAB have set out? Geoff Fimister: Yes. That sort of thing happens. I am Caroline Kenny: There should be flexibility in not saying this is something that is typical, because as tenancy durations. Obviously, the agent negotiates the I have said a couple of times, we get problems by terms internally with regards to the duration of the definition. However, retaliatory eviction is one of the tenancy, according to what the tenant has requested persistent things that comes through in housing cases. and what is suitable for the landlord. The problem Interestingly, DCLG set up a working party to look at is that there is a restriction from mortgage providers, this in the context of the Green Deal. I was involved restricting the initial term to 12 months. The agent has in that. The conclusion that we eventually came to to carry out the instructions from their landlord if they was that there was not a lot of large-scale evidence on have that restriction. this and that it would be useful if DCLG could possibly commission some. Q177 Andy Sawford: The Property Ombudsman’s Nevertheless, it is a persistent theme in terms of evidence tells us, though, that tenants need to be better bureaux. In the work that Debbie Crew did for us on educated to understand that they can request a tenancy this back in 2007, she also looked at what happened for a period of time that suits their circumstances. in some other countries. In Australia, New Zealand What do your members do to make sure that tenants and a number of American states, there is a system understand they can request a different length of whereby tenants who feel that an eviction is tenancy? Is it prominent on the website, for example, retaliatory can go to a tribunal and have it looked at, alongside the fees? which is something that could be explored. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG03 Source: /MILES/PKU/INPUT/027272/027272_o003_michelle_130304 HC 953-iii PRS CORRECTED transcript.xml
Ev 34 Communities and Local Government Committee: Evidence
4 March 2013 Mark Hayward, Jason Freeman, Geoff Fimister and Caroline Kenny
Q181 Andy Sawford: Mark, what does ARLA do to Q185 Andy Sawford: Finally, in a local authority make sure that retaliatory evictions do not take place? seeking to house a homeless person where social Mark Hayward: I do not think this happens in a great housing is not available, which is the assumption if deal of cases. Firstly, our members must act fairly. they are looking to place in the private rented sector, There is a code of conduct to which they have to how would the CAB advise someone who needed to adhere. Again, this is very much with the consumer be housed, given your position that this is not a or the tenant in mind, as well as the landlord. They satisfactory option? will advise their landlord that this is not the action Geoff Fimister: We clearly recognise that local to take. authorities in certain areas—particularly London, of course, but not exclusively London—are in a very difficult situation in terms of the possibilities available Q182 Andy Sawford: Jason, is this something you to them. This is a good example of why it is very could comment on? Have you seen any evidence of difficult to look at the private rented sector in isolation retaliatory evictions? from what is going on in the social rented sector. But Jason Freeman: There are some complaints; it is not the reason why we worry about it is partly the security a very large percentage. It is very small; I think 0.2% issues we have already discussed and partly the of the total cohort were around harassment issues. affordability issue. There were not many of them, but those would be When the DCLG guidance on suitability appeared in perhaps landlords making unnecessary visits. There draft, we were critical of the fact that it did not may be some evidence, but in the complaints we explicitly refer to affordability of accommodation in looked at, we did not see much about retaliatory the PRS. It refers back obliquely to the main evictions. homelessness guidance, which is actually good on It is, however, something that has been raised. We that. It says that you should not be putting somebody had a meeting with various stakeholders in Northern somewhere where they cannot afford to pay the rent Ireland and this was an issue they raised with us. The without being reduced below basic benefit levels. ability of tenants to be demanding, as we think they Because affordability is such a growing problem— should be, means they can be on the receiving end of with housing benefit increasingly restricted and retaliatory action of that kind. It is clearly a concern, increasingly not reflecting rental movements—we but it is not something we saw in the complaints that think homeless people should not be put into that we looked at. situation; even if the rent is affordable to start with, it may not stay that way for too long. Q183 Andy Sawford: My final question is about the To some extent, there is protection if the tenant placement of homeless households in the private becomes homeless again within two years. The rented sector. We have had some quite different views. homelessness responsibility is reactivated, but it still There was some very strong criticism from RICS seems to be an insecure and potentially unaffordable around local authorities discharging their duty to the context for tenants to be moved. But we are realistic: homeless in relation to the private rented sector. There we recognise that some local authorities do not have was a question from CAB about whether this is the a lot of room to manoeuvre. right way forward. I think you said it was an “unsatisfactory option”. Could you comment on those Q186 Andy Sawford: To finish this point, Geoff, do points—perhaps from the point of view of your you think it would be helpful for there to be some members, Caroline or Mark—around the experience guidance or regulation for local authorities—which I of engaging with local authorities in the discharge of am loth to call for, as a localist—specifically in their homeless duties? relation to placing homeless people in the private rented sector? For example, this could be for longer Caroline Kenny: This is a business decision that tenancies to be arranged or some guarantee around landlords need to take. It is not really within the rent increases. agent’s remit to comment on that. Geoff Fimister: Certainly, we hope that local authorities would seek to negotiate the best possible Q184 Andy Sawford: Presumably, you seek views terms in that sense, because it is not in their interest from your members about changes in the private for people to be returning to homelessness. That rented sector, and one of those is the likelihood that would be good practice. We already have the there will be an increase in the number of homeless suitability guidance and the main homelessness people that local authorities seek to place. guidance. Mark Hayward: Yes, we do. Caroline Kenny: We have not had anything raised. Q187 Heather Wheeler: I have a quick question for Mark Hayward: Certainly, in some areas it is Geoff. Have the CAB named and shamed judges who increasing. The problems are in terms of rent arrears have agreed to an eviction order on a tit-for-tat basis? and providing suitable accommodation. We must not I find it quite astonishing; if you pay your rent, I look at this as a London-centric issue; it is happening cannot imagine a judge agreeing to an eviction order. around the country. Our members will be engaging. I am stunned. As Caroline said, it depends upon the landlord, and Geoff Fimister: In the context of retaliatory eviction, whether or not they will look at people on benefit. for assured shorthold tenancies you do not have to Some will; some won’t. give a reason as to why you are bringing the tenancy cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG03 Source: /MILES/PKU/INPUT/027272/027272_o003_michelle_130304 HC 953-iii PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 35
4 March 2013 Mark Hayward, Jason Freeman, Geoff Fimister and Caroline Kenny to an end. That is what makes tenants particularly current market rent, because of the hassle of moving vulnerable in that sense. over—the time and the void. It is not in agents’ interests to churn property. Q188 John Stevenson: The tenancy must have come to an end. You cannot just kick somebody out of an Q194 Chair: No, but, certainly, to keep redoing the assured shorthold tenancy unless the term has actually tenancy every six months, to sign them up for another come to an end. Even then, you have to give your two six months, means you get the administration fee, do months’ notice. you not, from both parties? Geoff Fimister: You give two months’ notice; this is Mark Hayward: I do not think they are in a position what I am saying. If the landlord only has to give two to implement that. They are acting on behalf of their months’ notice without a reason, it makes it quite easy landlord; they are not acting on behalf of themselves. to evict a tenant. They are acting on behalf of the landlord, and they should take their client’s instructions. Q189 John Stevenson: That is nothing to do with retaliation; it is just a fact of the law. Q195 John Stevenson: On that point, when you have Geoff Fimister: The motive could be retaliatory. a tenancy that comes to an end, do you make a conscious effort to do a new lease for, say, six months Q190 John Stevenson: It does not matter what the or 12 months, or do you just let it run over into the motive is; it is a point of law. There is a six-month statutory period? tenancy; it comes to an end; the landlord has to give Mark Hayward: It becomes periodic. two months’ notice. End of story. Caroline Kenny: It all depends on the landlord’s Geoff Fimister: If you have not offended the landlord, instructions. the landlord may well readily renew the tenancy, whereas if you have, you can be given two months’ notice. Q196 John Stevenson: What do you do as a letting agent as a matter of policy? Do you go to the landlord and say, “The tenancy has run out,” or do you just let Q191 John Stevenson: And? That is just a fact. The landlord does not need to give any reasons for that. It it run? is a matter of law that the tenancy comes to an end. Caroline Kenny: Usually, if it is a year’s tenancy, If the tenant wanted a longer term, he should have three months prior to the end of the tenancy you will negotiated that at the outset or when the time for contact the tenant and the landlord. You will ask the renewal came up. tenant whether they want to stay on for an additional Geoff Fimister: That is my point: it puts tenants in a term; you will ask the landlord if they want the tenant particularly vulnerable situation. If you refer to the to remain in the property. If that is the case, you would point I was making about what goes on in other negotiate possibly a rent increase, according to the countries—about raising the possibility that the notice market conditions, or possibly not. It is all according to quit is related to an attempt to assert rights, for to your landlord’s instructions and the tenant’s instance—clearly, if we legislated to achieve that, it request. would have to be co-ordinated with the notice-giving provisions of assured shorthold tenancies. Q197 John Stevenson: More often than not, a new tenancy would be put in place. Q192 Chair: Do lettings agents not have a vested Caroline Kenny: It all depends on the circumstances. interest in shorter tenancies? Every time a tenant moves, you get the inventory fee and the reference Q198 Simon Danczuk: Following that point, when fees. Even if you renegotiate an existing tenancy, you you advertise a property on your website, do you get the administration fees. There is no incentive for specify for that property whether it is only a you to advise longer tenancies, is there? short-term, six-month or 12-month let, or whether it Caroline Kenny: I would contend otherwise, because can go on for a longer period? when property becomes available there are marketing Mark Hayward: No, it would not. It would just be costs and staff have to go out, physically, to show the available; there would be no reference to the length property and call at the property. That outweighs the of it. other costs involved. In terms of the inventory costs, usually an independent inventory clerk is appointed so that the agent does not benefit from that charge; the Q199 Simon Danczuk: Why would you not do that? inventory company does. Mark Hayward: At the moment, there is an assumption that it is an assured shorthold six-month Q193 Chair: The best position, then, is to have a renewable. There would not be a reason to state tenant in for six months, and every six months you anything else. That is the assumption. redo the tenancy and charge them an administration fee with no extra work for yourselves at all. Q200 Simon Danczuk: Whose assumption is that? Caroline Kenny: No. Mark Hayward: It is the tenant’s assumption. Mark Hayward: It is better to have a good, steady Simon Danczuk: It is the tenant who is assuming this. tenant. A lot of our members are managing agents as Mark Hayward: A lot of tenants assume that they well. Both an agent and a landlord who has a good have six months and they can renew thereafter or it tenant will wish him to stay, even if it is at less than goes periodic. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG03 Source: /MILES/PKU/INPUT/027272/027272_o003_michelle_130304 HC 953-iii PRS CORRECTED transcript.xml
Ev 36 Communities and Local Government Committee: Evidence
4 March 2013 Mark Hayward, Jason Freeman, Geoff Fimister and Caroline Kenny
Q201 Simon Danczuk: There is no responsibility on Q205 Simon Danczuk: Is the situation good, bad or you to inform the tenant. adequate? Mark Hayward: They will be informed. We will not Geoff Fimister: We see the problems, and we think actually say on the advertisement. that those kinds of problems are another argument in Caroline Kenny: My experience is slightly different. favour of having some sort of regulatory framework If it were a very short initial term—say, for three to six for landlords and letting agents. months—I would specify that within the advertising Jason Freeman: When we looked at this, issues particulars. I think a lot of agents would do the same. around the security deposit made up 20% of the Otherwise, you will get a lot of prospective tenants complaints. It is a fair percentage of the issues that presenting themselves to you looking for a 12 to are complained about. It is fair to say that most tenants 18-month tenancy, and you will just be wasting your do not necessarily have a problem with the security time. It is in the agent’s interest to specify that if they deposit. To say the system is not working would can, with very short-term tenancies. perhaps be a step too far. The system has some failings; they are mainly around people not properly Q202 Simon Danczuk: I do not think you are securing deposits when they should. providing enough information for tenants to be able How do you solve that? To some extent there is to make a reasonable decision before they even pick perhaps an enforcement agenda that could be up the phone and make an appointment. I do not discussed: should this be an enforcement priority for understand why you would not do that to be local authorities? I express no particular view on that; transparent and helpful to people who are looking for it would be a matter for local authorities. However, a longer-term tenancy. landlords and tenants need to be empowered and Mark Hayward: If they are looking for a longer-term enabled to demand what their rights are, and to know tenancy, in most instances they will inform the letting what their obligations are, if they are the landlord. agent that that is what they are looking for. There is a structural issue in the market whereby a lot of landlords are individuals. A lot of landlords are not Q203 Simon Danczuk: Surely, they would search on perhaps as aware of their obligations as perhaps they your members’ websites for all properties where they should be. Providing them with sources of information have a longer-term tenancy. That would be the so that they can find out what their obligations are is simplistic, easy way of assisting them and being an important building block to making this work well; transparent with tenants and potential tenants, landlords should know, if they were taking the wouldn’t it? deposit, what the consequences of that are. Similarly, Mark Hayward: As I say, we try wherever possible they and tenants should be able to check, if they are to be transparent; our members have to be. relying on an agent to secure a deposit, that the agent has in fact done so. Q204 Simon Danczuk: Moving quickly on, I have We certainly saw complaints by landlords who been reading some research done by Which?, the believed that the agent had secured the deposit and consumer organisation. It says they have found fairly unfortunately that was not the case. It then becomes high levels of dissatisfaction amongst tenants. One in an issue of who is going to repay the deposit. five tenants was found to be dissatisfied with their Sometimes you can have a dispute between the tenant agent. One of the reasons for that is that agents are and the landlord as to whether the deposit is going to not safely and fairly handling the security of deposits. be repaid. It becomes quite a difficult situation. If This research also showed that some landlords were tenants and landlords could be more aware of what is dissatisfied with their agents, particularly around necessary—what the agent and the landlord should be agents not putting the tenant’s deposit in the doing—we think that some of the problems would protection scheme and the landlord being liable. be rectified. Starting with you, Geoff, do you think the Mark Hayward: I can only speak for our members: arrangements for the protection of tenants’ money they have to belong to a deposit-protection scheme are adequate? and all our members are covered by client-money Geoff Fimister: The main problems that we get protection as well. coming up through the bureaux around tenancy deposit protection are landlords or agents failing to Q206 Simon Danczuk: Do all your members have to protect the deposit or the deposit not being refunded, belong to a deposit-protection scheme? or disputes around how much of it should be refunded. Caroline Kenny: Yes, that is correct. They are all also DCLG will say that the system works pretty well covered by client-money protection. overall in terms of the big picture. Of course, we see the problems. I would regard tenancy deposit Q207 Simon Danczuk: Finally and briefly, the Royal protection as a subcategory in the overall issue of how Institution of Chartered Surveyors does not have a you achieve decent standards of practice, which takes very high view of SAFEagent, the recognition scheme us back to questions of whether you should have a that exists. What is your view in relation to that? They regulatory framework. say it is just another logo and does not really do very I should also declare an interest, in that my daughter much for tenants. What is your view? had a landlord who disappeared with her deposit and Mark Hayward: It is a good logo. It says what it does I had to pay the deposit on the next flat as a on the tin. Everybody within SAFEagent has to have consequence. some form of client-money protection; unfortunately, cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG03 Source: /MILES/PKU/INPUT/027272/027272_o003_michelle_130304 HC 953-iii PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 37
4 March 2013 Mark Hayward, Jason Freeman, Geoff Fimister and Caroline Kenny they are not all the same. It is not necessarily what it nature and failing to disclose personal interests, which says on the tin. is a particular feature of estate agency services.
Q208 Simon Danczuk: It is not as secure as it may Q211 John Pugh: It does not apply to letting agents. seem. Jason Freeman: It does not apply in the same way to Mark Hayward: Some of the policies are different. letting agents. The amount of commission the estate Some of the client-money protection rules are agent is likely to get if they are doing a letting is different. In ours, there is run-on; your money is significantly smaller than if they are doing an estate secure. In others, if they are expelled from the agency. This is one of the reasons why there are a membership organisation, which they might be at the number of provisions in the Estate Agents Act where first sign of trouble, the tenant or the landlord is not there are particular risks. Those are not necessarily the covered. same in the lettings market. They both involve Geoff Fimister: We thought that SAFEagent was very property, but there are some slightly different issues. useful as far as it went as a kitemark scheme. We were quite concerned that with pressures upon more tenants Q212 John Pugh: Mr Fimister, in your evidence you to move, again because of the housing benefit said that landlords should not be permitted to refuse situation, there might be a problem of more people to accept housing benefit claimants as tenants. Why being vulnerable to dubious agents. We were quite not? It is their property. There are additional risks now keen to bring SAFEagent to the attention of bureaux. that housing benefit is paid directly to the individual, As far as it goes, it is useful; however, if you are a rather than to the landlord. Why do you say that? tenant who is operating right at the bottom of the Geoff Fimister: It seems an enormous problem at market and trying to find very cheap accommodation, present. It is becoming more and more widespread for those are the sorts of agents who are not going to be two main reasons. One is the fact that housing benefit signed up to SAFEagent anyway. is increasingly coming adrift from rents in the private One brief thing I forgot to mention on tenancy deposit rented sector. Shortfall is becoming more widespread protection is that one thing we would like to see is a and more substantial. Clearly, that is going to make common web-portal between the different schemes. landlords worried, as you say. There is also the Tenants would be able to easily check whether their proposal under Universal Credit that the default deposit has been protected, rather than having to position should be that the payment for rent should be check all the different websites, as they do at the made to the tenant normally, rather than to the moment. This is something that we, Shelter and the landlord. NUS have suggested to DCLG. You can see what the worries are, but the social consequences are really quite alarming. You will hear Q209 John Pugh: I have a question for all of you Ministers saying that 30% of tenancies in the private about housing benefit but, before that—with the rented sector will be available to housing benefit Chairman’s indulgence—can I ask you something that claimants. The reason they say that is because the 30th has been nagging away at the back of my mind? It is percentile is now used, or was used, to establish the a question I asked in the Westminster Hall debate last local housing allowance levels; it was the 30th week. It is a fact that all estate agents have to belong percentile of the rent distribution in a particular local to a recognised redress scheme. It is a fact that letting rental market area, although local housing allowances agents do not. Can any of you find a justification for have now been frozen and they are going to be uprated that? by CPI and then by 1%. It is coming adrift again there. Mark Hayward: I cannot find a justification for it. That is where the 30% figure comes from, but it takes They should be. no account of the fact that increasingly landlords will John Pugh: That is fine. Nobody can find a not let to HB claimants. The de facto availability of justification for it. accommodation is quite minuscule in many areas. Jason Freeman: If I could jump in, there are some That is enormously worrying. I take your point about justifications. In general, we are generally reticent landlords having good reasons to be concerned. It about getting traders to sign up to schemes. You can seems to us to be a form of discrimination against enter into business and you do enter into business. As people on the lowest incomes. It is causing soon as you put legislation in place to say, “We are enormous problems. now going to create a facility to remove people from a particular industry,” it arguably requires a certain Q213 John Pugh: Does anybody else have any ideas amount of justification. about what we can do to encourage landlords to take on housing benefit tenants, or are we going to accept Q210 John Pugh: That is a general argument against this as an inevitable fact of life? having schemes of registration; I am merely asking Mark Hayward: I think it is a fact of life at the you whether there is an argument for having estate moment because, as I said earlier, the imbalance agents subject to a recognised redress scheme, but not between supply and demand means they do not letting agents. necessarily have to in a great deal of areas. As Jason Freeman: The justification for regulating estate Caroline said, it is for the client or landlord to decide agents in that way has tended to be around the risks whether they will do it. In some areas, they are very around property-sale transactions, particularly the happy to do so. There needs to be more awareness out risks around secret commissions and profits of that there that this is an option. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG03 Source: /MILES/PKU/INPUT/027272/027272_o003_michelle_130304 HC 953-iii PRS CORRECTED transcript.xml
Ev 38 Communities and Local Government Committee: Evidence
4 March 2013 Mark Hayward, Jason Freeman, Geoff Fimister and Caroline Kenny
Q214 John Pugh: Is it a fact of commercial letting landlords who are dealing in the housing benefit life that a landlord, all things being equal, would market basically do not deal with letting agents? prefer not to have a housing benefit client? Some Caroline Kenny: There are a huge number of landlords, in the past, felt differently when it was a landlords that do, but it does vary regionally. pure form of income passed over to them, didn’t they? Caroline Kenny: I do not have much experience in Q216 John Pugh: Do agents not wish to handle that sector, to be honest with you; it is a business cases where housing benefit is involved? decision for landlords to take. Caroline Kenny: Agents are facilitators; if their clients wish them to do so, they are quite happy to Q215 John Pugh: Following on from that, do you do so. not have much experience of it because the sorts of Chair: Thank you all very much indeed for coming to give evidence to us this afternoon.
Examination of Witnesses
Witnesses: Peter Bolton-King, Global Residential Director, Royal Institution of Chartered Surveyors, Christopher Hamer, the Property Ombudsman, and Louisa Darian, Senior Policy Adviser, Which?, gave evidence.
Chair: Good afternoon and thank you very much for Louisa Darian: I am not suggesting that this is a joining us. legislative requirement. We would be very happy to work with the industry to think about how information Q217 John Stevenson: I will start with the issues of could be presented to help consumers make a very fees and charges. You have made some criticism of informed choice. There is some way of standardising the charges that are imposed on tenants, but could a that information so that people can look at the rent counter-argument be that it is the responsibility of the and the deposit that is required of them, and assess consumer, whether it be the landlord or the tenant, to whether it is more affordable to go to Agent A or find out what the fees are going to be from a letting Agent B. agent before they go down the road of signing any contracts or terms and conditions? Q219 John Stevenson: Peter, you are a member the Louisa Darian: It is a very fraught process when you RICS; in landlord and tenant situations, and letting are looking for a property. Tenants are often moving agents, who does the letting agent act for? Who is quite quickly because of a change in circumstances, their client? so having to think through all the questions you need Peter Bolton-King: The client of the letting agent is to ask and all the things you need to consider in that the person who is paying them and who asked them short timeframe is quite difficult. I would also say that to do the job in the first place. Of course, one has to in leaving it to the consumer to ask the agent later bear in mind that one of the things about consumer down the line, if fees are not presented in a written protection regulation is that it introduces the concept format, then the research we have done suggests that of “the consumer”. The consumer, as far as the agent it is very difficult to get accurate information on fees. is concerned, can be any number of people they come Even when we have done mystery shopping—the into contact with, but the person who is paying you is results of some will be published tomorrow—we have your primary client. found that you would have to be a very savvy consumer to get clear and accurate information on Q220 John Stevenson: Would this be, effectively, fees. So it is agents citing fees without VAT included the landlord? or different people being told different things in the Peter Bolton-King: It is the landlord. agency. We do think it is really important that that information is provided when consumers are Q221 John Stevenson: Do you think it is right, considering the property—in adverts on internet therefore, that agents should be charging the tenants portals—so that they can assess fairly whether or not anything? they can afford a property. Also, this would put a bit Peter Bolton-King: We heard earlier, sir, that there is more price competition on fees because, at the a multitude of different situations out there. You have moment, without that information being clearly some agents who are charging and some who are not. presented, there is no incentive for agents to lower Generally, you have the situation that while we think their fees. You have some agents charging £500 for there is a standard tenancy agreement—that they are an admin fee and some agents £100. We think that all the same—that is actually not the case. The would help put pressure on prices too. feedback we have had from our members is that, in the majority of cases, there is something that needs Q218 John Stevenson: Regarding the charging of altering to accommodate that particular tenant, fees, it is a competitive market, so it is up to each whether it be a pet or whatever it might be; that comes individual letting business how much they should at a cost. charge. Are you suggesting, therefore, that there should be some pro forma statutory framework for Q222 John Stevenson: Surely that is part of the fees and charges? negotiation between a landlord and a tenant and, cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG03 Source: /MILES/PKU/INPUT/027272/027272_o003_michelle_130304 HC 953-iii PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 39
4 March 2013 Peter Bolton-King, Christopher Hamer and Louisa Darian ultimately, that should be the landlord’s cost, you outset and, of course, it does not duplicate charges would have thought. They are the ones drawing up the that are being imposed on the landlord. letting agreement. Peter Bolton-King: They are the ones drawing up the Q227 John Stevenson: What about what I would call letting agreement but, again, it is all about “referral fees”, whereby you are a letting agent for a transparency, as far as we are concerned. Right at the landlord and certain work needs to be done, and you front, as we heard earlier, tenants, and landlords for use certain local joiners or other workmen and they that matter, must know as early as possible what their give you a kickback? How would that be regulated? costs are going to be, and we feel very strongly that Christopher Hamer: That is probably fairly common providing they have that information available, they practice in the industry, as I understand it, and, as I are able to come to a decision as to whether or not also understand it, I do not think referral fees per se they, personally, are prepared to pay them. are illegal. However, if the agent is gaining a referral fee, it should be disclosed to the individual—not Q223 John Stevenson: Do you think that should be necessarily the amount, because that will vary, underpinned by statute? clearly—and certainly to the landlord, who will be the Peter Bolton-King: The requirement to be one ultimately incurring the cost; it should be transparent, as far as our members are concerned, is disclosed that there is an element of the charge that is already there, sir. We expect all our members to be a referral fee. totally transparent. The problem, of course, is the 40% of people who do not belong to any organisation, as Q228 John Stevenson: Do you believe this system we have heard before. There is nothing to stop those should be underwritten by statute? people being totally un-transparent. Christopher Hamer: As Peter said, 40% of the letting agents operating in the UK are not affiliated to my Q224 John Stevenson: We are talking about the scheme, to RICS, or to ARLA. They are operating, regulation of letting agents. The danger you then have one assumes, according to their own set of standards. is the private landlord. How would you deal with that? The industry, along with consumer groups and other bodies, has been interested in some sort of voluntary, Peter Bolton-King: The situation that we have at the perhaps self-regulatory, situation. However, that can moment is that the whole approach to regulation only work if there is something forcing the other 40%, seems to me to be very inconsistent, fragmented and beyond the 60% that are willing to sign up to confusing for the consumer, not to mention standards, into that regulated environment. burdensome on business. I do not think you can just look at sales agents, letting agents, new home agents, Q229 John Stevenson: Does that mean you would managing agents and landlords in individual pockets. support statutory underpinning? We feel that we should have a holistic approach to the Christopher Hamer: Yes, indeed. whole thing. This may or may not require landlords, Peter Bolton-King: Your point about referral fees, sir, in some shape or form, to be in some scheme. As is absolutely right. I carried out some research you will be aware, there are boroughs in London, and recently and I wrote down on a bit of paper all the various towns and cities around the country and in different ways that, potentially, sales and letting Scotland and Wales, which are introducing some agents could be giving or taking referrals. I ran out of elements of landlord licensing or regulation. paper. There are many opportunities. To that extent, RICS have just launched a consultation around the Q225 John Stevenson: Christopher, what is your area of transparency on third-party referral fees. We view on charges and fees, and their transparency or believe they should be totally up front and open. otherwise? Again, as the Ombudsman said, this will only ever Christopher Hamer: I would agree with Peter that affect the people who are already complying with our transparency is the key here. The important thing is requirements anyway. That is the problem. that the charges are reasonable in the circumstances and, most importantly, are fully disclosed and Q230 John Stevenson: Louisa, do you consider it explained before the tenant—or indeed the landlord— legal for letting agents to charge tenants fees? is committed to the liability. By “fully explained”, I Louisa Darian: We have never gone as far as to say, do not just mean actively flagged, which is a current “This is what a proportionate fee would be,” or expression, but actually explained, and the agent “Tenants should not be paying fees.” This goes to the ensures that the consumer has understood those point you mentioned earlier: because tenants are charges: when they apply, what they are and that they paying fees, they think they are the customer. So when are reasonable for the work that is being undertaken we asked tenants and landlords, both parties agreed by the agent. that the agent was equally representing them both. There is some confusion that is created by the fact Q226 John Stevenson: Do you think it is reasonable that tenants are paying fees. We would be very for the letting agent to be charging the tenant certain concerned about banning fees for tenants and that fees and charges, given the fact that, in my view, their being added to the rent. client is the landlord? As a first step, we would like to see transparency of Christopher Hamer: I would take the view that the fees so there is greater price competition. This also important thing is that if there is a charge to the tenant, means—sorry, I should have said this earlier—that the it is properly explained and made very clear at the landlord should know what the tenant is being cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG03 Source: /MILES/PKU/INPUT/027272/027272_o003_michelle_130304 HC 953-iii PRS CORRECTED transcript.xml
Ev 40 Communities and Local Government Committee: Evidence
4 March 2013 Peter Bolton-King, Christopher Hamer and Louisa Darian charged; it was really quite surprising from this founded? We could not really drill down into the research that landlords often did not know that their numbers we were talking about; they said it was 0.2% tenants were being charged fees and often did not of the complaints. agree that they should be, as they thought it would put Louisa Darian: I do not know how much of it is the tenant off. If the landlord is the primary customer, perception or fear of a complaint and how much this they should be able to see the full set of fees being is happening. It was certainly the case that a third of charged both to them and to the tenant. the renters in our survey of 1,000 tenants said that it would have an influence on whether or not they would Q231 Heather Wheeler: Christopher, could I start complain. They would fear doing that in case there with you, please? Because you are the Ombudsman, was an implication for their tenancy. It is partly related you see all this pain that comes across your desk. to the fact that it is so difficult to find property now, What are the most common complaints that you see? especially if you have children and it is their home Christopher Hamer: In overall terms, the majority of with the school close by; you are in a market where my complaints are about what might be termed a complaining without thinking about repercussions is a misunderstanding or a miscommunication between the bit of a luxury. parties. Specifically, there would be things like claims of lack of diligence about referencing prospective Q234 Heather Wheeler: How do you think tenants tenants, so that the landlord ended up with a could be given confidence to complain about bad non-payer of rent or, perhaps, some criminal activity. service? It is also the case that agents will not be diligent about Louisa Darian: For us, one of the things that we think the referencing process just to get somebody in the is absolutely essential is for all agents to be signed up property, so that they get the fee for that, or they will to a redress scheme. We see that as basic consumer ignore the conditions that the referencing agent protection so that at least a tenant can make a requires. complaint about an agent to someone like the There will also be, for tenants, the agent taking an Ombudsman and it could be considered fairly. That is unrealistic amount of deposit. This is not the security one way of dealing with it. It is very difficult when deposit. This is the holding deposit, when somebody there is such a supply issue; people will feel reluctant is interested in renting a property; they are asking for if they are in a family home and feel that it is going that property to be removed from the marketplace, and to have an implication. referencing is carried out. A common scenario that I see is that the tenant fails the referencing or backs out, Q235 Heather Wheeler: I find it fascinating that in and the agent takes the whole of the deposit when, in all the evidence we have had today, not a single fact, they have not incurred anything like the typical person mentioned going to the council and talking to deposit of £500; they have incurred much less than the private sector housing officer. We employ these that from the cost of referencing. people to do stuff and not a single person has There will also be agents who collect rent and simply mentioned, “Let’s go to the council and knock on the do not pass it on, or who make unsubstantiated door.” A last question, if I may: a particular issue deductions for repairs. It is not the majority of agents, identified by Which? related to the protection of I hasten to add, but these are issues that cause tenants’ deposits. Are deposit protection problems arrangements adequate? Louisa Darian: Again, if you look at the DCLG data, Q232 Heather Wheeler: That is all very interesting. the tenancy deposit protection schemes obviously You obviously have very varied days in your life. Do have a massive effect, and they say the coverage is you think that people who are not part of the scheme pretty large. There is obviously still an issue, because are even worse offenders, or do you think you have our review of Citizens Advice complaints said there seen everything now? was an issue. It is particularly problematic in the Christopher Hamer: No, I would not say I have seen situation where the landlord thinks the agent has done everything. Of course, I do not know what is it and does not realise that they are ultimately happening with people who are transacting business responsible for protecting that deposit. I am not sure with non-members. In my view, people who do that, how widespread that issue is. The issue around whether they be landlords or tenants, are in a riskier holding deposits is probably wider spread. There are environment. They are transacting business with an obviously still problems. agent that is not operating according to a set of standards and perhaps does not have any client-money Q236 Mark Pawsey: All of you—in some form or protection insurance, and should something go wrong other—are happy to see more regulation in this sector, with the business, or indeed if the individual runs off but the bad news is that the Government does not with the money, they are at risk. If they are not within agree with you. The previous Government did not my scheme or affiliated to one of the main agree with you either, because in 13 years they did professional associations, those agents are riskier to nothing, and the existing Government says in its operate with. evidence that the existing legislation is adequate and that new regulation would increase costs for landlords. Q233 Heather Wheeler: Louisa, your research They also point to 50% of landlords being members found that tenants were reluctant to complain about of a voluntary scheme, including yours, Peter. If you agents for fear of repercussions; we have heard a little had the Minister in front of you, how would you seek bit about that from the CAB. Is this reluctance well to persuade him that he is wrong and you are right? cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG03 Source: /MILES/PKU/INPUT/027272/027272_o003_michelle_130304 HC 953-iii PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 41
4 March 2013 Peter Bolton-King, Christopher Hamer and Louisa Darian
Peter Bolton-King: We have been told by politicians, They have less chance to submit to redress if “Industry, you are totally dysfunctional; will you something goes wrong and they cannot resolve it please talk with one voice?” However, you have been between themselves and the agent. hearing an awful lot of evidence over your hearing that the industry is trying to talk with one voice. The Q238 Mark Pawsey: Why could we not just opposition parties have made it very clear where they persuade more letting agents to join the voluntary stand on this. You know where the consumer schemes, and then persuade landlords and tenants that associations stand. they should only deal with letting agents who are The answer to your question, Mr Pawsey, is that we members of those schemes? have to get across to the Minister that there are three Christopher Hamer: This is probably a cultural thing, principal problems at the moment. First of all, you and it comes back to what has been mentioned on have inconsistent regulation; you have heard, and are several occasions: the landlord and the tenant—the aware already, that it is a crazy situation that sales consumers—are ill equipped to understand who does agents should have to belong to a redress scheme and what in the lettings process, the liabilities they are letting agents do not, and I suggest managing agents taking on, and the risks they are taking on. There is a should as well—you cannot forget that. Interestingly lot of information given out by professional bodies— enough, if I cast my mind way back to when the indeed, by my office and by agents themselves—as to Consumers, Estate Agents and Redress Act was being what to look out for and what pitfalls may be faced. discussed, my memory tells me that there was every But when the information is given out, people are intention to include lettings agents—the Chairman is already in the web, if you like. They need to get it nodding. Actually, because the Estate Agents Act was before they set foot in the agent’s office. used as the vehicle to introduce that—and the Estate Agents Act still says that an estate agent is purely a Q239 Mark Pawsey: Louisa, landlords are often sales agent—it fell by the wayside. Clearly, as far as savvy business people. Why do they need protecting redress is concerned, it was clear that that was by legislation? intended. Louisa Darian: They are not all savvy business The second point, if I were talking to the Minister, is people. We have calculated that there are about 1.2 that we have poorly targeted regulations: no agent has million consumer landlords who have only a small to meet minimum competency standards, and lettings number of properties or probably a couple of agents are outside the scope of the Estate Agents Act. properties. The result is that the Office of Fair Trading can ban me operating as a sales agent—they do not ban many, Q240 Mark Pawsey: But shouldn’t they understand but they can ban me—but they cannot stop me taking that being a landlord involves responsibilities as well the sign down overnight, and putting it up again and as rights? It is their obligation to make certain that opening the door the next day: “Peter Bolton-King, they are well advised, and part of that is making Lettings Agent”. That is a crazy situation. We had certain they have a lettings agent who subscribes to a another case, which the Ombudsman will be well decent voluntary code. aware of, of a lettings agent who recently absconded Louisa Darian: I absolutely agree. There is a massive with a whole load of money. They were banned from role in terms of information. The point is that although operating as a company. He could not be banned from we have had SAFEagent in place for a while now, we operating as a letting agent because the OFT does not know that 37% of the landlords we surveyed had not have any power to do it, so he could not be a director. checked whether their agent was a member of a Actually, this does not stop him, to my knowledge, professional body. This means that their tenants are opening up a lettings company as a private individual. also very vulnerable to poor practice. It has That is a silly situation. implications for them if they make a bad choice, but The third point I would make to the Minister is that it also affects the tenant whose home it is. Who their we currently have ineffective and inconsistent agent is determines how secure they feel in their enforcement of even the existing legislation. That is home. Yes, it is essential that there is this minimum leaving a whole great load of unregulated agents to requirement to be signed up to an ombudsman quite honestly flout the existing law and often with scheme. few consequences for doing so. This lack of a level playing field is a real problem, and with the lack of Q241 James Morris: Mr Bolton-King, you said in money at the moment, I can only see enforcement your evidence that you recognised the changing nature activity decreasing rather than increasing. of the rental sector, particularly in relation to families coming in and looking for longer-term tenancies. Is Q237 Mark Pawsey: Mr Hamer, in relation to the there any reason why we should not be considering points raised by Mr Bolton-King, how would you longer-term tenancy options? persuade the Minister that regulation is necessary? Peter Bolton-King: Our members feel very strongly Christopher Hamer: I would support and agree with that there is nothing wrong with the current assured everything Peter said. I would make one further point: shorthold tenancy. This can be for any length, and you this inconsistency between sales agents and lettings heard in the earlier session that it is really just in agents is becoming more and more pronounced as people’s mindset that it has to be six months. As far more and more people, because of the economic as I am concerned, our members, especially if they situation that the country faces, are moving into the are managing a property, would be much happier to private rented sector to provide a roof over their head. see a property let long term. I do not think there is an cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG03 Source: /MILES/PKU/INPUT/027272/027272_o003_michelle_130304 HC 953-iii PRS CORRECTED transcript.xml
Ev 42 Communities and Local Government Committee: Evidence
4 March 2013 Peter Bolton-King, Christopher Hamer and Louisa Darian issue there. Tenants often do want the flexibility; they there is that extra cost involved? We have to be careful do not necessarily want to be tied down for the longer as to whether that is a real issue or just a red herring. term. I know that some do, but you have already heard of the big problem with the lenders and the insurance Q244 Chair: I have one point about this issue of industry, who say you cannot let your property for longer tenancies, which clearly would be helpful to more than 12 months. That is an area that needs families with children in particular; it would give looking at. them greater security and certainty. On the other hand, Christopher Hamer: From my point of view as the there might be the very reasonable concern of Ombudsman, I look at what the likely pitfalls are of landlords that if something does go wrong and the increasing the length of a tenancy. Yes, it would mean tenant does misbehave, it is difficult or at least fewer people moving, so possibly there would be expensive to get them out; there is a court process, fewer complaints at the point of sale, but actually it which is time-consuming and expensive. Is there any would mean fewer people would be able to move if way you could actually improve that process, whereby they were in a tenancy where the landlord was not those sorts of tenancy problems could be resolved being very amenable towards them or, indeed, if they more quickly and less expensively? Is that something were unhappy with the service they were getting from you have looked at at all? This might fit hand in hand the agent. Additionally, there would be fewer with longer tenancies. landlords able to regain their property if, conversely, Christopher Hamer: As we heard in the previous they were stuck with a poor tenant. While the landlord session, there is the ability of the landlord to provide may be able to give notice to his agent, in fact he two months’ notice with no reason—simply that he could find himself with a long tail of liabilities to fees wants the property back. lasting the length of the tenancy or even longer. Louisa Darian: I agree with many of the points that Q245 Chair: That is at the end of the tenancy. have been raised. Some people are living in the Christopher Hamer: That is at the end of the tenancy. private rented sector purposely for the flexibility that Throughout the tenancy, a landlord can issue what is it gives, but there are also many families living in it called a Section 8 notice, for various reasons. One who want a bit more security. Thinking of the survey, might be non-payment of the rent; it might be not a third, or about 27%, of tenants do worry about being treating the property in an acceptable manner, and so asked to leave before they are ready. One of the big on and so forth. That is, if you like, an accelerated issues, then, is working with buy-to-let mortgage termination of the tenancy process. It still requires a providers to try to understand why an assured court order. shorthold tenancy is a requirement. Peter Bolton-King: There is a potential issue there. It sometimes takes far too long to resolve that sort of issue if there is a serious problem but, as you say, the Q242 James Morris: Isn’t there, Mr Hamer, a vested system is in place to be able to take action. I do not interest from letting agents in having short-term think that is what is putting people off a longer tenancies, because they get repeat fees, and isn’t that tenancy. just part of the vested interest of the industry? Christopher Hamer: I suppose that might be a way Q246 Mrs Glindon: I am just going to ask about of looking at it. As I said at the outset, if there are redress. The average amount of money that a tenant fees due for a particular piece of work that the agent who made a complaint would receive as an award is is carrying out, he needs to make that clear to both about £300. This is just an amount of money and it is parties, and those charges need to be reasonable. It not going to do anything to give someone a better might be realistic for a fee to be charged for the home. Can I ask you in particular, Mr Hamer, whether renewal of a tenancy, providing it relates directly to you think that the Property Ombudsman has any the work the agent has carried out. teeth? Christopher Hamer: I would say “yes”, wouldn’t I? Q243 James Morris: Mr Bolton-King, do you think In regard to rewards, my rewards are for what I there is a vested interest among letting agents to keep perceive to be the aggravation, distress and the status quo? inconvenience caused to an individual by the action Peter Bolton-King: I keep hearing this, but I am really of an agent. When we have a lettings transaction, it is not convinced that this is a problem out there, important to point out that the contract between the although I am not saying that some agents do not like agent and the landlord is the tenancy agreement, and their churn. But you have to bear in mind, as was said if either party does not perform their commitments earlier, that if you have a property that has come back under that contract, they have to take action against on the market, it costs you money to market it, to each other. The agent, if you like, is the go-between, advertise it and to have people viewing it. It is not communicating between one and the other and, in the necessarily in the agent’s interest to actually see a void cases I see, quite often the agent has, yes, done period and all the cost involved in that. I still maintain something wrong, and maybe even done something that members do not mind, especially if they are seriously wrong, but I am only looking at the effect continuing to manage the property; they are getting of his—the agent’s—actions on either the tenant or their fee, whatever is agreed, every month, and they the landlord. are managing the property, so everyone is happy. Why As to my awards, I have an upper limit of £25,000 for would they want to go through all the effort of a void compensation; these are not penalties. That is not what period again just to get a few more pounds, when a redress mechanism does. If needed—if in a cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG03 Source: /MILES/PKU/INPUT/027272/027272_o003_michelle_130304 HC 953-iii PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 43
4 March 2013 Peter Bolton-King, Christopher Hamer and Louisa Darian circumstance presented to me there was a very serious looking round for where to go. It is confusing, and it issue—I have the ability to make a significant award. is probably not a good idea, when you are looking at a redress mechanism, to have two schemes. Q247 Mrs Glindon: What effect do you think that has on the agent or the landlord regarding doing Q250 Mrs Glindon: Could there be any future for something about the actual complaint? Do you usually merging the schemes? Have there been any find that you have an effect on that too? discussions? Christopher Hamer: Yes, in a number of situations— Christopher Hamer: There have not been any through my annual report, the website and speaking discussions in that respect. It is unfortunate that in the at various conferences and so on—I try to relay to legislation the OFT have approved two schemes and agents the sorts of issues that are causing problems. It allowed two schemes to operate. seems to be preferable that they head those off themselves so that complaints do not arise in the first Q251 Chair: You have also proposed that we have place. The positive element of my terms of reference an industry council established, which seems almost is to try to introduce that best practice within the like saying, “The Government will never regulate. We industry by feeding back what I have identified as cannot persuade them, so let’s find a way for us all to issues and how I think they should be resolved, as I sit round a table and have tea and biscuits and talk say, so complaints do not happen in the first place. about things as though that might achieve our objectives.” Is that a rather unkind way of describing Q248 Mrs Glindon: Last year, 14,000 issues were your proposal? reported to the Ombudsman, but less than 1,000 were Christopher Hamer: I do not think it is unkind. I am investigated. Could you say what happened to the standing in my independent role as Ombudsman and other 13,000 cases? Were they all solved simply by I am looking at what is being presented to me in terms the provision of further information? of complaints. I have been pursuing this idea of an Christopher Hamer: The 14,000 figure relates to the industry council for some time. Yes, I recognise that individual complaints; within one referral to me, there the current Government does not see regulation as a might be seven or eight different issues. It was priority in the property sector. In fact, the message probably more likely that I had about 20,000 or so that has been coming over from Minsters is: “Industry, formal referrals, within which there would have been you need to sort yourselves out.” 40,000 complaints. Taking my independent hat, I have promoted the idea A lot of those are immature complaints. The important that there could be an industry council, which would thing is that before my jurisdiction cuts in, the agent involve the industry, consumer groups, landlord has the opportunity to respond to the complaint and associations and so on, and there is a great deal of issue what we call a final viewpoint or a deadlock enthusiasm from those parties to pursue that. Of letter. This is the trigger for me starting work on a course, the ones that are not necessarily enthusiastic complaint. or are silent on the matter are the 40% of agents who A lot of people write to me before they have gone are not affiliated to any trade association and probably through that process. What my office does is to guide do not like the idea of some control over their them through the steps they have to take to progress business. But I think it is a valuable move forward to the complaint; ultimately, if they need to come back have some sort of council, not an executive body, to me, they can do so. About 20% of the matters that which takes a wide view to ensure that there is proper are within my terms of reference at that first contact redress in place and consistent codes of practice and stage come back to me as formal complaints. My own licensing schemes within the industry—not just one research indicates that around 60% are dealt with by licensing scheme, but that all meet certain standards. the agent; around 10% or so give up, which is slightly Above all, it should answer the question I mentioned unfortunate; and a small percentage take the matter earlier on the consumer education angle. We have through the courts. What we are doing in terms of the heard in the various sessions today about consumer formal complaints is making a formal decision, so in engagement; to my mind that is something that needs 1,000 or so formal complaints that you refer to, I to be almost the top priority for any council that would have made a formal decision; in 74% of cases, comes into being. that means an award against a letting agent. This Peter Bolton-King: Chair, just on that very last point, decision would be binding on the agent, if the the consumer research that we recently had carried complainant accepted. out, in which we talked to 1,000 tenants who had rented in the last year, showed an appallingly low lack Q249 Mrs Glindon: Finally, do you think it is of understanding about their basic rights. There is a appropriate to have two rival redress schemes or does big education element out there. RICS certainly stands it lead to confusion amongst consumers? by to work with Chris and others to look at the whole Christopher Hamer: I have to say that it does seem an question of a council and how it would operate. But I odd idea to have fragmentation in the redress world. It have to say, Chair, you are still stuck with the 40% would imply that there is an element of competition, who do not want to play ball. This is why recently, as perhaps, which would be worrying. More particularly, you are aware, we carried out an impact assessment, yes, it could lead to confusion. It is the agent’s which showed a payback period of two and a half responsibility to direct the person to the right redress years, which I think is phenomenally short, and a £21 scheme, but a lot of people are usually in complaining million per annum benefit of bringing some of the mode before they speak to the agent, and they will be things we have been talking about to fruition. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG03 Source: /MILES/PKU/INPUT/027272/027272_o003_michelle_130304 HC 953-iii PRS CORRECTED transcript.xml
Ev 44 Communities and Local Government Committee: Evidence
4 March 2013 Peter Bolton-King, Christopher Hamer and Louisa Darian
Louisa Darian: There is certainly benefit in the sector agents outside a scheme, so that consumer could not working together to try to minimise the many different get any redress. It is “yes” to the sector working Ombudsman schemes or standards; that is confusing together, but we also need legislation so there is a for the consumer. It is not a replacement for redress. minimum standard of consumer protection. There is certainly demand out there; 25% of Chair: Thank you very much indeed for coming to complaints to the Ombudsman this year related to give evidence this afternoon. cobber Pack: U PL: COE1 [SO] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG04 Source: /MILES/PKU/INPUT/027272/027272_o004_michelle_130311 HC 953-iv PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 45
Monday 11 March 2013
Members present: Mr Clive Betts (Chair)
Bob Blackman Mark Pawsey Simon Danczuk John Pugh Mrs Mary Glindon Andy Sawford James Morris Heather Wheeler ______
Examination of Witnesses
Witnesses: Cllr Simon Blackburn, Leader, Blackpool Borough Council, Tom Gilchrist, Service Manager, Private Housing and Accessible Homes, Bristol City Council, and Cllr Jonathan Glanz, Cabinet Member for Housing and Property, Westminster City Council, gave evidence.
Q252 Chair: This is our fourth evidence session for still a very small number of local authorities that are the inquiry into the private rented sector. Thank you pursuing selective licensing. very much for coming this afternoon. Just before we Cllr Glanz: Our position has slightly changed since begin taking evidence, members of the Committee the Rugg report, inasmuch as I think there has been need to place on record publicly any interests that they some relevant additional legislation around what have in this particular subject. I rent out a flat that I landlords can and cannot do in various areas, such own, and that is declared in the Register of Members’ as environmental health, electricity, gas, deposits, and Financial Interests. Shall we go around? those kinds of things. I just want to draw the Simon Danczuk: My wife has a small interest in a distinction between good landlords, of which we have rented property. a large number, and bad landlords. We are lucky in Andy Sawford: I have a small interest in a rented Westminster that we do not have a disproportionate property. number of bad landlords. Mrs Glindon: I have a tenant in Westminster. I have a view about them being described as “rogue Bob Blackman: I am the joint owner with my wife landlords”, which almost is as if they are likeable of six buytolet properties, which is declared in the rogues. It is more appropriate to describe bad Register of Members’ Financial Interests. landlords as criminal landlords. The legislation that is Chair: Okay, that is the record of our interests in this in place in relation to their obligations to comply with matter. Now we will move on to the evidence. Just for regulations in respect of gas, electricity or the holding the sake of our records, could you just say who you of deposits is, in fact, broadly criminal legislation, and are and the organisation that you represent? therefore their failure to comply with it makes them Tom Gilchrist: I am Tom Gilchrist. I am a service more appropriately described as criminal landlords. manager from Bristol City Council. In Westminster, we use the legislative framework that Cllr Blackburn: I am Councillor Simon Blackburn. I is there—both criminal and, more broadly, on the am the leader of Blackpool Council. environmental health side—and the other legislation Cllr Glanz: I am Jonathan Glanz, and I am the cabinet to enforce against the very small number of bad member for Housing and Property at Westminster. landlords that we have. We find that we are able to do that within existing legislative frameworks, rather Q253 Chair: In 2008, Julie Rugg did a review and than by imposing upon the large majority of good basically said that the current regulatory framework landlords additional obligations to comply with the was not fit for purpose. She said that landlords were proposals that might arise out of a further regulatory openly flouting the regulations, and that we needed a framework, which could come from a compulsory light-touch licensing system with effective redress to licensing scheme. improve regulation of the sector. Do you concur with her findings, or do you have a different view? Who Tom Gilchrist: Within Bristol, we are of the opinion would like to start? that registration of landlords would be a good thing. Cllr Blackburn: If I may, Chair, I would perhaps Certainly from our perspective, we have major disagree with the expression “light-touch”. I think we problems identifying ownership of properties and need a much more heavy touch. Dealing with land. If landlords had to register their interest in a landlords on a large scale, particularly in a town such property, it would certainly make the local authority’s as Blackpool, requires a great deal of tenacity. There requirements to deal with poor quality are an awful lot of opportunities under the current accommodation so much easier. Rugg was suggesting framework for landlords to shirk responsibility, if they a £50 licensing fee. That may be small in comparison so choose, and to shy away from the issues that their to the overall turnover for a licensing property, but I properties—and some of the tenants within those think that that small charge would save local properties—are causing. The framework that we have authorities up and down the country an enormous at the moment is sufficient, but as I say, it does take amount of money when having to track down who a an awful lot of tenacity and hard work on behalf of property owner actually is. Property ownership, and the authority to try to make the current system work. agent ownership and control, do change quite easily That is probably reflected in the fact that there are and quite frequently as you are pursuing cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG04 Source: /MILES/PKU/INPUT/027272/027272_o004_michelle_130311 HC 953-iv PRS CORRECTED transcript.xml
Ev 46 Communities and Local Government Committee: Evidence
11 March 2013 Cllr Simon Blackburn, Tom Gilchrist and Cllr Jonathan Glanz enforcementrelated action. I would certainly be all in the South Shore area, you will get a bill once every favour of a licensing scheme for landlords. five years for £75,000. That seems a lot of money, until you realise that if you have 100 flats in the South Q254 Chair: Back to Westminster, then, and that Shore area of Blackpool, you will receive a monthly contrary argument you just heard. Surely Westminster housing benefit cheque for somewhere in the region must have exactly the same problems tracking down of £49,000. landlords when you don’t know who they are and who I think a national scheme enables local authorities to owns what. When you go for a voluntary accreditation come together and to agree a fee that takes into scheme, surely the only people who volunteer are the account local factors and local differences. 70% of ones who have got nothing to fear from your officers housing benefit recipients in Blackpool live in private going around, having a look and trying to take action. rented accommodation, which tends to be of a certain Cllr Glanz: It is quite often the case that people who age. Therefore the inspection costs, certainly in the are actually the good guys in this end up effectively initial phase, are quite considerable. I apologise, paying for the problems that have been caused by the Chair, because I am not quite sure what the remit of noncompliant landlords, on whom we think it is more this particular session is, but some sort of national appropriate to concentrate. The problem is, of course, registration and licensing scheme and code of conduct that if you have a scheme there is no guarantee that in relation to letting agents would also be hugely those people will comply with that scheme. You can helpful. say that “£50 is a good investment in order to know Chair: We will come on to that in a second. who you are dealing with,” but you assume that those Tom Gilchrist: I totally agree. Certainly in our area, people who, in the past, have evidenced no we are about to commence a discretionary licensing willingness to get involved in being open and scheme covering both selective licensing, which is for transparent in relation to their dealings are then going single family houses, but also an additional scheme to say that they will comply with this licence, when covering multipleoccupied buildings. That scheme, as they are not complying with electricity legislation, gas the councillor said, is rightly selffinancing. The costs legislation and all sorts of other legislation. I do not in Bristol are actually a lot lower: they are £100 per think that there is any natural assumption that they selective licensing property for good landlords. For will then go ahead and comply with an additional set landlords who do not come forward, we have swung of regulations relating to their operation under a the pendulum, at the request of landlords during our licensing scheme. consultation exercise, and we now will charge them Tom Gilchrist: Certainly from our perspective—and I £1,000 if they do not come forward and license their suggest this may be replicated in Blackpool—if we properties. come across a property that is not registered, we then That scheme was approved and agreed by the know that the landlord is operating without a licence landlords that we consulted with. The good landlords and we can deal with him or the company were happy to pay a lower fee and comply with the appropriately. At the moment, the difficulty that we requirements and legal minimum standards, as long as have is in identifying the numbers and the they were aware that we would come down hard on whereabouts of the private rented sector across a city those bad landlords who did not license. Obviously, like Bristol. We have a stock size of over 200,000 selective and additional licensing will only happen in units, and so being able to identify out of that the specific parts of the city. A national registration 60,000 private rented properties can be difficult. scheme would enable us to pick up other properties Having to register those units would enable the local elsewhere within the city, and if we get a complaint authority to identify straight off where, and what, a about conditions generally in those other areas, we private rented unit is. If it is not registered and if we can then deal with it. receive a complaint from the tenant, we can then focus action in on that particular landlord if they have not licensed the property. Q256 Chair: Could you not just extend the registration scheme to the city yourself? Q255 Chair: Mr Gilchrist and Councillor Blackburn, Tom Gilchrist: We could do. The difficulty we have you are both supportive of selective licensing, but got with selective and additional licensing is that they local authorities can do it currently under the existing are really restrictive in the way they are described legislation if they want to. How would a national within the legislation. It is very hard to make general scheme help you do better what you are already doing areas licensing areas, and for those of us who have under the existing selective arrangements? been through licensing programmes, they are Cllr Blackburn: There remain, as you will all know, enormously complicated to declare. There are quite huge pressures on local authority budgets. I am sure specific legal requirements that have to be met. one of your meetings would not be complete without a local councillor turning up and saying, “We need Q257 Chair: Could we make it easier, then, so local more money,” so I will get it in early. The pressures councils could make those decisions? on us are huge. The selective licensing scheme in Tom Gilchrist: It could be made enormously easier, Blackpool thus far is selffinancing. The fees paid by yes. The issue for us within Bristol is that, for a landlords enable us to do the job, and to enforce that selective licensing area, we have got to have scheme. What that does mean, of course, is that the significant areas where a large proportion of the fee is considerable: £750 per unit, which buys the private rented sector is causing significant problems landlord a fiveyear licence. If you have 100 flats in of antisocial behaviour within the locality. That is cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG04 Source: /MILES/PKU/INPUT/027272/027272_o004_michelle_130311 HC 953-iv PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 47
11 March 2013 Cllr Simon Blackburn, Tom Gilchrist and Cllr Jonathan Glanz actually quite a difficult thing to prove, and to Cllr Blackburn: I do not have the figure, as I think I withstand legal challenge. said a few moments ago, Chair. What I do know is The other issue with selective licensing is that the area that I have two licensing officers who are almost must be suffering from low housing demand. In an permanently in court, or in negotiations with the area like Bristol—and, I suspect, in Westminster—that council’s lawyers. You will all know, I am sure, that is not an issue. We do not have problems of large the legal process of enforcing against the landlord is numbers of empty accommodation, but we do have both difficult and costly. It is not in the benefit of the high housing demand in the City. Being able to find landlord; it is certainly not. areas in which there are large levels of antisocial behaviour, specifically coming from the private rented Q262 Mark Pawsey: I was going to come on to that sector, is enormously complicated to prove. as a supplementary question. I was just trying to get a measure of the problem. If you are not able to help Q258 Mark Pawsey: Obviously there is a difference us with a measure of the problem, I wonder if we of view between the witnesses on the approach to might perhaps go on to the next witness. licensing. I wonder if I could ask you about the nature Tom Gilchrist: Within Bristol last year, we had 1,500 of the problem. It would be quite valuable for the complaints from tenants complaining about housing Committee to know the number of enforcement cases conditions that we would have responded to. Of these, that you deal with, and what that is as a proportion of 450 or 460 legal notices were served on landlords, the stock. As Councillor Glanz reminded us, these are giving them notice to undertake repair work or not rogue landlords; they are criminal landlords. What improvement work within a certain time period. 19 is the nature of the problem? How serious is the prosecutions were taken, and we took two simple problem? How many cases would you bring forward, cautions in 2011–12. and what proportion of the stock would that represent? So far this year, we have had 12 prosecutions and four Cllr Glanz: Westminster, as ever, is atypical of the simple cautions. In addition to those, we have had two country as a whole. We have only eight and a half judicial review cases that have been running around square miles in the centre. We have a very high the licensing definitions and the definitions around “fit proportion—probably one of the highest and proper person”, which are poorly defined within proportions—of privately rented stock in the country. the legalities of licensing. Those cases are now We have, I think, about 50,000 units of privately running through the legal process. I would say that, rented stock, which range from the One Hyde Park on an annual basis, we have about 40 to 50 private approach of extremely highvalue properties that are rented sector units within the court process, either in exceptionally wellfinished and maintained, to the sort court or going through our legal teams on the way to of properties that are perhaps more typical of other court. Obviously, as they are going through the legal parts of London, and, indeed, the country as a whole. teams, there will be various issues that crop up: As I say, we have that particular issue of great perhaps the case cannot be taken forward, or the disparity between the sort of stock that is available. landlord will undertake the works himself. The However, we have been actively enforcing against number of cases that I have described is the number of cases we take to court each year. landlords who fail to comply. We had, I think, 206 formal enforcement proceedings last year out of about 1,100 inspections. Q263 Mark Pawsey: Councillor Glanz thinks that the powers that the local authorities have got are adequate. Mr Gilchrist and Councillor Blackburn, you Q259 Mark Pawsey: That is out of a stock of do not think they are adequate. Please can you tell us 50,000. why you think the existing powers of the local Cllr Glanz: That is out of a stock of about 50,000, authorities do not give you more cases of enforcement which gives you our level of activity. coming forward? Cllr Blackburn: At the moment, there is a Q260 Mark Pawsey: Councillor Blackburn, could presumption that tenants will make complaints and you give us your numbers? will come forward. By and large, we know that the Cllr Blackburn: No, I cannot. I do not have the more vulnerable the tenant, the less likely they are to figures before me. What I do know is that the benefit want to try to put their housing in jeopardy, even when of the selective licensing regime has meant that we that housing is evidently substandard and they have been able to deal with problems much more themselves are aware that it is not compliant with effectively before they have reached the point of legislation. The power to go in and inspect is coming to court. At the risk of repeating myself, local absolutely vital, because we are not able to rely on authority budgets—in case you had not noticed—are people complaining, particularly in areas where under significant pressure. people are, as I say, especially vulnerable. I also think there are issues, as Mr Gilchrist has Q261 Mark Pawsey: You must have some already outlined, in terms of the enormous complexity assessment of how busy your department has been. of demonstrating that an area is right for selective You told us earlier that it was hard work to make the licensing. That is, as has been mentioned, always current system work, but everybody has to work hard; subject to judicial review and subject to challenge. We that is the nature of the climate that we exist in at the have been fortunate, in that our decisions thus far have moment. How many cases are your officers not been subject to judicial review. I am confident that prosecuting each year? our case has been strong, but there is a considerable cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG04 Source: /MILES/PKU/INPUT/027272/027272_o004_michelle_130311 HC 953-iv PRS CORRECTED transcript.xml
Ev 48 Communities and Local Government Committee: Evidence
11 March 2013 Cllr Simon Blackburn, Tom Gilchrist and Cllr Jonathan Glanz amount of work that has to go into that to demonstrate If we are successful, and we win those cases through beyond any reasonable—or even unreasonable— to appeal, we can get our costs back. The two judicial doubt that there is not a problem in the area. review cases that we have been involved with have Demonstrating that there is an impact in terms of a been on unlicensed properties that were found two lack of demand for housing in the area is particularly years ago. We have not even got to the magistrates difficult, because there is a demand for housing in the court yet to establish whether they required a licence, area. However, it is a demand for landlords to buy and that takes time for local authorities to do. properties and rent them out. There is not a demand for people to buy those properties to live in as family Q270 Mark Pawsey: How would the penalty charge homes; that is very difficult to demonstrate, and system that you propose be better? currently the guidelines do not make a distinction Tom Gilchrist: Penalty charge notices for simple between the two. It is very much a dark art: I know offences would be so much easier to do. You can give that, but how I demonstrate that is particularly a ticket to a landlord for relatively minor management difficult. offences within the house—a broken electricity supply, a broken fire alarm or storage and equipment Q264 Mark Pawsey: There is a riskbased system, is stored in escape routes—which are going to be fixed there not? You can evaluate risk and take action on relatively quickly. You can serve a fixed penalty the basis that you believe a risk may exist with a charge notice on the landlord. If that can be repaired/ particular landlord or a particular area. What resolved within seven days, there is no charge at all. additional powers would you like that would enable you to bring standards up? Q271 Mark Pawsey: So it will act as a warning. Cllr Blackburn: I would like to designate the whole Tom Gilchrist: Exactly. of the borough a selective licensing zone, but without investing huge amounts of— Q272 Mark Pawsey: Do you not have a warning mechanism currently? Q265 Mark Pawsey: Without additional powers of Tom Gilchrist: We do, but what we would do is serve enforcement, how would that on its own necessarily a legal notice. We would give the landlord 21 days. help? After 21 days, we would have to do another Cllr Blackburn: But I was not talking about inspection. If there is no work done, you would then additional powers of enforcement. serve notice.
Q266 Mark Pawsey: No, but what additional powers Q273 Mark Pawsey: So you just think that the fear would you like? of a penalty would get more action? Cllr Blackburn: I would like the power to designate Tom Gilchrist: Exactly. We have come to use fixed the whole of the borough a selective licensing zone. penalty charge notices for energy performance certificates. That has worked enormously well. We Q267 Mark Pawsey: Is that it? serve it on the landlord and we serve it on the owner. Cllr Blackburn: That is not it, but that is key amongst If we get the energy performance certificate back what we would ask for. The Chair has already within seven days, there is no charge to the landlord indicated that we are going to go on to discuss the and no charge to the owner. That works extremely lettings agencies later, so I do not want to intrude on well. that now. Q274 Mark Pawsey: You have also got concerns that Q268 Mark Pawsey: Mr Gilchrist, your authority landlords do not understand the housing health and would like to impose penalties. Tell us how they safety rating system. How can landlords be helped would work. with that? Tom Gilchrist: The legal process, by its very nature, Tom Gilchrist: The hazard rating system is a really is complex and quite difficult. By their very nature, complicated process. We are fortunate in Bristol that most local authorities are very conservative, with a we were involved with the national pilots when they small “c”. They will not take enforcement action were set up in the year 2000. It is a risk-based unless there are serious problems. The reality is that exercise: you look at a property to identify whether the prosecutions that we, as a city, tend to take are there is a risk there, and what the likely outcome of against the worst of the worst landlords. that risk would be. If somebody falls down the stairs, what would the outcome be? There is quite a Q269 Mark Pawsey: In an ideal world, you would complicated mathematical exercise that has to be gone bring forward more. through to establish whether it is a category 1 Tom Gilchrist: Yes, exactly. From our perspective, it hazard—a serious hazard—or a less serious category is an expensive business going into court, especially 2 hazard. For most people, that is quite a complicated where we know that the legislation is not particularly thing to get your head around, unless you are a well drafted—as the Housing Act 2004 is not well professional working in the field. DCLG issued drafted—around licensing. We can get appeals, and guidance for landlords on the use of the HHSRS some we will get appeals through into the county court and years ago, but it is a really complicated process. By then into the High Court. That in itself wraps up, not its very nature, it is difficult to understand. only your officers’ time, but your legal officers’ time as well, and that costs an enormous amount of money. Q275 Mark Pawsey: So would you do away with it? cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG04 Source: /MILES/PKU/INPUT/027272/027272_o004_michelle_130311 HC 953-iv PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 49
11 March 2013 Cllr Simon Blackburn, Tom Gilchrist and Cllr Jonathan Glanz
Tom Gilchrist: No, not at all. surveyors, who want to comply with the legislation and standards that we would hope everybody complies Q276 Mark Pawsey: What would you do? with. But clearly, there are others that do not. Tom Gilchrist: The operating guidance by which risk hazards and outcomes for hazards was devised Q280 Bob Blackman: What about you, Councillor between 1997 and 1999, so the operating guidance is Blackburn? now more than 10 years out of date. That desperately Cllr Blackburn: We received just over 500 complaints needs to be updated for operating officers. What was to our quality standards division in the last financial an excess-cold hazard has changed since the year year. 2000; things have moved on since then. Property construction techniques have changed. Insulation Q281 Bob Blackman: Has that figure gone up techniques have rapidly changed. If the operating dramatically, or has that changed? guidance can be reviewed to meet today’s present Cllr Blackburn: It has been constant at around about standards, and guidance can be given to local the 400-to-600 figure over the past three or four years. authorities, it would enable local authorities to be A greater percentage of those complaints are around operating a system that is up to date. At the moment, the bond-holding issue, and around the level of fees we are operating with guidance that is some years old. that people are being charged. We have had a number of cases that have gone through to the Lands Tribunal in London. When you Q282 Bob Blackman: I am going to come on to that. take a case to court through the HHSRS, there is an This is just to get a flavour. Without putting words appeals mechanism that goes into the Residential into your mouth, is it about specific agents? Are a Property Tribunal. If we win the case there, the landlord has the opportunity to appeal; it goes into the huge volume of complaints about specific agents, or Lands Tribunal in London. We have lost a couple of is it generally across the board? cases with the Lands Tribunal in London, because the Cllr Blackburn: It is generally across the board. Some chair has said the operating guidance is too old to are better than others. have been making decisions on. So the local Bob Blackman: How about you, Mr Gilchrist? authorities are trying their utmost to use a piece of Tom Gilchrist: I do not have numbers in relation to legislation that basically needs to be updated. letting agents that we get complaints about, although the two judicial review applications were through Q277 John Pugh: I am sorry if I have missed this letting agents. Of the prosecutions we have taken—I point. When you were mentioning selective licensing have got a list here—at least four or five of those are earlier, you said it was a complex process. I was just letting agents. Some of those are just awful. They are wondering, while you were saying that, how many just poor-quality agents. times it has actually been contested in practice. What The issue with agents that we find in Bristol—and, I mean to say is that no one individual landlord needs again, there may be similar problems elsewhere in the to think that the blame is being pointed at them country—is being able to establish where the particularly, if the area is considered to be an area of management responsibilities sit with an agent. Is it the social disorder or whatever. Presumably in most cases, landlord’s responsibility to do the repairs, or is it the when you go through this complex process, you go agent’s responsibility? What we do tend to find with through it successfully and without it being contested. agents is that they will set up an agreement with a Tom Gilchrist: Yes. landlord, either a verbal agreement or a fairly loose John Pugh: So it is complex, but not normally written agreement, but when you go into court, who contested. you then take to court can be really cumbersome and Tom Gilchrist: No, but that is because it has taken us difficult to prove. As a result of that, we tend to take 18 months from the initial discussion with my both landlord and agent to court and let them fight it executive member through to implementation in out between themselves as to who is guilty. It sounds April. awful, but— Bob Blackman: You have got to get there somehow. Q278 John Pugh: So it takes time and it is complex, Tom Gilchrist: Yes, exactly. but it is doable. Tom Gilchrist: It is doable, but it just takes a long Q283 Bob Blackman: Coming back to Councillor time to do. Blackburn, you, in your written evidence, have suggested that you want a kitemark for letting agents Q279 Bob Blackman: Moving on to the issue of across the country. We have already got ARLA, RICS, letting agents, which has already been raised once but two ombudsmen, and the SAFE Agent process. Are which we will cover in a bit more detail now, I just you suggesting replacing all of those with a different want to get a flavour, first of all, for the volume of regime, or are you suggesting another regime on top complaints that you, as local authorities, get about of it? If you are, does it not all look very confusing? letting agents. Councillor Glanz, how many Cllr Blackburn: Yes, I agree, Chair; it would look complaints do you get each year about letting agents? very confusing. I think an awful lot of the current Cllr Glanz: I do not have an exact figure, but I am regulation that is in place is not particularly effective. not aware of huge numbers of complaints about letting It is subject to the same vagaries as we discussed agents. In line with most of the stock that we have, earlier on: the good guys get involved; the people who we have letting agents who tend to be national want to do the job properly will engage, and the cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG04 Source: /MILES/PKU/INPUT/027272/027272_o004_michelle_130311 HC 953-iv PRS CORRECTED transcript.xml
Ev 50 Communities and Local Government Committee: Evidence
11 March 2013 Cllr Simon Blackburn, Tom Gilchrist and Cllr Jonathan Glanz people who do not, do not. This is frequently the case need to pay an application fee, and they both need to with memberships of professional bodies. be credit-checked. If people are fearful of failing a A national kitemark could replace a great deal of bits credit check, or if they cannot afford to pay two and pieces of regulation that have not proven to be application fees, quite often the earner—the person particularly effective. This has been a huge growth who earns the most money in the household, who area. There has been a huge growth in the number of sadly in this day and age still tends to be the male in letting agents and the number of landlords choosing the relationship—will apply for the property on their to use them, and they appear to be making the own. As and when the relationship breaks down, or situation worse, rather than better. I agree with Mr when there is an altercation, the female in question is Gilchrist’s comment that finding out exactly who is not named on the tenancy. She does not officially live responsible is a minefield for us and our legal teams, there, and has no tenant rights. She is the one who never mind for tenants, who I imagine are blissfully gets moved out. That is a specific concern. unaware of who is responsible for what. Q287 Bob Blackman: Surely, for the protection of Q284 Bob Blackman: Mr Gilchrist, you were both the landlord and the agent, credit checks are an suggesting in your written evidence about controlling example of something that should be carried out in fees. Could you just expand on what fees you would order to make sure that someone can afford to pay like to see controlled, and how they would be the rent. controlled? Cllr Blackburn: Indeed, that is absolutely right, and I Tom Gilchrist: As either a tenant or a landlord, when have no issue with the whole £2 cost being passed on you are walking into a letting agency, there are very to the tenant. I have an issue with the £2 cost rarely any charges up. It has actually come to light becoming a £50 fee. this morning—we were talking about this before I left Bristol—that we have got a letting agency that is an Q288 Bob Blackman: Councillor Glanz, in your ARLA agent, who represents the south-west region. written evidence, you suggest that no change is The south-west regional representative for ARLA required and no extra regulation is necessary. Do you informally told us, “We have got one fee that we disagree with what your colleagues have said? provide to large portfolio landlords, and one fee that Cllr Glanz: No, to a certain extent I would share their we provide to small landlords. But we do not publish concern about inappropriate fees, and certainly a lack them anywhere. Only following discussion with the of transparency in relation to costs being incurred in landlord, once we have established exactly how many relation to anybody entering into a tenancy. I would properties they have, do we decide what fee we should share the view that those costs, rightly, fall generally then charge.” The charging of fees by letting agents to the landlord as opposed to the tenant. There is would be really important, and charging of fees to certainly a lot of evidence to show that unforeseen tenants to secure accommodation would also be costs in relation to the preparation of inventories and extremely important. Some agents charge tenants a fee standard form tenancy agreements are being charged to put them on their books and to potentially go and at very high sums of money. There are also other find them a property. costs, such as bank reference fees as opposed to a more simple credit reference fee. I would share their Q285 Bob Blackman: Given that the position is that concern about those kinds of costs not being made the letting agent’s client is actually the landlord, is it clear to tenants. appropriate that the letting agent then charges the tenant a fee for finding them a property? Q289 Bob Blackman: What about Councillor Tom Gilchrist: Not at all, but some agents do. Blackburn’s idea of a kitemark for letting agents, so Bob Blackman: Yes, we have taken evidence that everyone knows that this is a nationally previously on this particular issue. accredited body, rather than, possibly, the vast array Tom Gilchrist: The issue for me is that a lot of these of different standards there are at the moment? fees are not published. If you walk into the local Cllr Glanz: Again, I come back to my concern about letting agent around the corner here, there will be no regulation generally not being something that would list of fees there, for either the tenant or the landlord. necessarily be taken on board by the sort of landlords that are causing the problems that we are largely Q286 Bob Blackman: Councillor Blackburn, have concerned about. I certainly would favour you got a view on fees? transparency in relation to fees, and making it clear Cllr Blackburn: Fees are a significant issue. They that people should enter into terms of reference in vary dramatically from one agency to another, and yet relation to— at the same time seem to bear little relation to the size of the house or the income of the people who are Q290 Bob Blackman: Should there be more action applying. The fees would be the same for me to rent against these rogue landlords that do not register for a four-bedroom detached house as they would be for anything and just carry on? someone to rent a one-bedroom bedsit. By and large, Cllr Glanz: Yes, and that is where we are looking to there tends to be one level of fees. concentrate our enforcement arrangements. One thing across a variety of different areas that is of specific concern to us is the policy of charging for Q291 Heather Wheeler: I am really interested in credit checks. Almost invariably—I assume this is the what you do to inform and educate landlords and same elsewhere—if a couple are applying, they both tenants about their respective roles and cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG04 Source: /MILES/PKU/INPUT/027272/027272_o004_michelle_130311 HC 953-iv PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 51
11 March 2013 Cllr Simon Blackburn, Tom Gilchrist and Cllr Jonathan Glanz responsibilities, and also how you go about getting what the selective licensing framework is there to that information out to hard-to-reach groups. Mr achieve. By and large, though, we are focusing on Gilchrist, I wonder whether you could just give us a what they can do to support their tenants. As quick rundown from Bristol’s perspective on that. politicians, you will all know that putting the bins out Tom Gilchrist: Within Bristol, we do an enormous is the single biggest issue that we encounter from amount of work around the private rented sector those people who we represent. It is vital, for through information, training and advice. I will just example, that we communicate to landlords how quickly run through stuff we do: on a quarterly basis, important it is that when a new tenant moves in, they we do a landlord newsletter, which is up to date with know when to put the bins out. That is one of the any changes in legislation. That goes out to 4,000 common issues. landlords by e-mail or by hard-copy post. We run an annual landlords’ Expo (Exhibition) in Bristol with Q293 Heather Wheeler: That is very interesting. the west of England local authorities—the other four Councillor Glanz, we are particularly interested in the unitary authorities around Bristol—and that is comments that have been made about the work that attended by between 400 and 600 landlords per year. you do with the Portman Group and Spirit Group. It is the second biggest landlord exhibition that runs Could you give us some feedback on that, please? in the UK. Cllr Glanz: That is a group that looks specifically at We have got a landlords’ manual that is available for residential accommodation above licensed premises. operation. Through that, we have also got a landlord Clearly, we have large numbers of licensed premises proficiency test. There is a small charge—£50—but in Westminster. Some of the accommodation above landlords can then read the manual and sit an online them has provided residential accommodation not test to make sure they understand the legislative only for just a landlord, but also, in many cases, requirements that they, as landlords, must meet. We people who are working in a pub or a restaurant. have an agents and landlords forum that meets twice Heather Wheeler: Just to be clear, because not many or three times a year to discuss current regulations and people were particularly aware of this: the Spirit current consultation documents that come out from the Group is actually the pubco spirit group, and the Houses of Parliament—to discuss how we are going Portman Group is to do with the brewers. I must to respond to those as a collective group. declare an interest, now that has been made clear to We run a West of England Landlords’ Panel—which, everybody. I am reliant on a pension from the again, covers the subregional aspect of the south-west brewing industry. of England—with the regional representatives of ARLA, South West Landlords, and the Westcountry Q294 Andy Sawford: I want to ask in particular Landlords Association. They all come together as a about the Local Housing Allowance, which you all group with the representatives of the four local gave evidence about. Councillor Blackburn, you authorities. We do an enormous amount of work with suggested that the Local Housing Allowance means landlords to try to bring them up to speed with what that rents are artificially high in Blackpool, because of they should be doing to properly manage their issues around the coastal properties and so on. Why is properties. the Department for Work and Pensions, in your view, That is where I come back to the point that we only unwilling to look at specific instances such as use the legislative provisions that we have got Blackpool where the LHA can create a problem in available to us as a last resort. What we want is a terms of rent levels? good, stable, manageable private rented sector that is Cllr Blackburn: I wish I knew. We did seek to resolve well managed by both agents and landlords. this in early conversations around a City Deal for Blackpool. We were sent away and told to be bold, Q292 Heather Wheeler: That was very radical and innovative, but to remain within the comprehensive, Mr Gilchrist. Councillor Blackburn, existing funding envelope. We came up with the idea you are very keen on this area-based work. Is the of taking local control of the Local Housing information that you give out and the interaction that Allowance, because we believed that we could deliver you have just in the area-based areas, or is it the whole substantial savings on it. It took all of 15 minutes for of the council? a civil servant to check with the DWP, ring us back, Cllr Blackburn: There is an all-inclusive Blackpool, and tell us that when they said “bold and radical”, Fylde and Wyre landlords forum, which the council they did not mean that bold and that radical, and that supports. It is largely similar to that that Mr Gilchrist the DWP money was not something that was up for outlines in terms of communicating and getting the grabs through the City Deal. Members will note that dialogue going, and council officers do support that Blackpool is not currently part of a City Deal. I do process. We also, because of the issue that I have not know, but I wish they would. outlined earlier about only those landlords who wish to be engaged turning up to these things, have started Q295 Andy Sawford: Are you currently actively distributing documents from the forum in the monthly pursuing this? Is this a conversation that you are statement of housing benefits that is sent out to every continuing to drag out? landlord with HB tenants in the town, so there is a Cllr Blackburn: It was made fairly clear to us that mechanism there as well. there was not a great deal of point continuing to have In terms of advice and guidance, we are working in it. We will continue to lobby, make the case, and the selective licensing area specifically with landlords demonstrate that we feel that that money could be to help them to understand their responsibilities and much better spent and it could support the housing cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG04 Source: /MILES/PKU/INPUT/027272/027272_o004_michelle_130311 HC 953-iv PRS CORRECTED transcript.xml
Ev 52 Communities and Local Government Committee: Evidence
11 March 2013 Cllr Simon Blackburn, Tom Gilchrist and Cllr Jonathan Glanz infrastructure and the people living in those houses in element of flexibility, in relation to the rent being a much better way than just handing money over to equated more closely to a percentage of market rents landlords every month. But I don’t think they are within the area, might have given us some flexibility listening. in dealing with the issues that we face. We still have significant numbers of people who are still in Q296 Andy Sawford: Councillor Glanz, you have accommodation that is over the maximum and are the opposite problem in Westminster, from your being supported through discretionary housing evidence. benefit— Cllr Glanz: We do. Q299 Andy Sawford: I am just aware of time, Q297 Andy Sawford: How many people do you Councillor Glanz. I think that was a yes? estimate have been forced to move from Westminster Cllr Glanz: Yes. as a result of the Local Housing Allowance cap? Cllr Glanz: When the housing caps were first Q300 Andy Sawford: I had one other question, and introduced, we estimated with a fair degree of I know there are others. Will welfare reform, such as research that we had 5,200 families in accommodation the introduction of the household benefit cap, impact that was above the caps at the time. What is on rent levels? Perhaps Councillor Blackburn could interesting is that many of those had actually come answer. into Westminster comparatively recently, because Cllr Blackburn: Yes, it will. There will be many under the previous arrangement, people were different impacts from the changes that we will see encouraged to take accommodation at levels that later on in the year. The move to paying only the could have been significantly higher than the caps single room rate for people under the age of 35 creates currently are. We had many stories about people living all sorts of problems when you are actively seeking to in St John’s Wood at £2,000 a week, etc. More move away from houses in multiple occupation, particularly we had a large number of people who because that is driving people towards houses in were in accommodation who had moved in multiple occupation. A move to universal credit will specifically to take advantage of that previous ensure that people are forced out of the more arrangement. expensive areas. There is not a huge, affluent middle Having said that, the number has reduced for a range class in Blackpool, but such as there is, it is around of reasons. One of these is that some people have the outside of the town; there is a band. People will actually been successful, with the support of our not be able to afford to live in that band. They will Housing Options Service, in negotiating down the then be pushed into the already deprived inner areas, rentals that were previously charged under the and there will be an even more stark contrast between arrangements that were in place. When we agree to the centre of the town and the more affluent outer part provide support through a discretionary housing of the town as a consequence. payment, for instance, we will do so against the Andy Sawford: Mr Gilchrist, you’re nodding. background of a negotiation with the landlord to Tom Gilchrist: Yes. That is one of the reasons for us reduce the sum of rent that is being paid for the declaring the licensing area in the centre of Bristol. property as a whole. We have had some significant The reality, we believe, is that the area currently is degree of success on that, particularly where the used for predominantly families in receipt of LHA. previous arrangements had been out of kilter with the We suspect that landlords will move those families market at the time. out, end tenancies, and fill the accommodation with At the same time, of course, the market has moved single people under 35 and convert properties into onwards and upwards generally. We do indeed have small, multipleoccupied units, therefore increasing some of the most expensive real estate in the country, their rent levels. As LHA drops, obviously, the if not the world, within these eight square miles. We landlords’ income stream from a family will reduce. have found that the pressures in relation to being able Obviously, if he can fill a property with four or five to find homes for people within those caps has now single people, his income can go back up again. That become very intense indeed, to the extent that in most in itself will create all sorts of problems in an inner- cases it is unrealistic for people to expect to continue city area. We are certainly extremely concerned about to be housed within the Westminster City boundary. high concentrations of single people into a locality, and all of the associated potential problems that that Q298 Andy Sawford: Would it be fair to take from may cause. both your comments that, in different ways, you Another issue we have got is that we are really would both welcome a greater degree of localism? concerned about the benefit cap for larger families. Councillor Blackburn has been clear on that, but what Within the city, we have a significant number of about you, Councillor Glanz? Would you benefit from households with more than four children. This benefit a greater flexibility and power in respect of localism? cap is on the four children. Those families will be Cllr Glanz: Yes. It would certainly help us to address unable to be housed in certain parts of the city, and the concerns that we have around the spike that we that, I suspect, will result in us having overcrowding are dealing with at present, because the national where they reduce their accommodation sizes. numbers that were put in place are the right thing for the country as a whole, but inevitably have caused us Q301 Andy Sawford: Councillor Glanz—briefly, if some very specific issues in terms of finding you would—do you foresee a similar scenario in accommodation for people within Westminster. An Westminster where family accommodation may be cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG04 Source: /MILES/PKU/INPUT/027272/027272_o004_michelle_130311 HC 953-iv PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 53
11 March 2013 Cllr Simon Blackburn, Tom Gilchrist and Cllr Jonathan Glanz pushed further out? Do you anticipate the same effects Cllr Glanz: As I said, at the moment we have an in Westminster as in Blackpool or Bristol? insatiable demand of people coming to Westminster, Cllr Glanz: We are certainly seeing a ripple effect. I many of whom have very little connection, and think it is realistic to expect that that will go from certainly no longterm connection, with Westminster. central London—not just Westminster, but other The idea that the streets of the West End are paved central boroughs—through the outer boroughs and with gold is something that, I think, will continue to possibly beyond, given the pressure that there is on attract people. We have major transport hubs within trying to find accommodation within the cap. Westminster where people arrive, whether it is at the bus station in Victoria, or at Paddington railway Q302 Simon Danczuk: I want to ask about station having come from Heathrow, and in some homelessness. Councillor Glanz, you state in your cases present themselves soon after arriving in the submission that homeless households may be placed city, asking to be housed in the city, and we are not some distance from Westminster. I am currently able to do so with the current housing stock available reading a book called “Dr Johnson’s London”. It is a to us within the eight and a half square miles. nonfiction book. It talks about London in the 1750s, and it talks about districts in London paying other Q306 Simon Danczuk: What is the furthest that you areas to take the poor off their hands. Do you not have placed homeless people from Westminster? think there are some parallels between what was Cllr Glanz: At the moment, we have placed people happening in the 1750s in Dr Johnson’s London and on the south coast of the UK. what you are doing in Westminster now? Cllr Glanz: I think there are a number of parallels in Q307 Simon Danczuk: Where would that be, for relation to what has happened historically in London. example? I was not aware of the 1750s example, and I would Cllr Glanz: We have put people in, I think, Bognor be interested to go away and have a look at that. But Regis, and certainly on the north coast of Kent. That more recently, certainly after the war, people moved has been in discussion and by agreement with people out of central London. They were encouraged to do who have either got family connections there, or who so, whether it was to garden cities or whether it was have said that they would be quite happy to do so. We through schemes such as that of the London Borough are not banishing people. of Newham, which built housing for Newham residents outside Newham. Certainly, the City of Q308 Simon Danczuk: That would be in the sort of London has historically built housing for its residents coastal towns that Cllr Blackburn is grappling with. outside the City boundaries. As I have said before, as Let me just ask another question. Don Foster, the the prices move on, I think it is inevitable that central Minister, says that placing homeless households in London boroughs will have to look at ways in which threestar and fourstar hotels is unacceptable and a the requirements of people presenting as homeless waste of taxpayers’ money. Have you stopped doing within those boroughs are accommodated slightly that now? outside their boroughs, or even outside London, Cllr Glanz: As I said, we have a spike of people who depending on where we end up with the market. have presented in Westminster, and we have had to find accommodation for them where we owe them a Q303 Simon Danczuk: But you have a responsibility duty to do so. That has been quite difficult to achieve. for these people, don’t you? Although we have doubled our efforts to find Cllr Glanz: Indeed, and we accept that responsibility. selfcontained temporary accommodation both within Westminster and close by Westminster, the number of Q304 Simon Danczuk: Why should Rochdale, or people who have presented has gone up from about any other town, take responsibility for these people? 30 families a month to over 100 families a month. Cllr Glanz: We provide a million jobs in Westminster, We have not, in such a short period, been able to find so should we be responsible to everybody in relation sufficient accommodation. We are still faced with the to the jobs that we provide here? What we cannot do, prospect of occasionally having to use in eight square miles, is to provide homes for bed-and-breakfast accommodation as emergency everybody that might want to come and live here. At accommodation. The corollary to that is that the the current time we do not have the stock, and we are housing benefit bill for Westminster has reduced by discharging our responsibility in a responsible way by £14 million a year. Therefore, although there is looking at where people can be accommodated close currently a spike of people presenting, we anticipate to London, and/or close to Westminster, where they that that will come down as the legislation runs can maintain links through commuting on good lines through the various lease renewals and tenancy of communication, in a way that many, many people renewals. At a certain point, hopefully in the not too who work in London and live outside do on a distant future, the number of people who are currently regular basis. in emergency accommodation will also come down very significantly. Q305 Simon Danczuk: In your submission, you admit that homelessness is increasing, but you appear Q309 Simon Danczuk: So you are still using hotels to be opposed to any further regulation. What do you for homeless households? think needs to change for Westminster to enable them Cllr Glanz: We are currently using them, because we to look after their own poorer people? have more demand than we can cope with in the short cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG04 Source: /MILES/PKU/INPUT/027272/027272_o004_michelle_130311 HC 953-iv PRS CORRECTED transcript.xml
Ev 54 Communities and Local Government Committee: Evidence
11 March 2013 Cllr Simon Blackburn, Tom Gilchrist and Cllr Jonathan Glanz term within Westminster, or within self-contained housing market, it is possible to do that. You can pitch accommodation nearby. up in any part of central Blackpool with £50 in your back pocket and a bin liner full of clothes, and you Q310 Simon Danczuk: Are you not able to build will find somewhere to live. There is no longterm anything? security, either for landlord or for tenant. The Cllr Glanz: We are building homes in Westminster. introduction of longerterm secure tenancies would be Simon Danczuk: No, I don’t mean homes. I mean a huge benefit because that then starts to strip out accommodation for homeless households. some of the risk associated with streets full of rented Cllr Glanz: We are building all sorts of homes within properties, in the fact that, for whatever reason, at the Westminster, which includes all sorts of affordable end of a sixmonth period, people either choose to accommodation and social homes. We continue to leave or are asked to leave. build those, but we cannot build them quickly enough Tom Gilchrist: Certainly from a Bristol perspective, to deal with the spike that has presented itself. we do believe that a flexible 12month tenancy should be the minimum for tenancies. We do, however, Q311 Simon Danczuk: Just finally, Tom, how does understand that landlords, where they have a difficult your homelessness prevention fund work? or disruptive tenant, should have the right to terminate Tom Gilchrist: The homelessness prevention fund is that tenancy, very much like an introductory tenancy used to prevent people ending up in bed-and-breakfast in the social housing sector. We do believe there accommodation, and to stop the local authority having should be good reason: if a landlord has good reason to discharge its functions. It was initially set up in to evict a tenancy, even if they have got a 12-month 2004. At the time, we received a grant from DCLG— minimum tenancy, they should be able to do so. or DPM, as it was then—because our B&B bill was £3 As Councillor Blackburn said, I wholly endorse the million a year. In effect, we basically provide housing need for increasing the length of time for assured advice and assistance to use the private rented sector shortholds from six to 12 months as a default across before somebody statutorily presents to the council. In the board. Where landlords are prepared to give longer effect, we use the fund to pay deposit bonds; rent in periods of tenancy, they have to be incentivised. advance; and a whole range of other things—even Certainly part of the homeless prevention fund work including spot purchases where there is some damage that we do is to pay more money to the landlords if and the landlord wants to evict the tenant, to keep they will give a two or threeyear tenancy to families, them in the private rented sector unit. Every year, we to try to enable them to get into school and to put take on about 350 units—predominantly it is landlords down roots. However, we would certainly recommend who have got reasonable quality accommodation, a 12month tenancy as a default. because it is all inspected beforehand to make sure it The other issue for us is the requirement that landlords meets minimum standards—to LHA claimants. We should be required to have a tenancy of some sort. We have currently got six or seven people in B&B at the are assuming here that all landlords provide an moment. We do not have a B&B problem. assured shorthold sixmonth tenancy. Vast numbers of One issue that we have as a city is that this is a landlords do not even provide that. It is a shake of a discretionary fund that we use. We use £250,000 a hand and an exchange of money, and that is year. The tenant pays the money back. This is the problematic in the extreme. If you are looking to try other thing: we get about 40% or 50% back from the to improve the agent in the rental market, a tenant where we are paying rent in advance. By doing requirement to have a statutory minimum tenancy— so, we are actually cutting our B&B bill. But that is however long it is, be it six months or 12 months, the sort of fund that is under threat of local although we would prefer 12—and actually having government cuts—general cuts across the General something in writing that a tenant should sign before Funds. In the forthcoming year, 2013–14, that was there is an exchange of a rental payment, would going to be cut, and we had to put up quite a defence certainly be much easier to prove from our to keep that in place for one year. But that is the sort perspective. of really good practice that is operating across the Cllr Glanz: I think that the assured shorthold tenancy country, that needs to be encouraged by this does provide flexibility for many of the people who Committee—because this saves local authorities a come into the central London market. It allows people fortune in B&B costs. who are studying or here on a work placement, or whatever, to know where they stand. There is an Q312 Mrs Glindon: Does the assured shorthold argument that longerterm, longer-period tenancies are tenancy meet the needs of those that are looking to attractive to both landlords and tenants in cases where the private sector as a longterm housing option? people are looking at accommodation that is perhaps Cllr Blackburn: No, it does not, nor, if I may make more suitable for families and people that have got so bold, do I feel it meets the needs of landlords either. issues in and around schools. Transience is a huge problem in Blackpool, and that Having said that, although most of the tenancies is not just transience in and out of the borough: people granted would normally be oneyear tenancies with, coming, and then going again when they realise that sometimes, a sixmonth break clause, many tenants in our streets are most certainly not paved with gold. It Westminster stay for considerably longer than that is transience within the borough. It is families and time. We have got many tenants in the private rental individuals moving every time the gas bill arrives, or sector who have been there for five, 10, 15 or 20 years every time a bailiff turns up at the door, and moving by agreement with landlords, who appreciate having around within the town. Because of our dysfunctional a good and responsible tenant and are therefore happy cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:50] Job: 027272 Unit: PG04 Source: /MILES/PKU/INPUT/027272/027272_o004_michelle_130311 HC 953-iv PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 55
11 March 2013 Cllr Simon Blackburn, Tom Gilchrist and Cllr Jonathan Glanz to extend the periods. There may be an opportunity doing using planning policy to try and keep homes as where we have got institutional investment looking to family homes, rather than having them become become involved in the private rental sector. They HMOs? Perhaps you could say a little bit about what could perhaps be encouraged to have longer tenancies, you have been doing there, and how successful or for two, three, four, or five years, as part of an difficult it has been. approach to that which would provide more stability Cllr Blackburn: Absolutely, Chair. This started some for people at a certain stage in their housing journey. 10 years ago, in a specific area of Blackpool—the Talbot and Brunswick area, which happens to be Q313 Mrs Glindon: Councillor Glanz, you have where I represent—where there was a particular issue mentioned the institutional investment into the private around terraced houses being subdivided into flats. We rented sector. What is Westminster as a council doing, introduced in, I believe, 2005 a supplementary or what has Westminster done, to attract that kind of planning guidance for that particular area. It stated investment? that, first, there should be no further subdivision, and Cllr Glanz: We have been in discussions with a secondly, that in any new development there should number of institutions who have expressed an interest be a maximum 15% of any property developed that in becoming involved in that particular market. One was onebedroom flats. One-bedroom flats are a thing that is clear is that they want the continuity and particular bugbear in Blackpool. It assumes that certainty of the rental income, and therefore that the people have no friends or family who may wish to longerterm commitments are, as I say, attractive to come and stay with them. Blackpool attracts people them. It is also worth saying that the shadow of who are looking for something which they currently previous interference in relation to rents that took do not have, whether that is a job or whether it is a place some decades ago still puts a concern in some community, a family, or a group of friends. For institutions’ minds as to whether they are going to somebody new to an area to live in a onebedroom flat be able to maintain that, or whether they might find really does hobble them from the start, in terms of themselves in a position where they agree a rent and building networks and relationships and developing then that rent is somehow altered through some kind friendships. of rent control. That has certainly been seen in this Potential reforms that would allow subdivision of country historically, but is something that we would properties—which I believe are being suggested at the not be in favour of, because of the potential adverse moment in order to stimulate the housing market, and effect it could have in relation to encouraging those against which we have lobbied quite hard—I do not institutions to get involved in the market in the same believe would be helpful. Likewise, I do not think way as they are in many other European countries. that converting retail properties into accommodation would be helpful. Not just in Blackpool, but I would Q314 Mrs Glindon: What role would you see social imagine in all town and city centres, we have got a landlords playing in the private rented sector in the really difficult fight on our hands in planning terms to future, Councillor Glanz? Are there any examples in preserve the character of a city centre as largely a Westminster of social landlords? retail environment and a site that drives employment Cllr Glanz: Yes, absolutely. For many years, we have forward. We would want to lobby very hard against had buildings that have been provided through the conversion of retail properties, because I want to organisations like Peabody, and Octavia Hill, I try and retain the characteristics of that area. believe, started her work in Westminster. We have a Very briefly, Chair, if I may, in more general terms, long tradition of social homes being provided by we were discussing outside, before we were brought organisations and institutions of that kind. We also in to you, the length of time that any planning policy have well represented within Westminster the great takes to achieve, and the amount of consultation that estates, such as the Grosvenor Estate and the Portman there has to be. Under the current consultation Estate, who have expressed an interest in becoming framework, it is enormously difficult to get our draft involved in homes that would be available at local plan—which is currently in the 73rd phase of significantly less than market rents, in order to provide the consultation period—to reflect the Blackpool that for the particular need. I think they share the view that I hope we will see towards the end of its life once the maintaining mixed communities within the centre of selective licensing scheme and all of our other reforms London, and the centre of cities generally, is part of in the private rented sector have happened. If we do the lifeblood of the city. The ability of people to live make the changes that we want to make over the next close to where they are working and contribute to their decade, I fear that we will have a local plan that says communities is recognised, not only by Westminster one thing and an actuality that is completely different. City Council, but also by those institutions. We would Chair: That is a very interesting point to finish on. certainly encourage them to explore that and find Thank you all very much for coming this afternoon ways of making accommodation available to people and giving evidence to us. It is appreciated. to fulfil those roles.
Q315 Chair: Finally, Councillor Blackburn, could you speak a little bit about what Blackpool have been cobber Pack: U PL: COE1 [SE] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG05 Source: /MILES/PKU/INPUT/027272/027272_o005_michelle_130325 HC 953-v PRS CORRECTED transcript.xml
Ev 56 Communities and Local Government Committee: Evidence
Monday 25 March 2013
Members present: Mr Clive Betts (Chair)
Bob Blackman John Pugh Simon Danczuk Andy Sawford Mrs Mary Glindon John Stevenson Mark Pawsey Heather Wheeler ______
Examination of Witnesses
Witnesses: Andrew Cunningham, Chief Executive, Grainger plc, Richard Lambert, Chief Executive Officer, National Landlords Association, and Sir Robin Wales, Mayor of Newham, gave evidence.
Q316 Chair: I welcome you all to this, our fifth housing career, it may be more appropriate for them evidence session of the inquiry into the private rented to be a tenant rather than an owner-occupier. I think sector. Just before we start with the evidence, could I all of those factors have been exacerbated by the ask all members of the Committee to declare imbalance between supply and demand. There simply interests? I have one flat that I rent out in London. are not enough houses, and if people cannot afford Bob Blackman: I own six buy-to-let flats jointly with to buy or do not choose to buy, then they are going my wife. to rent. John Stevenson: I declare an interest in three Richard Lambert: What you have seen, particularly residential properties. over the past five years since the collapse of the Simon Danczuk: My wife has an interest in a small financial markets, is that it is harder and harder for rented property. people to access mortgages. As a result, they have had Andy Sawford: I have a small interest in a rented to stay for longer in the private rented sector. You property. have also seen the gradual decline of social housing John Pugh: I am a tenant. over the past 10 to 20 years, and the private rented sector has effectively picked up the slack between the Q317 Chair: We have put that on the record. two and kept those houses in circulation. Welcome to all three of you. Thank you for coming. Sir Robin Wales: If a house is built, the house is built. Could you just go along the row and say who you are Whether owned or rented, it is still there. I listen and the organisation that you represent, for our sometimes to arguments about houses going out of records? Thank you very much. use. Why would they go out of use? People will find Andrew Cunningham: I am Andrew Cunningham. I a way and they will take the best financial am the Chief Executive of Grainger plc. opportunities. I judge it by the fact that if they can Sir Robin Wales: Robin Wales; I am the elected afford to, people will buy property where they can. Mayor of Newham. Even looking around the Committee, people will buy Richard Lambert: Richard Lambert, Chief Executive property in order to make money. It is financially Officer, National Landlords Association. worthwhile to rent your property; it is not worth selling. If you are living in London, for example, it is Q318 Chair: Thank you all for coming. If there are not worth selling your property if you are moving out. things that other witnesses say that you absolutely It is far better to rent it. Take the asset increase and agree with, you do not have to repeat them; you can take the revenue. My answer would be: people are say you agree, though that may not be necessarily true making judgments and now young people cannot get in all cases. Anyway, we will begin with a general mortgages. It is impossible to get a mortgage unless question about the private rented sector. Why do you your parents are helping you with deposits or think it has grown so rapidly in recent years? Is it whatever. I would just go and look at where the down to the change in the tenancy arrangements with finances are and look at what judgments people make. assured shorthold tenancy, or is it simply down to the The other thing is, the last time there was a downturn, failings of other forms of tenure–the fact that some people could not easily move and rent their property, people end up in the private rented sector because and it has got much easier. Therefore, people choose there is no real choice for them? to do that, so lots of people have left their property, Andrew Cunningham: I think it is probably a mix of moved and then rented it out, because they cannot a whole series of things, whether they are cultural, necessarily sell it. I think people make financial social or economic. There has been a trend over the judgments. last 50 years for all Western democracies to encourage home ownership and owner occupation, and there is a Q319 Chair: Clearly Grainger is one of the major realisation that that may not be the appropriate form players in terms of letting properties in the private of tenure for a large section of our population. That rented sector. Just looking at your model, it seems that may be for financial reasons—they cannot get hold of you are making a return from your rental incomes mortgages or they cannot afford a mortgage—but it often over quite a long period of time but, at the same also relates to social mobility and job flexibility. time, churning property around—buying it and selling People are realising that, at certain stages of their it. The two do not seem quite to marry together. You cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG05 Source: /MILES/PKU/INPUT/027272/027272_o005_michelle_130325 HC 953-v PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 57
25 March 2013 Andrew Cunningham, Richard Lambert and Sir Robin Wales are a long-term landlord keeping property, even Q323 Mark Pawsey: I would like to ask questions looking in the future to build it and let it on, but then about the powers that local authorities currently have you are also relying for your income on buying and to deal with both substandard properties and landlords selling. Why are there two elements? who fail to make sure their properties are available to Andrew Cunningham: It goes to the historic heart of tenants at the required standard. I first want to ask you the Grainger business, which is dealing in regulated if we are talking about rogue landlords here or tenancies. As you know, or I hope you are aware, a criminal landlords, and is there a difference? regulated tenant has right of tenure and can stay in the Sir Robin Wales: We called them “rogue landlords” property for as long as they live, and Grainger’s until we were asked, by the National Landlords historic business has been to own those and then, Association, to call them “criminal landlords”. I do when the tenant vacates the property, we have traded not much care; they are people who are looking to the property as a vacant property. Our returns have exploit other people. Before we went to do been a mixture of rental, while the tenant is in borough-wide licensing, we did a pilot in Little Ilford, occupation, and then capital appreciation, and which is an area in Newham. Very roughly, one-third crystallising the capital gain when the property falls of landlords were very good. This was not new-build vacant and is sold. However, no regulated tenancies landlords either, so you did not have the really have been created since 1989, and so Grainger’s top-of-the-range landlords. One-third were very good; emphasis has changed, over the last few years, to have one-third were okay and dragged a wee bit doing it; a greater proportion of market rented properties in the and about 25% were cash-in-hand criminal landlords. private rented sector, whether they are in the UK or We are finding some very interesting evidence. Sadly Germany, so now we regard ourselves as having two we have not got it sorted out yet, but we are portfolios: one that is a trading portfolio, when the discovering quite a lot of what we think is fraud. All properties fall vacant and we sell out of those, and sorts of things are going on. I can give you lots of the other is very much a market rented private rented cases. I have some fantastic examples of people we sector portfolio. have found living in squalid, unacceptable conditions. The scale of what we are finding is very surprising. It is much bigger than we thought. We thought we had Q320 Chair: I suppose I am asking why you do not 5,000 landlords; we now know we have 15,000, and then rent the properties on a non-regulated basis when those are just the ones who have registered early. It is they become vacant, or is it that you feel that they are amazing. What is going on out there is something I not good long-term prospects? do not think we are as aware of, and we think we Andrew Cunningham: When a regulated tenancy know more about it than other people, because we property falls vacant, it is probably not suitable for a have been doing this for a while. market rented tenancy, because of its condition, style and how it has been occupied over the previous 50 Q324 Mark Pawsey: Sir Robin, would you prefer years or so. that, as a Committee, we did not use the term “rogue landlords”, but called them either “legitimate Q321 Chair: To come to Richard Lambert, on your landlords” or “criminal landlords”? website you claim to represent the interests of Richard Lambert: For the kind of people that Sir 1.4 million landlords, but you only have 20,000 Robin is talking about, I would actually prefer you members. How do you know you represent all the used “out-and-out criminals”, because they are interests of all the landlords, because presumably the criminals. They are people who are exploiting the ones who join you are the enthusiastic, committed, vulnerable, because they see the main chance and good landlords, aren’t they? You do not claim to there is an opportunity to do it. Our members are as represent the rest of them. incensed as anybody, because it is their reputation that Richard Lambert: I think that is why we claim to is being dragged down by people who are operating represent the interests, rather than actually represent completely outside the law. the constituency. I think one of the things you find with any trade association is that the people who tend Q325 Mark Pawsey: At the very bottom end, the to join the association tend to be a good cross-section worst of those examples, Sir Robin, are the “beds in and by and large reflect the opinions of the wider sheds”. I understand that, in Newham, you believe market. there are 1,500 properties. First of all, how did you come about the figure and, secondly, what powers Q322 Chair: Right, so you think you are a have you currently got in order to deal with that cross-section of landlords, do you? problem? Richard Lambert: We have a pretty good Sir Robin Wales: There were issues about the cross-section, in terms of size, and in terms of the numbers. We originally thought 1,800. It has been kinds of properties and the kinds of markets our going down as we have gone looking. It is also very members work in. If you are probing gently to see patchy; there are some parts of our borough that we whether we represent the people who do not come up know are likely to have them. We have not done them to standard, almost certainly not, because people who all yet. We have gone round looking at them. We have do not come up to the kinds of standards that would used heat sensors to identify where people are, but we be expected do not tend to join trade bodies like ours. have a long process to go through to identify them all. Chair: We might probe that point a bit further in a bit. We guess at 1,500, but do not hold me to it. If it is cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG05 Source: /MILES/PKU/INPUT/027272/027272_o005_michelle_130325 HC 953-v PRS CORRECTED transcript.xml
Ev 58 Communities and Local Government Committee: Evidence
25 March 2013 Andrew Cunningham, Richard Lambert and Sir Robin Wales
1,000, it is 1,000. It will be what it will be. We will is we will use some of the powers, but we do not find it. know who the landlords are. The great thing about We certainly have some planning powers to be able to licensing is they are forced to tell you or the fines are do things in there, but one thing we would say is that very substantial. Once we know they are there, we can the four-year rule is fine if you are building a then begin to enforce in lots of different ways. conservatory and your neighbours do not complain, The most important thing I would say we have done— but if you then use that to house people and make we have talked about the licensing—is joining the money out of it, we would argue that the four-year enforcement up. We will use whatever powers of rule should be abolished. If you are using it to make enforcement work best—trading standards, money and exploit people, there should be no rule. planning—in a specific place. I can get you details, if you want to get into greater detail; I can get papers Q326 Mark Pawsey: Sorry; can you just remind us sent to you. Basically, we can now identify them, about the four-year rule? because the ones who do not want to be found are the Sir Robin Wales: The four-year rule of planning is ones who stay away from all these things as best they that something is deemed to have planning consent can. We had 10% of all enforcements last year on after four years; we would argue that is perfectly all housing, so we are using our powers, but with right. If you build a conservatory and people do not licensing we can identify where they are and use a mind, we are not bothered. If you then use it to house variety of powers. If you ask me, honestly, it would people—if you attach power and water when you have be really good if we could have a review of powers not told people—and you use it to exploit people, we and make them simpler to use. They are quite difficult think at that point you should lose the right to have to use. deemed planning permission, and we should be able Mark Pawsey: Richard, you have some views about to rip it down. We have put money into knocking these powers as well. things down directly. Richard Lambert: If we look at what Newham has done in Little Ilford, it is a classic example of the Q327 Mark Pawsey: Are there buildings that are problem that the legislation on discretionary licensing more than four years old that have effectively become was intended for, and the really impressive thing about legitimised through permitted development? the way the powers were used was that they were Sir Robin Wales: That is right. If you were smart, you concentrated and co-ordinated in a really effective would build and, after four years, you would then say, way. Now, whether that can be done on a “Right, I can now rent it,” and there is nothing we can borough-wide basis is another question, and I know do on the planning side. If it is a genuine conservatory, that Sir Robin is very confident that he can do that. I do not want to get involved in people doing things I have asked both him and his officials on previous and improving their property, but it is when you start occasions, and he has always said he could. Where we to exploit people. Because we are doing the licensing, become concerned about licensing is that, in effect, we can do something about that, but it could be because it seems to— much easier. Mark Pawsey: We have some questions on licensing The beds in sheds are certainly not the worst ones. Do a bit later on. I do want to press you on how suitable you want me to tell you about a joint operation we the existing powers of local authorities are. had? You might find this interesting. This is just the Richard Lambert: If they are used and they are used latest joint operation. The landlord was known to us. in an effective and co-ordinated way, then they are We found two illegally converted flats being used as very effective. HMOs for security guards. We took seven dogs away. That was after five were removed on a previous visit. Q330 Heather Wheeler: I would like to really tease We had occupiers sleeping in the cellar, two to three out issues about licensing and so, Richard Lambert, if to a room. We had dog faeces and a cockroach I could start with you first, you are very keen on infestation. The unlicensed HMO was next door to voluntary accreditation. Newham, we have heard one held by the same owner. We got three arrests, and before in evidence, has tried voluntary accreditation one of them was running down the road in handcuffs. and only 10% of landlords actually signed up, so how I only give that as an example. It is just the latest one could that be the basis of an effective system? What we got. I can give you hundreds of them. was missing there? Richard Lambert: What was missing was the Q328 Mark Pawsey: Why isn’t the housing health approach. Accreditation, when it is introduced by and safety rating system sufficiently powerful to deal local authorities, is often seen as an attempt to make with that problem? Where does it fall down? Why bad landlords better. Accreditation is not a way of doesn’t it work? making bad landlords better, because the bad Sir Robin Wales: It is just not right. The great thing landlords, the kinds of criminals we have just been about licensing is you can identify all the landlords. talking about, will always avoid that kind of engagement. What it is effective at is finding a way Q329 Mark Pawsey: I know you are keen on of giving the responsible landlords, the good landlords licensing, but tell me why the existing powers are and the people who may not be as good as they could not suitable be—one of our greatest issues is around the people Sir Robin Wales: We have tried to use them. We have who do not understand the rights and responsibilities used them sometimes to try to enforce. It is not that they have taken on until they actually fall foul of properly understood. It is not clear. The real difficulty the problem—a way to gain competence, gain cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG05 Source: /MILES/PKU/INPUT/027272/027272_o005_michelle_130325 HC 953-v PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 59
25 March 2013 Andrew Cunningham, Richard Lambert and Sir Robin Wales knowledge and identify themselves. If you can get the not say we will be “driven out”, because we would people who are not causing problems to identify not leave Newham because of that—would not put themselves and use accreditation as a filter, then the any more money in there. local authority will be able to direct their scarce Richard Lambert: What is lacking from Sir Robin’s resources down towards the people who are causing approach is engagement with the local landlord the problem and not need to worry about that other community. Although he uses statistics that sound group, unless of course a problem actually emerges. very successful, the expense at which that has been bought is the alienation of the vast majority of the Q331 Heather Wheeler: Unbelievably, Sir Robin, responsible landlord community, who could have been that was actually going to be my next question to you, his biggest allies and his biggest supporters. If you word for word. Have you been looking at my scripts? talk to local landlords and EHOs on the ground in What I am fascinated by is that it just seems so logical almost any borough I can think of, they will say, “We to me that you are going to get the good and the know where the problems are. By and large, we know middling who sign up for accreditation. Why do you which are the properties causing the problems. Let’s think you only got 10%? focus on how we attack those, rather than undergoing Sir Robin Wales: We did not. We did not even get a box-ticking exercise with the people who are not 10%; we got 600. We thought it was 10%, but it is causing the problems.” 600 out of a known 15,000 now, and we are fairly confident that will go up to 20,000 to 25,000, although Q333 Heather Wheeler: Sir Robin is desperate to these things are difficult to predict. We got that come back, but actually I am going to move you on because there are good landlords who come in and slightly, because I am sure other friends want to ask say, “I want to get accredited. I want to do the right some other questions. There is this other dilemma: thing.” I said earlier that two-thirds, by and large, we whose responsibility is it to understand the rights and have found no problems with. They want to do the responsibilities between the landlord and the tenant? right thing in getting our advice and support. We are Does the council end up doing it, or do you guys do very happy to provide that. The difficulty is you do it, or is it the letting agents that do it? not know where they are. Quite often, they are single Richard Lambert: It is the landlord’s responsibility. people or singleton properties, and they will get a This is a business. You get into this to offer a service letting agent. If you want to talk about letting agents, and the landlord should make sure they understand the we would love to talk about that, because they should responsibilities and what they are aiming to do. If you be licensed and we would be looking for the same ask me what our biggest concern about the private system for letting agents, which are often very bad but rented sector is, it is not the criminals that we are sometimes very good. talking about, because actually I think they are, My problem in coming to you now is we have had an overall, a relatively small proportion; it is the people accreditation scheme; we have done what we can. I who do not know what they do not know. That is why am coming to you and saying I have 15,000 that I the NLA has put so much investment into landlord know of, and the stuff they are starting to open up is development and education, because if you are going astonishing. We have not really got to all the bad ones, to do this, you need to know what you are doing and though we are targeting a few. We know it does not you need to do it competently and creditably. work. We know that, with all the powers and all the stuff that we had, it does not work, because we tried it. Q334 Heather Wheeler: That is where the housing officer from the council comes along. He talks to the Q332 Heather Wheeler: Okay, that is great. Thank landlords. you for that. Perhaps, Mr Cunningham, you would be Sir Robin Wales: We are talking two different things kind enough to expand on why you think having a here. We are talking chalk and cheese. I am kitemark, which only in effect is going to be another completely supportive of the idea that with an name for an accreditation scheme, would work when accreditation scheme you try to help and you give we have heard the evidence now from Sir Robin that advice. I think it is a great idea. Landlords who are actually it does not. It will work for the great guys, trying to invest, particularly ones with just one or two but for everybody else— properties, need support, and I am completely a fan of Andrew Cunningham: When we talk about that; I suspect Grainger does not need that support. accreditation and licensing, if the background to that The truth is that the landlords do not know where the is to try to improve standards, particularly for the problems are, because many of the landlords do not vulnerable, because the better off can vote with their live in my borough. If I go from 600 accredited to feet and can move to other properties, then we are 15,000–and those are the good ones, we think, wholly supportive of it. My concern is that the best because they have registered early–I am sorry, but I sort of regulation or legislation is a mixture of carrot will tell you who knows where they are, and that is and stick, and the introduction of licensing that our residents. Newham has done is for an organisation like ourselves ASB is twice as likely to happen in a private rented a very heavy stick. There is no incentive for an property in Newham as in a council place or an organisation like Grainger to invest its relatively owner-occupied place. There is a real problem. We scarce resources into a borough like Newham. There are talking about two different groups of people and is no incentive for a landlord like us to stay there. that is one of my problems. We would love to have Therefore, I worry that there are perverse Grainger there. If Grainger does not want to invest in consequences, in that large landlords like us—I would Newham, that is okay; we will do it ourselves, cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG05 Source: /MILES/PKU/INPUT/027272/027272_o005_michelle_130325 HC 953-v PRS CORRECTED transcript.xml
Ev 60 Communities and Local Government Committee: Evidence
25 March 2013 Andrew Cunningham, Richard Lambert and Sir Robin Wales because we think it is a great place to make money. we would expect, but when we go and visit some of We are very keen on the landlords and supporting them, we will be able to identify them. We think those what they are trying to do, but that is not addressing things will come up and fall out as we go along, but the criminal element in my borough who are ripping we based it on the evidence from Little Ilford, and people off and having people live two to a walk-in Little Ilford was quite overwhelming. freezer. It is not uncommon to get 15 people in a property in Newham. Q336 Simon Danczuk: Let me just ask a couple Now, I am sorry; that we have to do something about. more quick questions, Sir Robin. Grainger, “a In fact, when we asked the residents, they said, “Yes, respectable landlord”, it says here, raised concerns please; do something about it, because we are sick to that they are having to do too much form-filling, death of these bad landlords,” who by the way bring which is quite understandable for a respectable other landlords into disrepute, which is why I am landlord. What do you say about that? You have surprised I am not getting much more support from created a convoluted bureaucratic process. landlords. If we can clean them up and clean this mess Sir Robin Wales: I will throw that back at you and up, we will have good landlords who, by the way, will say, if when legislation was passed it was not so pay fees to you and you will make more money out convoluted and bureaucratic, we would be a lot better of them. off. One of the things I would beg and plead is: make Andrew Cunningham: The question was about it simpler. education and about whose responsibility it is, whether it is the landlord or the tenant. One of the Q337 Simon Danczuk: That is a good point, Sir potential pluses of a kitemark system is making Robin. In what way? tenants aware of what they should get from a landlord. Sir Robin Wales: Any form-filling was minimised. If there are published standards—“this is what you as We only took what the Government said we had to a tenant should be asking for” but also setting a moral take. We were not looking to add to that; we really standard and a physical standard for landlords—then were not. I would say a review of the legislation that both sides are absolutely clear what they should be says, “How do you make it simpler for us to enforce, getting from the service function. That does not exist and do not make us go through this?” We can do that at the moment, and a kitemark service would help and have a discussion in concrete terms. that. In terms of public awareness and how you do that, I Q338 Chair: Sorry; is this to simplify the am not a communications expert, but the Government enforcement aspect or the actual creation of the manages to publicise smoke alarms, breathalysers and registration? changing to digital TV, so I am sure it can publicise Sir Robin Wales: All of it. Instead of civil servants landlord and tenant relationships. spending years dotting every ‘i’ and crossing every ‘t’, trust us to do it in a way that will give us some Q335 Simon Danczuk: Sir Robin, can you very broad guidelines. A bit of localism would be really briefly summarise the evidence that you have to good. justify introducing the licensing scheme right across the entire borough? Q339 Heather Wheeler: This is your scheme and Sir Robin Wales: Sure. I mentioned the ASB you are making them fill it in 600 times. information we have; we know it is twice as likely to Sir Robin Wales: We have to. Sorry; that is your happen in a private rented property compared with legislation. We have to go with what we have. other tenures. When we asked our residents, 74% of residents and 76% of private tenants said, “Yes, Q340 Bob Blackman: May I just clarify this, Sir please; we would very much like you to do something Robin, because I think this is very important? You are about that.” We went to Little Ilford, and after we had saying to us that the legislation requires the landlord done the licensing, 99% of properties had no waste in of every single property to complete all the forms for their front gardens; there was a 75% drop in reported each property. ASB; and the supply of PRS properties went up. It Sir Robin Wales: Yes, because you have to have the did not go down; it went up. There is plenty of details, but we would be delighted to have a evidence that this will work. conversation with you in detail to try to make it We will then have many cases. As I said, about 25% simpler and say these are the things we want. Having of those we found were cash-in-hand—people doing said that, without the legislation we could not do the things that they should not do. We are now beginning things we are doing and we are very grateful for the to see with this licensing scheme some really legislation. I do not want to be critical of it. The other interesting results. It is too early, but when we get thing is it is filled in once. It is £150 for five years, so them, we will share them with you. It is looking it is not the most expensive thing in the world. We quite interesting. have tried to make it simple. If you have registered Having looked at that and looked around the borough, early, it is £150 for five years. For those who are we felt that we could go across the borough and look coming late, it is £500. We think those are the ones to license all private rented property. So far, the results who will tend to be the worst landlords. look about right, but there is the fact of the sheer number that we are getting in and the need to tackle Q341 Simon Danczuk: Sir Robin, two more quick those problems. At the moment we think there are questions to you specifically. Those who do not many more HMOs that people are not reporting than register for the scheme, what happens to them? cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG05 Source: /MILES/PKU/INPUT/027272/027272_o005_michelle_130325 HC 953-v PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 61
25 March 2013 Andrew Cunningham, Richard Lambert and Sir Robin Wales
Secondly, could you just tell the Committee how would ask is that, if we have 60 properties, we fill in many people have been fined under your scheme? one form and list 60 addresses. Sir Robin Wales: At the moment, none in the new Sir Robin Wales: Yes. scheme, because we have just started it. We registered Chair: So there is agreement. them all by January, so you will have to be reasonable. Richard Lambert: We are certainly starting to get We got in levels—I do not have the full details—of anecdotal evidence from our members in Newham, about £23,000 in housing benefit paid with 20 cases and indeed from some of the other boroughs that have still to come, but that was from four cases. I can get discretionary licensing schemes, that lenders are you the details of Little Ilford, which was not a big reluctant or actively telling them that they will not area. lend on properties in a borough area that has selective licensing. Q342 Simon Danczuk: What happens to those who Sir Robin Wales: Hang on; there are two different do not register? questions. One is that some of the banks are taking a Sir Robin Wales: That is the great thing about the view that they will not lend on private rented in a scheme and that is the thing that is most positive. If place that is licensed. We are asking for the power to you fail to register and we find you, you are subject do that. We are perfectly happy to invest in Newham to some very substantial fines, and the reason why this and perfectly happy to take that risk. You are mad if is so powerful is we can identify where the landlords you do not invest in Newham at the moment; we are are. Of course the Graingers of this world will in a special position, because we had the Olympics, register; of course they will. If we can make it simpler which is making a difference. There will be an for them, we would love to do that. It is the other ones interesting issue to take up with the banks. In the end, who do not register. My understanding is that you can they will realise it is a better place to invest, because be subject to a fine of a year’s rent. actually you are going to have a much better standard of accommodation. It takes a wee while for them to get used to new things, our banks, unless it makes a Q343 Simon Danczuk: You are going to do this. lot of money and wrecks the economy. Sir Robin Wales: Yes. To give you an idea, we have taken 15 additional licensing officers; we have paid Q345 John Stevenson: Richard, HMO licensing: you for 46 police officers from the Met and we have gone seem to accept there is a need for a certain amount of from 18 to 52 enforcement officers, because we regulation. You have called for a review. What recognise this is serious stuff. Actually, our residents changes would you like to see? tell us the biggest issue is crime and anti-social Richard Lambert: It is very difficult to answer, behaviour, which is why we are doing this. When they because we do not actually know what effect tell us that is the biggest issue, we think we should mandatory HMO licensing has had. There has not respond to that. They say to us that the biggest been an evaluation of the system that is in place. Until problems are rubbish in gardens, people not behaving we actually have some kind of objective analysis of and people drinking until late at night, all in places what has been done, it is very difficult to recommend that are private rented, though not the good ones. I changes as it stands. keep coming back to that. It is the fact that they are forced to register. We will visit every home. We will Q346 John Stevenson: What system would you like, go to every one and we will identify them. Remember, if you are accepting there has to be a degree of residents are likely to tell us. Tenants are likely to tell regulation? What would you like? What regime would us. When we get an ASB complaint, we will look at you like to see in place? that property first. Richard Lambert: There is actually a huge amount of regulation in the private rented sector already. There Q344 Simon Danczuk: Andrew, you suggested when are over 50 Acts of Parliament, and over 70 other the scheme was devised that investors would be pieces of delegated legislation. What we would like to walking away from Newham. That is what you said see is the existing legislation in force effectively and in the submission. Do you have any evidence for that more intelligence-led enforcement, rather than simply at all? waiting for something to emerge. The kind of system Andrew Cunningham: No, but I think that if you are that I was postulating as an alternative to the licensing looking to invest in various places, if there are exactly scheme that has been adopted in Newham is actually equivalent properties in two boroughs, one where you trying to encourage the responsible landlords to filter have to spend an hour filling in a form and spend themselves out and identify themselves, so that the some money on fees and one where you do not, then local authority can then focus their resources down on investors will go to that one. I do not think people the people who might be causing the problem. That will flood out of the borough. In terms of the minutiae involves the kind of intelligence-led enforcement that of Newham and the way that it works, we have about we are talking about. 60 properties in the borough. Most of those are regulated tenancies, where the rental is very low and Q347 John Stevenson: Andrew, Grainger supports also the rights of the tenant are significantly different greater regulation of letting agents. What about from a market rented property. Therefore, some of the landlords? Do you think they should be regulated? things we are having to do are not necessarily Andrew Cunningham: For letting agents, there is a appropriate, so it is a little bit of a blunt instrument strong argument there, because somebody is entering for us, but we also have to fill in 60 forms. All we into what could be a relatively long-term financial cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG05 Source: /MILES/PKU/INPUT/027272/027272_o005_michelle_130325 HC 953-v PRS CORRECTED transcript.xml
Ev 62 Communities and Local Government Committee: Evidence
25 March 2013 Andrew Cunningham, Richard Lambert and Sir Robin Wales contract, and virtually every long-term financial their members that actually are not set down in law: contract is regulated one way or another, whether it is the requirement for client money protection; the an HP agreement or a mortgage, so we see the requirement for professional indemnity insurance; the justification for that. In terms of landlords, I do think need to be upfront and transparent about fees; and the that there are sufficient existing regulations and need for independent redress. If we were looking at enforcement procedures available. The key is applying that kind of registration, although as a small business them, and so it comes back to enforcement. organisation instinctively we do not favour increased It is enforcement, as I said right at the beginning; it is regulation, we could see a rational argument for the vulnerable who need protecting. At the higher extending the kinds of expectations that the level of the private rented sector, people can exercise associations have for their members to cover the entire their will through choice. In other words, they leave letting agent industry. the property and they go and rent somewhere else. It is at that lower level, at the vulnerable level, and we Q352 Bob Blackman: Andrew, in your submission, are as conscious as anybody else that there has to be you are concerned about regulation, particularly in some measure of protection there. terms of institutional investment, saying that more regulation may deter institutional investment. What is Q348 John Stevenson: Do you not think regulation your evidence to support that view? would achieve that then? Andrew Cunningham: If it drifts into rent control in Andrew Cunningham: It would, but is it too big a particular or anything that smacks of rent control, I sledgehammer to crack a nut and is there a different think that would make institutions nervous. A lot of way of doing it? In fact, is the sledgehammer missing the issues we have been talking about this afternoon the nut altogether? As we see from Newham’s would actually be solved by supply: if there was instance, we get the sense that it is possibly the larger, sufficient good-quality residential property available more professional landlords that, in the short term at to let. least, are paying for the rogue or criminal landlords, in terms of registration and licensing, because we will Q353 Bob Blackman: We should not have any more always register and we will always pay. I am not in regulation. We just build more properties and that will favour of increased regulation for regulation’s sake, drive out the rogue landlords—the criminal landlords. and I am not convinced that regulating every landlord Andrew Cunningham: If you move to a more mature, in the country is either practical or desirable. sophisticated rental system as they have in some other countries, where the element of choice goes down the Q349 John Stevenson: Could the same arguments be scale and therefore is available to everybody, you can applied to letting agents then? help eliminate some of the problems we are talking Andrew Cunningham: I think for letting agents, at about. One of the ways of funding that is through least from what we see, there is a lack of transparency institutional landlords; in other words, people about the fees, particularly when people are entering investing large-scale institutional money into the into long-term financial contracts. That is the area that sector. Anything that smacks to them of needs to be caught. From Grainger’s point of view, over-regulation or of change of legislation or tax— we advertise on our website what our fees would be when we let. We only use accredited letting agents. Q354 Bob Blackman: Can we just clarify what we We get feedback from both tenants and from our mean by “over-regulation”? You have talked about managers, and so we police letting agents ourselves. rent controls. That is clear, but the sort of thing that If that could be done for us through a registration is going on in Newham, where the rogue landlords are scheme, fine. being identified and stomped on quite hard, surely must be good news for the good landlords. Q350 John Stevenson: Richard, what is your view Andrew Cunningham: If you have got to an on regulation of landlords? You have talked quite a equilibrium, what institutional investors are nervous bit about criminal landlords. You clearly want to see of is change, because they underwrite an investment them pushed out of the market. Why not regulate for a number of years. If they are nervous about landlords? constantly changing regulation surrounding their Richard Lambert: As I said, there is a lot of investment policy, then that will make them nervous. regulation already, so if there is a gap in that regulation, then let us have that specific debate. The Q355 Bob Blackman: Richard, the Government has thing is, if you add another piece of regulation or announced an extra £1 billion for the build-to-rent or legislation on top of all that, the responsible landlords build-to-let scheme. How much effect is that going to will comply; the law-abiding always do. The problem have on the availability of supply and your members? you have is that the people who are already ignoring Richard Lambert: On the availability of supply, if it the law will not take notice of another thing that is can actually be brought into building more properties, laid on top of that. and that is the $64 billion question at the moment, it could have quite a significant effect on supply. Q351 John Stevenson: The same applies to letting agents. Why regulate them then? Q356 Bob Blackman: You obviously have a fear that Richard Lambert: The regulation around letting it will not increase the supply. agents is not necessarily as clear. If you look at all the Richard Lambert: I have been working in and around letting agent associations, they have set standards for housing and the private rented sector for the last 15 cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG05 Source: /MILES/PKU/INPUT/027272/027272_o005_michelle_130325 HC 953-v PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 63
25 March 2013 Andrew Cunningham, Richard Lambert and Sir Robin Wales years and, for as long as I can remember, increased a lovely place to move into, but what about these institutional investment has been the Holy Grail; it has awful properties? What about taking those over, never quite come through. In the circumstances we expropriating them and doing something about them? have at the moment, it is closer than it has possibly Sir Robin Wales: That is precisely what we intend to ever been before, but that is because we are looking do if they cannot be sold and brought up to a decent at build-to-rent rather than the previous aspect that we standard. We will do it, and then sell them for people looked at, which was more buying up enough stock to to live in, which would be great. Interestingly, the create an institutional-style portfolio. There is a real deposit scheme the Government has brought in is prospect of it coming through. If we can persuade the exactly the same as the one we were talking to the institutions, which are probably the one part of the Government about us doing, in terms of giving people economy sitting on piles of money, to put that money 20%. It is very interesting that they have followed into building more housing, then that starts to address that; even the 1.75% is what we were talking to CLG the fundamental issue, which actually everything about. We are looking to sell them, rent them or get comes back to. All problems stem from the fact that people to buy them to rent, but we will look to do that there is simply not enough housing for the number of proactively if other people will not do it. If an people looking for it. individual landlord wants to come in and raise the In terms of the NLA members, we are predominantly standard of that property, then that is, by far, the best small landlords, rather than institutional investors. solution, but we will proactively do that. We think There is a slight concern that, if the institutions come that, financially, we are in a perfectly good position to in, the best tenants will be creamed off. Personally, I do it. am not entirely convinced by that argument, but what London’s problem is there is not enough supply. That it will do is raise the overall awareness and standards is absolutely right. At the moment, in terms of of the private rented sector. investing in London, you are mad not to, because it is such a good opportunity, but you have to have the Q357 Bob Blackman: Sir Robin, you have a plan for confidence to do that. The great thing about the local the borough to effectively become not only a public authority is we can think 25 years ahead. If we did sector landlord, but a private sector landlord as well. that in housing, we would be in a better position. Could you explain to us what you are doing? Sir Robin Wales: Sure. I will just say we are not Q359 Bob Blackman: Richard, do you see this as a calling for more regulation; we are applying the potential threat to your members: a local authority, not regulation that is there. We would actually like to just Newham—it could be others—deciding to simplify it. We do not want more and we want it municipalise all the private rented sector effectively? simplified. We are just applying the powers we have Sir Robin Wales: Not all of it. to make sure we can do things. Richard Lambert: We are an organisation that We are having no trouble getting people investing in believes in the free market and open competition, so Newham. Our New Homes Bonus is substantial. The if the local authority comes in on the basis of the open Olympic Village was bought. Canning Town, which is market and open competition, then I do not see that a major regeneration scheme, is run by the council. It there is a problem with that. Where the concern would is on council land with some very good partners, and come is if a local authority was to use its power to, everything is being sold as it comes up. We are having effectively, manipulate the market and force sales, no trouble. What we have asked for and what we which could happen. It is possible. We would also would like is the power to build and rent ourselves, at want to be sure that the properties were being bought market rent. Our plan currently is that we are building at market price, let at market rents and it was being on all the land we have, and we are seeking to purchase any land we can find in Newham. We intend done on fair competition. to build affordable housing because we know that all The other question I would have is: who would be the numbers look very good, in terms of us making a overseeing that as a regulator, in terms of ensuring return, so we would be much more proactive. competition is free and fair? Also, if I remember The other thing we want to do is be proactive in rightly, there was an issue at one stage about whether purchasing some of the properties that will come free a local authority could actually enforce against itself. from this scheme, this regulation, so that we can turn If there were problems in the management of those them into better properties; then we sell them. I am properties, who would do that? not bothered that we run them. Good landlords are Bob Blackman: Just arrest Sir Robin. great; it means we do not have to worry about it. If it Sir Robin Wales: We would love the power to pay comes to it, we are looking to do the same, because ourselves a fee for all the properties we have. financially it makes lots of sense in Newham. That just happens to be a thing in Newham. It just happens Q360 Bob Blackman: Andrew, finally, do you see to be the nature of where we are in London. this as a threat to your institution? Andrew Cunningham: One of the problems with the Q358 Bob Blackman: That is your plan in terms of private rented sector is actually the lack of new build. Clearly, one of the things that you have good-quality competition. I said before that a lot of talked about is the fact that you have a lot of criminal these issues can be solved by supply, but also by landlords, who have got rundown properties. The competition. We do not see it as a threat; we see it as issue for many people, not only in your borough but a benefit of good-quality ones. We do not want to elsewhere, is that it is great having new properties and compete against rogue or criminal landlords. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG05 Source: /MILES/PKU/INPUT/027272/027272_o005_michelle_130325 HC 953-v PRS CORRECTED transcript.xml
Ev 64 Communities and Local Government Committee: Evidence
25 March 2013 Andrew Cunningham, Richard Lambert and Sir Robin Wales
Just one final point on the Build to Rent Fund—I Richard Lambert: I would be reluctant to change it, know you have moved off it a little bit—if you look because people are used to it. What I do think is at institutional investment in that, what they want is a important is making sure that landlords, tenants and stabilised block that gives regular rental income. What indeed agents are aware of the flexibility in the they do not want is development risk. The Build to options within there. That puts an onus on us, as a Rent Fund is designed to help a developer get over landlord organisation, to make sure that our members that initial phase of development risk. Therefore, understand the flexibility. In the end, what a landlord increasing it from £200 million to £1 billion is a wants is a good customer. They want somebody who positive, in terms of the ability of developers to have is going to pay their rent in full, on time, look after the confidence to develop for institutions, because the property and get on with the neighbours. The institutions generally do not want to take a longer they stay, the better. One of our regional reps development risk. still has a tenant on one of the very first ASTs issued Sir Robin Wales: I should just add: we have done in 1989, so that shows how long a tenancy can last, if something like this already. We set up a housing the relationship between the landlord and the tenant association, Local Space, where we invested some works. assets and they bought 1,000 properties, which we rent at full market value. We use that as temporary Q363 Mrs Glindon: Mr Cunningham, Grainger accommodation. It was one of our ways of protecting operates in Germany, where there is a regulated people who are homeless and of being more active, so system of indefinite tenancies, with freely set initial there are 1,000 properties, mostly in Newham but a rent and index-linked rent increases. Do you think that few around the other boroughs nearby, that are could work here? actually in that position. The difference there is the Andrew Cunningham: Potentially, if you have a more plan is to use the profit, in about 2025, to turn them mature market. One of the issues, as I keep on coming into social homes, so that they pay social rent. That back to, is the scale and maturity of the residential was the original thinking. We have done something lettings market in the UK. If you are talking about like this. The housing association borrows the money, length of tenure and length of tenancy, our average but we have to make the payments and we took all for the market rented people is about two years. That the risk, so it is not something we have not done. is how long people stay. We would have no particular Chair: I just want to pass over to Mary. I just problems about extending tenures, but there is no apologise, on behalf of our Conservative colleagues, great demand for our particular tenancy type at the for their having to leave. It is nothing that you have moment, because it tends to be focused on young said, and there has not been a split in the Committee. professional people who have a desire for a degree of It is simply that they are going to see the Prime flexibility and mobility. As the sector expands, and Minister, and when the Prime Minister calls, I am perhaps it becomes easier to accommodate married afraid you have to go. families who are more likely to want longer tenancies, Simon Danczuk: This side has not been invited. then I see that becoming more prevalent. One thing I would say is that, when it is drawn to tenants’ attention that a long-term tenancy is a Q361 Mrs Glindon: Mr Lambert, the NLA has said two-way street—in other words not only is the and we have heard that the current tenancy structure landlord committing for five years, but the tenant is is actually a lot more flexible than people think. If this committing to a five-year contract to pay the rent— is the case, why are there so few tenancies longer than that is when most of them say, “Actually, I’ll just take 12 months on offer? it for six months or 12 months,” because remember Richard Lambert: You have to draw a distinction they are on the hook. If they sign for a five-year between the term of a tenancy and the duration of a tenancy, they are on the hook for the rent for five tenancy. We have done some work surveying tenants years. over the course of the last year, and we have found, from asking them, that of the people who responded Q364 Mrs Glindon: That is a good point. Again to to our survey, over 60% had been in the tenancy for you, Mr Cunningham; you suggested that, in return longer than two years, and over 40% had been in there for reduced affordable housing requirements, as per for longer than four years. We equally found that some the 106 agreements, local authorities could demand 39% had been offered a 12-month tenancy first off, that a property remain in the private rented sector for and 36% had been offered a six-month tenancy, but 10 to 20 years. First of all, how do you think that that is because, if you are dealing with somebody for could be enforced and could properties be left empty the first time, you want to get to know them; you want if demand for private renting falls off over a 20-year to understand them; you want to see if it works for period? you and it works for them. In the same way that you Andrew Cunningham: I do not think so. We are a do not get married on a first date, you are not going little bit like a borough. We do take a 25-year view, to offer somebody a longer tenancy straight off. which is slightly unusual in a commercial enterprise. We would be perfectly happy to set aside a block of Q362 Mrs Glindon: Do you think perhaps the name flats and say every flat in that has got to be rented for of the first tenancy should be changed somehow, X number of years. After that period, it can be split perhaps to “introductory tenancy”, to give people the up and sold as individual flats. If the landlord wanted idea that they can have a more permanent home, or realisation of the asset in advance of that, then he do you think it is fine as it is? would have to sell the entire block. That is no cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG05 Source: /MILES/PKU/INPUT/027272/027272_o005_michelle_130325 HC 953-v PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 65
25 March 2013 Andrew Cunningham, Richard Lambert and Sir Robin Wales different from a commercial landlord owning a or 12-month assured shorthold. We need to develop shopping centre. If a commercial landlord owns a different tenancies for different needs. shopping centre, he does not sell off individual shops; Sir Robin Wales: Different things for different places. he would sell the entire block as a rental business. We know, in the west of our borough around Stratford, That is what we are saying at Grainger: we would be people are probably looking for six to 12 months. perfectly willing to build and let out, for an extended They are young people; they are moving and all the period of time, entire blocks of flats, but there has to rest of it. One of the reasons we want to get into be a financial incentive for us to do so. One of the private rented is to give long-term tenancies to people ways of doing that is to reduce the in-cost, by with kids at school. We also know that jobs sometimes reducing the Section 106 costs—i.e. build less change and that people have to move, so what we are affordable housing or to be able to use public land looking for, as a council, is to provide what we can in for it. terms of housing options so that kids can be stable at school. If you, as a family, choose to move, we will Q365 Mrs Glindon: Finally, do you think that would take that and accept that, because we can be much give a big enough mix of types of houses available? more flexible, because there is a public good here. Andrew Cunningham: Yes. We are doing a Our view is we should be giving long tenures to development down in Hampshire, where we have, not people with kids while the kids are at school and while officially but pretty much, reached agreement with the the kids are local, which is also good for us in terms local authority that we will let properties for a period of building communities, so we have different things 1 of 15 years. We are calling them, very that we are looking for. We, for example, would not imaginatively, “Grainger Lets”, and we have want more private rented; we would actually like committed to a local authority that this becomes part some more owner-occupation. That would be really of the affordable housing component. Alongside good for us, because we are losing that at a fantastic affordable housing and the shared equity, there are 2 rate. That is not because we are against private rented; Grainger Lets. The local authority recognises that a it is because we want that mix. It is different in mixed-tenure community of private renters, of shared different places, and that is about letting people make equity people, affordable housing and owner- a judgment locally and letting councils say, “We will occupiers is the best form of mixed tenure. Having move into this to try to provide some of the things been in the business for a long time, Grainger realises some of our residents need,” which for us is a bit of that sort of mixed-tenure base actually helps drive stability while kids are at school. After that, if they lands values, so we are not being entirely altruistic. move about a bit, it is not so serious. This is commercial as well. Q368 Simon Danczuk: Richard, in 2011 your Q366 Chair: Just explain that mix again. Is it that colleagues at the Residential Landlords Association that mix of development has all those various tenures told us that yields for landlords were being eroded and in the same development? Because of a lower proportion of affordable houses, you then put some that rents had fallen in real terms. Is it time for us to private rented in as well. start feeling sorry for landlords, do you think? Andrew Cunningham: Absolutely, but we are Richard Lambert: I think landlords are in a committing to say that that private rented is going to competitive business and I would not go as far as to be there for X number of years. say you should feel sorry for them. What has happened is very much that there has been a shift in Q367 Chair: Before I pass on, on the issue of the the way that landlords look at judging their business. longer term tenancies, you were talking about the It was formerly that, with the increase in capital problem of tenants locking themselves in. I think values, you could look at a combination of both the Shelter has come up with a model where there would rent and the capital. With a much more stagnant be more flexibility for a tenant to get out of a five-year housing market, with prices not going up the way they rent. Equally, the landlord, if they got into financial were, people are looking much more now to rental difficulties, could get out as well. return. From the surveys we do of landlords, we know Andrew Cunningham: That is what you would have that rental returns run between about 6% and 6.5% at to do. You would have to start building in exit the moment, which is not bad compared with other mechanisms. How big do you make those exit asset classes. However, going over to the point about mechanisms before it does not become a five-year institutional investment, it is much lower than other tenancy? It actually just becomes a 12-month tenancy, forms of property. Landlords can make a reasonable and then somebody finds an excuse to go. That is the return. Thinking back on our most recent survey, 10% point. Where do you draw those distinctions or exit said that they were just breaking even; 4% said that routes? they were making a slight loss; 1% said they were Richard Lambert: What Shelter has described is one making quite a serious loss. It is not necessarily a possible option, but what we need to do is develop a licence to print money. wider range of options, rather than assuming that the only form of tenancy you can have is a six-month Q369 Simon Danczuk: Robin, you were calling for
1 a higher benefit cap for London. Given that you Correction by witness: 25 years. estimate that £100 million a year is spent on housing 2 Note by witness: They will be let at 80% of market rent during the period and once the period is over they can be let benefit in Newham, are you not concerned that that is or sold at full market value. really not sustainable? You could be accused of being cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG05 Source: /MILES/PKU/INPUT/027272/027272_o005_michelle_130325 HC 953-v PRS CORRECTED transcript.xml
Ev 66 Communities and Local Government Committee: Evidence
25 March 2013 Andrew Cunningham, Richard Lambert and Sir Robin Wales
financially irresponsible in terms of suggesting an ultimately delay the granting of a tenancy. If local increase in benefits, do you not think? authorities can now exercise their duty to house the Sir Robin Wales: What we know is that, if you have homeless by discharging people into the private rented three kids, you cannot afford Newham if you are not sector, I would certainly say that the local authorities working. That is what is going to happen: three kids, should be making sure that any property they put get out. That is not right. somebody into should be of a decent standard.
Q370 Simon Danczuk: More to be spent on Q373 Simon Danczuk: Are there any other views on housing benefit. that housing benefit link? Sir Robin Wales: I believe what we should have been Andrew Cunningham: I would just be slightly careful doing is investing in assets. What I think is awful is that it is not too broad-brush, because for certain types that we are selling our housing assets. We have of tenancies, regulated tenancies for example, the housing assets; we have them in social housing. We rights and obligations of a landlord are very different are rapidly removing our social housing assets and than for the landlord of a market rented property. removing our housing assets, which is why we did Sometimes, we do not even get access to the property, Local Space; it was to build some housing assets. I for example, on a regulated tenancy. Therefore, believe we have to get in the business of reversing the although our properties are a reasonable standard, to trend, because if we had owned more assets, we would impose quality standards that we then cannot improve be spending less on housing benefits now and having and penalise us by not giving the tenant sufficient more in terms of investing in the bricks and mortar. I housing benefit to pay the rent would be slightly am entirely a fan of that, but it is going to take 10 or perverse. 20 years to do that. Simon Danczuk: We need to be aware of that. In the meantime, I do not want to see people driven Andrew Cunningham: You just have to wary of that. out of Newham because there are higher rents in Sir Robin Wales: All properties should be of the London. That is our worry. We have very few people standard that Parliament has legislated that they living out of London at the moment. When it comes should be at, and that would make them acceptable, to temporary accommodation, there are only about 14, which is what we are doing, which is why I would I think, out of London, which is not many of the total expect more support from the private landlords, in we deal with, but there are going to be more. Early terms of us trying to enforce the standards, so that on we tried to identify where people would have everybody is doing that. Otherwise, spending public options. We are now going to have people coming to money on places that are not fit is not acceptable. It us to whom we will say, “These are your options in is a waste of public money; we should do something terms of where you can live with a cap,” and I think about it. it drives people who are not working out of London into other places where there are people who are not Q374 Chair: Before we move on to Andy’s questions working. It will create ghettos across the country. That on housing homeless families, Andrew, I understand is just wrong. you have a plane to catch. While I think we need to reverse the whole issue about Andrew Cunningham: I do. As long as I am away by benefit, you are not going to do that in the space of half past— six months to a year without massive social upheaval Chair: Are you sure? The last set of questions is just and serious personal cost to families. Yes, it is right about housing homeless families so, if you needed to to have a higher cap, but we should also be investing go— in those assets, so that we have options in the future. Andrew Cunningham: Can I follow the example of I can stand here and say that is what Newham did. We your colleagues? If I walk out, I am not being did get £250 million invested without Government terribly rude. help or support, and we are trying to do more to do that investment, so I think we have a good record on Q375 Andy Sawford: It follows on, Sir Robin, very that. Yes, it is bad news, but it is the only thing. The much from the discussion that has just taken place. short-term costs are too high. We need a long-term You talk about massive social upheaval coming. What strategy, which I do not think we have. are your estimates of homelessness numbers in Newham and what do you see as the critical timing of Q371 Simon Danczuk: Richard, whilst we are on that? For example, do you envisage a rise in housing benefit, it seems like a good idea to link homelessness in April or this autumn—at what point? housing benefit to the condition of the property, do Sir Robin Wales: It is an interesting question. To give you not think? you an idea at the moment, 97.7% of people that we Richard Lambert: We do not think anybody should discharge to private rented are living in Newham or be letting substandard property. what we describe as our local boroughs around about, and 1.6% are out of London. Some of them are in Q372 Simon Danczuk: If the Committee Thurrock. My goodness, we have somebody in recommended linking the payment of housing benefit Falkirk, which is an interesting choice. to landlords keeping their properties in a decent Andy Sawford: I want to ask you about that, but my condition, you would be happy with that. first question was just about— Richard Lambert: We would have to understand Sir Robin Wales: I was going to explain that. What exactly how that worked. I can see it becoming a will then happen, we do not know. Some people are complex and bureaucratic process, which could going to lose £500 a week. With three children, it cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG05 Source: /MILES/PKU/INPUT/027272/027272_o005_michelle_130325 HC 953-v PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 67
25 March 2013 Andrew Cunningham, Richard Lambert and Sir Robin Wales becomes very difficult. I think there has been evidence Q379 Andy Sawford: With respect, it is pretty of people lying about being in work. It is anecdotal at straightforward. the moment. There is a question of when the Sir Robin Wales: No, it is not. Government will actually apply the caps, to whom and in what way. How many come in a particular week? Q380 Andy Sawford: We are quite happy, because We are getting some but not all, so we do not know. we want this to be as informative as possible, for you What will people do in terms of choosing to live to explain how that choice works. But we ought to together or to move out? We simply do not know. just be clear that when you talk about choice, this may When I see estimates, my comment is, “I do not know not be a choice to be housed within the borough and, what is going to happen.” therefore, it is accurate, as reported in the press, that What I do know is this: if you have three children, people are being offered housing elsewhere and not you will hit the cap in Newham and, at that point, you local housing. are going to have to do something, whatever that is. Sir Robin Wales: There you said people are being Our fear is that of course people will run up rent offered housing. What do we mean by choice? We arrears, be evicted, and then they are on their own, would argue very strongly that people make choices but honestly people come and they go and sort for themselves. They come to us and we say, “What themselves out. do you want?” If you are renting and then you are My other comment would be something that has long told you cannot rent anymore, you go and find a place. been a Newham view. We encourage people to present You make a choice. We believe that when people with need and present as homeless, and many do. This come in, we should say, “Look, here are your choices. You might not get a place in Newham for six months, is the route we choose to force people down—to have because they are not easy to come by; they are really them present need. Many other people in the same not.” They might want a place in Barking and position choose to do things differently. They are Dagenham, or they might want a place in Thurrock or more resilient, which is something we are very keen they might want a place somewhere else. I cannot to push. We took the Ahmad case to court, and argued magic homes out of nothing. Westminster has dumped that it should not be about need; it should be about lots of people out in Newham, in the sense that they length of time and stay, and there should be a different are dumped. There are only so many properties and view of it. We have quite a different view of this but, homes. All I can do is say to them is: “Look, the truth three kids and above, you have to do something. I do is that the rental market in Newham is very busy. If not know all the numbers. you have got four kids, you are not going to be able to afford the rent. What do you want to do? What Q376 Andy Sawford: Doing something might choice do you want to make?” I do not believe we tell involve sending somebody to Falkirk or people what to do or send them places. People need Stoke-on-Trent, as was widely publicised. How can it to make rational choices. be acceptable? How can it be acceptable? Sir Robin Wales: Never. We never send people Q381 Andy Sawford: Would you accept that these anywhere. People choose. are people, actually, for whom the choices are very Andy Sawford: You earlier said 14 people have gone limited? out of London. Sir Robin Wales: Yes, I would, which is why we have Sir Robin Wales: People are out of London. They called for a higher cap, so they have a bit more choice choose to be out of London. I really think you have in terms of London. We have argued for a long time to look more closely at what you mean by “homeless”. that the homelessness legislation is badly flawed. It If I have two families exactly the same and one does not deal with homeless families. The idea of presents and says, “I’m homeless. Do things,” and people being on the streets and homeless is horrible another says, “I’m homeless. I’ll go and find and we should do something about it. What it deals something for myself,” why don’t they both do that? with, what it says is, “Come and present as needy, and We present people with options. They make the we will spend a lot of public money for no benefit,” choices. as opposed to saying, “Why don’t we have a positive Andy Sawford: So each of those 14 families— conversation with you about the real options you have Sir Robin Wales: You have options. Ensure you have and what you might choose to do?” The cap will force got enough properties across the country. a lot more people down a different line. If people are going to move to a place where they cannot afford the rent, let us tell them before they do it. Q377 Andy Sawford: They have been shown properties within the borough. Q382 Andy Sawford: What about housing homeless Sir Robin Wales: There may not be properties in the people in the private rented sector? borough. We tell them the truth. Listen, there are so Sir Robin Wales: We have argued that for an awfully many properties in the borough. long time. To give you an idea, 1.6% of the people we have housed in private rented are outside London. Q378 Andy Sawford: They have not necessarily had A third of them are in Thurrock. A lot of people would the option to be housed within the borough. choose to go there. The vast majority are still in Sir Robin Wales: Again, people choose what they London and making choices in London. I come back want to do. Many people from Westminster are again to saying that people can choose what they want dumped in Newham. to do. I do not make anybody do anything. All I can cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG05 Source: /MILES/PKU/INPUT/027272/027272_o005_michelle_130325 HC 953-v PRS CORRECTED transcript.xml
Ev 68 Communities and Local Government Committee: Evidence
25 March 2013 Andrew Cunningham, Richard Lambert and Sir Robin Wales do is say to people, “Here are your options. If it is a are very keen to support that. We are very keen to leased property, that is where I can send you for a help people with information and help people to make leased property. If it is private rented sector, we will those decisions. That, as far as any choice they have discharge. But do you know what? You are still got, is limited by benefit or other things. completely at liberty to go and find your own place in The other thing I would say is we have the best jobs Newham or close by.” brokers in the country, because helping people into work—we got 5,000 last year—does give them more Q383 Andy Sawford: You know that they are not choice. If they are in a job, they then have more available. options and more choice. You have to look at the Sir Robin Wales: They are available to a certain whole thing. Look at the family and what you can do number. as a totality. The homelessness system is mad. It is just a daft system. It does not work. Q384 Andy Sawford: You know that they are not available, so let us think about this choice and how Q386 Andy Sawford: Richard, is there capacity in real this choice is for the individual. They are offered the private rented sector to house homeless people? a private rented property in Thurrock. They may feel Richard Lambert: The private rented sector is that, for transport reasons or family reasons or for all expanding all the time so, yes, there is capacity to sorts of reasons, that is not a choice that they can house people. If landlords see that there is a business make. You would then say to them, “Just go and find opportunity in a particular sector, then they will look somewhere,” even though you know that there are not to see if they can invest to provide that particular kind any places available. of housing. I would say that housing benefit claimants Sir Robin Wales: I think you are conflating several is becoming more and more the province of the things. If I take the benefit cap, you are not going to experienced professional landlord, because it is that have a choice. You will only be able to afford certain much harder to find the properties where you can get places and they may not be in London. That is not a return on the rent. Also, you may be dealing with something I think is right, which is why I think the people who live disorganised, chaotic lives and are benefit cap should be different for London, so people very vulnerable, who actually need more management do have more choices. That is the Government from the landlord’s side of things. That again requires imposing no choice on people. I accept that is not a more experience. choice. I accept it is a very limited choice, but then, insofar as I have anything, there are a certain number Q387 Andy Sawford: Should homeless families be of properties in Newham; there are a certain number offered tenancies of longer than a year to provide of properties in London, by and large. The choice is them with stability? for all families. We do not have enough supply in Richard Lambert: Again, you have to find the point London. It comes back to this. In the end, there should at which both the landlord and the tenant are be more supply. If you limit the cap, you limit choice. comfortable working with each other. Interestingly, Within that, all I can do is say, “These are your we have done a lot of work with Crisis on private options. What would you want to do? Be realistic rented sector access schemes. about it.” It may be that, in Newham, we simply do not have the properties because other people are Q388 Andy Sawford: Richard, your answer seems living there. to relate to the question, perhaps in part, of where people go. The farther away you are from the borough Q385 Andy Sawford: The Government is talking where you wanted to be housed–we have been about statutory guidance, and you commented to the through the Newham example–the greater the problem Committee that you think it is unhelpful for the of instability is, if the tenancy is short. For example, Government to impose on Newham in this way, and if you have uprooted and moved to Stoke-on-Trent, a you have made an argument for localism at stages of six-month tenancy is obviously of itself going to this hearing. What is your view about statutory create great instability. Can you see that and how guidance and the placement of homeless households? might we, as a Committee, make recommendations Will Newham comply with it? that mitigate that? Sir Robin Wales: We will comply with anything we Richard Lambert: The first thing I would say is that are told to do, but our view has long been that people actually uprooting anybody out of their environment who present as homeless are going through a system and their support networks, and putting them down that forces them to do that or they choose to go somewhere else that is completely unfamiliar to them through that. Our argument is very much that, instead is going to be incredibly destabilising. That is of starting with what your options are in terms of something that adds to the difficulties of creating that housing that is available, if there is a property effective tenancy relationship. I come back to this available in Newham, one family can get it, by and point: in the first instance, you need that kind of large. One family gets it. If there are two families, I introductory process; you need that initial am sorry; that is the number of properties we have. relationship, just so that everyone knows they can get What you are trying to do is come up with a system on with each other. that does not marry those two things together, and that To come back to the point I was about to make about is what is ludicrous about the system. It does not say, the work we have done with Crisis on private rented “I only have so many properties.” Most people get sector access schemes, they have analysed what housed; they make choices; they make decisions. We makes a placement work, what makes a scheme work cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG05 Source: /MILES/PKU/INPUT/027272/027272_o005_michelle_130325 HC 953-v PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 69
25 March 2013 Andrew Cunningham, Richard Lambert and Sir Robin Wales and what makes a scheme fail. One of the things that capacity. That is a positive thing for us to do. I believe makes a scheme work, and one of the things that is that is what we should be doing. We should be saying, most likely to ensure that a placement lasts more than when people come in homeless, “What is it you as a six months, is if you give the tenant some kind of family are trying to do? Here are your options. Judge initial training and initial understanding of what it is your options, but we cannot do it for you. What we that they are getting into and what their rights and can do is help you do it yourself, because that will responsibilities are, and you try to encourage them to make you more resilient and more capable and more work more effectively with the landlord. If you can able to survive.” then add into that a tenancy relations officer who is We are launching a scheme where we are saying to going to take a proactive role in sustaining that people, “If you have something that will change your tenancy, then you can get something that works. life, we will give you money to do it,” because we want to invest in people doing something for Q389 Andy Sawford: Who pays for it? themselves. We have got to. I believe, if you want to Richard Lambert: The local authorities are already try to do something, we should be your best buddies. employing tenancy relations officers. That is what we are trying to be, as a local council. If Andy Sawford: Sir Robin is going to pay for it. you come to me and say, “I’m homeless,” my answer Richard Lambert: The local authorities already have is, “These are your options. What do you want to do?” private sector housing departments, and we have seen Enough of telling people what to do, of saying, “You several of the local authorities in the north-west have to go to that leased property or that leased almost re-task their private sector housing team to property, because that is all we can do.” It is far better work on this basis. If you can sustain a tenancy, for us to say, “Here are the real options you have. actually, it works out better for the local authority How can we help you take the decisions you want as overall. a family? How can we help you?” That is where I Sir Robin Wales: That is such a better way to look at think we should be. it. We believe in resilience. We believe in building the concept of resilience in people. We have cut the legs Q390 Andy Sawford: It seems like there is a choice off people for years. We have actually put in place a of not very much sometimes though, which you may dependency. That is why we spend £5 million a year be equally as dissatisfied with as I am. getting 5,000 people into work with no Government Sir Robin Wales: Yes, I am, absolutely. support, because we think that is important. It is why Chair: Thank you all very much indeed for coming we have the biggest free music tuition scheme in the this afternoon and giving evidence to us. Thank you. country, because we think it builds resilience and cobber Pack: U PL: COE1 [SE] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG06 Source: /MILES/PKU/INPUT/027272/027272_o006_michelle_130508 HC 50-i PRS CORRECTED transcript.xml
Ev 70 Communities and Local Government Committee: Evidence
Wednesday 8 May 2013
Members present: Mr Clive Betts (Chair)
Simon Danczuk Mark Pawsey Mrs Mary Glindon Andy Sawford James Morris John Stevenson ______
Examination of Witnesses
Witnesses: Richard Blakeway, Deputy Mayor for Housing, Land and Property, Greater London Authority, Stuart Corbyn, Chairman, Qatari Diar Delancey, East Village Operations, and Neil Hadden, Chief Executive, Genesis Housing Association, gave evidence.
Q391 Chair: Welcome, everyone, to our sixth development of over 700 dwellings, and therefore, it evidence session on private rented sector housing. is a mixed community. It has shared ownership and a Before I thank the witnesses for coming, Members flexi-care scheme—it used to be called extra care. It have the chance to declare any relevant interests. I has affordable rent on the estate, as well as some own a flat, which I rent out. commercial properties; there is a Tesco underneath. Simon Danczuk: My wife has an interest in a small We think that the scheme was attractive to M&G, rented property. because there are 400 units in one place. It will be Andy Sawford: I have a small interest in a small managed by a housing association with a track record rented property. of managing rental units, and indeed, since 2006, a John Stevenson: I have an interest in two residential track record of managing private rented sector properties. housing. The deal was attractive, in that we struck the deal at a particular yield, and that will be uprated on Q392 Chair: Right. Those are our interests. I am sure an annual basis by RPI. The income that they get from you have a lot more interests that you want to talk Genesis basically matches their outgoings, their long- about in a minute, but welcome to all our witnesses term liabilities, and they know that we will be this afternoon. For our records, may I ask you to say managing it for that 35-year period. who you are and the organisation that you represent? What made us go into that? We had this development: We will then come to our questions. we built it to sell it in the first place. The sales market, Neil Hadden: I am Neil Hadden, the chief executive as you know, has not been fantastic over the past few of Genesis Housing Association. years, and we saw an opportunity in the marketplace. Stuart Corbyn: I am Stuart Corbyn, the chairman of We were very keen to move into market renting at this QDD athletes village management. point in time for a number of reasons. First, we all Richard Blakeway: I am Richard Blakeway, deputy know about generation rent and the difficulties that mayor for housing, land and property at the Greater the younger generation have in accessing home London Authority. ownership or indeed social housing. We also know that increasingly the private rented sector is a bigger Q393 Chair: Thank you all for coming. First, to Neil feature of tenure in this country. We believe that Hadden and Stuart Corbyn, your organisations have feature is going to last for some time to come, and recently become involved in large-scale market rented therefore this is a business stream that we want to get developments in east London. People have been involved in. talking for a long time about institutional investment Stuart Corbyn: QDD is a joint venture between Qatari and large companies getting involved in various ways Diar, which is Qatar’s sovereign wealth fund, and in the private rented sector and producing new Delancey, which is a private property company, properties. Not much has happened historically, but formed for this particular acquisition of the private suddenly, both of you are there making this part of East Village—the former athletes’ village: contribution. What encouraged you, at this stage, to 1,439 flats that will be the ones that we own. It was become involved? seen as an opportunity to buy in scale, because there Neil Hadden: Earlier this year, we sold 401 flats to are very few opportunities to buy enough private M&G—their property fund—at Stratford Halo. I have rented property in one area, which is part of what we a brochure here; I am happy to leave some copies with see as essential to help with the management of it. the Committee if you would like to find out a bit more Private rented has only really been possible for the about it. past 25 years or so, and there have not been all that many opportunities that have come up in that time. Q394 Chair: Are you looking for customers? The idea was initiated by Delancey, which has Neil Hadden: Maybe. I can do you a good deal. What certainly had experience of the residential market in attracted them to it? We have been reflecting on that, the past. We see it as an opportunity for long-term because we are very pleased with the deal. In fact, we investment, concentrating on private renting. sold those flats on a 160-year lease, and we have a management agreement—a management leaseback— Q395 Chair: I suppose there has always been a with M&G for 35 years. The 401 units are part of a discussion about whether things not happening in the cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG06 Source: /MILES/PKU/INPUT/027272/027272_o006_michelle_130508 HC 50-i PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 71
8 May 2013 Richard Blakeway, Stuart Corbyn and Neil Hadden past were due to a lack of available property or lack about 13%. Those are LSE figures. In London, we are of available finance. To what extent are organisations, looking at 10% at the moment.1 Even in those more such as sovereign wealth funds, starting to get more mature markets, it is still only a proportion of interested in the private sector housing field and London’s market, so I suspect that owner occupiers feeling that it is a good place to put their money for and buy to let landlords will continue to be the the long term? Do you think there has been a change predominant investors in London stock. of climate at all? Stuart Corbyn: The change of climate has largely Q398 Chair: Do you have a feel for the numbers in come about because of the change in legislation with the next 10 years, or is it too early? the ’88 Act. Private renting was normal for Richard Blakeway: It is probably too early to say. institutional investors, even up to the ’60s and ’70s, You will see a significant amount of build to rent but it died away. Nobody is going to dive in just come through; it could be as much as 4,000 units on because legislation changed in 1988 and now private current bidding, but some of those schemes will fall renting is possible; it takes people some time to feel— back through due diligence. In addition to what is happening here, I know London & Quadrant said that Q396 Chair: It is over 20 years. their aim is 1,000 units, but I am not sure whether Stuart Corbyn: It is, but I think people are perhaps Genesis has put a figure on exactly how much it wants suspicious of politicians, because legislation does to do. We know of at least 5,000 units that will come change, and there is a need for people to feel forward in the next few years. That is not a huge comfortable with the environment. There have been amount, but it demonstrates an increase in few opportunities to buy of sufficient size, and that is institutional interest. one of the issues. Income returns are quite low with private renting. Management costs are very high. It is Q399 Chair: Neil Hadden, is there a feeling that only when you have the full package of management housing associations offer a degree of certainty and set up that you can deal with those sorts of things. If managerial experience, so that institutional investors you look across the whole of conventional forms of can see what you have done over the years and know investment property—retail, office, industrial and that you are not fly by night organisations but are there residential—residential has performed better over the for the long term? Given the business plan that must past 10 years than the other asset classes. An be involved in sale and leaseback, has the regulator organisation called IPD has been doing analysis on expressed any concern or has it been comfortable with those, and IPD itself only started looking at the that approach? residential side over the past few years and has Neil Hadden: Yes, the regulator, the Homes and therefore been able to produce statistics to Communities Agency, has expressed an interest, and demonstrate how the residential market has you may be aware that it recently issued a discussion performed. paper, Protecting social housing assets in a more diverse sector. It is concerned that there is no leakage Q397 Chair: Richard Blakeway, given what is from social housing assets into commercial activity, happening with these two particular schemes and what such as market renting. The premise is that in future else you are aware of, do you anticipate now that housing associations should ring-fence social housing developments of this kind are going to play a greater assets and therefore also ring-fence market rent or role in meeting the housing needs of London over the other commercial activities so that there is no leakage. next 10 years? Do you have any idea of the sorts of That is something we were thinking of doing anyway, numbers that might become possible? because our vision is that our development subsidiary should be able to stand on its own two feet. It should Richard Blakeway: Yes, I think they will feature more make schemes such as this work, and it should be able in London’s residential market. If you look at the to access money on its own balance sheet. That is the appetite there has been for the Government’s build to strategy we are working on, so the regulator’s view rent programme, about a third of the schemes that may be a bit heavy-handed, but it is not out of line have gone through are in London, and that will be a with our thinking. significant quantum of housing—several thousand units of housing. In addition to these guys, you are Q400 James Morris: Going back to the also seeing London & Quadrant do quite a lot, Fizzy Government’s build to rent fund, I think you were a Living do a lot and Prudential bought Barclays bidder, Mr Hadden. portfolio, so there is obviously significant appetite. Neil Hadden: Yes. A successful bidder. The only thing that I would put down is, first, a test: how is it different from what you would build for sale? If we are going see more of this development Q401 James Morris: What was your motivation for come forward, it has to be distinct and the product has wanting to bid into that fund? What benefits did it give you as a potential investor, and how many new to be clearly aimed as a rented product, both in terms housing units will come out of that investment? of the design of the scheme and also in terms of what Neil Hadden: There are two ways of looking at the the offer is to the consumer. The second thing is to be incentive, and why we bid for this. First, there was a realistic about how much of it there would be in pot of money available, and frankly there isn’t a lot London’s market. In Europe, I think the largest of public funding around for housing at the moment, proportion of institutional investment as part of the so we were looking to see how we might make it housing market is in the Netherlands, and that is 37%. In the United States, institutional investment in resi is 1 Correction by witness: This figure is for the UK, not London. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG06 Source: /MILES/PKU/INPUT/027272/027272_o006_michelle_130508 HC 50-i PRS CORRECTED transcript.xml
Ev 72 Communities and Local Government Committee: Evidence
8 May 2013 Richard Blakeway, Stuart Corbyn and Neil Hadden work. Secondly, we have a big development Q407 James Morris: How much does that programme of more than 2,000 new homes either contribute, in your assessment, to the housing gap in committed or on site, and this is one way of de-risking the rented sector? that development programme. In terms of the Richard Blakeway: It will certainly help to contribute numbers, we have allocations for five projects, and to overall housing numbers, and I think we can be together they will deliver 361 new homes. very confident that these homes would have been built far slower if they had not benefited from the fund. Q402 James Morris: Are they schemes that you would definitely not have invested in? Q408 James Morris: The Government are also Neil Hadden: No, we already own the sites and we talking about a guarantee worth £10 billion. Is that were going to develop them anyway. The issue was something that interests you, Mr Hadden? what tenure mix we would deliver on those sites. This Neil Hadden: There are two guarantees: one is for fund came along, so we said, “Okay, we might as well affordable rent, and one is for market renting. It is see whether it works for us.” difficult to answer that question, because all the details of the scheme are not yet known. We think that we Q403 James Morris: Mr Corbyn, were you a bidder can move on with the schemes we bid for under the for funds from this Government scheme? build to rent fund without the guarantee. There is Stuart Corbyn: No. The units we are acquiring at the always an issue about what terms and conditions moment are built. We are buying or will buy apply to particular pots of money and whether they completed products. At East Village, we have are beneficial to us. The beauty of working in this type development sites with outline consent for another of area is that we can be more in control of what we 2,000 flats on six sites, and we might look at that. We do, rather than having to follow Government rules. are looking at other sites around London. Q409 James Morris: Are you saying that a Q404 James Morris: So it was not necessarily the guarantee would not necessarily affect your nature of the Government’s scheme that made you commercial investment decisions? decide not to bid? What sort of scheme could the Neil Hadden: No, because we can borrow money Government promote that you would be interested in quite cheaply anyway. There will be a fee that goes to bidding into? the HCA, and there will be a fee that goes to the Stuart Corbyn: Development projects—new build. aggregator. By the time you have totted all that up, The 1,400 or so flats that we are buying now are with the guaranteed low cost of borrowing it will already built, effectively. I don’t think we felt entitled perhaps not be much different from what we can to bid for that, but for development sites where we borrow at anyway. would be starting from scratch, we might do so. On Neil’s point, access to pots of money is always Q410 James Morris: Mr Corbyn, what about you? attractive. Even institutional investors like to feel that Stuart Corbyn: It is too early for us to say. they do not necessarily have to put in all their own money. For East Village, the commitment we are Q411 John Stevenson: My line of questioning is on making at the moment is £557 million, so it is quite a the tenancy itself, its length and flexibility. Mr significant sum of money. Another 2,000 flats would Hadden, your organisation is offering tenancies of be large sums of money, so an element of gearing is one, two, three, four and five years, and you are also something that we would regard as worth buying into. offering the tenant, after six months, the opportunity to bring the tenancy agreement to an end with two Q405 James Morris: Mr Hadden, in terms of the months’ notice. money that you receive from the build to let fund, Neil Hadden: Yes. what percentage does that money represent? Neil Hadden: It is a loan that will cover 50% of the Q412 John Stevenson: Is that built into the legal costs of development. agreement? If I were to take a tenancy of, say, three years from you, could I give you two months’ notice Q406 James Morris: Mr Blakeway, the Chairman two years into it? asked you some questions about numbers, but Neil Hadden: Yes. Obviously, we are looking for as specifically in relation to the build to let fund, what much certainty as possible, both for the tenant and for additional housing numbers would you expect to be ourselves, but if circumstances changed and the tenant produced in London as a result of the scheme? came to us and said, “We want to renegotiate the terms Richard Blakeway: The way the fund works is that of the tenancy”— there is an initial tranche of money, which was announced back in September and has been topped up Q413 John Stevenson: No, that is not my question. through the Budget, so we will have to wait to see Is it actually built into the legal agreement, or is it just what happens there. On the initial bidding, so far a good-will undertaking on your part? about a third of the schemes going through are in Neil Hadden: You are talking about a legal 2 London, and the quantum of homes is about 4,000. agreement. There will be a tenancy agreement. That number may reduce though, because there has to 2 Correction by witness: When you say legal agreement, there be further due diligence. will be a tenancy agreement in place. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG06 Source: /MILES/PKU/INPUT/027272/027272_o006_michelle_130508 HC 50-i PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 73
8 May 2013 Richard Blakeway, Stuart Corbyn and Neil Hadden
Q414 John Stevenson: Yes, but is a two-month something with the buy to let sector as well as with notice period written into that legal agreement? bigger social landlords that would be very good news. Neil Hadden: Yes. Q422 John Stevenson: Would you like to see the Q415 John Stevenson: So if I am two years into my same offer made—for example, flexibility for three-year or four-year tenancy and I come along and tenants—so the tenant can have that two-months’ say, “I want to give you two months’ notice,” it is notice in, say, a three or four-year tenancy agreement? built into my agreement? Richard Blakeway: Particularly for buy to let Neil Hadden: Yes. What you have to remember is landlords the ability to get vacant possession would be that— critical for their investment and for securing mortgage finance, so I think you have to keep within the AST Q416 John Stevenson: Sorry, but that is a really framework. important point. Neil Hadden: The answer is yes. Q423 John Stevenson: So you would like only to see six-month or 12-month tenancies, rather than four Q417 John Stevenson: Thank you. That is or five-year ones? clarification, which is what we need. It creates Richard Blakeway: No, where appropriate we would flexibility for a tenant. like to see landlords offer longer tenancies. In reality Neil Hadden: Yes. the majority of tenants in London end up staying for longer than the initial six to 12-month AST period, but Q418 John Stevenson: How many tenancies do you I think that notice period, the two months, is critical. have under way that are more than, say, one year? Neil Hadden: Not very many at the moment. We have Q424 John Stevenson: For the tenant? only just started to market the Stratford scheme, and Richard Blakeway: Well, for the tenant, or indeed for this is the first area where we will be piloting this the landlord. approach. Q425 John Stevenson: Right, so if you are having Q419 John Stevenson: If I was a tenant and I came a longer tenancy, you are quite happy—a three-year along and said, “I want three years,” would you tenancy—but you are still allowing the landlord to automatically give me those three years? have the two months, because under the present Neil Hadden: There would need to be the normal legislation if you have a three-year tenancy the checks on tenants’ backgrounds—the credit checks, landlord cannot bring it to an end within those three all that sort of stuff—and if they were all satisfactory years. They have to wait until the end. there would be no reason why we wouldn’t. Richard Blakeway: Under an AST there is obviously, because of rent arrears and the rest, flexibility on both Q420 John Stevenson: It would still be subject to sides, and the AST framework is the one we are keen your discretion. to support. Neil Hadden: Of course. Q426 John Stevenson: But would you like to see Q421 John Stevenson: Richard, the Mayor is landlords offering longer tenancies? looking to introduce a pilot scheme. Could you give Richard Blakeway: Yes. me some details of that pilot scheme—the numbers involved, when you think it will be up and running, Q427 John Stevenson: Stuart, in the Olympic village and the extent of the scheme with regard to flexibility what length of tenancies are you going to be offering? and length of tenancies? Stuart Corbyn: We are going to be announcing it in a Richard Blakeway: First, we are very keen to explore couple of weeks’ time, but I can give you an whether you can do longer tenancies, but critically indication of the sort of ideas that we have talked within existing ASTs, because an assured shorthold about. One is a 12-month tenancy, which tends to be tenancy is quite flexible, and we are very keen to the standard one. Other people have talked about five- explore the potential to do them within that rather than year tenancies, or even longer. Some people have have additional legislation. talked about giving 10-year tenancies. Ten-year In so far as the pilot is concerned, there are two parts tenancies throw up other issues because of the ability to it. The first is that we are very keen to work with to deal with service charges, and pass service charges major landlords—QDD, Genesis and others—to back to tenants over the lease, over seven years. The evaluate how their projects are working. It is very probability is that we will be looking at something early days at the moment, but we are very keen to like three years. evaluate the success for them, what the demand has John Stevenson: Again—because if you go for three been, and how it has operated. years, the landlord is subject to that—would you like The second bit we are keen to explore is whether you to throw in flexibility for the tenant, so that they could could do a similar pilot with build to let landlords. I bring it to an end earlier? understand that there is some work on this happening Stuart Corbyn: That is entirely possible. There is an in other parts of the country. In Newcastle I think issue— there might be something happening, and I am keen to see how successful that is and what the terms of a Q428 John Stevenson: It is really a straight choice. London pilot would be; but clearly if we could do Does the tenant have the flexibility or not? cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG06 Source: /MILES/PKU/INPUT/027272/027272_o006_michelle_130508 HC 50-i PRS CORRECTED transcript.xml
Ev 74 Communities and Local Government Committee: Evidence
8 May 2013 Richard Blakeway, Stuart Corbyn and Neil Hadden
Stuart Corbyn: It comes down to a question of rent landlord’s. According to the IPD analysis, something level, because one of the issues for landlords—a point like 25% of gross rent goes out, as far as the landlord that Neil touched on—is that they like where possible is concerned, in maintenance charges. The issue is to have security. If a landlord knows that they have how you deal with that in a situation where somebody security of income for three years it is much more has a lease that goes on indefinitely, with whatever attractive than being at risk of somebody leaving at mechanism you have for uplifts—whether it is an RPI any time during the three-year period on two months’ or a CPI annual uplift—which probably does not notice. A landlord would therefore be in a position to cover the costs that a landlord is bearing all the time. come up with a lower rent if he felt that a tenant was I have reservations and I am not actually sure it is committed to staying there for longer. Whether the necessary. London market is fully ready for that, I am not sure, An answer I gave you earlier, Mr Betts, was about because in some of the discussions we had with focus institutional landlords only relatively recently groups flexibility was one of the things that appealed becoming involved. You made the point that to them, so the idea of being able to— legislation had been in place for 20 years. Landlords obviously need tenants, and one of the issues in this Q429 John Stevenson: Flexibility on whose part? country has been whether there are enough people Stuart Corbyn: The tenant only. around who like the idea of renting over the longer term, because we have been brought up to have a Q430 John Stevenson: But you could build that fixation about owner occupation. The issue is whether flexibility in if the tenant had the ability to bring a there are enough people around nowadays who accept tenancy to an end. that renting is an alternative option for making a Stuart Corbyn: It would be very easy to grant a three- home. It is growing, but it is still some way from the year lease that binds the landlord to three years, continental model. subject to rent arrears or those sorts of things, giving a tenant a rolling two-month break. That is quite Q432 John Stevenson: Richard, is this something possible. It would be normal for a landlord to require that the Mayor would like to see introduced into this a tenant to stay there for six months anyway, so you country? have a degree of security, and then, beyond the six Richard Blakeway: I think it would have to be months, to have a rolling two-month break. That nationwide. I don’t think the German model is would be fairly standard. appropriate here. One aspect is that it does not reflect One of the issues that has come out of the discussions the very, very different market that you have in with focus groups is whether tenants understand that Germany. It is structurally a very different housing if they are offered a two-year, three-year or four-year market from this country’s; for example, in Germany lease with a rolling break, it means they can actually they do not have a supply problem. It is a very, very go, or whether they have in their minds that all their different market. mates have 12-month tenancies and they want a 12- More broadly, there is a challenge to try to balance month tenancy because they can get out at the end of the flexibility that the PRS offers, which is critically 12 months. A three-year or four-year tenancy with a important, particularly for labour mobility and for our rolling two-month break would give a tenant an economic competitiveness, with greater security, amazing amount of flexibility. Landlords might like to particularly for families, who are forming a larger feel that they had a bit more security. proportion of private tenants, certainly in London. Q431 John Stevenson: This is a general question for Q433 Mark Pawsey: Stuart, you indicated that your all of you. In Germany, tenancies are indefinite and company is involved in other sectors of the property rent increases are linked to a local index. Is that something that you could see working in this country? market. Could you ever see a situation existing in Let’s start with Neil. residential property where people would have a long Neil Hadden: We think there is a downside to the lease, at a rent, and at the end, if they wished to German model. It is that tenants basically build up the vacate, rather than handing in their notice, they would right to stay and they also have a right to lower rent sell the lease in the same way as exists in the rises than might be the case if rents were linked to commercial sector? Could you ever envisage that RPI; therefore landlords might not be able to get the situation arising? income they need in order to maintain the property. Stuart Corbyn: If you mean, by a long lease, more Therefore the standards in those homes would go than 20 years, no landlord is going to grant a lease of down and the tenant might not get as good a deal as over 20 years these days, because it is enfranchisable. they might otherwise. It is something we would have You lose the freehold after two years. to look at very, very carefully. I am not sure we are ready for that yet. Q434 Mark Pawsey: Okay. Let’s assume 15 years, Stuart Corbyn: In a previous job, I was responsible for example. for a large number of statutory tenants—people who Stuart Corbyn: It is a perfectly acceptable model. I had been around for some time and so were there am sure there will be people around who will want to indefinitely—and there were problems from time to use that as a commercial approach. It is not something time, not just because of the odd dodgy tenant, but that QDD has in mind, but I am aware from because when it comes to repair issues and things like discussions with other people that it is a model that, the cost of maintaining properties is all a adopted in some parts of the States, for example. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG06 Source: /MILES/PKU/INPUT/027272/027272_o006_michelle_130508 HC 50-i PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 75
8 May 2013 Richard Blakeway, Stuart Corbyn and Neil Hadden
Q435 Mark Pawsey: Why wouldn’t it work here? well as how much they are paying, is important in a Why wouldn’t your firm offer it here? lender’s market. Stuart Corbyn: It may work here. I am not saying it wouldn’t work. As far as QDD is concerned, we see Q440 Simon Danczuk: Londoners watching this will ourselves as long-term investors. That means that you probably leave with the impression that the answer to are looking for long-term rental growth and long-term my question is that the Mayor of London is not doing capital appreciation. You are not looking to sell out. anything about that spike in rental increases, or nothing significant now. Q436 Chair: In terms of your recent decision about Richard Blakeway: I don’t think that is fair. First, rent renting arrangements for your development, could you controls are not the answer. One of the most striking drop us a note about it? That would be helpful. things about London’s rental market is that yields are Stuart Corbyn: Yes, certainly. By all means. the lowest in the UK. If you introduce rent controls, you will drive away investment, limit mobility and Q437 Simon Danczuk: Richard, I have been reading drive away people improving their properties. You the Mayor of London’s housing covenant. It talks will see a deterioration in the quality of rented about a spike in rent increases, which it says are a accommodation as well as a reduction in quantity. The serious issue. It then goes on to say, “Rent controls very first thing that I would say is that rent controls are not the answer to these affordability issues.” What are not the answer. If you look at when we had rent is the answer? controls in this country, the amount of available rented Richard Blakeway: Increasing the supply. stock was 10%. That will put significant pressure on the sector at exactly a time when we need to be Q438 Simon Danczuk: Okay. We heard earlier today attracting more investment to build more homes. that some Londoners are using payday loan companies There is a lot we are doing on the London rental to help them pay rising rents. People in London are standard and transparency of fees, and there is a lot really suffering from the spike in rental increases. we are doing to remove demand from the PRS and Londoners, I suspect, do not want to wait for you to help people into owner occupation or alternatives, establish a better supply. What is the Mayor of which will help on prices. London doing now to address that problem for those Londoners? Q441 Simon Danczuk: Neil, three-bedroom flats in Richard Blakeway: Fundamentally, we are trying to your Stratford Halo development are advertised at increase supply. We are doing a lot there; you have £2,850 a month. Is that not beyond the reach of the heard about build to rent and other programmes. To average family in that area? step back a bit, it is worth looking at why rents have Neil Hadden: We have to remember that we are gone up. Over the last— talking about market renting. The market will dictate the levels of rent that are charged and are possible to Q439 Simon Danczuk: I don’t need to know that. I receive from tenants. am just asking what the Mayor of London is doing now to address those Londoners who are having to Q442 Simon Danczuk: Stuart, what type of people take out payday loans because they are really will be able to afford homes in East Village? struggling with rent. We have the analysis of why Stuart Corbyn: Young professionals. We have a range rents have gone up, but what is the Mayor of London of studios and one, two, three, four and five-bedroom doing, not in terms of future supply but now, about flats. We are hoping to attract families as well as the the increased rents that are causing real misery for inevitable sharers. We would like to think that we can Londoners? get families. There is a new school at East Village, an Richard Blakeway: One thing that is linked to supply 1800-pupil school, which is one of the attractions of but also takes pressure off the PRS is helping people the area. into home ownership who have ended up in the PRS due to the lack of mortgage availability, which has Q443 Simon Danczuk: But they will have to be on pushed up prices. The whole range of programmes a decent income, won’t they? about low-cost ownership, particularly the stuff that Stuart Corbyn: Correct. Part of East Village is social the Government have just announced on help to buy, housing—just under half of it—which includes will help people leave the PRS, taking pressure off the intermediate rents, and shared ownership/shared sector, which should help control prices. That could equity. It is run by Triathlon. For the intermediate be very immediate, but it is still linked to supply. housing, I think the household income has to be below The other thing that is very important is that there is £60,000 a year. The flats we have are quite similar to greater transparency about what people are paying. the Triathlon ones, so the people who take ours are One of the things that we are very keen to explore— likely to have household incomes in excess of it is perhaps a natural step beyond the redress £60,000. measures that the Government are introducing in the One of the things we are looking at is using annual legislation on letting and managing agents—is what indexation. If we go with longer leases—just using fees are being charged to tenants. I think it is your example of three years—we would expect to commendable that Genesis, for example, are clear and apply CPI or RPI, so that at least they are known up front about what fees people will pay. A lot more quantities rather than the horrendous stories of 20% a transparency about how much people are paying, as year uplift. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG06 Source: /MILES/PKU/INPUT/027272/027272_o006_michelle_130508 HC 50-i PRS CORRECTED transcript.xml
Ev 76 Communities and Local Government Committee: Evidence
8 May 2013 Richard Blakeway, Stuart Corbyn and Neil Hadden
Q444 Mark Pawsey: Mr Danczuk just referred to the Q449 Mark Pawsey: Can I come on to advice and Mayor’s housing covenant, and the Mayor is also information for tenants? Stuart, your organisation is bringing forward a proposed rental standard, so he has arguing that more information should “be made clearly been busy in the private rented sector. But the available to landlords, tenants and professional rental standard will not do anything to help those at advisers.” In your experience, do people not take up the bottom end of the market, from whom we have advice before entering into leases and rental taken a lot of evidence in this report, because those agreements? kinds of landlords will not adhere to it. Stuart Corbyn: I think landlords do, but it is slightly Richard Blakeway: It is a fair challenge. I think we scary that quite a few professional advisers—lawyers have been clear from the start that the rental standard as well as agents—do not necessarily know how long is not statutory; it is voluntary. Therefore, if someone an AST can be. An awful lot of people assume that is acting criminally it will not address that. The first an AST can only be 12 months. There are basic things thing that we must be very clear about is that there is like that which even professionals need to have a legislation currently in place that means that if you better idea about. are a criminal landlord and you are not meeting the required health and safety standards you can be Q450 Mark Pawsey: How about information for prosecuted. One of the things that we want to do tenants? Do you advise prospective tenants, or do your through the London rental standard is ensure that there agents advise prospective tenants? is more active and consistent enforcement by local Stuart Corbyn: When we go to the market, we hope authorities, which have powers under the 2004 Act to that we will be making it entirely clear to tenants what address the poor state of the market. we are providing and what they can do, but there are probably few people around who can say to Q445 Mark Pawsey: But if that rental standard is somebody, “Well, you can only take a 12-month not going to address the area where the problems tenancy, but actually you can have a five-year exist, what is the point of it? tenancy.” I doubt if that information is there. We Richard Blakeway: The point is to professionalise the probably will not be, because we will be offering a market. Rather than demonising it, we are keen to form of tenancy and hoping that people will take that. professionalise it. It is important that there is consistency in terms of what it offers. There are 12 Q451 Mark Pawsey: Generally, how can we elements to the rental standard. Following the improve advice and knowledge for both landlords and consultation, from which we had 5,000 responses, tenants before entering into agreements? there was a lot of engagement among Londoners in Richard Blakeway: One of the things in the standard the standard. There are 12 core standards that set out is actually using plain English—I think that is expectations on repairs, contact details, written important—but also raising awareness of what the contracts and so forth. All of that is very important, responsibilities are. We will have a large marketing and it will help to empower tenants. It will also campaign behind this, and we have a lot of support empower landlords. The majority of properties are from the six accrediting bodies in London, which I managed not by the landlord themselves but by an think will raise awareness. One of the really striking agent. There should be an expectation on the part of things, which comes back to the heart of your landlords of what their agent is doing, and that can question—why bother with this?—is that DCLG include client money protection. figures show that 81% of landlords are not aware of the category 1 hazards3, which are set down in law. Q446 Mark Pawsey: Neil and Stuart, presumably Clearly it is about raising awareness among landlords. because the market in which you are operating is at a I am not saying that they are bad landlords; they are level beyond that standard, it will have no relevance just not necessarily aware of all the responsibilities. to your businesses? Tenants certainly are not: the level of expectation Neil Hadden: Yes, we believe that we are operating among tenants is affected as well, because of that lack well above the bar that the standard introduces, but of awareness. One of the key things that we can do we are a bit concerned about regulation drift and the through the standard is to raise awareness. possibility of double regulation for housing associations, so of course we would want to make sure Q452 Mark Pawsey: Will that improve landlords’ that Richard and the Mayor and others—didn’t allow awareness of the condition that they need to keep that to happen. properties in? Richard Blakeway: Yes. Q447 Mark Pawsey: Would you rather the standard did not exist? Q453 Mark Pawsey: When people are in receipt of Neil Hadden: I would like to be clear as to who it housing benefit, it has been suggested to us by some was applying to, because we are regulated by the that receipt of that housing benefit should be Homes and Communities Agency. conditional on landlords keeping the property in particular order. Do you agree with that? Q448 Mark Pawsey: Richard, is Neil’s business Richard Blakeway: I think that has a lot of merit. going to be regulated by your new standard? Particularly where discretion is exercised over the Richard Blakeway: No, but his subsidiary will be—if 3 Note by witness: The actual figure is 85% and refers to the he sets one up for his private rented properties— Housing Health & Safety Rating System (HHSRS), not because it is not regulated by the HCA. category 1 hazards. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG06 Source: /MILES/PKU/INPUT/027272/027272_o006_michelle_130508 HC 50-i PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 77
8 May 2013 Richard Blakeway, Stuart Corbyn and Neil Hadden housing benefit direct—the local housing allowance Q458 Andy Sawford: How many letting agents are direct—it has even more merit. One of the things that now signed up to it? we are certainly encouraging local authorities in Richard Blakeway: It has not started yet. We have London—boroughs in London—to do is, at the very been through— least, to make the landlords that they are working with aware that they could be accredited, and about the Q459 Andy Sawford: So given that we are looking benefits of accreditation. at this across the country, there is not really anything in London that we can look to as an example of Q454 Mark Pawsey: To go back to the point about improved transparency. the withholding of housing benefit, you said that it has Richard Blakeway: No, but that should not be a merit. Would you support such a change? criticism of the Mayor; it reflects how he is going into Richard Blakeway: If the Government sought to very new territory. introduce it, yes. The challenge that we have, though, and that boroughs in London have, is accessing Q460 Andy Sawford: Does that go for the means of sufficient PRS. It would be another barrier to independent redress? accessing private rented stock, but it has enormous Richard Blakeway: We are very supportive of what merit. When the public sector is paying enormous has come through on the legislation around redress. quantities in housing benefit, demanding quality We will have to see, later this year, what DCLG’s because of that is absolutely right. consultation says, but we will respond to that and will certainly be pushing it. All the noises are positive. Q455 Andy Sawford: My questions are about I think there are three bodies in London that accredit regulation of landlords and letting agents, and the first agents and one of the things we have done is to work is for Mr Blakeway. The Mayor’s housing covenant very closely with them on the London rental standard, says that you will work towards “greater transparency so I think you will see a significant increase in the about letting agent fees so that landlords and tenants number of agents accredited and, therefore, a bar will have clarity” about the services that are being be set in London that does not currently exist around provided. That is something that we have explored in greater transparency. the Committee. Could you comment on what success there has been in ensuring greater clarity? Q461 Andy Sawford: Mr Hadden and Mr Corbyn, Richard Blakeway: It is a good question. One of the the case has been made that local discretionary things that we would be keen to explore with schemes could deter institutional investment, yet you Government is whether, as an addition to the measures are both making significant investments in Newham, that they have introduced around redress, you have which is at the moment the national example of a local something around transparency of fees. The second scheme. Is it not true that claims that those schemes thing is working closely with the ombudsmen—there are a real deterrent have been exaggerated? Are there are various ombudsmen operating around this—to not far more important considerations? make sure that fees are prioritised. The third area is Stuart Corbyn: We had committed ourselves to the working very closely with landlords to see that they acquisition of East Village before Newham came out get some leaders within the market. I already with their final indication of— referenced Genesis, who are very clear and up front around fees; I am sure that QDD would support this, Q462 Andy Sawford: Would you have changed and I think that getting some market leadership will your mind? be important. Stuart Corbyn: I am sure that we would not have changed our mind, to be fair, but we did try to have quiet discussions with Newham to suggest that their Q456 Andy Sawford: If I were to ask a letting agent compulsory landlord licensing scheme was something in London where they felt the force of the Mayor’s that did not have to apply across the borough; it could office in ensuring that their fees are more transparent, be discretionary. They said that the legislation in what examples would they give me of how you have place—from 2004, or whenever it is—means that they impacted on how they tell their clients about their are not able to use any discretion whatsoever. But fees? when you see the form, it is going to be an Richard Blakeway: The Mayor has no formal powers administrative burden, because apart from the fees on this— that one has to pay, even Newham admit that they are getting the process down for landlords to have to take Q457 Andy Sawford: But the Mayor chose to make only 20 minutes per property. Well, 20 minutes on a pledge, so there must have been an idea about how 1,439 properties with whatever ongoing issues will be he would implement the pledge. an administrative burden. Richard Blakeway: And we set that out in the covenant. We went through a consultation on that Q463 Andy Sawford: Is it not in the interests of the covenant and certainly one of the things we would reputation of those organisations investing in the expect is that every letting agent who signs up to the private rented sector, and indeed landlords, that the London rental standard—we have a target of 100,000 quality of provision in the private rented sector is landlords and letting agents—is transparent around improved? how their fees are charged. Stuart Corbyn: Oh gosh yes. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG06 Source: /MILES/PKU/INPUT/027272/027272_o006_michelle_130508 HC 50-i PRS CORRECTED transcript.xml
Ev 78 Communities and Local Government Committee: Evidence
8 May 2013 Richard Blakeway, Stuart Corbyn and Neil Hadden
Q464 Andy Sawford: So there is a social Neil Hadden: I think an exception should be made responsibility—another reason that surely has for registered providers, yes, because there are higher economic benefit—to support the local discretionary standards that we are already meeting. scheme. Stuart Corbyn: Even Newham themselves say that Q471 Mrs Glindon: Each of you touched on the they do not like the scheme that is in place because it German model of renting and pointed out some does not give them the degree of flexibility that they reasons why it might not work here. When our would have liked. Committee visited Germany two weeks ago, we were impressed by how the private rented market works. Q465 Andy Sawford: That is not what they told us. More than 54% of people rent there. There is a vast range of tenants. Do you think that we could ever Stuart Corbyn: Well, this is the conversation that we achieve such a mature market here? have had with Newham— Neil Hadden: There are two parts to your question. One is about the maturity of the market going Q466 Andy Sawford: The Mayor was quite forward. The other is whether it is to be based on the supportive. Could I ask Mr Hadden the same German model. I think that we will see a maturity question? of the private rented sector coming forward for pure Neil Hadden: There are two issues about local economic reasons. The average age of somebody schemes that certainly need to be looked into very accessing owner occupation is 37 and the average carefully. Firstly, will the costs of registration or fees, deposit that they need is something like £90,000, so or whatever, not be passed on to tenants in the rent? more and more people are moving into the private Secondly, will more regulation drive out potential rented sector and therefore there will be a maturity, landlords? I think that, anecdotally, any additional naturally, within the sector. Whether it is on the regulation or extra costs have the potential to do that. German model remains to be seen. I think we have to build our own model first. Q467 Andy Sawford: As someone with huge Stuart Corbyn: I lived in Holland for a number of experience in the sector, with all the time you spent years. The Dutch were fascinated by the English at the Housing Corporation and so on trying to raise obsession for owner occupation. They would look at how much we paid for a two-storey Victorian terraced standards in the sector, in your cost-benefit analysis, house and wonder what on earth we were doing. As what price would you put on safe, reasonable quality far as they were concerned, renting was a perfectly housing? reasonable way of living somewhere. It is all about Neil Hadden: A high price; it is very important. The choice at the end of the day. I think it will take quite other part of my answer is that as a regulated provider some time before culturally we have moved from this of housing, we feel that we have sufficient regulation obsession with owner occupation. It is a long, slow to cope with, and we are providing standards much process. The sort of things that we are doing help that higher than the standards either in the Mayor’s rental process, but I think it will be a long time before we standard or in the local licensing scheme that Newham ever get to the sort of approach that the Germans or came up with. Therefore this is not targeted at the Dutch take to renting. organisations like ours; it is targeted at private Richard Blakeway: It is interesting. I have said before landlords. how, structurally, the German housing market is completely different from here. For example, there are Q468 Andy Sawford: You see this as an opportunity, higher rates of taxation on ownership there. These are don’t you? You suggested that landlords be big issues for any Government to have to deal with. encouraged to use a registered provider and that the Whether they wanted to make property ownership a local authority would reduce or waive the fee. Why less tax-efficient asset class is a big question for the do you think that the council tax payer more generally Government or Treasury to undertake. The UK rental market and particularly London’s rental market has should fund improvements in the private rented sector doubled during the last decade, so now roughly 25% and their regulation? of households live in the rented sector. On our current Neil Hadden: Why do I think that the council tax projections, that will probably go up. By the payer—? beginning of the next decade, in the early 2020s, about a third of households will be living in the rented Q469 Andy Sawford: What is the economic model sector. Certainly within this mayoral term, which runs whereby the fees can be waived if a landlord registers until 2016, we anticipate it being a larger proportion with you, because the local authority will still have to of London’s housing market than social rent. perform a regulatory function? The rented sector is growing, and there was particular Neil Hadden: The landlord doesn’t register with us. growth during a time when it was far easier to access We are registered with the Homes and Communities mortgages. It is very striking. Most of that growth, as Agency. That should be sufficient for any local Stuart alluded to, came about as a result of the ’88 authority seeking to get a registration scheme. Act and banks offering buy to let mortgages. Last year, even though it has not got back to the pre-’08 Q470 Andy Sawford: But there would be an levels, we were looking at something like £16 billion coming through the buy to let market.4 We think the exception, if they are registered with a registered provider. 4 Correction by witness: This is the UK, not London, figure. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG06 Source: /MILES/PKU/INPUT/027272/027272_o006_michelle_130508 HC 50-i PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 79
8 May 2013 Richard Blakeway, Stuart Corbyn and Neil Hadden vast majority of landlords in London own fewer than There is a conversation about the product and the five properties. quality of that product; there is a conversation about You have a very different market—clearly not an institutional investment and the attractiveness of the institutionally backed market. You now have a big UK market, and the London market in particular; and debate about what standard we should expect and how there is a conversation about individuals who, as I say, professional that market is, particularly as agents and put in £16 billion of lending last year through buy to others are coming into it, in a way that was not the let5, and about whether there are options for them case before. That is very much where our focus is, as to invest in housing in a more structured way, rather well as trying to see whether we can tap into a more than through the cottage industry that exists. institutionally backed market and talking to Chair: Okay. Thank you all very much indeed for individuals in the buy to let sector who are investing coming to give evidence this afternoon. in property. Is there a more structured way that they could invest in property that has less risk for them, lower entry costs and generates a better yield for them than the 3% net yield that you probably see in London? 5 Correction by witness: This the UK, not London, figure.
Examination of Witnesses
Witnesses: Ian Fletcher, Director of Policy (Real Estate), British Property Federation, Paul Smee, Director General, Council of Mortgage Lenders, and Nigel Terrington, Chief Executive, Paragon Group of Companies plc, gave evidence.
Q472 Chair: Good afternoon. Thank you all very people value the flexibility and choice that they get much for coming to give evidence. To begin with, for from the private rented sector. I also believe that the our records, could you say who you are and the quality of rented accommodation on offer in many organisation you represent? parts of the market has improved. All those things Nigel Terrington: I am Nigel Terrington. I am the have come together to lead to this increase. chief executive of the Paragon group. I am also Nigel Terrington: I think we are in the middle of a chairman of the Council of Mortgage Lenders, but I long-term structural change in housing tenure within am here representing Paragon. the UK. It kicked off with the regulatory change in Paul Smee: I am Paul Smee, director general of the the ’80s, and that has been developed further by Council of Mortgage Lenders. additional Government policy on things such as the Ian Fletcher: Good afternoon. I am Ian Fletcher, increasing levels of student population. But then director of policy at the British Property Federation. moving further afield, it is the social and economic changes that have taken place alongside demographic Q473 Chair: Thank you all for that. The private changes. I am sure that a lot of people who would like rented sector has grown quite considerably over the to buy a house simply cannot, either because of tighter last decade. Is this simply a result of the changed regulation through the banking system or because of economic circumstances that we are now seeing—the affordability issues. If you talk to the young rising cost of properties to buy, followed by the non- generation today, they do not want to do what their availability of mortgages—or is it a delayed reaction parents did; they want more flexibility and more to the deregulation in 1988 that has taken some time choice. They want more flexibility over when they get to work through? on to the housing ladder. Families are being formed Ian Fletcher: I think it is a combination of different later in life. People are getting married later in life. factors. Clearly, the buy to let market over the past 10 There are more people at university, and more people years changed dramatically, following the changes we leaving university with debt. As a consequence, that have seen in the mortgage market, with mortgage settling-down time has been pushed back. Alongside lenders being prepared to provide finance for the that, we have all the demographic changes, the most letting of property. Clearly, over the past few years, there has been a significant need for that type of notable of which is the immigration flow where we property; it has been building over the last decade, have clearly seen a significant population shift. We and we have seen the expansion of things like student have had inward migration into the UK. Our evidence accommodation. Generally, the sector has, I hope, shows that five years after economic migrants come been a force for good in terms of delivering for to the UK, around 70% of them are in the private those needs. rented sector. If you compare that with the average Paul Smee: There is a cocktail of reasons. tenure mix, you will see that the more that the Affordability concerns have prevented some people demographics or population change, the more demand who would previously have got on the owner-occupier and pressure comes on to the private rented sector. ladder earlier from moving into that form of Clearly, the economic environment has not been ownership. There has been a perception that mortgage helpful in that regard. First-time buyers have struggled finance was not available. While I believe the with the after-effects of the financial crisis. As Paul mortgage market is open for business, public said, the market is open for business, but its capacity perception lags behind. We have evidence as well that is not as big as it once was. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG06 Source: /MILES/PKU/INPUT/027272/027272_o006_michelle_130508 HC 50-i PRS CORRECTED transcript.xml
Ev 80 Communities and Local Government Committee: Evidence
8 May 2013 Ian Fletcher, Paul Smee and Nigel Terrington
Q474 Chair: To go back to the longer-term shift, market price. Also, it is very difficult to value a when the recession first hit it seemed that within the property in a newly built block. private rented sector itself, the buy to let sector was going to be as badly hit as any; mortgages almost Q477 Mark Pawsey: Does that mean that you are dried up as the first reaction was, “We can’t lend sceptical about incentives such as build to let funding, there.” That seems to have changed quite a bit over because investors will always prefer to buy second- the past couple of years. Do you see continuing hand stock rather than stock built specifically for growth in the private rented sector to be further letting? growth in buy to let, or will it shift to institutional Nigel Terrington: It is a factor. In our experience and investors coming in, as we heard from previous from what we have seen, institutional investment in witnesses? larger blocks has worked well where it has been Nigel Terrington: There was that immediate reaction focused—for example, student accommodation. One after the credit crunch, and also a collapse in the level thing I am a little concerned about in the production of supply of finance. One of the key reasons was that of large-scale build to let projects is the creation of a lot of the lenders, ourselves included, financed what may be almost rented ghettoes when you perhaps themselves through the capital markets, the wanted a more integrated housing market. securitisation markets, all of which have performed in an exemplary fashion unlike the sister transactions that were done in the States. The point here though Q478 Mark Pawsey: Paul and Neil, are you bothered was that in that aftermath the availability of new about rented ghettoes? money to do new lending was in short supply, but it Paul Smee: I would like to see supply increase, has come back quite significantly over the past few because that would solve some of the root problems years. The other perception was also that there was a in the housing market at the moment. Perhaps I could much greater risk. That was almost personified by the add a further flavour. We have recently done research performance of Bradford & Bingley, which was, I about people’s long-term aspirations, and the British think, down to some very poor lending. If you look at aspiration to own your own home remains very strong, the credit performance of buy to let as a whole it is with 79% of people wanting to own their own home as good if not better than owner-occupied lending, as within the next 10 years. Some will already own them, evidenced by the CML stats that are produced on a but they want to stay in that state. There remains a fairly regular basis. I think the growth will come in high level of demand for owner-occupation the private rented sector and in the buy to let sector. eventually. What has happened is that people’s time In the past few years, the buy to let market has scales have moved for satisfying their objective, and typically been growing at about 20% per annum, that is where the opportunity is for the PRS. which is a much faster rate than owner-occupied lending in the UK. Q479 Mark Pawsey: You are suggesting that people Ian Fletcher: We have heard from our landlord are in the private rented sector with some reluctance. members that, like any mortgage market, low risk is Paul Smee: Not necessarily immediate reluctance, but priced accordingly and a new investor in the buy to with a long-term aspiration to move somewhere else let market may struggle to get finance. If they do get within10 years. it, it is at a higher rate of interest than for an established buy to let player. That will be taken Q480 Mark Pawsey: You said you wanted to see account of, and the market is open for those sorts of more supply, and that your solution to that is tax landlords. breaks for landlords. Why should we give more tax breaks to an already privileged sector? Q475 Mark Pawsey: Isn’t it the case that many Paul Smee: I am not sure that that was our particular houses and flats that were built for owner-occupation proposal. We are keen to see supply increased and we have simply been diverted to the private rental sector have supported things such as the Government’s help because they were not saleable, or because there to buy equity loan scheme and the original New Buy wasn’t the money around for owner-occupation? All I project that was introduced early last year. want to explore is whether growth in the private rented sector is encouraging developers to satisfy that demand by bringing stock forward specifically for the Q481 Mark Pawsey: But you have spoken about sector. Is there any evidence of that happening? there being “merit in individual landlords’ tax Nigel Terrington: I think that happens indirectly. In demands, upon sale of the property, being more our experience, landlords prefer to buy through the aligned to what a small business would pay.” You secondary market and tend to buy used properties— want landlords to be treated as businesses, which would be an improvement in their tax treatment. Q476 Mark Pawsey: Properties that were designed Paul Smee: I am sorry. I thought you were talking for another purpose. about new build. Yes, I think there is a case to be Nigel Terrington: Yes. They may have been designed made— as a two-bedroom apartment. The developer some decades ago may not have intended to rent it, but it Q482 Mark Pawsey: Make the case. What is the could be rented. Our experience is that new-build case? properties tend to be priced with a premium and may Paul Smee: You want a vibrant and different mix of be around 5% more expensive than a secondary landlords. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG06 Source: /MILES/PKU/INPUT/027272/027272_o006_michelle_130508 HC 50-i PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 81
8 May 2013 Ian Fletcher, Paul Smee and Nigel Terrington
Q483 Mark Pawsey: We want a growing private normal investment criteria. In terms of our landlords’ rented sector, and we have one, so why should give return, there is currently a high expectation of return more tax incentives? coming from yield, with rental yields averaging Paul Smee: Because if you give tax incentives you around 6%. will probably get new types of landlord in, and there is a particular interest in increasing the number of Q488 Mark Pawsey: But over 17 years, there is a landlords who own more than a couple of properties, lot of capital growth, historically and, presumably, in and moving away from the cottage industry that it has the future. been to date.6 Nigel Terrington: Yes. What they tend to see, in terms of capital growth, is an inflationary hedge. If you look Q484 Mark Pawsey: Where would you put the break at the long-term movements of house prices, you had between treatment as an investor and treatment as a something like 2.5% over inflation over a 30-year business? Five, 10, 15? Where would you set the period. We have had good periods and bad periods, determining level? but if you take a 17-year view on things, you should Paul Smee: I don’t think I have a view on that. get through with an inflation-plus return across that period. On the way through, though, rental yield is Q485 Mark Pawsey: May I ask all of you about the important to investors, because they have costs to stability of the private rented sector? People have cover, including their debt costs, which represent a done very well out of the private rented sector, despite fairly significant part. The gross yields might be 6% relatively low yields, because of rapidly increasing at the moment, as an average across the country, but, capital values. We are in an era of not-increasing clearly, the net yields will be somewhat lower than capital values and, in some cases, capital values are that. falling back. How do we make the private rented sector viable with such low yields? Q489 Chair: Let’s move to regulation. Is it really the Ian Fletcher: I tend to represent the institutional case that investors will be put off by the prospect of investor, who is investing predominantly for yield. more regulation, or is there simply a fear that Clearly, they want to see capital appreciation as well, regulation might mean rent control? If regulation but their business model is being driven on the basis actually means trying to ensure proper standards in of yield. Therefore, providing that house prices are the private rented sector, is there really anything to not going to fall dramatically, the current conditions worry about? are conducive to trying to get that institutional Ian Fletcher: From our perspective, as we said in our investment. evidence, we would support certain kinds of regulation that helped local authorities to do their job Q486 Mark Pawsey: So yields are currently in setting standards. We said that we would support satisfactory in the absence of capital growth. landlord registration. Our arguments are a little more Ian Fletcher: It is marginal. I sat on the Montague nuanced than that. I would not support a registration review, which came forward with a number of scheme along the Scottish lines—we set up a register recommendations which help support the sector. You and expect landlords to come, as it were, and asked about institutions not buying second-hand register—because the worst landlords are not going to stock, and the primary reason for that is that there is register, in the same way that they break the various not the stock out there to buy in quantities that an laws that are out there at the moment. The registration institution would want. It will be satisfied only by new scheme that we supported was that set out by Julie stock, and it wants new stock that is efficient to Rugg in her review, which was far more nuanced and manage and that is bespoke—built for renting. In that said that you used all the connections that landlords regard, the Montague review was trying to tick a had with the state to check that they were registered. number of boxes. So when they went to court, they needed the registration number; when they entered a tenancy Q487 Mark Pawsey: Nigel, are you looking for deposit scheme, they needed the registration number; capital appreciation, to justify the low yields on and when their tenants applied for housing benefit, rental properties? they needed their landlord’s registration number. It Nigel Terrington: No. Our customers take a very, very became self-reinforcing that way. long-term view of their property investments, as you We have not been so supportive of licensing. You tend should. It is expensive to get in, it is expensive get to find that a lot of the effort in terms of landlord out, and you need care and maintenance on the way licensing goes into bureaucracy—form-filling and through, so this not a free investment option that they people checking the forms—and that takes resource run. The average investment hold period that our away from— customers have on property is 17 years, which is considerably longer than you would expect under Q490 Chair: Could you just explain the difference between registration and licensing as you understand 6 Note by witness: The CML believes that government should further consider tax incentives for private landlords, while it? avoiding unintended negative impacts in the owner occupied Ian Fletcher: The simple registration scheme that space. For example, either the depreciation and setting of Julie set out meant simply that you were identified as rental losses against other income (such is allowable in Germany, France and the USA) or, to encourage investment a landlord. That would help local authorities in terms in the PRA, tapering the payable capital gains tax the longer of being able to know the landlords in their area and an asset is held merit further examination. then use their existing enforcement powers, but it cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG06 Source: /MILES/PKU/INPUT/027272/027272_o006_michelle_130508 HC 50-i PRS CORRECTED transcript.xml
Ev 82 Communities and Local Government Committee: Evidence
8 May 2013 Ian Fletcher, Paul Smee and Nigel Terrington would also have some benefits in terms of national Nigel Terrington: More the latter. There are, I think, Government being able to communicate far better 70 statutes and 50 separate regulations. It is clear from with landlords. You were discussing in the last session experiences that we have seen and, I am sure, the the fact that landlords and tenants are not very well evidence that you have heard from others that there is acquainted with the existing law. There would be the a lack of understanding of the regulatory framework ability to communicate to them in that way. that exists at the moment—what people’s rights Licensing is far more bureaucratic and heavy in terms already are. If simplification to try to bring these 70 of landlords having to go through various checks: fit statutes up to date in order to deal with the modern and proper person tests, tests to see that they are world in which we want this market to exist results in abiding by various management standards that are set fewer and less confusing laws but tougher laws, fine. locally and that sort of thing. We are supportive of agent regulation— Q494 Chair: On the issue of tougher laws, one of the Chair: We will come to that. complaints that you get from many landlords—often Paul Smee: I think lenders would work alongside any smaller ones—is, “We’re behaving properly. If you registration system where it was introduced and would bring in schemes of regulation, we’re going to end up take into account whether that affected their view of paying like the guys who don’t want to behave the security of the loan that they were making. They properly.” Are there any simple ways that we could would take into account any implications of a actually make sure that the costs of doing anything registration system for the terms on which they really fall on the people against whom enforcement advance the money. That said, it would be helpful if action needs to be taken? there was some sort of central register where details Nigel Terrington: Consistent enforcement action is of various selective licensing regimes were readily probably something to be welcomed. We have available, which I do not think is available at the obviously seen that certain boroughs and certain moment. councils have taken a very proactive stance on Nigel Terrington: ARLA, for example, has its own enforcement, but you can walk not too many miles accreditation scheme, but clearly if you are going to away to find you are dealing with a borough that does be a rogue landlord, you will not be a member of it, so not actually have the resources or the will to apply I think an imposed register across the country makes some of its powers—so we need consistent application eminent sense. In terms of regulation, having operated across the board. I would not be surprised if Newham in the banking sector and seen massive regulatory was successful in driving more rogue landlords out of change in the last few years, I think that the greatest its area than other boroughs. Maybe that just pushes risk is not so much the regulation as the uncertainty the problem elsewhere—pushes it down the street— surrounding it. Where people do not know what is unless there is consistent application. coming, they will not make investment decisions, Ian Fletcher: Local authorities, when they take because of the uncertainty about what it means or enforcement action, often do not get the fine income could mean. that is coming back to the court and, equally, they are not able to recover their costs in terms of that Q491 Andy Sawford: To follow up on that point, enforcement action. Two things that I hear local this is not the first time that it has been argued in the authorities complain about are those two. Committee that rogue landlords would not be caught by a registration scheme, but I want to know on what Q495 Chair: The idea you put forward about basis you assert that, given that we do not know what registration would presumably have attractions to the penalties might be for not signing up to the HMRC as well, in terms of making sure that the registration scheme. If, for example, the severest proper share of the rents goes to the tax authorities. penalty was a custodial sentence—a prison sentence— Ian Fletcher: Yes, and we would not object—clearly, why could we not reasonably expect people to people should be paying their correct tax in that participate in the scheme? respect. Nigel Terrington: I agree with you. I was saying that we have a scheme at the moment that is run by ARLA, Q496 Chair: On the regulation of agents, which you the Association of Residential Letting Agents. It is an touched on a few minutes ago, you had quite a lot of accreditation scheme. There is a redress mechanism evidence in support of the regulation of letting agents. within it. But if you want to behave badly—if you Do the three of you have a view? The Government want to be a rogue landlord—you will not sign up to have obviously signalled their intention to bring in a the ARLA accreditation— redress scheme. Is that sufficient, and how should that be gone about? What are the key elements to the Q492 Andy Sawford: Therefore you’re arguing for design of a scheme that would make it effective? a registration scheme. Nigel Terrington: We thought it was a good idea to Nigel Terrington: Yes, I am arguing for that. bring in the regulation of letting agents. We thought that an opportunity was maybe missed a few years Q493 Chair: You said in your written evidence that ago, when it was looked at once before. In terms of a you thought there could be some simplification of redress system, there are many examples. The most regulation; I think you said there were 70 different important thing is that it needs to have teeth. There are sets. Is that really a call for less regulation, in terms plenty of examples of schemes that exist, including of less effect, or simply a call to make it more umpteen examples of the financial ombudsman understandable and more usable? scheme and how that is handled. There is an cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG06 Source: /MILES/PKU/INPUT/027272/027272_o006_michelle_130508 HC 50-i PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 83
8 May 2013 Ian Fletcher, Paul Smee and Nigel Terrington organisation that has teeth, and has the ability to fine Q500 Chair: Could I challenge that? You are saying and the ability to seek recovery to the aggrieved party. that because the tenant pays a fee, the letting agent There are many ways to do it; it must have teeth, does not treat them like a commodity. But what though. powers do the tenants have? They do not enter into Paul Smee: We would certainly have no objections to the contract with the agent; they just have to pay him. the introduction of a regulatory system. We think that Ian Fletcher: I can remember having unsatisfactory it should build upon principles of good regulation, as situations with letting agents. The mere fact that I was enunciated elsewhere. I think that there is broad paying for the inventory to be done and for the letting support for the introduction of a redress scheme. agreements to be prepared gave me some leverage in terms of saying, for example, that I wanted to sign at Q497 Chair: Would a redress scheme go far enough? x time or that I wanted to agree these terms. Paul Smee: It is a very good first step. You might want to take a first step and see how behaviours Q501 Mark Pawsey: May I ask some questions change as a consequence before you follow up with about rental levels and the impact of housing benefit, the full apparatus of regulation, accreditation or or the interaction between rent and housing benefit? whatever. It does not necessarily have to be the only First, in the BPF document, “Rents: The True Picture” step in the journey. you suggest that rents actually fell between September Ian Fletcher: As the others have said, I think it is just 2011 and 2012 in the north-east and that in many other a first step. In terms of enforcement, I looked at the areas, rental growth was less than CPI. That does not lists of estate agents that are members of the existing sit neatly with much of the evidence that we have ombudsman, because it is law that estate agents taken during this inquiry. How can you support those should be members of a redress scheme, and that list data? was surprisingly short in comparison with the number Ian Fletcher: Those data are the official data. They of estate agents that I imagine there are in the UK. I are the data of the valuation agency, which, importantly and increasingly, has been improving its do not know to what extent that is actively policed, so data. The data are now being used as part of the I have concerns about the enforcement of this first ONS’s calculations for the retail price index, so there step in terms of a simple measure. In the BPF, we has been significant improvement in the accuracy of would have liked to have seen that amendment go the data. They come from 500,000 incidents of further. lettings and are by far and away superior to anything A particular issue is shared across landlords and out there. tenants, which is that existing members of ARLA, NALS and RICS have client money protection. The Q502 Mark Pawsey: You are confident that, in some money that is paid by landlords and tenants to agents areas, rents are falling and that, in much of the is not protected in any way, so you do hear horrible country, they have fallen behind CPI? cases of rogue letting agents absconding with tens of Ian Fletcher: Absolutely. I would stake my granny’s thousands of pounds of people’s money. life on it.
Q498 Chair: That is something that both landlords Q503 Mark Pawsey: How would you account for the and tenants would have an interest in stopping, of growth in the sector if rents are falling? course. Ian Fletcher: That is a transient phase. It is something Ian Fletcher: Yes, and there are certainly a number that will change with circumstances. As we have of bodies in the sector that would support that measure heard, some landlords will rely on capital appreciation as well. as well as that rental income. They will be able to reduce their costs and so on. Q499 Chair: As I understand it, under the Scottish system, letting agents cannot charge a fee to the Q504 Mark Pawsey: Is this picture recognised by tenant, because they are regarded as acting on behalf our two other witnesses? of the landlord. Should we bring in that rule in Nigel Terrington: Yes. We have our own in-house England as well? team of surveyors, and we draw up regional Ian Fletcher: I think the issue is that the first time the intelligence. There is definitely a mixed picture across parties meet, the tenants should expect a tariff that is the country. London is a little world on its own, but clear, not changeable in any respect and gives them the south-east has performed significantly better than peace of mind in terms of clarity and where they regions in the north. You can obviously get down to stand. I would not support the Scottish model. Going particular postcodes, but as a general picture there is back to my days of letting a property in London, one quite a clear north-south divide between house price of the few bits of leverage that I had over the letting appreciation and rental levels. agent was that I was actually paying for some services that they were providing to me. If a tenant wasn’t Q505 Mark Pawsey: I am not sure whether Mrs paying for anything, the service might deteriorate and Glindon would recognise that rents fell over that they would be treated just like a commodity. I would period in the north-east. like to see more landlords being very proactive in Ian Fletcher: I find this frustrating because that is the trying to ensure that the letting agents are dealing with official statistic. Some really poor statistics have been the tenants appropriately. Unfortunately, I do not see put out. About two weeks ago, there was a statistic on enough landlords doing that. the front page of the Evening Standard saying that cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG06 Source: /MILES/PKU/INPUT/027272/027272_o006_michelle_130508 HC 50-i PRS CORRECTED transcript.xml
Ev 84 Communities and Local Government Committee: Evidence
8 May 2013 Ian Fletcher, Paul Smee and Nigel Terrington rents in London were eight times income growth. That being conditional upon landlords maintaining the was a very poor piece of statistical analysis, because condition of their property? If a landlord permits his they were using the rental data for London, but property to fall into disrepair, with tenants on housing average earnings for the UK. The affordability of benefit, the benefit should not be payable in those property in London should not rely on the average circumstances. earnings of someone in Islay in the Inner Hebrides. Paul Smee: Clearly, that would affect the lender’s There are a lot of dodgy statistics out there. I urge the view of the landlord and the lender would want to Committee to come forward with a recommendation have a conversation with the landlord about it to on this, very much to support further and continued ensure that the landlord took action to ensure that that improvement in those official statistics. situation did not continue.
Q506 Mark Pawsey: However, it leads the Q512 Mark Pawsey: Would lenders be proactive in Committee into difficulty, because the evidence we helping to get properties up to scratch in those are getting from tenant organisations does not seem to circumstances? accord with the sort of official statistics you have just Paul Smee: I think there would be a time lag. referred to. Proactivity might be the wrong word, but I think that Ian Fletcher: And there’s a curiosity there, because would be a positive circle, where the lender would be on the one hand, Shelter is saying that landlords pushing the landlord in the same direction. would be better off with a stable rental contract that Nigel Terrington: Buy to let has been a significant is CPI or RPI-linked, yet on the other hand, it is force for good in terms of the improvements in the making a lot of noise about rents being out of control. quality of the housing stock in the private rented Those two arguments do not really equate. sector since probably the mid-’90s. One of the reasons for that is that we will not lend to someone where the Q507 Mark Pawsey: I wonder if I might ask one or property is substandard in the first instance—it is just two questions about the Council of Mortgage Lenders’ a straight no. Secondly, a landlord will have an view on buy to let lenders prohibiting letting to obligation under his loan agreement to maintain the housing benefit claimants. What is the position there? standard of that property. Paul Smee: It’s a mixed position. I know that a couple of very major lenders have changed their view on this Q513 Mark Pawsey: But how often do you inspect? and have removed or relaxed their restrictions. I think How do you ensure that? our members will look at their experience, and at the Nigel Terrington: It is a threat. The landlord knows experience of landlords with housing benefit tenants. that we— Possibly you will see some lenders being more relaxed if they are satisfied that the landlord Q514 Mark Pawsey: So it’s of no practical use? understands what they are doing. Nigel Terrington: It’s there as a threat and it can be invoked. Q508 Mark Pawsey: But what proportion of your lenders would still have a prohibition on letting to a Q515 Mark Pawsey: How often is it invoked? housing benefit claimant within their offer of Nigel Terrington: It is rarely invoked. However, I can mortgage funds? tell you that the standard of properties, certainly Paul Smee: I might have to provide you with an within our loan portfolio, is very high because we additional note on the exact figures. Two of our major make sure that we select the right landlord with the buy to let lenders have removed that provision. I could right property on day one. If you look at the credit not tell you for the moment— experience, our 90-day-plus arrears stands at only 40 basis points—0.4%—compared with something Q509 Mark Pawsey: For those who retain that nearer 2% for the whole of the mortgage industry. provision, what happens if someone unfortunately, having been able to pay their rent out of their income, Q516 Mark Pawsey: Mr Smee, we hear a lot about goes on to housing benefit? Does the lender foreclose? the accidental landlord. Have you got a view about Paul Smee: I think you’ll find that lenders in those how many people have a conventional repayment circumstances do not take any precipitate action. mortgage but are letting out the property when they shouldn’t be? Q510 Mark Pawsey: So there’s no point in the Paul Smee: No, we don’t. I would believe it was the provision being there? exception, not the rule. Paul Smee: For those lenders who continue to impose it I think it is there because they want to understand Q517 Mark Pawsey: Would it be 10% of mortgages? the particular circumstances of the landlord to whom Paul Smee: No, I think far fewer. If you look at the they are lending the money. I think that the concern is way in which arrears have been handled— over whether the landlord can handle those sorts of situations—that might be what encourages them to Q518 Mark Pawsey: But the lender may not know have those sorts of provisions in place. about the arrears—there may be no arrears. What percentage of buy to let landlords have the wrong Q511 Mark Pawsey: Can I ask each of you your mortgage? views about the issue we raised in the previous Paul Smee: I know of no study where we have evidence session, on the receipt of housing benefit attempted to estimate this, but I think the evidence cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG06 Source: /MILES/PKU/INPUT/027272/027272_o006_michelle_130508 HC 50-i PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 85
8 May 2013 Ian Fletcher, Paul Smee and Nigel Terrington would be that it was a very small proportion. I am, etc., and equally, whether it should be a five-year, again, willing to see if there is any better evidence.7 three-year or one-year tenancy. The big issue is Mark Pawsey: It might be helpful. addressing that possession and access to the courts. Paul Smee: I think it would be a small proportion. If you look at the way in which the industry treats those Q520 Mrs Glindon: Mr Fletcher, the British borrowers who get into difficulty with their mortgage Property Federation has specifically stated that index- repayment—because the idea is that they will have linked rents would jeopardise investment. What does purchased a home for themselves to live in. the organisation mean by that? Mark Pawsey: Absolutely. Ian Fletcher: I have concerns about index-linked Paul Smee: If you look at the way in which arrears rents. Part of my day job is facing the commercial are handled, I think the evidence would confirm my sector, and over the past 15 or 20 years, the worst view that it is only a small number. deal in the marketplace has been index-linked rents. Market rents have been better for tenants. Fixed Q519 Mrs Glindon: On length of tenure, a lot of uplifts and things of that nature have also been better, other countries have indefinite tenancies with index- and I see also, in the property sector, that you get a linked rent increases. Why do you think that model lot of complaints about how business rates are going would not work in England? up. Business rates, obviously, are linked to RPI each Nigel Terrington: You can get longer-term tenancies year, so that small increment each year compounds by mutual agreement today. The concept of indefinite quite dramatically and you find, for example, that tenancies—a permanent rolling contract—has never small businesses’ business rates have increased by been tested, but clearly one of the things that has been something like 200% over the past 20 years. Actually, emerging is a desire for longer-term tenancies, market rents where the landlord is not raising the rent particularly with evidence that more families are every year, which is what tends to happen in the seeing the private rented sector as a permanent source marketplace, are quite a good deal. of housing tenure for them. Shelter came out with some good points, in one of their recent papers, about Q521 Mrs Glindon: Mr Smee and Mr Terrington, we the idea of a longer-term tenancy with index linking. have often heard that the biggest barriers to longer The concept of “indefinite” may be leaping to the tenancies are terms and conditions in mortgages that second or third stage or iteration of that. Some of restrict lets to six to 12 months. Why are such Shelter’s views were good—but not perfect. They conditions insisted upon? wanted five-year letting agreements one way, and two Paul Smee: It goes back to what Mr Fletcher was months the other way. I think landlords would find the talking about: the ability to get vacant possession if a imbalance there a little troublesome to deal with, and landlord gets into trouble. But I know that lenders are therefore, that may turn them away from it. But three looking very seriously at whether and how they can years and six months, or something like that, may be remove that condition from mortgage offers, and the a better balance to strike between the two. circumstances in which they can do so. I know that Paul Smee: It is worth adding that only about 30% of one major lender has been doing a very serious review properties in the private rented sector are subject to a of its policy and expects to announce a conclusion buy to let mortgage, so the buy to let mortgage shortly. They may want to look at the landlord to providers are not exactly driving all the conditions whom they are offering a mortgage without the prevailing in the sector. condition, because they want to focus more on those Ian Fletcher: I don’t think we have addressed the with some experience of the market, who can handle issue that stops this head on. To me, the major barrier the implications of longer tenancies. is being able to gain possession of your property as a It is also fair to say that the lender has not felt a great landlord—or indeed, as a lender—and being able to surge in demand for these mortgages from landlords, do so at open market value. Properties that have not least because I think there is lots of evidence that tenants unfortunately tend to be valued at less than those in the private rented sector value the flexibility market value, because of a sitting tenant in there. Memories remain long and hard about that from that a one-year tenancy agreement gives them. Quite previous examples of rent control and security of a complex mix has led to this condition being tenure. I think we need to address that issue, and it is introduced into mortgage documentation, but it is about speedy access to the courts, and the ability, as I being considered at the moment to see whether more say, to gain possession. flexibility is possible, possibly in return for different If there was a way of ensuring that we had some sort economic conditions, because the risk in the lending of guarantee that you could have possession cases would change for that particular contract. turned around in court in eight weeks, that would Nigel Terrington: We have asked our landlords on a probably go a lot further, in terms of getting our fairly regular basis what things they see from tenants landlords’ confidence to consider longer tenancies, and what they want. Specifically, a question has been than some other issues that are being bandied around asked about longer-term tenancies. The demand at the moment—for example, whether it should be an coming back to us from our landlords is very low. It RPI or CPI link, a fixed uplift, or reverting to market, may appear that we have landlords saying there is no demand, but the tenants appear to be asking for it. 7 Note by witness: The CML does not hold any data on There is clearly a gap that needs to be understood and residential mortgagors renting out their properties without the lender’s prior consent. Lenders will generally be bridged, particularly given the way that the private sympathetic to a residential mortgagor’s request to rented sector seems to be developing and will develop temporarily to let their property. over the years to come. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG06 Source: /MILES/PKU/INPUT/027272/027272_o006_michelle_130508 HC 50-i PRS CORRECTED transcript.xml
Ev 86 Communities and Local Government Committee: Evidence
8 May 2013 Ian Fletcher, Paul Smee and Nigel Terrington
From a lender’s perspective, there is clearly a risk to Ian Fletcher: Clearly, I think there is a range of their security if they have a property in arrears, there different things that might help to get landlords is a long-term tenancy in there and the landlord is not voluntarily to adopt long-term tenancies. For example, paying. There is nothing they can really do about that. on the tax incentive side, particularly if you combine Trying to sell the property with a tenant in situ, where it with registration so that you are able to have the the rent may be under market, is not a great position checks and balances in place to ensure that incentives to be in, hence the reluctance of landlords to enter into go only to those who are having those longer such agreements. tenancies, you could have some sort of VAT However, one of the tools that is available to lenders differential. At the moment, landlords charge VAT on is the ability to appoint a receiver of rent. “Receiver” their management costs. That would be one way of sounds a terrible word, because it immediately doing it. conjures up “fire sale.” It is far from that; it is There are other things that we have already discussed. essentially where the lender takes control of the Clearly, it would be more attractive if there was landlord’s job, as it were, and ensures the correct greater security of income for the landlord than just management of the property. At that point, the tenant the two months that the tenant is able to give notice. will pay the rent to the bank or lender, which, if the I notice that Genesis has discussed having anything rent is sufficient to manage the debt-service costs on up to five-year tenancies, but in their case the the loan, can count down the days until the tenancy institution that is investing the money is getting a agreement ends and deal with it in an orderly fashion. lease-back from Genesis, so Genesis is taking the But it is important that the lender is able to use that risk—whether or not those tenancies are occupied, it receiver of rent tool to achieve that. If it is six months is not the end investor. Another way of perhaps into a five-year letting agreement, that is a long period getting more long-term tenancies into the sector is to of work-out and management to be dealing with, have the sort of intermediaries that can facilitate and hence I think it probably needs to be pulled back from take some of the risks of that lack of occupancy. a five-year to a three-year period. That should be Chair: Thank you very much for coming to give explored further by the industry to accommodate those evidence this afternoon. changing needs.
Q522 Mrs Glindon: Mr Fletcher, you suggested that tax incentives could be used to promote longer tenancies. How would they work? cobber Pack: U PL: COE1 [SO] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG07 Source: /MILES/PKU/INPUT/027272/027272_o007_michelle_130513 HC 50-ii PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 87
Monday 13 May 2013
Members present: Mr Clive Betts (Chair)
Simon Danczuk John Pugh Mark Pawsey ______
Examination of Witnesses
Witnesses: David Shepherd, Assistant Director, Housing, Employment and Skills, Bradford Metropolitan District Council, Ruth Abbott, Housing Standards and Adaptations Manager, City of York Council, and John Statham, Head of Housing Partnerships, Leeds City Council, gave evidence.
Q523 Chair: Thank you all for coming. This is the have settled down now and the market, as I say, tends seventh evidence session of the Communities and to regulate itself. Local Government Committee inquiry into the private We then have a smaller high-end market, which is rented sector. Thank you for coming along to meet us located in and around the outer ring road of the city— in Leeds Town Hall. I will start off by thanking Leeds so, if you like, in the suburbs of the city. Again, that Council very much indeed for making the generally has regulated itself. The market has been for arrangements for us today and hosting this particular young people and young families, although increasing hearing. issues with affordability are now putting pressure on As a matter of proper formality at the beginning, we that market in terms of how much people can afford have to put on record, again, any interests we have in out of their income. this particular sector as Members of Parliament. I have We have a significant student population in Leeds and, a flat that I rent out. traditionally, that has lived in the Leeds 6 area. Simon Danczuk: My wife has a small interest in a Historically, we never have had a significant amount small rented property in Rochdale. of purpose-built halls of residence, so large numbers John Pugh: I am a tenant. of first-year students have always lived in private Chair: You are a tenant. Okay—we probably all are, rented accommodation. Over the last five or six years, in various forms, as well. To begin with, could each that has significantly shifted. The demands of students of you just say, for the sake of our records, who you have become significantly higher, with issues around are and the organisation you are representing this access to wi-fi and things of that nature. We have seen afternoon? a growth, in the last four or five years, of purpose- David Shepherd: I am David Shepherd. I am built flatted accommodation, located closer to the Assistant Director for Regeneration and Culture at universities or city centre. That then means the Bradford Metropolitan District Council. traditional student market in the Leeds 6 area has Ruth Abbott: I am Ruth Abbott. I am Housing started to change and the council has to look at that Standards and Adaptations Manager with the City of and work with the market itself as to how we deal York Council. with it. John Statham: I am John Statham. I am Head of In the inner city we have significant markets, which Housing Partnerships with Leeds City Council. you have seen this morning, that are largely pre-1919, largely poorer-quality housing and largely in the Q524 Chair: Can I just begin, appropriately, with housing benefit market. We have concentrated a lot of John Statham? Once again, thank you for the help you our efforts in terms of regulation in that area because have given to us with our visit today. What we have of the poorer quality of the accommodation. We have learned already is that there are a number of different got great concerns as to what impact the welfare private rented markets in Leeds with their different changes will have in that area, whether or not that characteristics, different tenants and different market then becomes even more squeezed and then landlords. Could you just say a little bit about that and what happens as a result of that, particularly in what the proportions are? Has it changed much over relation to links in to homelessness. That is an the years? overview of our market. John Statham: There are a number of markets within Leeds and it has changed over the years and is Q525 Chair: To Ruth Abbott and David Shepherd, changing now. We are in the city centre, so we can how do your cities compare with that? You both start there. referred to the fact there has been significant growth In the past 10 or 12 years, we have seen a significant in the private rented sector in recent years. Has that development of flatted accommodation within the city come about because new properties have been built centre. It is usually high quality. The market regulates specifically for the private rented sector, or is it itself because of the type of accommodation it properties that were in another tenure switching over provides and who it is providing it for. It is largely for to the private rented sector? young professionals and young people wanting to live David Shepherd: In Bradford it is the latter: property in the city centre. It certainly grew significantly from switched over into the private rented sector. We saw 2000 to where we are now. There were, initially, a lot of those come through buy-to-let mortgages that problems with volume and demand, but that seems to people took advantage of. What we did see with that cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG07 Source: /MILES/PKU/INPUT/027272/027272_o007_michelle_130513 HC 50-ii PRS CORRECTED transcript.xml
Ev 88 Communities and Local Government Committee: Evidence
13 May 2013 David Shepherd, Ruth Abbott and John Statham as well, just from anecdotal evidence alone, was that does present a significant problem for local authorities a lot of people do not know what to do with those when they are looking to enforce. properties then. They have not entered into private renting with any particular business plan in mind. Q527 Chair: Is it possible you can give us some They do not own many properties. Often, not detail on that? necessarily purposefully, they end up with problems David Shepherd: Yes, I can give you detail. that we need to intervene in, whether that be through Chair: That would be helpful. We would be looking encouraging or educating them or, ultimately, for a written note, so we can take that on board, as it enforcing as well. It has definitely been as a result of is a very interesting point that we have not had made conversion, rather than building new properties. to us before. Ruth Abbott: I would say that that was echoed in David Shepherd: There are other areas of York. The only thing with York is it is a very compact inconsistency as well, where we find that staircases city and a place where people seek to invest. We are that are ladders, effectively, up into a room that could the third fastest growing city in the country and people be a bedroom are allowed under building regs; for come in with money to invest in this, particularly private rented standards, and in terms of the Housing wanting to enter the student market, which tends to Act, that is not appropriate. Also, bedrooms without mean that the people who want to go on housing windows would be another issue we find that would benefit are excluded from that market and are pushed pass in terms of building regulations, but not in terms out to the poorer types of properties, clustering in pre- of the standards enforced through the Housing Act. 1919s. In particular, they are excluded from properties You might see it as a technicality, but it is one that near the universities and colleges, which is a big sometimes causes problems for the enforcement swathe. If you think of York as being very compact, officers. there is not really anywhere for them to go, because Ruth Abbott: The only thing I would say for York is almost everything is within walking distance, or at that the accommodation for students tended, in the least within cycling distance, of the university. It does past, to be built close to universities. What we are leave very few areas left for people to actually get a actually seeing now is they are accommodated in the rent at a reasonable rate. new purpose-built accommodation, which is coming down into York itself. That is great, to be honest. It Q526 Chair: In terms of students, it has been stops them from being isolated up on the hill, as such. mentioned that, as in all university cities, there has That has been a change over the last couple of years been some building out of purpose-built student in that we have seen the growth of new purpose-built accommodation in Leeds. Is that happening in York student accommodation in the city, which is of benefit and Bradford? Is there an impact in terms of the other to the city. properties that students rent? One thing we heard this morning when talking to landlords and tenants is that, Q528 Chair: Finally, just in terms of Bradford, it often, even in the traditional private rented sector, obviously has a very ethnically diverse population; standards have been pushed up in the student areas, does that create any further issues that you have to perhaps because they have a better understanding of address in terms of private renting? Are there extra what their entitlements are and pressure to improve challenges for the local authority as a result of that? those standards. The worst standards seem to be left David Shepherd: Anecdotally, we deal with for other people who perhaps have not got that enforcement issues, and we have a lot of landlords understanding of what their rights as tenants are. who are of Asian origin, but we would not have hard David Shepherd: In Bradford, there has been a evidence to say that there are particular differences. considerable new build in the student market and, by The other issue we are looking at is updating our and large, that has pushed standards up in that market. information. Census data has only just come out and We have started seeing people move away from we are looking to that data. If we do get additional traditional student-let properties into the new build information in time, we will tell you. In the main, it where they can afford it, because the rents are does not present particular enforcement issues for us considerably different for those. There will always be because we find that there will be enforcement issues, a market for students who do not want to pay the whatever the characteristics of the household. There amount for purpose-built accommodation. does not seem to be a pattern, as such, across the What has been interesting to me is that we have had district. a particular case where we had some very high-grade student accommodation built, but it highlighted an Q529 Mark Pawsey: We have heard from each of inconsistency between the standards that we enforce you about the growth in the market and the challenge through the Housing Act and the HHSRS and building of maintaining standards within the sector. The regulations, because there often is a difference Housing Act 2004 gives local authorities the powers between those. There would be a lower standard to set up a scheme of selective licensing where certain within building regulations; however, when you apply conditions are met. You seem to have, as authorities, the higher standards within the Housing Act, you find different approaches to that. John, you have set up a that there is a problem. That is what we found with system of selective licensing. Can you tell us how you some of the new-build student accommodation. went about that process and which areas you chose to One of the issues for this Committee, which will be apply it to? Just talk us through that. of interest, will be to try and simplify and iron out John Statham: Yes, we have a selective licensing area those inconsistencies where they do exist, because it in east Leeds, in Cross Green. The process from the cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG07 Source: /MILES/PKU/INPUT/027272/027272_o007_michelle_130513 HC 50-ii PRS CORRECTED transcript.xml
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13 May 2013 David Shepherd, Ruth Abbott and John Statham concept to the actual start was about two years; that Similarly to what John and David said, most of the gives you an idea of the problem of establishing a landlords in York are very small landlords—they have selective licensing scheme. We spent in the region of only two or three properties—and what we would like £80,000 to £100,000 in bringing that scheme to life, to do is to have a system where we know where they so, again, there has been a significant cost in that are and we know how we can give advice, information process. and knowledge to improve. They are not rogue The problem with developing them is that time frame: landlords; they are just landlords who tend to be—I the consultation is required, the business case needs hate to say the word “unprofessional”, but that is not developing and there are approval processes that you their main business. They have bought a house or have to go through. Having said that, we are now maybe a couple of houses for their retirement, looking halfway through the five-year period of the selective to the future, and it is an investment for them. What licensing scheme and it has been extremely we would like to do is to support them. successful. We have certainly worked very closely with partners, which is critical for that sort of scheme Q533 Mark Pawsey: Are you actively doing things to be a success. Partners have included both agencies to remind those kinds of landlords what their within the local authority, but particularly the police, obligations are to their tenants? fire service and agencies of that nature. Ruth Abbott: We regularly hold what we call our In selective licensing, what one is trying to do is to annual landlord fair. We have what we call a code of do more than just the standards of the property; one practice for landlords. What we feel we are missing is is trying to tackle issues in the area, whether that is a scheme. crime and disorder or fly-tipping, as well as to tackle At the moment we are looking to introduce an the standards in properties. Certainly, what we found accreditation scheme that we have been developing in is that there were more privately rented properties that partnership with landlords and other stakeholders in we needed to license than we anticipated. Clearly, that the city. The four key elements of that mirror some of has given us a benefit. We have started licensing the the stuff to do with licensing. It mirrors the stuff to properties and we have taken enforcement and prosecuted a number of landlords in the area for their do with fit and proper person. It mirrors the stuff to failure to comply. Certainly, antisocial behaviour and do with management standards and physical general environmental issues in the area have standards. The fourth element that we are really keen improved significantly as a result of the work. on is introducing core responsibility tools and core training, so we are actually improving their knowledge and awareness. As I say, most of the time Q530 Mark Pawsey: Are there any firm stats you when we find enforcement issues—when we go back can give us on that? Can you talk to us about the to it—it is because they did not know, and we want incidence of antisocial behaviour, or numbers and to make sure they have that information there as early quality of improvements that have been made to on as possible. properties? John Statham: We could certainly give you statistics around that. I can arrange for those to be given to you. Q534 Mark Pawsey: David, your authority has not introduced discretionary licensing because you are bothered about penalising good landlords. Why Q531 Mark Pawsey: If I might go to the other two witnesses, neither of you have introduced those should good landlords be penalised by registration in schemes. Ruth, you have said there is very little hope an accreditation scheme? of introducing that in York. Is that because the rules David Shepherd: They will have to pay a fee to the are too tight or are you put off by the idea that it is authority to regulate the behaviour where they were going to take two years, in the same way as they found previously working in line with the expectations of in Leeds? them. Just doing that penalises better-quality Ruth Abbott: We did not think we had the tests, such landlords. as the antisocial behaviour or the low demand. Houses always sell very rapidly; even now they do not hang Q535 Mark Pawsey: We heard today from landlords around on the market. What we thought we would who told us they were quite happy to pay that fee prefer to have as an approach was to look at because that gave them a sense of accreditation and controlling, with a number of HMOs—again, I go drove the bad landlords out of the sector. back to the dominance of the shared student market David Shepherd: You have heard from different of the universities and the colleges—where we have landlords from the ones my staff and I speak to. We introduced Article 4 and removed the permitted have got a lot of experience. Previously, I worked with development rights— Sheffield City Council and I had experience of managing a similar portfolio there, and it was exactly Q532 Mark Pawsey: May I just ask: if those two the same arrangement there. Whenever we broached tests did not exist, would you still want to go for a these subjects with landlords, they were loth to pay— system of selective licensing? they were loth to pay even the HMO licence fee that Ruth Abbott: I would not go for selective licensing. they have to pay. We also find from experience that What we would be very keen on is looking at a we, as authorities, pick up the costs of those schemes. process of licensing landlords, not necessarily their If you look at the HMO example, the licence fee that properties, and looking at the way that we can support we take in for that is around a fifth of the cost of landlords, so we know where the landlords are. running the overall scheme to an expected standard. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG07 Source: /MILES/PKU/INPUT/027272/027272_o007_michelle_130513 HC 50-ii PRS CORRECTED transcript.xml
Ev 90 Communities and Local Government Committee: Evidence
13 May 2013 David Shepherd, Ruth Abbott and John Statham
Q536 Mark Pawsey: To Ruth and John: how much authorities to incentivise landlords to work with an do you charge landlords? John, you have introduced accreditation scheme. We think there could be a your scheme; what is the cost of accreditation? decent deal for landlords, which does not necessarily John Statham: I have not got a figure to hand, but I contravene state aid rules, such as making equity loan can get that for you. finance available for them to invest in their properties and bring them up to appropriate standards. Q537 Mark Pawsey: The message we got today Government has an opportunity now to look, with the from landlords in Leeds was that they were very introduction of the various welfare reform measures, happy to pay it. I am wondering why landlords in and to think again about housing benefit direct. If you Leeds are happy to pay it, but those in Bradford are want a landlord to work with a local authority, there is not. no greater incentive than to pay housing benefit direct. David Shepherd: I can only tell you what I know from speaking to landlords. I am more interested in the experience that my officers in both councils have had Q541 Simon Danczuk: We will come on to that. Just in working with landlords on a proactive basis, where to be clear, do you have an accreditation scheme in we have had really great success. We work on targeted Bradford? areas. In Bradford, over the last few years, we have David Shepherd: We had an accreditation scheme, but improved over 1,000 properties to standards set out it is no longer operating effectively because of the within the HHSRS, through a proactive working reasons I have explained. Landlords, basically, voted approach. I would say that the money that we put into with their feet because they could not see what the that is money better spent for Bradford than it is in incentives for them remaining within the scheme putting a selective licensing scheme in place because, were. We were prepared to put the effort in. at the end of the day, what we are interested in is improving the quality of tenanted properties and Q542 Simon Danczuk: Just to finish the point, does ensuring tenants do not fall foul of poor standards, Bradford think that landlords should be regulated in either because of the property or because of their some or any way, or no way at all, compared with landlord’s behaviour. I believe, from our experience, what they are now? that that is better delivered through working hand in David Shepherd: There is appropriate provision hand with landlords and enforcing where you have to, within the legislation in order to enforce. There is a because we are not a soft authority on bad-quality particular issue around agents, though. landlords.
Q538 Mark Pawsey: You are saying that, because Q543 Simon Danczuk: We will come on to agents. you do not have this discretionary licensing scheme, Other than what is already in place, does Bradford you have got more money to put into enforcement. not think it needs any other form of regulation or any Does that mean that John has got less money to put structure to it? into enforcement because he has got a licensing David Shepherd: No, other than what I previously scheme? said about ironing out some of the contradictions David Shepherd: I cannot speak for John. between the various regulations and statutes that do John Statham: No, our position is that we have tried cause some problems. to maintain a balance across those areas. Q544 Simon Danczuk: I am sure you cannot answer Q539 Mark Pawsey: Does the income from this, David, but it would be interesting to know landlords cover its costs in Leeds? whether your tenants in Bradford agree with your John Statham: Overall, our licensing scheme is view. Talking of tenants, Ruth, is it right that you are financially balanced covering the overall cost of our proposing an accreditation scheme for tenants in licensing scheme. York? Can you tell us a bit about that? Ruth Abbott: It is in the early stages. In a way, it has Q540 Simon Danczuk: Just following on from that almost come out of the welfare reform changes and is then, David, are you opposed to any licensing or any to do with our social tenants, because we believe we accreditation? You do not like regulation. What are you in favour of? may have a number of properties of social landlords David Shepherd: That is not true; I did not say that. in York where it is a case of people wanting to rent I said I am opposed to bringing in selecting licensing. out rooms to help pay for some of the changes, We are definitely in support of accreditation; we have because now they are not going to get the benefit. set that out in the evidence that we have put before Basically, we are looking at how we can actually you. We have run accreditation schemes in the past to improve the tenant’s ability to find accommodation by some success, but they are difficult to keep going giving them some accreditation. At the moment, the when there is no clear incentive for the landlords to only thing we have put in place is to do some checks continue working with you, particularly when you are with North Yorkshire Police, and we will be revealing dealing with some of the landlords who, as Ruth those background checks only if we think it is explained, have not necessarily got a business plan appropriate to do so. That will only be on the basis of before them in the way that you or I would expect. the tenant saying yes, they are happy for us to do that. We have suggested that there are ways that the It is a very light-touch approach that we are taking Government could look at working with local with tenants to help them to find accommodation. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG07 Source: /MILES/PKU/INPUT/027272/027272_o007_michelle_130513 HC 50-ii PRS CORRECTED transcript.xml
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13 May 2013 David Shepherd, Ruth Abbott and John Statham
Q545 Simon Danczuk: Starting with you, John, what innovative ways that will benefit tenants when they steps do you take, as an authority, to inform tenants are looking for accommodation, and also ensure that of their rights and responsibilities? there is appropriate advice when things go wrong John Statham: We have got a range of information when they are in that accommodation. and guidance that we publish through various forms, such as in a leaflet or on our website. Every time we Q549 John Pugh: Can I speak to John? We were visit the tenant who has requested that service from privileged earlier today to talk to many landlords and us, we give them information and access about their tenants in your neck of the woods in the city. rights. We have a strong benefits advisory service in Practically none of them had a bad word to say about the city, which can also support them in terms of the council in its role as the regulator. Do you find the advice about how much, or what, they are entitled to. regulation of the private rented sector complex and We have a range of activities that help tenants. difficult to interpret? Tenants do sometimes feel worried about going to John Statham: It is complex, but it is not that difficult local authorities to request service and support. to interpret. We have worked with landlords—this is Tenants of the poorer landlords perhaps worry about perhaps why they have good things to say about us— whether they will be evicted if they are seen to be to make sure that they understand why enforcement causing a problem, so we also try to arrange for advice action would be taken and what they need to do to for them on their legal rights within whatever tenancy prevent that action from being taken. Certainly, the agreements they hold. We do quite a bit with tenants. joint work we have done, whether it is through the accreditation scheme or with the associations, has Q546 Simon Danczuk: Ruth, how does your helped us greatly, to be quite honest. authority support tenants in their rights and responsibilities? Q550 John Pugh: David, in your evidence you said Ruth Abbott: Again, we have very similar kinds of that the regulations were difficult to interpret. John things. We have a well-developed website. We also disagrees with you here. Why is there this have a housing options service, for when somebody disagreement? What is it that is difficult to interpret? comes in to the council to get advice about not only David Shepherd: As I have already said, there are what their rights and responsibilities are, but what conflicts between— options are out there. We have also, in the last couple John Pugh: We have all agreed it is complex. There of years, set up a social lettings agency as part of is no dispute that the regulation is complex, but I was the council, called Your Home, which helps tenants to on the point of whether it was difficult to interpret and find accommodation. whether there was serious ambiguity around it. David Shepherd: I did not say “complex”; I said there Q547 Simon Danczuk: Does that include the are conflicts within the legislative provisions set out private sector? that govern operations in this area. I have already Ruth Abbott: It is in the private rented sector, so we talked about the differences between building let, through the social letting agency, about 75 to 80 regulations and the Housing Act and Regulatory homes now that are in the private rented sector, but Reform order. We have to put protocols in place for they are managed privately by the letting agency. enforcement between ourselves as local authorities Again, that is to try to help tenants—particularly and the fire authorities to ensure we are absolutely tenants who were in receipt of housing benefits—to clear as to who has got enforcement responsibility find accommodation, because it is so scarce in York within the area. Again, that is not altogether clear at the moment. from reading the legislation. There are some complexities, but they are just brought about by the Q548 Simon Danczuk: David, in terms of supporting conflicts. All I am suggesting there is that there is a tenants, what do you do? read across between the different legislative David Shepherd: We have the same arrangements in provisions and that there is a standardised approach terms of information and advice. We do have the bond that puts everyone in place. guarantee scheme in place as well to enable people to move into the private rented sector without any Q551 John Pugh: In your view, is it a matter of obstruction to them; literally hundreds of people have making a few good tweaks to the regulation and taken advantage of that and that has assisted with our legislation, or is it a question of having a complete social housing waiting list quite considerably, because overhaul and a new look at it? it is the same people who will be putting pressure on David Shepherd: I would suggest it is the former, social housing. rather than the latter. I prefer not to have new At the same time, through the bond guarantee, we are legislation introduced where it is not necessary, but able to construct a dialogue with landlords to ensure then again that is not my decision—it is yours. that those properties are of an appropriate standard and are maintained at an appropriate standard. That Q552 John Pugh: Ruth, what do you think? Are all has been very effective. In addition to that, in West the tools and levers available now, or do you think we Yorkshire, Leeds included, we run a lettings approach need to change things? through a web-based tool that Kirklees developed on Ruth Abbott: The only thing I would say is necessary our behalf. That came into operation just over a year is to know your landlords and how to contact them. ago; it was one of the CLG pilots for new lettings There is potentially a role for having a registration approaches. We do try to look at, I suppose, scheme of all landlords so that we are able to provide cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG07 Source: /MILES/PKU/INPUT/027272/027272_o007_michelle_130513 HC 50-ii PRS CORRECTED transcript.xml
Ev 92 Communities and Local Government Committee: Evidence
13 May 2013 David Shepherd, Ruth Abbott and John Statham that information and training. We have put that judges will be prepared to issue quite strong and large forward definitely for the letting agent, but having fines to send a message, and this is part of the judicial some simple registration scheme for landlords so that process, but others are certainly not consistent. That we know to contact them, where they are— is difficult given the amount of work that is put into every individual case. Q553 John Pugh: Should that be mandatory? Ruth Abbott: That should be mandatory. I am not Q558 Chair: Let us move on to the length of looking for all their properties, but just being able to tenancies. We were in Germany the other week where contact the landlords and being able to provide they have a very different system, in which tenants information. Also, there is a need to do some work on effectively get tenancy for life. However, here we the training and the knowledge to support them. have these relatively short tenancies, which may be Without having that simple registration scheme, I do okay for mobile, single people who may be thinking not see how we can provide that training and the about moving to a different place next year. Do you knowledge. think we do need longer-term tenancies for families, who are increasingly occupying private rented Q554 Chair: Someone the other day said to us that properties, and are thinking about their kids remaining they could see the different ways we needed to bring at the same school as well as them staying in the same to book those landlords who were persistent offenders, house? How can we achieve that? What would be the and they were talking about something like a fixed way forward? penalty notice with the council having the power to Ruth Abbott: That is a really difficult one to do issue it and then take the money back to help cover because there is a need, as you say, with families in their costs. Would any of you support that approach? particular. There is some concern about the fact that, Is this one you have not been asked about before? in particular, the mortgage companies perhaps John Statham: Again, that sounds like you would penalise and say to landlords, “You can’t give longer need a significant influx of resources to be issuing tenancies than that,” and that is a condition of when fixed penalty notices and then to be managing they are providing mortgages to those who invest in whatever happens with the payments or non-payments the market. of it. We are all pretty much agreed that the current We are looking, all of the time, at how to incentivise arrangements on regulation are rounded; it is just they landlords to give extended tenancies. I do not know if can be complex. As David said, a few tweaks— you can do that through changes to the law—I do not know whether that would work or not, to be honest— Q555 Chair: It is just that councils tell us they have but we are looking at ways of saying, “How can we not got the resources to do as much as they would like give 12-month tenancies, two-year tenancies through in this area. the Your Home social letting agency?” At the moment John Statham: I think that is true. that is the way we think we can do it. There are some restrictions with that. As I understand, with some Q556 Chair: It is a way of trying to get some money mortgages, some landlords cannot do that. back from the people who are not doing the work, John Statham: Yes, we need to look at it. If we can where you have to spend a lot of time and effort find a way through extending tenancies, that is very making them do the work and getting them to help worth while. One of the issues is that, yes, we are with your costs. about improving properties, but we are also about John Statham: As long as they pay. improving communities. If somebody has got a six- Ruth Abbott: This issue with housing legislation, in month tenancy and is here today and gone tomorrow, particular, is that it is about improving the property, at there is no buy in into that property or into that the end of the day. I am not quite sure how giving a community, necessarily, because they may be in a fixed penalty notice results in the actual work being different part of the city, or a different city, in six done to the property. months’ time. If people could have a longer tenancy, they would perhaps be more inclined to be part of Q557 Chair: If they do not do it, they get another the community, to look at the changing environmental one, I presume. issues within the community and to support the Ruth Abbott: It is about doing both, is it not? community. John Statham: I would suggest that pursuing It is very difficult, though, in the lower end of the somebody through the courts and succeeding in the market to do that, because at that end, landlords are prosecution is far more effective than issuing a fixed mainly reliant on the housing benefit payment. They penalty notice. They would then become like parking just want the money. They are not really that bothered fines getting thrown on the back seat of the car. about who is in there or what is happening with the David Shepherd: Unfortunately, the courts are community, to some extent. I do think it would be incredibly inconsistent when it comes to fines, I would beneficial if we could have longer tenancies. I dare suggest. Recently, we had a landlord taken through the say that landlords would argue that that would then courts process who was prosecuted and then, within a restrict their ability to get their property back if they month, he was back in front of the courts and needed to. It is quite a difficult one, but I would be in prosecuted a second time. However, the courts only favour of longer tenancies. offered a £300 fine, which was not much of a David Shepherd: Longer tenancies can be granted, disincentive for him to stop doing what he was doing clearly, at the present time, if the landlord wishes to in putting tenants in jeopardy. We do find that some do so, but having the assured shorthold tenancy there cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG07 Source: /MILES/PKU/INPUT/027272/027272_o007_michelle_130513 HC 50-ii PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 93
13 May 2013 David Shepherd, Ruth Abbott and John Statham as a backstop option will always be used by landlords. landlord and doing nothing. The landlord then is As John has already said, that is the failsafe option surprised when the authority takes action against him for them. What we find is, again, just looking at what or her for the condition of their property, saying, happens in a case, we see a lot of retaliatory evictions “Well, I’ve been paying a letting agent and the letting if somebody has approached a local authority for agent has taken the money, but doesn’t do anything assistance and the landlord can end up evicting very for that money.” It is a very difficult area, but there is quickly with assured shorthold tenancy, which does significant growth in that lower market, where some not help, particularly with more families moving into of the less scrupulous letting agents can see an easy this tenure, because they do not have the choice within 10% or 15%. the owner-occupier market. I would definitely be in favour of longer-term tenancies; I am not so sure how Q561 Chair: Should we be insisting on licensing for you can achieve that by having the assured shorthold letting agents? tenancy available to everybody at the same time, Ruth Abbott: Yes. The difficulty is that they all have because it will always be the preferred approach for different roles as well. Some of them just find tenants landlords. and some of them manage properties. They seem to have a varying degree of involvement in the property Q559 Chair: One thing that some landlords have said and that is quite difficult for enforcing officers to to us is, “We will be content having a longer tenancy, understand as well. The landlord will say, “I’ve got a but where we do have the occasional tenant who just managing agent,” but then you go to the managing is very difficult and doesn’t pay the rent, at least we agent and the managing agent says, “Well, actually, know if it’s six months we get rid of them at the end no, I just found the tenant.” There has to be some sort of the six months and that’s it. But if we have to go of understanding of the responsibility between the two through a process of evicting them for non-payment, parties as well. that can take three or four months in itself.” Would David Shepherd: I would suggest that some there be a trade off with longer tenancy as long as you regulatory provision for letting agents is absolutely pay your rent, but a quicker way of getting rid of a essential, particularly at the lower end of the market, tenant who does not pay their rent? as John said. What causes a problem in many cases John Statham: There is a broader issue here about of which I am aware is that the tenant often does not how much is expected of a private landlord in know who their landlord is; they only ever deal with managing his or her tenant or tenants. If you look in a letting agent. As Ruth was saying earlier on, if there the council sector, it takes us about six months to get was some way of ensuring that people did know who through the process if we want to evict somebody, and their landlord was, you could establish the appropriate you can spend half that time waiting for the courts to relationship earlier on, rather than through a letting give you the time to do it. I am not sure about that. agent, who may be interested only in the fee, not in There is a real issue there. More and more, we are delivering a service. now housing the private sector tenants who might, traditionally, have been housed in the council sector or Q562 Simon Danczuk: John, I think I am right in the third sector. The need for support in that tenancy is saying that you said there are arguments for and great, and the difficulty for the landlord is that they against linking housing benefits to property condition. do not have those skills and many of them are not set Why not come off the fence and tell us whether you up to manage that type of tenancy, whereas in the think it is a good idea or not? public sector, housing authorities have clearly been doing that for years—they have the skills and the John Statham: The difficulty for me is that housing professionalism. There is a broader issue there that we benefit is for the person; it is not for the property. It need to look at and how we overcome it, because I is there to support somebody who is on low income, cannot see that changing. I can see it being more and either temporarily or for whatever reason. That is my more, actually, as the squeeze on affordable housing concern about linking to the property. It is supposed becomes bigger and bigger. That is the broader issue to be for the individual because of their personal for me that we need to probably address. circumstances, not because they live in a property that does not have proper heating or something of that Q560 Chair: Letting agents have been mentioned. nature. There is the suspicion that they rather like the idea of regular changes of tenancies. It is a bit like football Q563 Simon Danczuk: You are not coming off the agents saying, “Can you find another club next year fence, then. Surely the argument is that the idea of because we get a payoff for the transfer?” Letting raising benefit is to provide a decent house on behalf agents always deny this, of course, and say that it does of that individual tenant you are talking about. not happen. John Statham: What I am saying is that housing John Statham: Again, it depends on the market or benefit is there to support the income of the sub-market within the city. There are many letting individual, because they are unable to provide fully agents that are operating in the city centre of Leeds for themselves at that point in time. There are other that are perfectly reputable and doing a good job, and mechanisms that deal with standards, which we talked landlords welcome them. What we have seen in Leeds about earlier. in the last four or five years, in particular, is the growth of letting agents in the lower end of the Q564 Simon Danczuk: You do not think it should market, who are taking their 10% or 15% from the be linked. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG07 Source: /MILES/PKU/INPUT/027272/027272_o007_michelle_130513 HC 50-ii PRS CORRECTED transcript.xml
Ev 94 Communities and Local Government Committee: Evidence
13 May 2013 David Shepherd, Ruth Abbott and John Statham
John Statham: I do not think it should be linked. It people on lower incomes. What are your concerns, is a personal benefit. just broadly speaking, around the welfare reform? Simon Danczuk: I got a sense earlier that you felt it John Statham: The key issue in the private rental should be. sector is the poorer end of it, so, in other words, what David Shepherd: There are legislative provisions in is happening in the local housing allowance market. place that we have talked about already, but I do That is largely reliant on housing benefit, both for the believe that the best way to work with landlords is to customer, and for the landlord therefore to make their incentivise them. The one thing that they repeatedly income in it. Any reduction in that level of income, tell me is that they want the ability to have the housing whether that is because of non-payment or because of benefit paid direct to them, so they are in more control other welfare changes, is going to put extreme of the money. It is not surprising they say that, but I pressure on that end of the market. There is not the think if a landlord is doing everything they should be space in council housing, or housing association doing, the money should be going direct to them. I housing, should those landlords decide, “This is not appreciate that there are welfare reform provisions worth the business anymore—I’m coming out of that this cuts right across, but I do believe that if you that.” That worries me in terms of homelessness, and want to address issues of poor standards within the we have done fantastically well in Leeds with levels private rented sector, you will have no better way of of homelessness over the last five to 10 years. doing that than linking the payment of housing benefit I would just be extremely concerned about what direct to the property and putting the local authority landlords do if that payment does not come through. in a role where they can then work with the landlord If they evict or they come out of the market, the to keep their properties at a good standard. pressure is going to come back onto the local authority Ruth Abbott: Our main concern about this is the fact to provide the solution. The local housing allowance that, from my understanding, housing benefit is going at the 30th percentile is not a massive rent; it is to be abolished in the next four years. If it is linked probably only just enough for some landlords. If to standards then I am not sure how any new centrally- pressure comes on non-payment, we could see a administered benefit is going to be linked to standards. meltdown in that market, which could be disastrous for any city. Q565 Simon Danczuk: What about in the here and now? Do you think it should be? Q568 Simon Danczuk: Ruth, do you have any Ruth Abbott: In the here and now I think there is a concerns around welfare reform? case, like David said, for linking condition to housing Ruth Abbott: I will go back a step and just say about benefit. I just worry about the fact that you start a the impact of when they established the local housing whole new regime and how you then tie the two allowance in Yorkshire in 2011. That was a big issue together, because standards are enforced at a local for us, because what happened in York was the fact level and benefits, from my understanding, will be that it took into account the rural area just outside of administered more centrally. How do you link the two York. When they set the local housing allowance in together and how do you do that going forward? York, it was a significant impact in the fact that 57% of the properties outside of York were okay with the Q566 Simon Danczuk: David, in the submission local housing allowance, but only 8% of properties in Bradford made, it showed that you had a concern York were able still to attract housing benefit tenants. about the broad-brush national approach to reducing We were already starting from a really low point and LHA expenditure. What is the alternative to that? any more changes to the housing benefit and this 30th David Shepherd: I guess the alternative is to pay the percentile will squeeze tenants out of the market even appropriate rate that keeps rent at an appropriate level more. With such strength in other markets—I go back where landlords can invest in their properties, get a to the shared student market or the young professional reasonable rate of return and keep the properties in a market—housing benefit tenants will be further good standard. What we find is that when you are squeezed in York. We would want York to be looked dealing with percentiles—and Bradford’s LHA at the at in isolation, rather than being looked at across such 30th percentile is very low—it does not offer a great a broad assessment, including the rural areas. It has incentive for people to invest in their properties. caused us a major problem. Clearly, when you compare the different levels across David Shepherd: The issue coming from welfare even the Leeds city region, you will see that there reform is one of pressure put into this particular tenure is a wide variation there. As John said in his earlier in this sector because there will be people moving submission, there are multiple markets operating. from social housing where there are spare rooms and What we find in Bradford is we tend to have more of they do not want to pay the subsidy. Therefore, they the lower end of the market. I am always coming back will move over to this area. There is finite stock and to: what is the incentive for the landlord to invest? If there is even less of that stock that is of the they can charge a rent of only a certain level because appropriate standard. If we have to, at the same time, the LHA level is fixed for them, there is not a great use another one of the provisions that has come in incentive for them to offer a better landlord service. through the Localism Act to discharge our duty into the private rented sector, that also brings with it Q567 Simon Danczuk: Just briefly from each of some uncertainty. you—starting with you, John—each local authority The guidance we have been issued by CLG, as local has raised concerns about changes in terms of welfare authorities, is not clear as to what standard we should reform and how that will impact on the sector and expect of that accommodation. We can only enforce cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG07 Source: /MILES/PKU/INPUT/027272/027272_o007_michelle_130513 HC 50-ii PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 95
13 May 2013 David Shepherd, Ruth Abbott and John Statham to the HHSRS standard, but that has not been clearly people to be accommodated in the private rented set out to us, and there is an issue there around the sector. How does that work? quality of accommodation that we are allocating to John Statham: That is administered through our people through the private rented sector as a discharge housing options service, which is similar to the one of our duty. that Ruth talked about. All those properties would be Again, it comes back to the capacity of local authority inspected by our private sector regulation team before areas. If we are then taking on that responsibility and we let, so we ensure that they meet the housing health there are many more properties that we need to keep and safety rating system before we would let to on top of and ensure that they are of an appropriate people. What we try to do through the homeless standard, that might be a better use of public resource service and prevention service is not just in the long term. You are then dealing with properties automatically to put people on the council waiting list. that are there and it is an issue of ensuring that We have tried to prevent that happening because we landlords keep up with the standards, rather than have got 27,000 on it already and we try to see constantly trying to build new social housing stock. whether other solutions would fit certain people. It does not work for everybody, but for some people the Q569 Mark Pawsey: That leads to my questions, private rented sector can be a solution, rather than just which are about homelessness. David, you have just going on the waiting list for the council and waiting raised the issue of the housing health and safety rating for ever, and in the interim time being in temporary system. Is there a danger that, with the requirement to accommodation or living on somebody’s sofa. place homeless families in the private rented sector, they will be housed through local authorities in Q575 Mark Pawsey: You are talking also about a inadequate accommodation? private sector leasing scheme to stimulate the supply David Shepherd: I can only speak for my own of property suitable for dealing with homeless people. authority. There will not be, in Bradford, because— How is that going to work? Is it working now? even for the bond scheme that we have had already— John Statham: We do not have one at the moment. we ensure that we do inspect the properties ahead of We were approached by a couple of landlords in Leeds them being let to people. There will be pressure who have significant portfolios in the city, asking brought to bear on local authorities, which is why I whether we would be prepared to enter into a leasing suggest that it might be helpful if the Government can scheme with them. What they were saying is that, be clear about which standards they expect to be put essentially— in place. If the Government just state that it is the HHSRS, we can plan accordingly and I can put the Q576 Mark Pawsey: Would you lease properties case for the appropriate resources to be allocated from them? within my local authority to ensure that people do John Statham: Yes, we would lease properties from not— them. What they were saying was—
Q570 Mark Pawsey: Sorry, can you explain how Q577 Mark Pawsey: Would it be on long-term that standard differs from other standards? leases? David Shepherd: If a local authority is not told, John Statham: We would want it on a long-term effectively, what it must do, as I have said before— lease, yes. They were saying that they were keeping properties empty because they would rather leave Q571 Mark Pawsey: Why can you not decide for them empty than house some of the people that they yourselves what to do? were being offered as a tenant. David Shepherd: Well, we will do, and, as I have said, from a Bradford perspective— Q578 Mark Pawsey: That is not what they told us this morning. Q572 Mark Pawsey: Why have you got to look at John Statham: Really? Well, perhaps you were not the Government all of the time for an answer? talking to those landlords then. David Shepherd: It is helpful if the Government can Mark Pawsey: They said they would rather have their be clear about what standards they expect. Working properties occupied than left vacant. from a local authority perspective, that is always John Statham: I can only report to you what those helpful. When you are looking at a difficulty of less landlords who came and sat down with me, face to resource being available for local authorities, where face, said. The idea would be that we would take them should the local authority put that resource? If this is on a long lease and then there would be a management an area where people are put in danger, it would be fee, which would represent the risk that was passing helpful if local authorities and Government could be to the local authority for doing that. We think that that saying the same thing. can work. The difficulty is the welfare change and removing direct payments, and whether that adds too Q573 Mark Pawsey: Right. You are suggesting they much risk to the local authority to make it worth are not, currently. while. Certainly, our partner housing associations are David Shepherd: I am just suggesting that there is a quite interested in coming in with us on that scheme, grey area. but that financial risk element is a bit of a worry at the moment. We have a financial model and we are Q574 Mark Pawsey: John, in Leeds, you have got due to sit down before the end of June with landlord a private sector letting scheme that enables homeless associations and talk it through. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG07 Source: /MILES/PKU/INPUT/027272/027272_o007_michelle_130513 HC 50-ii PRS CORRECTED transcript.xml
Ev 96 Communities and Local Government Committee: Evidence
13 May 2013 David Shepherd, Ruth Abbott and John Statham
David Shepherd: Can I just say that we do have a revert that back to a house in multiple occupation, leasing scheme in operation at the moment? It was they would have to get planning permission. They just a pilot phase that we ran and we did want to think that the council has put that in to prevent them expand that through the Homes and Communities from doing that. Therefore, it restricts their ability to Agency in one of their recent bid rounds. With a lot manage their property and to earn income from it. of leasing schemes, the Homes and Communities I am not sure that that is evidenced as yet. Certainly, Agency has moved away to more of an acquisition, in Leeds, we still have a significant number of repair and then get property into use. planning applications in the pipeline for houses to be turned into houses in multiple occupation for the first Q579 Mark Pawsey: Just as a matter of interest, time. There are still landlords who see that as a way what lengths of leases are being looked at? of managing their property, of using their stock. There David Shepherd: Seven years is generally the term has been a proliferation of houses in multiple that we looked at. It does differ, because it depends occupation in Leeds as a result of the student market. how much you have to invest in the property. That is now changing and that is why the landlords Generally, what you are dealing with is empty are concerned that if they move— properties and some of them do require a significant amount of investment, so some might go beyond that Q583 John Pugh: You are broadly happy with term and that is when landlords— Article 4, then. John Statham: We are, yes. Q580 Mark Pawsey: Presumably, the more Ruth Abbott: Article 4 has now been in place since investment, the longer the lease. last April. It is due to have a review this year. The David Shepherd: Yes. That is when landlords get a planning team would say it is working well and is little concerned. Also, their expectations about the rent doing what it set out to do, in the fact that it is trying levels and income that they are going to get back to control the numbers of HMOs. Again, it goes back during the period of the lease are sometimes far higher to the HMOs close to the universities and the colleges, than can be delivered. Clearly, the lease has to pay for because there were some areas that did feel like they all those improvements to the stock, so they get a were being dominated by the growth in the shared reduced income level during that time. student market. It is forcing landlords to look at new markets across the city, not just close to the Q581 Mark Pawsey: Ruth, you referred earlier to the universities and the colleges. local housing allowance and that only 8% of There have been a couple of issues: two have gone to properties in York fell into the 30th percentile, but appeal with the fact that one inspector said that they 57% outside. Presumably, then, you are discharging should have a more flexible approach to the criteria your homeless duty by placing people outside York. and the threshold; another inspector said, “No, we Is that a problem? must keep with the data and the information that Ruth Abbott: I cannot give advice on that. We try and you’ve got.” Again, going back to the data and the discharge our homelessness duty within York, because information that we hold, it is very much based on that is where families want to live; that is where they numbers from council tax data and from our own data come from and that is where we want to make sure pooled together on licensing. There is, potentially, that they continue to live and be part of the some missing information. I would go back to this community, because they have got family networks, approach about knowing how to identify landlords and etc, there. We therefore always try and discharge our identify where they are so that information can get duty within York itself. out, because there was a gap when we were setting up Article 4. Q582 John Pugh: The Residential Landlords Association says that Article 4 powers should be Q584 John Pugh: Used discriminatingly, are you in repealed and local authorities should “be more favour of Article 4 being maintained? creative and work with landlords”. Now, Ruth and Ruth Abbott: I am in favour of Article 4. John, you have both used Article 4 powers in your respective boroughs. Do you agree with that? What Q585 John Pugh: David, are you considering it in problems were you endeavouring to solve when you Bradford? used Article 4? David Shepherd: We have not made use of Article 4, John Statham: One of the things I have learned in presumably because it is not such a problem for us. dealing with private landlords is: never go near one We do not have the same pressures on markets as are without a planning officer. Perhaps we should have being described in York; it is a different type of had one here today, I don’t know. The council pressure there. I would not necessarily have a view introduced Article 4 because it wanted to have some for the Committee. way of managing the development of houses in Chair: Thank you all very much for coming this multiple occupation. Landlords’ concerns about it are afternoon and giving us some very interesting that if they change a house in multiple occupation into evidence. flats or back to a full house, if they then wanted to cobber Pack: U PL: CWE1 [O] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG07
Communities and Local Government Committee: Evidence Ev 97
Examination of Witnesses
Witnesses: Liam Burns, President, National Union of Students, Irfan Ahmed, Director, East Midlands Property Owners, and Dr Richard Tyler, Co-ordinator, National HMO Lobby, gave evidence.
Q586 Chair: Thank you all very much for coming. certainly in favour of licensing and certainly in favour Just as we did on the first occasion, could you say of registration. The previous speakers gave plenty of who you are and the organisation you represent? reasons why registration is valuable. There are so Liam Burns: My name is Liam Burns. I am President many gaps in the information about the private rented of the National Union of Students. sector and one way of filling those gaps is through Irfan Ahmed: I am Irfan Ahmed, representing East what Julie Rugg in her report calls a “light touch” Midlands Property Owners. registration.1 This is a report that is very supportive Dr Tyler: I am Richard Tyler. I am a co-ordinator of of the private rented sector and that is one of her the National HMO Lobby. We are not just reactive; we major recommendations, so we are very much in also take a proactive role. I have another hat, which is support of that. Chair of Headingley Homes, a community land trust interested in converting surplus student housing back Q589 Chair: Assuming that there would be more into family accommodation. regulation of some sort, how can we make sure that what it does is to deal with the rogue landlords who Q587 Chair: The first issue to address is the issue of we know exist, and does not put additional costs on landlord licensing law registration. I think you are all the good landlords who are doing things right basically in favour of some form of licensing or anyway? registration. Could you say how you think it ought to Irfan Ahmed: That has been the eternal question, be done and what you think the benefits would be, hasn’t it? just briefly? Chair: So we would like the answer to it. Irfan Ahmed: I will certainly speak on the licensing Irfan Ahmed: How do you find these rogue one. It was interesting to hear the comments in the landlords? It is very, very difficult because they are previous session on the other side of the fence. In not going to put their heads above the parapet. Nottingham, the good landlords—those who have put Dr Tyler: This is why you want registration—so that their heads above the parapet and have gone through you have some sort of record across the board. licensing—are completely opposed to it. The Irfan Ahmed: Yes, absolutely. accreditation may well be a way forward for them. Dr Tyler: If you have the registration, the ones who Licensing is seen as nothing more than a stealth tax volunteer for their licensing or accreditation we know on good landlords. There has been huge adverse are the responsible landlords. reaction to it, including mandatory licensing. Irfan Ahmed: One way, potentially, of finding this Nottingham is a city like most university cities. There out—putting the data protection issue to one side, if is a high number of HMOs within the city. The you can do—is that private landlords will be difficulties there are duplicated and have been seen mentioned on tenancy agreements, housing benefits across the country as well. and local housing allowance, and the housing benefits department will know who those landlords are. Q588 Chair: You are drawing a distinction between Liam Burns: Certainly, student unions have used it in registration and licensing. a similar way. Where local accreditation schemes do Irfan Ahmed: Yes. exist, they will take a choice not to advertise those Chair: Could you simply say what you think the that are not accredited and not with a local register. difference is and why there should be one and not That does mean that you introduce a competitive the other? advantage to increasing standards. It is a soft lever, but Irfan Ahmed: I understand registration to be a it is one that has been effective in some institutions. register, and I think landlords would be happy with the register. Licensing, on the other hand, because of Q590 Chair: Voluntary schemes have the problem the high fees involved, is an issue. that the ones you would really like to get hold of and Liam Burns: We have no opposition to licensing or deal with do not volunteer to be part of the scheme. registration. In fact, we are very much in favour of We just privately talked to some landlords from Leeds registration in particular. One of the issues that this morning who are all members of the scheme and students face locally is awareness of where to seek all very supportive of the accreditation scheme here. recourse, being able to proactively see what type of They all wanted to make that compulsory, because agencies or landlords have indeed been accredited, if they said that the landlords they know who create that is part of the registration process—and the two problems do not join the scheme. are linked. I do see a distinction as well in terms of Liam Burns: I do not think there would be a problem licensing. Again, we have no opposition to additional making a policy. One of the challenges would be that or voluntary licensing; we think the local community it does not become just a piece of paper that carries should be able to act in setting standards and making an additional cost that eventually goes on to the sure that they are right in the area. We have different tenant. There are some accreditation schemes that do not have any form of on-site visiting or any inspection views as to where that licensing is then used to other than a self-reflection of standards. That itself engineer the local community and impact on students could just add cost over actually driving up standards. living in the area. The soft lever is providing a kitemark system that is Dr Tyler: Licensing has nothing to do with engineering, social or otherwise. The lobby is 1 J Rugg, the Private Rented Sector, 2008. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG07 Source: /MILES/PKU/INPUT/027272/027272_o007_michelle_130513 HC 50-ii PRS CORRECTED transcript.xml
Ev 98 Communities and Local Government Committee: Evidence
13 May 2013 Liam Burns, Irfan Ahmed and Dr Richard Tyler recognised. For us, the real challenge is making sure Q594 Simon Danczuk: This self-regulation would students recognise that kitemark system and what its involve letting agents being members of a regulatory purpose is. Where it is recognised, it becomes quite a body that they choose to join. powerful way of giving a distinct competitive Irfan Ahmed: Of one of the associations that are advantage to good landlords. already out there, yes. Dr Tyler: Headingley Homes is a member of the Leeds Landlords Accreditation Scheme. We benefit Q595 Simon Danczuk: What would that then entail? from mostly having two side-by-side accreditation What would the self-regulation involve? You schemes in Leeds: there is one run by Unipol, which mentioned training. is specifically for student housing, and it overlaps with Irfan Ahmed: As Liam has indicated previously, it the one run by the council. Both these schemes offer would involve training and accountability. a lot of benefits as well as the cost that goes with them. For the landlords who do participate in them, Q596 Simon Danczuk: Would that accountability they do provide distinct advantages. In Leeds, there is include letting agents publishing, on their website, the no reason at all why a student, for instance, should fees that they charge tenants? end up in poor-quality accommodation, because there Irfan Ahmed: Absolutely. Many of the good ones are these two complementary schemes that provide should be doing that, or are doing that, in any case. them with reassurances. The problem is extending it from middling markets—like the student market, you Q597 Simon Danczuk: Do all the letting agents— might say—into the lower end of the market that John the directors you mentioned at the beginning—publish was talking about earlier on. I was quite closely theirs on the websites? involved in the development of the accreditation Irfan Ahmed: Absolutely. scheme in Leeds and one of the problems has always Liam Burns: There is a secondary opportunity to that been extending the scheme to that area of the PRS. as well. One of the things that Scotland has now done is to scrap the idea of additional fees that agencies can Q591 Simon Danczuk: Liam, you have said that the charge. Ultimately, we would like to see that legislated regulation of letting agents should be a priority for the for, for obvious reasons, in that agencies can get away Government. Could you tell me why you think it now with double-charging to the landlord and the should be a priority, and what form should that tenant. Particularly for students, it means that instead regulation take, in terms of letting agents? of front-loading additional costs, it is spread out Liam Burns: We would certainly like to see letting throughout the year, because we know fine and well agents move far more under the same legal status as that the money will be passed on to the rent, but at estate agents. We do at least have this coming through least at that point it becomes transparent. our independent ombudsman process, but much As I say, I would like that legislated, but one of the stronger scrutiny and expectation of inspection of things that we would take advantage of, in any self- things like that comes with that status. That is why regulating move by the sector, would be to say that we think such a move would be incredibly beneficial. one of the features of that should be that you ask your members to not have agent fees, but to have that Q592 Simon Danczuk: Who would it benefit? within the actual cost of the rent. Liam Burns: It would benefit the tenants themselves and confidence in the market around the area. Again, Q598 Simon Danczuk: Irfan, why should letting there is another status that it is linked to, but we can agents be allowed to charge tenants fees when the have a situation where recourse is sought. It can be letting agents’ client/customer is really the landlord? almost seen as criminal in nature, where a landlord Irfan Ahmed: There is an application process, I and an agency have acted in a way that, by any other suppose. They should not be charging tenants fees. means, would be seen as theft or fraud. It is very rarely treated as a criminal matter; it is treated as a Q599 Simon Danczuk: All the directors that you civil matter. That can make it very hard for a student mentioned earlier do not charge tenants fees. then to seek any form of recourse. We are suggesting Irfan Ahmed: I would not agree with that comment here that what the Government do with that regulation one bit. is important. Simon Danczuk: They do charge tenants fees. Irfan Ahmed: Yes, because they can do at the Q593 Simon Danczuk: Irfan, are you suggesting that moment. membership of a self-regulating body should become compulsory for letting agents? Q600 Simon Danczuk: As you suggest, why have Irfan Ahmed: As part of East Midlands Property you not been able to convince them that they should Owners, we have four directors who are letting agents just charge their customer—the landlord? and they are horrified that any one of us could walk Irfan Ahmed: I am sure that the landlord would be out of this room today and go and set up as a letting quite opposed to increased fees. agent, without having gone through any training of any kind, let alone professional training. On a weekly Q601 Simon Danczuk: It is only an administrative basis, we come across questions coming in from cost. You are saying that the cost to the letting agent agents who have set up in this manner and have no is in having to administer the application form from idea of the basic necessities of being a good landlord, the tenant, which might be an hour’s work, or let alone a professional letting agent. something like that. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG07 Source: /MILES/PKU/INPUT/027272/027272_o007_michelle_130513 HC 50-ii PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 99
13 May 2013 Liam Burns, Irfan Ahmed and Dr Richard Tyler
Irfan Ahmed: Yes. individuals, couples or whatever. You have much Simon Danczuk: I do not know what that would higher levels of occupancy within houses in multiple cost—£30 or £40. occupation than you do in normal family houses. It is Irfan Ahmed: There are credit referencing checks as equivalent to a hotel in full season. well; they go through that process. It is £30 or £35, Nearly always—not entirely—the occupants of houses which is an up-front fee they say they are paying. I in multiple occupation are young people who have understand they will charge £100, £150 or somewhere moved away from home for the first time; they are, in that region—they are some of the lowest fees that if you like, novice householders. You do not have a I have picked up on. I do know some that are hierarchy for passing on information, and the considerably higher. occupants of houses in multiple occupation turn over at a very high rate. Q602 Simon Danczuk: Is it your view that tenants should not be charged? Q607 Mark Pawsey: Are you agreeing with Liam Irfan Ahmed: Yes, it is. and Irfan that these properties should have a higher standard of protection against fire and all these kinds Q603 Simon Danczuk: It should all go to the of things than houses occupied by families? landlord. Dr Tyler: I am not saying they should have a higher Irfan Ahmed: Yes. standard, but there should be mechanisms to make sure that the standards are maintained, because the Q604 Mark Pawsey: Can I ask a question about people in them are more vulnerable to accidents and houses in multiple occupation? Are there particular so on. safety or housing condition issues for houses in multiple occupation? Perhaps I can start off with Q608 Mark Pawsey: The legislation currently Liam, because students, by definition, do not live in a distinguishes between houses in multiple occupation single-person house; in many cases, they do live in and those that are not. The evidence from all three houses in multiple occupation, where there are several witnesses is that you do not want to see that people in one large house. What are the special distinction applying. characteristics of those properties? Liam Burns: I do not see why. Dr Tyler’s point is Liam Burns: I have never quite understood why the probably more about transience. It is fair that you type of person to the numbers you have is dependent would want additional scrutiny where there is not on this, but it would be things like fire doors being in consistent oversight. It is a massive generalisation to place, appropriate glazing, smoke detectors and say that that would be as transient as what a student carbon monoxide detectors. These would all be population might or might not look like, but I do agree expected in that. One of the really important things to it is more transient. I get why it is in place. remember with HMO legislation is that it came about after quite tragic circumstances in which death was Q609 Mark Pawsey: Why should these properties be caused by poor health and safety standards within of a higher standard in terms of fire risk and safety properties. than family accommodation? Liam Burns: In terms of final outcome, of course, Q605 Mark Pawsey: Is there a case for all those they should not be; they should all be equally as high. things you have just mentioned being in the general The question is whether you need additional resources housing stock? What is so special about HMOs? to look into whether they are being kept to that Liam Burns: I do not believe there is. standard, which is a fair point. Dr Tyler: Given the social contract we have, society Q606 Mark Pawsey: Would you like to see all that at large has an obligation to look after people in extended to the general housing stock? houses in multiple occupation, in the same way as Liam Burns: I am speaking for my constituents, who hotel owners or residential institutions have are students. I am very glad that that legislation is in obligations laid on them to look after the people they place for the reasons I have outlined. If I was are responsible for. advocating more generally to society, I am not sure why five people in a flat who are unrelated are any Q610 Chair: I got involved in this when the Housing more deserving of fire doors than those who are Act was the Housing Bill. Dr Tyler, some argue that related. there are houses in multiple occupation that are not Irfan Ahmed: I agree entirely, again. It is going to covered by the mandatory licensing scheme. Should it raise standards within the property. be extended to all houses in multiple occupation? I Dr Tyler: Houses in multiple occupation are a very think of two-storey properties, which can still have a distinctive form of accommodation. They are as lot of people in them. different from a family dwelling house as a hotel is, Dr Tyler: When the Housing Bill was going through say, or a residential institution—those are four the Commons, we and a lot of other organisations different categories within Use Class C in the Use argued that the scope of mandatory licensing should Classes Order. First of all, as the name says, it is a be wider than it ended up being. At the moment, it is multiple household; you have not got a single a house with at least three storeys and at least five household with a single co-ordinating set of occupants. Our view was that it should be three relationships among them. You have got quite discrete storeys or five or more occupants. By putting those households. In some cases, these may be single two criteria together you narrow the scope a good cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG07 Source: /MILES/PKU/INPUT/027272/027272_o007_michelle_130513 HC 50-ii PRS CORRECTED transcript.xml
Ev 100 Communities and Local Government Committee: Evidence
13 May 2013 Liam Burns, Irfan Ahmed and Dr Richard Tyler deal. Our recommendation was to expand that. We are out there; hence, it is not factual to say there is a have lobbied our own council for additional licensing causal link between antisocial behaviour and HMOs. to cover HMOs in general. I still would argue in The other part of that is: many HMOs are simply not favour of that, though I understand why Leeds City just about students. All sorts of other young Council has adopted a different sort of strategy. The professionals are living in these properties, so the council wants to target the most vulnerable sectors of causal link between students and HMOs alone is the market. The size of an HMO does have a bearing something to be challenged. Finally, I do not expect on the health and safety within it, but the very for a minute a local resident not to point out and qualities of an HMO that I have just been talking pursue antisocial behaviour. Society has bad apples as about mean that that sort of accommodation is more much as the student movement. Where I do get vulnerable than other forms of accommodation. somewhat frustrated is that we have hard evidence of tens of millions of pounds that students generate by Q611 John Pugh: Liam, on the high concentration of raising and giving in voluntary activity, let alone the students, residents have told us of antisocial economic and fiscal impact students have on an area. behaviour: damage to cars; throwing of fireworks; We need to take that in the whole in whatever overturning of bins; drunkenness; public nudity; and conclusions your inquiry may lead to. That is why we vomiting. I am not accusing you of all of these—or are up for dealing with the impact of a high number any of them—but does the NUS offer any rational of students in an area. We want to do it in a holistic advice to students on their duties or experiences in way that is not about driving out students, but making being, to use Dr Tyler’s expression, novice sure there is a cohesive society at the end of the day. householders? Has the student community given any Dr Tyler: I probably agree with most of what Liam advice to move towards from some model of student has just said. There is no direct link between students occupation other than that found in The Young Ones and antisocial behaviour as such; there is no direct and other such programmes? link between HMOs and antisocial behaviour as such. Liam Burns: I will answer your question and then, if The problems arise when you have high it is okay, challenge the premise of the question. The concentrations of HMOs. I know very well that the student union is incredibly proactive in what it can do local union in Leeds and student unions around the to make sure that students are safe and can access country and the NUS do advocate, as the title of one housing. That comes along with community cohesion of their publications goes, living and working and gives as much enabling to the huge and positive together.2 This came out a couple of years ago, and impacts students have in local communities. Right my organisation had a great deal of input into this. It from the start, we did things such as hold is in all our interests to try to live and work together. accommodation fairs where only accredited registered I do not gainsay all the voluntary work that students landlords are allowed to come along. Many do regular do, but that does not necessarily address the problems surveys. In Brighton it is fairly regular. I know that that arise and are, if you like, the unintended Essex does surveys of standards, which is quite consequences of education, education, education. We common, and lobbies local areas to increase standards. had a huge expansion of higher education in the There are many community action groups. In Leeds, 1990s. No thought whatsoever was given to how there is one called Leave Leeds Tidy, which is about students who would be taking up this education would making sure that waste on exiting a flat is dealt with be accommodated and so the market, represented by properly. There has been a lot of work in Leeds to get Irfan among many others, enthusiastically jumped into people to volunteer in the local community and things the gap and started buying up not just individual like that. That is the proactive nature of it. properties but whole streets that lay in the shadow, if They are starting to deal with the overtly negative you like, of the ivory tower. behaviour. If there is a perception of, say, noise Just round the corner from where I live is Chestnut pollution, many students unions will run campaigns Avenue, which had a reputation some years ago in the on that in particular, ultimately leading to the tabloids as the most burgled street in Britain. If you disciplining of their members if they are found to be walk down it now, virtually every other house has acting in an antisocial way. A lot of activity goes on, grilles on the doors and windows. These are all and we are always interested in doing more on that. student houses. There are 54 houses in the street and 52 are student houses. They are very vulnerable to Q612 John Pugh: But when you are fire-fighting, or burglary. With the best will in the world, students are novice householders; they have very poor ideas about advising students, is it more critical—Dr Tyler may the security of their properties. It is an absolutely want to come in on this—where there is a very high filthy street. There are bins in the road all the time. concentration of student population, for example as in The whole student area is filthy. If you go through Headingley and the like? some of the more deprived areas of Leeds, these are Liam Burns: This is where I challenge the premise. I cleaner than the student area in Headingley, which is have yet to see evidence of increased antisocial absolutely filthy. behaviour in any area across the country. When I say “evidence”, as Obama said in the US election said, I Q613 John Pugh: I think you identify what we see will allow people to hold their own opinion; I will not as the problem. You call for measures to discourage allow them to hold their own facts. One of the the use of domestic properties as second homes. Is problems with HMOs and not compulsory registration around that is that nobody knows how many HMOs 2 NUS, Living Together, Working Together, 2010. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG07 Source: /MILES/PKU/INPUT/027272/027272_o007_michelle_130513 HC 50-ii PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 101
13 May 2013 Liam Burns, Irfan Ahmed and Dr Richard Tyler that primarily aimed at students and their parents, or antisocial behaviour, so as much as anecdotally I am MPs? sure people would jump to that conclusion, that Dr Tyler: I’m sorry. certainly is not a basis to do policy development. John Pugh: You call for measures in your submission Student accommodation is not a magnet for crime and to discourage or prevent the use of domestic property criminality, because by the nature of student property, as a second home. I think you are advocating that as those people are in it more often. This is interesting, a solution to the problem you have just outlined. Is because we are entering a time when that primarily about students? de-studentification will be more of an economic and Dr Tyler: It is largely about students. On the whole, social issue than studentification. As to the argument it is the student market that has generated high about deserting a community during holiday periods, concentrations. This is what I wanted to say. It is not I have some sympathy for that in terms of aesthetics, the HMOs and students as such; it is the fact that a but that does not stack up. The fact that the local street like Chestnut Avenue is almost entirely economy thrives in an area and all this vibrancy and occupied by students. There are 100 streets in volunteering happens when students are there is not a Headingley where student occupants outnumber reason to try to stop them being there in the first place. residents. It means that in those streets you have a I want to talk a little about what you do about this continuous turnover of population. It is a very young issue. The one that has been used is Article 4, which and enthusiastic population, but that enthusiasm spills is about dispersal of students. It is not across the piece. over into all sorts of activities. It is a seasonal I think that a review nationwide is needed at some population. One of the most depressing aspects of an point. There are places in Leeds where houses are area dominated by student housing is that, if you go lying empty because they have taken on Article 4 down Chestnut Avenue during the Christmas vacation, direction, but they are not in areas where families unlike any normal street where there are little lights want to move to. You have a double-whammy. twinkling in all the windows, with people are coming Students are being dispersed, there is a reduction in and going and a general festive atmosphere about the choice for students driving up costs in the market and place, it is in complete and utter darkness. There you are not delivering what you want to do. cannot be many things more depressing in the middle A sensible way of dealing with this issue of of winter than going down a street that is almost community cohesion, in which we all have a common entirely deserted. On the one hand, you have a interest, is that, if you want additional licensing to collapse of the networks that sustain a local deal with that issue, there are things like additional community, and, on the other hand, you have low waste collections available. Remember, the individual levels of behaviour that impact on the appearance of will produce their amount of waste. If you want to the area. Last year, the NUS brought out a report on 3 disperse the concentration to deal with it in terms of lad culture, which was mostly about activities community services, fine, but logically I do not see within the student body, but the lad culture identified why you would want to disperse that. Deal with that in that report impacts on the people who live next through local community action and the community door to students. coming together to talk about what can be done. Don’t take what is about safety legislation and protecting Q614 John Pugh: Can we be clear about this? In the rights and try to conflate it with the aesthetics of evidence you are presenting you are basically arguing whether or not there are tree lights on at Christmas. that the problem is occupation of property by students, They are two separate problems to be dealt with, and not necessarily students or families buying up I do not think we should conflate the two issues. property. The main thrust of your objection is density Dr Tyler: There is a lot of confusion there between of student population. licensing and Article 4 direction. This is a common Dr Tyler: Yes, and this is supported by national policy. misunderstanding in the submissions of both of my The National Planning Policy Framework sets as one colleagues. Article 4 direction is not about restriction, of the objectives of local authorities mixed sustainable dispersal or whatever. Article 4 direction on its own communities. A neighbourhood that is occupied simply requires planning permission for the predominantly by a population that is very narrow in conversion of a family house into a house in multiple age range, short term and seasonal loses all the occupation. All that does is put that form of housing networks on which a local community is based. development on a level footing with every other form of housing development. If you are going to make a Q615 John Pugh: Can I just ask Irfan and Liam significant change in the use of property, normally you briefly to comment on that problem, or the solution? need planning permission. That is all Article 4 Liam Burns: The important thing to remember in this direction does. Article 4 per se neither encourages nor debate is that property is being conflated with people. discourages; it does not do anything at all about HMOs are a type of property. Lots of the examples HMOs. What does impact on HMOs is the policy that used, which I also challenge, have been cases you need to have in place to implement an Article 4 involving people and their behaviour. I get frustrated; direction. Councils around the country are adopting we are trying to do policy-based evidence. The street policies to meet the objectives of the National referred to earlier has not got the highest crime rate at Planning Policy Framework to create balanced and all. That was disproven subsequent to the HMO lobby sustainable communities. A neighbourhood that is making that assertion. There is no evidence that entirely dominated by a young, seasonal and transient HMOs in and of themselves will create higher population is not a mixed, balanced and sustainable 3 NUS, That’s What She Said, 2012. community. The issue of sustainability is beginning to cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG07 Source: /MILES/PKU/INPUT/027272/027272_o007_michelle_130513 HC 50-ii PRS CORRECTED transcript.xml
Ev 102 Communities and Local Government Committee: Evidence
13 May 2013 Liam Burns, Irfan Ahmed and Dr Richard Tyler emerge in Leeds because of de-studentification, as absolutely no reason why a local authority in its Liam mentioned, because student bodies move from policies cannot include the capability for exceptions. one area to another. Southampton has done that. We have advocated that in Leeds. If a street is like Chestnut Avenue and the Q616 Mark Pawsey: We have started quite an last remaining resident wants to move out, we would interesting discussion on the impact of intensification say, “Okay, no family will want to move in here.” The of student areas within cities. In Nottingham, the only way you can dispose of the property is to sell it council has introduced an Article 4 direction. Can you to a landlord, so we would make an exception. tell us what has happened? What has been the experience there? Are there lots of Chestnut avenues Q623 Mark Pawsey: How does the local authority in Nottingham? know when to make these exceptions? Are you going Irfan Ahmed: There is absolutely huge stagnation in to tell them, or is it for the NUS or a developer to Nottingham now. It is a chicken and egg. If you go to tell them? buy a property and then apply for planning Dr Tyler: This where a systematic licensing scheme permission— would be helpful, but it is not difficult to identify a street in Leeds from council tax returns or the Q617 Mark Pawsey: Is this an investor? electoral register. This is how I am able to tell you Irfan Ahmed: An investor. Do they go for Article 4 that 52 out of 54 houses are occupied by students. first and wait? Q624 Mark Pawsey: Do you have in your mind a Q618 Mark Pawsey: Presumably they chat to the percentage of properties in the street in multiple planning committee. occupation that is acceptable and a percentage that is Irfan Ahmed: It is not rubber-stamped; it never is. Do not? What is the tipping point? you wait? Dr Tyler: Many local authorities have agreed that there is a threshold and if you go beyond that Q619 Mark Pawsey: So the investor does not invest threshold it starts collapsing. It varies. Manchester, and Dr Tyler gets his way, which is that there are Portsmouth, Canterbury, Leamington—a whole range fewer houses converted to HMOs occupied by of authorities—have adopted what we would students in that particular area. Is that what is recommend, which is a 10% threshold. HMOs have happening? double the occupancy of a normal household, so that Irfan Ahmed: Yes. roughly equates to 20% of the population of that street. If 20% of the population is transient, turning Q620 Mark Pawsey: So you are happy with it all, over, seasonal and so on, the rest of the street can Dr Tyler. It is a great idea. cope with that. Once you start moving beyond that, Dr Tyler: That was the whole purpose of our you start precipitating flight from the street. Before campaign right from the beginning. long, the dominoes are collapsing and you have a Chestnut Avenue on your hands. If you want to keep Q621 Mark Pawsey: You would love it if every city mixed and sustainable communities, you have to with a big student population had swathes of Article manage the properties in those communities, and that 4 directions. is what the change of Use Classes Order that we Dr Tyler: Yes. What every student town has now, lobbied for in the first place was about. The coalition pretty well without exception— Government made change of use permitted Irfan Ahmed: But this is not just about students in development, so Article 4 directions have come in. cities like Nottingham; it is a blanket. Put the idea of The purpose of Article 4 directions is that local the investor to one side and look at two houses: this authorities can fulfil their planning objective of is a property you are allowed to let; in this one Mr and Mrs X want to sell it. They are two identical sustainable communities. It applies just as much to properties. It may be in a student area; it may be non-student HMOs as to student HMOs. The student another high concentration HMO area. No Article 4 issue happens to come up because that is by far the planning permission is being granted on that property. biggest market for HMOs and the biggest driver for The owners of that property are restricted. The the concentrations we get, because universities are valuations on those properties are now up to 50% less very specific places and inevitably people want to live than for the property that has the HMO. around them. The principle applies to all forms of HMOs. Q622 Mark Pawsey: Dr Tyler, how do you feel Liam Burns: The phrase “balanced, sustainable about doing hard-working families out of getting full communities” has been thrown around a lot. It is used value when they come to sell their properties? in a very problematic way. Limiting the supply of Dr Tyler: The situation Irfan is talking about is housing where a particular group or society can live entirely the result of the fact that the market has gone without action to provide supply somewhere else is ludicrously wild in areas like Lenton in Nottingham. not building a mixed and balanced society. We do not The only reason why property is not selling is that go into places like Chelsea and ask middle-class there has been such intensive development, cultivation families to move out so we can move in students. I and mining of the area by the property industry, think that starts to expose the underlying motivation. turning into houses in multiple occupation. This is one I would again challenge the idea that Article 4 and of the problems of using Article 4 directions. There is licensing are completely separate things. It is not true. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG07 Source: /MILES/PKU/INPUT/027272/027272_o007_michelle_130513 HC 50-ii PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 103
13 May 2013 Liam Burns, Irfan Ahmed and Dr Richard Tyler
Dr Tyler has just confirmed that his objective is to Q627 Chair: In terms of the purpose-built market for have fewer students in a particular area. students that you refer to, surely in order to make that The number of Article 4 directions passed4 in Leeds happen you need private sector investment, which is is tiny; not many have been granted, because that is looking for a return. If it suddenly loses its return, or about restricting supply. You are also about to have a it is threatened that in future it might lose its return, situation where affordable shared occupancy moves it will not get funds; it is not going to happen. from 25 to 35 under the benefits system. You are about Liam Burns: It is about whether it is connected to the to have a decade of people who are also not going to supply and demand element. A doubling in the past be able to apply for benefits on the basis of single 10 years seems to me somewhat disconnected. occupancy but shared occupancy. They are going to look at the HMO market to be able to do that. It Q628 Chair: Is that building overall? It is a doubling sounds very nice to say that we want balanced on some schemes but not overall, is it? communities as well, but this is not a system that is Liam Burns: Rent has doubled. building a balanced community; it is about taking a Irfan Ahmed: The utopia for the HMO group was particular part of society and displacing it. That is these purpose-built apartments that came along that very different. would take students out of those areas and put them Dr Tyler: That is simply not the case. in those blocks. As Liam has rightly said, the rent for those places is phenomenal—£100 or £150 a week. Q625 Chair: We have to move on from there. Who comes and fills the void? The private rented Clearly we have a difference of view, and you have sector. all put your arguments very effectively, if somewhat differently. Q629 Chair: Some of these properties have been May I go on to rent control? Liam Burns, you have built in dealing with the universities; sometimes a said to us that you think there should be some form university has even given the land for them to be built of rent control. Other people at different hearings have on. Hasn’t the university got some responsibility? Do said to us that if you control rent, you will restrict the they use it properly? amount of investment that goes into the private rented Liam Burns: There are different forms of sector, which is investment we would all like to partnerships. One of the most problematic areas is encourage to get more properties built, so there is a private providers that have no form of nomination potential conflict there. agreement with an institution whereby they agree that Liam Burns: You will notice that we worded it very x number of students will come to their property. carefully. We think we should investigate rent control. Instead, they go directly to students. That is where we see the greatest inflation of prices. Because there is no Q626 Chair: That sounds like a politician’s link to any of the institutions’ pastoral services, a lot recommendation. more dodgy dealings can occur. We often ask Liam Burns: I am among friends here. The reason for institutions to try to keep that provision in-house, that is complex. I could point to rent control in other because we believe there will be a better outcome for countries with different housing markets, so people the tenant. I am not arguing against private would challenge that. The reason we are favourable to accommodation per se, because it might play an rent control is the following. You have to say where integral role in some parts of the country. You would you want rent control to apply, because for students not be able just to withdraw it. None the less, if you in particular, there are different areas you can focus were to think about what rent control could look like on. Over the past 10 years, the rent for purpose-built in a more holistic sense, we know that students paying student accommodation has doubled. It is completely between £500 and £600 a month are four times more disconnected from inflation or cost of provision. It has likely to turn to high-risk lenders such as Wonga. sky-rocketed. That means that on average for purpose- There are causal links between the wellbeing of the built private accommodation, your annual student loan individual and the rent that is being charged. and grant, if you get the maximum amount, would not cover it. London has hit 10k as the average. There is Q630 Chair: If you have got some detailed an implication for the Treasury here. You supply information about rising levels of rent, perhaps you students with cash in the form of loans and grants as could pass it on to us. a proportion. Controlling rent would mean that you Liam Burns: Of course. are doing a service to other parts of government in terms of what student financial support needs to be Q631 Chair: You referred in your evidence to being given, because increasingly students are not able to in support of rents being determined by the market. afford to go to university as a result of that. You have also made some reference to rents being As for the rest of the private rented sector, we have linked to average earnings. Isn’t that a conflict? heard already how many people are applying either Irfan Ahmed: I will have to stand away from that for things like HMOs, or to be in the private rented comment. That was made by a colleague, so I cannot sector. There is a lot of demand there. I do not think answer that. Perhaps I could pass on some further anyone would argue there is a lot of profit there. All information, but unfortunately I cannot comment on we are saying is that we think it is about time we that. looked at what benefits there could be for having a bit more regulation on how prices are allowed to escalate. Q632 Chair: You are basically supportive of the 4 Correction by witness: Planning permission applications. market determining rents. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG07 Source: /MILES/PKU/INPUT/027272/027272_o007_michelle_130513 HC 50-ii PRS CORRECTED transcript.xml
Ev 104 Communities and Local Government Committee: Evidence
13 May 2013 Liam Burns, Irfan Ahmed and Dr Richard Tyler
Irfan Ahmed: Yes, absolutely. another report by Julie Rugg ten or so years ago on Dr Tyler: One interesting thing is that a short while the nature and impact of student demand on housing ago there was a report on a group of students in markets as a whole.5 She points out the impact that Birmingham who developed co-operative housing. I student demand has on other markets, and she also know that a few years ago the NUS mounted quite recommended—it is one of our recommendations that a large project on co-operative housing for students. you can follow up—that local higher education Student housing co-ops are a big issue in the institutions should have housing policies for their Americas, North America, Canada, and Australia too. students to try to ensure that the impact they make as You could say that to some degree the whole issue is an institution is not detrimental on the supply in the in students’ hands themselves. That is quite a town in which they are located. substantial body of people. If anybody could make a Liam Burns: I can only presume that this Committee go of co-operative housing, it ought to be students. is not going to make a recommendation that anyone Another thing, which is going to annoy Liam, is that should stay in their local area to pursue higher the student housing market is quite an artificial education. I am just going to leave that alone and creation anyway. In this country, about 80% of leave the inaccuracy to the last statement. The “co-op” students go away to university, but we are unique in point Dr Tyler made is an interesting one. this in the world. Liam just mentioned the costs of Birmingham now has a very small-scale student university education as a deterrent to promoting co-operative. A few years ago, in Manchester, we did inclusivity, but we could adopt a higher education not get a project off the ground, but there are lots culture much more like that in the rest of the world. of different areas where we have looked at student Only a third of American students go to university. co-operatives. Equally, I would point out that those For heaven’s sake, we have enough universities in this co-operatives often look like distinct geographical country so that practically everybody, unless you areas being occupied solely by students. None the happen to live in quite a remote area, is able to less, they have worked in different places to bring commute to university. Obviously, there will be down rent, and it is an area in which we are interested, exceptions to that. but we have not made any headway. Chair: There is some semblance of agreement on the Q633 Chair: I can understand that view, but our job final point. Thank you all very much for coming. It in this inquiry is to look at the private rented sector was a very lively session. and how it operates, rather than to try to reform higher education policy, which probably is a bit beyond our scope and remit. I take the point; the point has been made already. Dr Tyler: The culture of higher education does have 5 J. Rugg, The Nature & Impact of Student Demand on a huge impact on the private rented sector. There was Housing Markets, 2000. cobber Pack: U PL: COE1 [SO] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG08 Source: /MILES/PKU/INPUT/027272/027272_o008_michelle_130515 HC 50-iii PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 105
Wednesday 15 May 2013
Members present: Mr Clive Betts (Chair)
Simon Danczuk James Morris Mrs Mary Glindon John Pugh ______
Examination of Witnesses
Witnesses: Councillor Tony Ball, District Councils’ Network, Mr Harry Cotterell, President, Country Land and Business Association, and Councillor Sarah Hayward, Leader, London Borough of Camden, gave evidence.
Q634 Chair: Thank you all for coming. Welcome to added incentives for people who have property to start our eighth evidence session for the inquiry into the thinking about letting it out. There are huge numbers private rented sector. Just a formality to begin with, of other factors as well. We have one of the largest as Members of the Committee, we ought to declare student populations in the country, which means there our interests, which are recorded anyway. I have a flat is a ready-made demand of people wanting to live that I rent out. there, which means competition between people who Simon Danczuk: My wife has an interest in a small are there for a year, two or three, versus families who rented property. have a long history with the area. The two markets do Chair: Thank you. Those are our interests recorded. not necessarily marry up, but it fuels demand, it fuels For the sake of our records as well, just at the growth and it fuels rent increases. beginning, could you all just say who you are and the Cllr Ball: According to the Census the private rented organisation you represent? sector has increased by 88% in the last 10 years, Cllr Ball: Good afternoon, everybody. I am across England and Wales, from 1.9 million to Councillor Tony Ball; I am leader of Basildon 3.8 million. The sector is growing, maybe not in rural Borough Council, but I am here representing the areas but across England and Wales it certainly is. I District Councils’ Network, which is an organisation would agree with Councillor Hayward: it is the made up of 201 district councils in England. availability of finance and getting a deposit together Cllr Hayward: I am Sarah Hayward; I am the Leader for first-time buyers, and the access to perhaps what of Camden Council. we would understand as social affordable housing that Harry Cotterell: Harry Cotterell. I am President of the is driving the private rented sector. CLA, which is a trade association of 34,000 rural land and property owners who provide a significant Q636 Chair: The obvious question then is: if the quantity of rented accommodation in the rural areas. economic circumstances change, do you expect that growth to stop or, indeed, to be reversed so the sector Q635 Chair: Thank you all very much for coming starts to decrease in size again? this afternoon to give evidence to us. First of all, the Harry Cotterell: Sorry, what was the first part of the private rented sector is growing significantly. It is the question? one growing area of housing tenure in the country. What is driving the growth, as far as you are Q637 Chair: If the economic circumstances change concerned? and the economy starts to grow again, given these Harry Cotterell: In the rural areas, I think it is fair to economic factors that have been highlighted as say that it is not growing, although we would very resulting in the sector increasing over the last few much like it to grow. The difficulty is two major years, do you then believe that the sector will stop barriers: taxation—the tax system is very growing or even start to shrink in size? unfavourable to residential landlords, both on the Cllr Ball: There could be an issue, a personal view income side but also on the capital side, as well— perhaps, that if the private housing market does pick and secondly planning. We know the NPPF has only up then obviously it would be an attractive option for recently come into play and we hope that that will private sector landlords to get some capital back if deliver significant gains in the rented housing sector, they are not getting the rental values they were but broadly speaking my members are up to try to expecting. increase the supply. That will be the message that I Cllr Hayward: In Camden, there is always going to am bringing here today. be a demand from students, young professionals and Cllr Hayward: In Camden, the sector is growing. We what have you, as well as families who live here. It is have gone up by 10% of our housing stock between always going to be a high-demand area, with access censuses, from 2001 to 2011. In Central London, it is to jobs. It is just a popular place to live, Central a multitude of factors. Latterly, the lack of availability London. Since 2007–08, we have seen particular of mortgages has increased demand massively dynamics in the private rented sector that have been because people cannot get on the housing market in caused by the global economic circumstances and Central London, which means there are added have fuelled some sharp practices as well, which we incentives. Therefore rent inflation has been dramatic were discussing just before outside, in terms of in Central London, which means there have been signing-on fees for letting agencies and what have cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG08 Source: /MILES/PKU/INPUT/027272/027272_o008_michelle_130515 HC 50-iii PRS CORRECTED transcript.xml
Ev 106 Communities and Local Government Committee: Evidence
15 May 2013 Councillor Tony Ball, Mr Harry Cotterell and Councillor Sarah Hayward you, which was alien to me. I bought in 2007 at the public houses and music and dance, for the protection height of the housing boom. As a renter that was alien of the public. Absolutely from that point of view, to me and is now common practice. accreditation/licensing has to be good for both. Chair: We will come on to discuss those practices. Cllr Hayward: I agree with Councillor Ball; it Cllr Hayward: The 20-year story in Camden is definitely has a strong part to play in terms of growth in the private rented sector, both in rents and improving quality and security, both for landlords size. and tenants. Harry Cotterell: The problems that licensing would Q638 Chair: Even before the recession? be intended to address are much less prevalent in rural Cllr Hayward: Yes. areas, so I would say I do not think it would make a Harry Cotterell: Shortage of supply is a bigger issue huge amount of difference in the majority of cases. in the rural areas than the economic situation. We have The concerns about licensing are that it is bound to be too many three-bedroom detached and semi-detached a huge scheme, if it is done nationally, because there houses in rural areas and not enough more targeted are an enormous number of landlords. We probably units for the social makeup of households nowadays, have 20,000 in our own membership alone. and I think that is a bigger issue than the economy itself. Q641 James Morris: I just wanted to move on to that point. To you councillors, do you think it should Q639 Chair: Just on the rural area, before I move on be a national scheme or should you be given to another colleague, you probably have more discretion to develop local schemes of licensing? protected tenancies than may be around elsewhere, but also you talk about letting at below market rents in Cllr Ball: My personal view is that as much discretion some cases, which your members do. Why would to react to local factors has to be good, because it is anyone do that? not a “one size fits all”; the issues are not the same Harry Cotterell: Our members are in this for the long up and down the country. As evidence, it is different term. Quite often, they have owned the properties for in rural areas than it is in urban areas. A structure and a long time and intend to own them for generations, perhaps a commitment—this is about protection of the in cases. When you have a good tenant in place, you public—we can all go forward with that ethos and let will keep them in; the term becomes longer. The local authorities build on that. I think it would be assured shorthold is a good vehicle to rent property good. on, because it means that both sides have plenty of Cllr Hayward: At the risk of lots of agreement opportunities to stop engaging with each other and, breaking out, I would endorse what Councillor Ball therefore, consequently you have certainty. As the said. I would just like to make one point. The housing term extends, the rent will always fall below market market is so dramatically different in different areas value for a new let and that is just the way the rented of the country, I do think there needs to be some local market goes. That is the first issue. discretion, but it is helpful for both tenants— The second one is quite a lot of people in rural areas particularly mobile tenants—and landlords if there are are reasonable. Landlords in rural areas do have an some national standards that people have to comply element of public spiritedness to elderly people, with that they can recognise when they move from people who have worked for them, people who have region to region, so there are some common principles retired, widows and those kinds of people who are around accreditation schemes to help people socially disadvantaged, who are rented to at a understand what they are getting for their money. significant discount. It is fair to say that the majority James Morris: You have an accreditation scheme of rural landlords live within the areas where they own already in Camden. property and, consequently, they are renting to their Cllr Hayward: We do yes, which we pioneered. neighbours and they like a decent cohesive neighbourhood. Chair: That makes it different from some other parts Q642 James Morris: What is the difference between of the country probably. the scheme that you currently have and a broader voluntary accreditation scheme? What is the Q640 James Morris: Can I just ask about licensing difference between the two? of landlords? Do you think the idea of having a Cllr Hayward: We pioneered an accreditation scheme licensing system is an effective way of improving that other boroughs buy into, and we have just standards in the private rented sector? received some money from the Mayor to expand it Cllr Ball: Absolutely, the District Councils’ Network even further for landlords. It is not the same as very much supports some kind of licensing/ licensing, because it is not compulsory. I do not know accreditation. We do believe that it is in the interests whether the Committee has made that distinction of good landlords that they would want to see some between licensing and accreditation. I do think there kind of kudos. Perhaps some Members of the is a place for some compulsory licensing of landlords, Committee may be aware that, within local but it cannot just be a register of landlords; it needs authorities, we have a food rating system, which is to have some teeth behind it, some regulatory powers publicly on the doors, and restaurants that have five to improve standards and protections for tenants and stars for their hygiene system welcome that and they landlords. An accreditation scheme gets us a good use that as a tool to get customers in. You can put the way there, but we could do with stronger teeth on a analogy with licensed taxi drivers, with licensed national basis. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG08 Source: /MILES/PKU/INPUT/027272/027272_o008_michelle_130515 HC 50-iii PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 107
15 May 2013 Councillor Tony Ball, Mr Harry Cotterell and Councillor Sarah Hayward
Q643 Chair: How many landlords are members of market rent, they are scared to come forward with the your accreditation scheme? How many have you got evidence, because they are worried about being priced and how many join up? out, or the improvement works having to be done and Cllr Hayward: 11,000 in London. being charged more or not being able to find other Chair: You have 11,000 joined up to your scheme. tenancies. The problem is not with us bringing Cllr Hayward: Yes. prosecutions; it is with tenants coming forward with the evidence to help us take those prosecutions and Q644 Chair: How many more are out there who are deal with bad practice. not joined up to your scheme? Cllr Hayward: Nationally? Q648 Simon Danczuk: Is there anything we should Chair: No, within Camden. recommend as a Committee that will help local Cllr Hayward: We now operate the scheme so people authorities act more promptly or encourage local can join from across London, so they are not just authorities? Do we need to simplify the regulations Camden landlords. There are about 0.5 million across and enforcement rules around this sort of thing? London, so it is quite small beer. Cllr Hayward: A licensing scheme with clear expectations and clear teeth behind it would probably Q645 Chair: Within Camden, do you know what be the way to do it, and then all local authorities, all percentage have not joined? tenants and all landlords would understand the Cllr Hayward: No, sorry. We can try to get you that parameters by which they were operating and what figure afterwards. was expected of them. Cllr Ball: I absolutely agree with that. It is the Q646 Chair: If you would, but presumably it is the ambiguity around making judgments. If there are clear bad ones who have not joined. rules that have been breached and that magistrates are Cllr Hayward: Yes, I think that is the problem with aware of as well, it would make the local authority’s an accreditation scheme as opposed to a licensing scheme. If you do not want yourself to be regulated, job much easier. you have to question why. Cllr Ball: I absolutely agree that, at the moment, we Q649 Simon Danczuk: We talk about accidental have accreditation schemes that are voluntary but, as landlords, people who have become landlords they did you said, it is only the good landlords who are joining. not really have any intention to become. What sort of It is also about getting information to the tenant that information is provided to help educate and inform they have rights. Of course, a landlord will not landlords and tenants about their rights and necessarily make tenants aware of what their responsibilities? Is there anything that local authorities obligations are. are particularly doing to get the message out there in a softer sort of way? Q647 Simon Danczuk: We have heard a number of Cllr Ball: I do not have any particular evidence from times that local authorities have the powers they need across the network. I can only speak from Basildon’s to deal with criminal landlords, rogue landlords, but point of view that, if we become aware, we make the then we hear that local authorities are unable or private sector landlord forum available to anyone who unwilling to use those powers. Is that a fair comment? does come into that situation. Of course, letting agents Cllr Ball: I think it is, because local authorities at the is another issue that perhaps we might be able to go moment are in the position of reacting. They cannot on to a bit later. The letting agents that we are aware be proactive so, in the main, once they get information of are aware of this voluntary scheme, but it is an or complaints, they react to that. They then have to issue where there is no training for somebody to make a judgment as to the amount of resource it is become a landlord if, perhaps, they inherit a property going to take to then take it through courts or and it is the way to get some revenue. whatever, to magistrates. The view is that, in the main, Cllr Hayward: We have focused on bad practice, the small fines or whatever that are dished out or the perhaps rightly so. It is important to note that not all penalties imposed in the main do not cover the cost landlords are bad; we have some incredibly good or the action that is required, so a judgment is made and, in a lot of cases, it is not worth it. landlords who are very good to their tenants and work Cllr Hayward: We do actively take prosecutions. We very co-operatively within the housing market in recently had a case that got quite a lot of coverage of Camden. Our accreditation scheme offers training to an organisation presenting themselves as a hotel, but landlords to help them, and we have information on effectively an HMO, where there were cockroaches our website, both for landlords and for tenants. We up the walls; the rooms were not a proper size; there also fund an independent advisory service for private were toilets in the single rooms. The owner was tenants in Camden, and have done for a very long raking in tens of thousands of pounds in housing time. Now, I would say the problem with stuff like benefit, because there were 70-odd rooms in the that is that you need to know you have rights to know “hotel”. They were absolutely appalling conditions. to go looking for the information. I would certainly He was an incredibly charismatic person and his say, when I moved to Camden straight after university, tenants liked him. I equated it to almost a Stockholm I was not sure of my rights and I was not sure where syndrome, and that was a very extreme case, but often to go to go and find out about them. It is the we find the market is so competitive in Camden, if known-unknowns or unknown-unknowns scenario, or people get a good deal on rent or a little bit below it can be for some tenants. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG08 Source: /MILES/PKU/INPUT/027272/027272_o008_michelle_130515 HC 50-iii PRS CORRECTED transcript.xml
Ev 108 Communities and Local Government Committee: Evidence
15 May 2013 Councillor Tony Ball, Mr Harry Cotterell and Councillor Sarah Hayward
Q650 Simon Danczuk: Sarah, you raised concerns Harry Cotterell: It is generally not a significant issue in the submission about overseas landlords. Is there in rural areas, but the one thing I would say from a anything that we can do to make them more landlord’s perspective is that, if there is cost in letting accountable, do you think? a property, it has to be paid somehow. That is pretty Cllr Hayward: It used to be the case that, under obvious, but someone has to pay at some stage. companies law, we could go after managing agents and that has been changed. Taking prosecutions Q653 Mrs Glindon: Councillor Ball, the District against people based overseas is obviously incredibly Councils’ Network suggests that the difficult and can be incredibly expensive. For a local local-authority-run accreditation schemes be authority balancing up value for money that is a real developed as a way of regulating letting agents. Could risk to us, so a change in legislation back to us being you maybe just elaborate on how those schemes able to go after managing agents in the UK, as well might work? as overseas landlords, would be a real help in that. Cllr Ball: Again, I think that we need some national guidelines around training and management practices, Q651 Mrs Glindon: Do you welcome the from a national level, which would go across the Government’s proposal to require letting agents to country. Then, the opportunity for local factors to be belong to an approved redress scheme and what issues put into that from a local authority point of view would you think that the Government should consider would only help. It is around managing the before any implementation of such a scheme? expectation, particularly in management of the Cllr Hayward: I might start on that one, if you do not property and its condition, private sector decent mind, because I could wax lyrical about this for ages. homes and also letting the tenants be aware of their Again, we have very different issues in Camden. We rights and what they should expect as well. have seen an incredible increase in really sharp practices from letting agents over the last few years: Q654 John Pugh: Can I ask the councillors first things like double charging, so charging both the about the business of short-term tenancies? You tend landlord and the tenant for searches; signing-on fees to think that people want longer tenancies—you can for tenants; holding of deposits when people have understand some of the motives behind that—but a lot moved out for a really long period of time. Again, of short-term tenancies just get rolled over time and it is not universal—there are still some good letting time again. Where is the evidence that people want a agencies out there—but it is becoming more and more different system or more people want long-term prevalent, and hundreds and hundreds of pounds are at tenancies? stake. Often tenants will find themselves in a situation Cllr Hayward: It depends on where you are in your where they have had to move out of a property for life stage, does it not? If you are at university for three whatever reason and are struggling to fund a deposit years and perhaps want to try three different locations for the next property because the landlord is holding in London, including a halls of residence, you might on to it. There should be an approved register for want a short-term tenancy. If you have kids and cannot letting agents, but the Government should also outlaw afford to get on the housing ladder, you want a bit things like double charging and signing-on fees. more security of tenure and to know that you are not Cllr Ball: I do not think there should be too much of going to have to hike your kids out of school and a difference between a private landlord and letting halfway across town. agents when it comes to licensing. Certainly where there is the issue of an absentee landlord, then they Q655 John Pugh: Do you get representations about rely upon their letting agent to manage that property. that? If it is difficult for a local authority to get hold of that Cllr Hayward: Yes, we do. absentee landlord, then the responsibility should fall Cllr Ball: There does not seem to be anything upon the letting agent, in our view. Again, the good between, at the moment, secured social tenancies and letting agents would welcome this as something to put six-month assured tenancies. Absolutely, we need on their CVs. some churn and the ability for people to move about, but we also have families in this accommodation who Q652 Mrs Glindon: Councillor Hayward, you have have children at school. They want some certainty already touched on the fees that tenants have to pay. where possible. Again, perhaps going back to the first Should agents’ fees to tenants be made illegal, as they question, the view is that some tenants are concerned have been in Scotland? about raising issues, if they have them, with their Cllr Hayward: Yes, I think so. The tenant needs a landlord, because of the security of their tenure. house. People need somewhere to live. The landlord should factor in the costs of letting the property in Q656 John Pugh: Have you done any number their overall charges. Yes, fees to tenants should crunching on this? You must know what addresses absolutely be outlawed and certainly signing-on fees children give at primary schools: you can track for agents. It is absolutely scandalous and often people whether these changes over the course of their school get nothing. career. Do you have any hard data? Cllr Ball: I do not have a view from the District Cllr Hayward: We are seeing quite a lot of turbulence, Councils’ Network on that, but I think we are as a result of the housing benefit changes, in our generally supportive of what Councillor Hayward private rented sector at the moment. People are was saying. moving from the south of the borough where it is cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG08 Source: /MILES/PKU/INPUT/027272/027272_o008_michelle_130515 HC 50-iii PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 109
15 May 2013 Councillor Tony Ball, Mr Harry Cotterell and Councillor Sarah Hayward more expensive to the north and northwest of the poorer for a residential landlord than the return in an borough. urban area. We are probably only seeing 2% on rental yield in a good environment, so consequently you Q657 John Pugh: We are not talking specifically really do not want voids. You want the property let about that issue now; we are talking about historical full time. fact. You are suggesting that, as more families have gone into the rented market, their education is being Q662 John Pugh: A rural landlord will look for a disrupted. Now the school clearly will know whether pattern of a long-term tenancy with maybe slightly that is the case, will they not, because at one stage less return than they would get in an urban they will get one address from the parents and, at environment. another stage, they will get more information saying Harry Cotterell: Yes. that the address has changed? I was just wondering whether you, in the local authority role, have any hard Q663 John Pugh: When we went to Germany, we evidence and facts about this churn. found that to be very much the pattern, even in the Cllr Hayward: We have the current evidence, which urban environment. Tenancies are indefinite and rent has spurred a particular level of turbulence in the increases are determined by reference to a local rent private rented sector. It is causing churn in the private index. Can you see that system working in the UK? rented sector above and beyond what was there Harry Cotterell: Any control on rent is going to before. Any councillor in Camden will tell you impact on supply, because it is going to make anecdotally that they have had a family in their landlords less inclined to rent. The alternative is surgery who is about to be turfed out. always to stop renting and to sell and move on. Invariably in the rural areas, there is no such thing as Q658 John Pugh: I accept the anecdotal evidence. a buy-to-let sector. Properties that are sold are What I really asked you is whether you have done any invariably occupied by the new owner, as opposed to number crunching on change of address at primary let, so consequently supply comes under pressure. You school, for example. need to have as much freedom as you possibly can, Cllr Hayward: Not that I am aware of, but we could both in terms of contract and in terms of setting the probably do it. rent, to enable the sector to thrive. John Pugh: It would be helpful. Cllr Ball: What we can do, perhaps through the Q664 John Pugh: What about the councillors? Do District Councils’ Network, is work with the County you think that indefinite tenancies are a good idea or Councils Network or the education authorities for us, setting rents by a local rent index and those sorts of and we will see if we can get some numbers. controls? Cllr Hayward: I think Councillor Ball is right: there Q659 John Pugh: Mr Cotterell, you have this needs to be something between six-month or year ingenious scheme for tax relief to encourage people tenancies and lifetime tenancies offered by the social to offer longer tenancies. sector. Harry Cotterell: I am not sure it would be longer John Pugh: Not indefinite then? tenancies. It is committing the property to being in the Cllr Hayward: There is a clear demand and rationale rental market. That is the key. for some short-term or shorter-term tenancies in the private rented sector. We have a mobile labour market Q660 John Pugh: Can you tell us more about that? in Central London. People want to move in and out, Harry Cotterell: Yes, on two fronts. Firstly, it is and there is a place for that market. There is also a inheritance tax at the moment. This is easily illustrated place for families to be able to have stability, where by a landlord who happens to have three properties they cannot buy and cannot get into a social rented that are all in the rental market: if he dies he will sector for all sorts of reasons, so there is room for a probably have to sell one of them to pay inheritance mixed economy. We should look at things like tax. That will almost certainly be bought by someone whether something as extreme as a rent cap is the who is going to live in it, so an owner-occupier; it is right thing to do or whether we look at something like out of the rental market and supply diminishes again. a living rent, where you look at the rental market in If there was an inheritance tax relief for rented an area and try to encourage good practice compared property, provided that the property remained in the to wages and the wider economic conditions. That rental market on transfer, then that would keep three would be something that would be very definitely properties in the rental market. You could always worth looking at. bring in some way that, if it went out of the rental market but was subsequently sold, then the tax was Q665 John Pugh: So some properly modulated held over, so it was not actually a tax, but the delay mechanism rather than a crude rent cap, you would of a tax to bring about a certain use of a property. favour. Cllr Hayward: Yes. Outside of the realities of the Q661 John Pugh: Do you think the net effect would economy, a crude rent cap is quite attractive to me. be to encourage landlords to let their properties for When we talk about accidental landlords or people longer periods of time? who have dabbled in the buy-to-let market with one Harry Cotterell: Landlords in rural areas, if they have or two properties, who have quite high mortgage a good tenant and the relationship is good, will do costs, there are some obvious pitfalls to a rent cap in their best to keep hold. In rural areas the return is places like Central London, in terms of those people cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG08 Source: /MILES/PKU/INPUT/027272/027272_o008_michelle_130515 HC 50-iii PRS CORRECTED transcript.xml
Ev 110 Communities and Local Government Committee: Evidence
15 May 2013 Councillor Tony Ball, Mr Harry Cotterell and Councillor Sarah Hayward who own those properties, which would need to be homes standards. To be honest, I find it scandalous worked through if you went for it, so a living rent that my taxpayers’ money is spent on people living in model might be better. sometimes really very terrible conditions. Cllr Ball: On the length of tenancy, certainly there is Cllr Ball: Absolutely. Should we not, as the taxpayer, a view among our members that something like five expect our money to be spent wisely and on housing years would be something to explore to begin with. in decent conditions for the people we are paying On rent capping, I absolutely recognise that it is very benefit for? difficult to implement because the market will dictate to a certain extent. Again, it is different. In Cumbria, Q668 Simon Danczuk: How do we make it work for instance, private rent is below social rent. That is practically, especially if the housing benefit is paid to absolutely not the case in mine or Councillor the tenant and not to the landlord? I am just thinking Hayward’s areas. To have a blanket rent cap I just of the practicalities of it. Is there an expectation on think would be impossible, but some kinds of controls the tenant withholding their rent from the landlord? to assist would help. Cllr Hayward: Again, we are coming back to licensing or accreditation. The landlord could have Q666 Chair: In relation to longer-term tenancies, some form of certification that says that they meet the some landlords have said to us, and they are probably decent homes standard, potentially, for the tenant to landlords who generally have fairly good records, “We be able to claim housing benefit. That would be one would not mind letting on a longer-term basis and we way of operating it. Obviously the way that housing understand the issue that tenants want more security. benefit is administered has changed recently. For us, if we get a long-term let that is good, that means we do not have any vacancies, which is good Q669 Simon Danczuk: It would be down to the local for our income stream as well. Our only problem is if authority to visit every privately rented property to a tenant does, at some point, stop paying the rent for assess it, in terms of its decent homes standard. Is that whatever reason, then we suffer a major problem, what you are proposing? because it takes ages to get them out and the lender Cllr Hayward: If you have a licensing scheme, would will not lend to us, because they are concerned about landlords not be expected to meet certain criteria to that situation as well.” Should there be an easier way, be able to be licensed landlords anyway? You could if a tenant is refusing to pay the rent, to get them out make decent homes standards a condition of getting of the property to enable that situation to be properly the licence, which means, before they even applied for regularised, where longer-term tenancies could come it, the landlord would have to satisfy themselves they in without that risk to the landlords? had a reasonable chance of getting the licence. Cllr Ball: Absolutely, I do understand that. As well as Cllr Ball: Remember, we do license homes of protecting the public, what we do want are more multiple occupancy and inspect those. We do not supply and more private landlords. We do not want to inspect every single one but, again, the expectation is put impediments in the way. Again from my own there and, if there are issues, then we have the powers personal experience, and without abdicating to act on HMOs. responsibility, it is difficult to get possession from the Cllr Hayward: Tenants could come to us and say, courts. There is no doubt about that. Whether it is “We’re receiving housing benefit and my landlord is councils or private landlords, the courts will give not doing vital works to the house.” We know that some time or opportunity for the tenants, the the wider social problems of poor housing impact on refuseniks, to perhaps pay. If they have no intention people’s health and other outcomes. It is well worth of doing so, it just postpones what the private landlord doing. can do. Harry Cotterell: Can I make a point on this? One of Cllr Hayward: I would be reluctant to do anything the big concerns, particularly in rural areas, is to that made it easier to evict tenants. The genuine maintain availability of housing to people who are on refuseniks are very few and far between, and it is housing benefit. The difficulty is that, if you are a because people have got into trouble for some reason landlord and you are confronted by two different or another. They have been made redundant; the local systems—one for people who are not on housing authority housing cap has changed or what have you. benefit and others who are—you are automatically There are a multitude of reasons why people fall going to go for the non-housing-benefit tenant if it is behind with their rent. The incentive for landlords going to be easier for you, going forward. I think it should be on helping them deal with their debt and would be a great pity to make landlords less likely to paying problems, before you look to get them out. If house, in an open market situation, a housing benefit the landlord is so inclined, it is quite easy to intimidate tenant, because there is a chance that later on they are a tenant out of a property, but obviously that goes going to have to justify the housing benefit payment. back to bad landlords. An example of that is the housing health and safety rating system. Loads and loads of rural houses will Q667 Simon Danczuk: Sarah and Tony, you have never get above an energy performance certificate both suggested making the payment of housing benefit rating of E. They are stuck in F and G, because they conditional upon landlords meeting certain standards. have three walls and a roof of their own. They are How would that work in practice? traditional housing; they are traditional build. They do Cllr Hayward: This comes back to licensing or not have cavity walls and are impossible to insulate. registration schemes, does it not? Someone can You will always fail on the excessively cold condition independently verify that housing meets the decent in the housing health and safety rating system. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG08 Source: /MILES/PKU/INPUT/027272/027272_o008_michelle_130515 HC 50-iii PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 111
15 May 2013 Councillor Tony Ball, Mr Harry Cotterell and Councillor Sarah Hayward
Consequently it would make one in rural areas very Cllr Hayward: We have placed people outside the disinclined to rent to a housing benefit claimant, if local authority area. London Councils published some that had come into play. statistics for the Leaders’ Committee yesterday. We Cllr Hayward: If you made it a condition of a national have placed less than almost any other authority in licensing scheme, it would be irrespective of whether London which, given we have the fourth-highest rents, the tenant was in receipt of housing benefit or not. For I am quite proud of. all tenants, you could then guarantee decent homes standard because, at the point of applying for the Q674 Simon Danczuk: What are those numbers? licence, the landlord would have to meet decent Cllr Hayward: We have placed 34 families outside homes standards. You could drive up standards in the Camden in the last 12 months, compared to private rented sector for everybody. Westminster, which has placed 355 outside Westminster in the last 12 months. Those stats were Q670 Simon Danczuk: Good. Sarah, I know you published on the London Councils website yesterday. mentioned earlier that you appear to be quite keen on We have only placed in London so far; I do not think the idea of rent capping. Why are you interfering in we have placed anyone outside London so far. A the free market? handful of families have left London voluntarily to Cllr Hayward: We recently did a piece of work in meet other needs; we have not forced anyone to Camden looking in depth at some of the inequalities leave London. issues in the borough, and housing is top. There is a Harry Cotterell: I wanted to come in on rent capping. market failure in Camden. Supply does not meet I am afraid, if you introduce any form of rent capping, demand. Increasingly, people in middle-income bands you will kill the private rented sector in a very short are pushed out of Camden. You have to be very poor time. or very rich to live there. The wider economy demands a more diverse range of skills, both in Q675 Simon Danczuk: Why do you think that? Camden and the wider Central London area. Rents Harry Cotterell: The returns are too low already. are being pushed up by a range of factors, including properties being left empty. Some intervention to Q676 Simon Danczuk: Let me just finish with Sarah. enable a wider cross-section of people to be able to You have done a lot in terms of preventing live in Camden and actively participate in the Central homelessness and using the private rented sector to London economy would be a good thing. support that. Could you just describe that to us briefly and tell us how that has been more helpful than using Q671 Simon Danczuk: Your interference in the free social housing perhaps? market will, will it not, discourage investors from Cllr Hayward: One of the key things is we have a providing the flats and apartments that are required to waiting list of 26,000 families in Camden, so our meet supply. Investors will not want to invest in a supply of social housing simply is not there to deal sector where the rents are capped, will they? with homelessness. We have worked in the private Cllr Hayward: It depends how you do it. The private rented sector, through both temporary hostel-style rented sector does not just exist for investors’ profit. accommodation and family accommodation, to help It also exists to meet a housing demand. We all agree families avoid homelessness, preferably, who are at with the principle of people being able to access threat of homelessness, but also to take people out of housing in this country. homelessness. We have provided quite a lot of evidence on it. We have a very good reputation and a Q672 Simon Danczuk: To increase the supply, very good record on preventing homelessness, of which is what you want, the money is not going to which we are proud. I do think it will get more come from anywhere else. You need private investors difficult with the housing benefit caps because of the to put money into building privately rented market rents in the area. accommodation. If you put a cap on rents, then they will not invest in it, because they will not get a return, Q677 Chair: Just to pick up the issue of regulation, so you are reducing the supply. That is the argument. clearly there is some division of opinion. What might Cllr Hayward: It depends on how you administer the be best is, Camden, if you are so much in favour of cap and what sort of cap you put in place. Going back regulation and licensing, and the district councils are to the issue of length of tenancies, you could have as well, you have powers now for selective licensing variable rates, if you are talking about a living rent, to that you have not used. How many district councils cater to different elements of the market. We already have used selective licensing, which is there on the interfere in the housing market in all sorts of ways. statute book to be used now? Things like CORGI certificates interfere in the market, Cllr Hayward: The evidence base required for the if you want to take it to its logical conclusion, but we selective licensing schemes, such as it exists, is quite do that. We need to think bravely and differently about onerous on local councils. It is around preventing how to deal with supply issues that exist all over the quite extreme antisocial behaviour, rather than a South East, not just Central London. broader licensing scheme that we can enforce on everyone. Q673 Simon Danczuk: While we are on it, have you as an authority placed people outside the local area, Q678 Chair: You are asking for different criteria for in terms of finding them accommodation? If you have, the licensing scheme. You are saying that the actual where have you tended to place them? licensing scheme that could be introduced would be cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG08 Source: /MILES/PKU/INPUT/027272/027272_o008_michelle_130515 HC 50-iii PRS CORRECTED transcript.xml
Ev 112 Communities and Local Government Committee: Evidence
15 May 2013 Councillor Tony Ball, Mr Harry Cotterell and Councillor Sarah Hayward the one you wanted, but it is the fact that you cannot working or it is not seen as an effective tool, and that introduce it because of the criteria at present. we need a broader licensing regime. Cllr Hayward: Yes. The criteria need to be broader. Harry Cotterell: On that and the mandatory licensing For any licensing scheme to really work, it probably scheme in Scotland, the Shelter report says it is not needs to cover everybody or a majority of people, so working. It is not disincentivising criminal landlords. you get the good practice buying into the scheme, as It is too broad and too cumbersome. I can provide you well as using it as a stick with which to beat the bad with the details if you want. landlords. Chair: That is helpful. Is there anything else you Cllr Ball: That is a very good point. Perhaps the lack would like to add? Thank you very much indeed, all of evidence on district councils using the licensing of you, for coming and giving evidence this afternoon. that you suggested shows that it is obviously not It has been very helpful for the Committee. cobber Pack: U PL: COE1 [SO] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG09 Source: /MILES/PKU/INPUT/027272/027272_o009_michelle_130520 HC 50-iv PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 113
Monday 20 May 2013
Members present: Mr Clive Betts (Chair)
Simon Danczuk Andy Sawford Mary Glindon John Stevenson James Morris Heather Wheeler Mark Pawsey ______
Examination of Witness
Witness: Mr Mark Prisk MP, Minister for Housing, Department for Communities and Local Government, gave evidence.
Chair: Minister, you are most welcome. Thank you reduce the frankly dysfunctional nature of the way in for joining us for our ninth and final evidence session which housing has developed in this country. of the inquiry into the private rented sector. Before we I am—and this is as a Government—strongly in commence with the session, just for the record, those favour of encouraging people who can afford it to be of us with an interest ought to put them on the record able to own their own home, absolutely. However, we in this session. I have one flat that I rent out. need to set a sensible balance, and that is why we Simon Danczuk: My wife has a small interest in a have tried to make sure that we have looked at both small rented property. supply and demand issues in owner occupation, in Andy Sawford: I have a small interest in a small social housing as is, and also of course in private rented property. rented. We have to make sure that we work in all those sectors, and look at those sectors together and how Q679 Chair: That is all for us. I apologise for they relate to each other, if we are to start to turn back keeping you, Minister. We were having a bit of tuition what is probably 20 or maybe 25 years of at the beginning on how to use iPads. You have dysfunctional markets, whether rented or freehold. probably noticed we are all using paper briefs— Mr Prisk: So that worked then? Q682 Chair: What would your expectation be? Is the private renting growth that has happened over the last Q680 Chair: —apart from Mary. Mary, you win the 10 years largely to reverse at some point? Is it a prize today—and James as well; that is two prizes. We product of the recession to some degree and will there thought we might keep you longer if we all reverted to be a reversal of that trend when the economy our iPads. improves? What is your take on the situation? Mr Prisk: I am still on paper. Mr Prisk: If we look back, I think 1988 was an important point because at that point, once we moved Q681 Chair: Thank you very much for coming to to a more flexible market, we had started to see a rise give evidence to us, and welcome once again. The in the numbers. Inevitably it is not just the regulatory private rented sector has been the tenure of growth framework; I think a shift to more flexible labour over the last few years. However, when people are markets, a demand for people to be able to be more asked what they aspire to, many people who do not mobile contributes to the process of needing to have own a home will say, “We want to be owner greater flexibility in how the markets work. occupiers.” Government policy over the years has Looking forward, I would suggest that all the tended towards seeing owner occupation as a indicators are that with a growing population, with the preferred form of tenure, and it is Government’s job fact that not only is the population growing but the to help people towards that. Is it Government policy gap remains at the moment between supply and that private renting is a temporary form of tenure for demand, the prospects for this sector are therefore many people, or that the growth in the private rented strong in terms of its growth. That is something we sector will be of limited duration and then things will are happy to encourage, indeed it is something we are all revert back and owner occupation will start actively encouraging, particularly through the build to growing again? What is the Government approach to rent and the housing guarantee. The prospects are this, and how are you shaping the landscape? strong for this marketplace and for this sector, but we Mr Prisk: I think it is a very pertinent question, have to make sure it is both a better and bigger sector. Chairman, and thank you for this opportunity to contribute to your inquiry. I think, and I have felt this Q683 James Morris: Can I just ask about the two for some time, that an over-preoccupation of Government schemes that you just referred to, with Governments on either owner occupation or, for that build to let. What are your expectations in terms of matter, on social housing has been part of a failure to the number of new private rented houses that will deal with housing markets in the round. I strongly come out of that scheme? believe that for each of the different markets, with the Mr Prisk: We have gone for the level of investment private rented sector perhaps sitting in the middle, as rather than trying to count the dwellings, as it were, it were, we need to understand how each operates and because it has to be demand-led, so therefore the how they interrelate with the others, in order to try to moment we try—as has happened in Government cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG09 Source: /MILES/PKU/INPUT/027272/027272_o009_michelle_130520 HC 50-iv PRS CORRECTED transcript.xml
Ev 114 Communities and Local Government Committee: Evidence
20 May 2013 Mr Mark Prisk MP schemes—to pluck a figure out of the air, the market of the tenancy and the rental package, for those who will cheerfully manage to disprove it. are young people not looking to spend a fortune through to a more serviced facility, as it were. There Q684 James Morris: Just broad ballpark is quite a range there, but the key is to get that expectations? investment into the market, grow the market, give Mr Prisk: We are putting £1 billion forward. We tenants choice. believe that will unlock several billion other. That is in the build to rent scheme. Clearly that will deliver Q688 James Morris: On the £10 billion guarantee, tens of thousands, but how many and over what we had some institutional investors who came, who duration we have not set a target. were saying, “It is all very well having a guarantee; we probably do not need it because we can borrow Q685 James Morris: Do you think it will have the anyway.” We have had similar evidence from housing effect of just unlocking pipeline, rather than delivering associations. What impact do you think that guarantee new private rental homes? will have—or is already having? Mr Prisk: I think it will add to the situation, because Mr Prisk: This is one of those funny areas where it is what is encouraging when I look at the first 45 a little bit like wrestling with jelly. It is entirely applications that we are now moving forward through unclear sometimes as to whether, simply by due diligence to complete, as it were, it is very announcing your intention to do something, you affect interesting that firstly there is a whole range of new the market without having done it yet. providers, many of whom are institutional investors who are not in the marketplace now, or who have a Q689 James Morris: So it has not been done yet. very small presence in the market. Secondly there is Mr Prisk: We are in the middle of the procurement quite a good geographical spread. It was quite for that whole process, and we are on the verge of understandable that some people might have looked being able to announce where we have got to on that. of this and thought, “Is this just going to be another To go back to your question, the representations I have London-centric thing?” We think around half of the had from housing associations and major investors is applications we have had so far include sites in the that they very much welcome this because this is north; about one quarter of those schemes are in the about helping to de-risk some of those upfront costs midlands, so there is quite a good spread in terms of and will allow them to go for larger schemes and be new providers and geographies. That suggests to me a little more ambitious than perhaps they would have that it is an additional— been in the past. I take your point, however; the point about the guarantees is that we help lever in additional Q686 James Morris: What sort of order of private finance. Some major investors may be magnitude of money has been taken up by confident that the market they are targeting within this institutional investors? overall sector does not need that. That is fine; we do Mr Prisk: What we have done is to put forward £1 not need to spend the taxpayer’s dollar. billion in total. This round that we have invited applications for we think is to the value of £700 Q690 James Morris: Just a final question: when you million to £800 million, which leaves us with some say you are going through a procurement process, residue. When you do that you also slightly what stage have you got to? What is that over-programme, because inevitably when you go procurement process? through due diligence you will find there are some Mr Prisk: That is really in terms of the way in which gaps or problems with that. That is the public sector we deliver the guarantees, because obviously we have investment, and we would expect to lever in three or an affordable market, affordable rented sector, to four times on top of that. which the guarantees apply, and we have the private rented sector, to which the guarantees apply, and Q687 James Morris: One of the criticisms or inevitably, and very encouragingly, there are some thoughts might be that one of the effects of the scheme people who are coming forward with schemes that might be to build lots more dwellings for the middle will mix the two. What we have been looking at is class, but not necessarily improve the situation in how we deliver that process. We are in the middle of areas of deprivation or where we have overcrowded procurement for that, and we will have something to accommodation. Do you see that as a danger? announce on that shortly. Mr Prisk: No, what we have to do first of all is to recognise that this is a sector that needs an injection Q691 Mark Pawsey: Minister, in this inquiry we of investment, further to what it has already had. If have spent an awful lot of time talking to both you do that, not only do you get the additional landlords and tenants about the length of tenancies dwellings themselves, but that then starts to open up and the issue of security of tenure. Landlords are the market more and give tenants genuinely better telling us that they have an interest in longer choice, both overall but also, most importantly, in the tenancies, because many of them are investors who locality they are seeking. If you like, by growing the are there for the long term. There are some who are market it will give all tenants greater choice. In terms short-term landlords, but we have heard an awful lot of at what point in the marketplace they will reside, it from long-term landlords who want the security of a depends. I have certainly been to see a number of long-term income. In many instances tenants also schemes, one or two of them in the east end, where would benefit from knowing that they are able to they have quite a range of steps, as it were, in terms securely remain in occupation for a fairly lengthy cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG09 Source: /MILES/PKU/INPUT/027272/027272_o009_michelle_130520 HC 50-iv PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 115
20 May 2013 Mr Mark Prisk MP period, and there are lots of barriers to enabling Q694 Mark Pawsey: But overwhelmingly what we landlords and tenants to do what, in many cases, both are getting from landlords is that they cannot get of them would want to do. occupation, because when they go to a court to seek One key issue is that of gaining occupation if either occupation the courts will not give them occupation. the landlord or the tenant fails to honour the They will not evict people from their home. Is there commitment within the tenancy agreement: if on the anything we can do to strengthen the hand of part of the tenant he does not pay his rent, it is very landlords in such a position where a tenant has not difficult for the landlord to secure occupation. Judges done their part of the bargain—namely, paid the rent? are often very reluctant to evict people from their Mr Prisk: I am wary of statutory legislation, because home, and we are wondering what the Government obviously if we start moving that out further there will might do in order to encourage longer tenancies. We be some people who will want to have the ability to also have the issue of lenders, who are also very know that if something goes wrong, especially with worried that if a tenant refuses to pay, they might want the buy-to-let market, and they need to recoup that to gain occupation and sell the property with vacant investment—or indeed in some cases recoup the possession. How can we change the system to family home in order to be able to live somewhere as encourage longer tenancies? a landlord—the worry is that if it is a two, three or Mr Prisk: This is a sector that is hugely diverse, so four-year minimum we may see a number of the key thing is to ensure there is genuine flexibility properties come off the market altogether. However, I and choice for tenants here. I have been looking at the am certainly open to suggestions as to whether there issue around duration of tenure, because this is an are non-statutory barriers that would help us issue I see in constituency correspondence, from encourage people to have greater choice. colleagues here, but also from the rest of the House, and obviously it is part of the general debate. The Q695 Mark Pawsey: From the tenant’s point of median length of leases, as I understand it at the view, Minister, we have heard serious concerns about moment, is around two years. Half of tenants are over retaliatory eviction from both tenants and local two years in tenancy, and in fact about 19% are over authorities. That is where a tenant makes a complaint five years, so there is some interesting information in about the nature of their property, and then their terms of the number of tenants that are in longer six-month lease is not renewed because they are seen leases. to be a problem tenant. How can we give tenants more confidence to ask landlords, or require landlords in many cases, to do what is necessary but without the Q692 Mark Pawsey: That may be the amount of fear of eviction if they do so? time that people remain in a property, but the evidence Mr Prisk: It is difficult, because of course harassment we are getting is that what people are often doing is and illegal eviction are already a criminal offence, taking renewable six-monthly or annual leases. A with custodial sentences of up to two years. That is tenant will only have the security of six months, and already in place. a landlord will only have security of income for a period of six months, and even though there is Q696 Mark Pawsey: These are not legal issues, provision in the legislation for them to between them Minister. These are where people have a genuine fear agree for a longer period, in practice they are not that if they make a complaint about their landlord that doing so. the landlord may not harass them or anything of that Mr Prisk: I accept and I think most people recognise nature; he may simply refuse to renew when the that shorthold tenancy does have a minimum of six six-month or one-year period comes to an end. months, but there is nothing to stop either party from Mr Prisk: The difficulty we have had is trying, in law, doing more than that, so your question effectively is to distinguish between a reasonable eviction, where why it is not happening. someone has a perfectly legitimate reason, and someone who may have a reason but may be acting Q693 Mark Pawsey: In many cases, what stops a for other purposes behind that and being malicious landlord from offering a longer period is the terms perhaps in intent. I know that certainly my officials, imposed by their lender. as I understand it not only under this Administration Mr Prisk: When we have been talking to the but the previous Administration, have had lengthy lenders—and we are very happy to seek further conversations with people like Shelter and others information on this one—they say to us, “We have yet about this. If we can find a good place to draw that to see the evidence that there is demand coming from line that is effective, then that is something we ought landlords in this regard, particularly in the buy to let to do. I would certainly be happy to see if the market.” Again, we said to them that we want to make Committee felt they could, but it has challenged some sure there are not unreasonable barriers in the of the brightest minds in the Department, and indeed marketplace. We have also made that clear to in the housing sector, as to how you draw that line landlords in our regular dialogue, and I think that is without unintended consequences. I am happy to look an important aspect that we want to reflect on. There at it. is no reason, as I said, why assured shorthold tenancies cannot be for longer periods; it may be that Q697 Andy Sawford: Thank you, Minister. We have it is something as basic as information to both had discussions with a range of organisations through landlords and tenants about what their rights are. This the evidence sessions about the extent to which is one other further aspect that I think is important. tenants and landlords know their rights and they are cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG09 Source: /MILES/PKU/INPUT/027272/027272_o009_michelle_130520 HC 50-iv PRS CORRECTED transcript.xml
Ev 116 Communities and Local Government Committee: Evidence
20 May 2013 Mr Mark Prisk MP well publicised. We have heard suggestions that the should be a partnership. I am more than happy, and I Government should instigate a publicity campaign to have had those initial conversations with some of make tenants and landlords more aware of their them, to say, “This is where you in the industry, the respective rights and responsibilities. One witness to different players that you are, and we in Government, us said that the Government publicise information need to work together in partnership.” We want to about digital switchover and breathalysers; would you make sure that people have a clearer idea, and that support a campaign so that tenants and landlords are then may well mean—whether it is a kitemark or more aware of their rights and responsibilities? whatever, I think that is the detail. The key is making Mr Prisk: I am a strong believer that an effective sure there is clarity around it and people know where market works when, in the broadest sense, the to go, know what the key issues are, know the consumer understands exactly what their rights are. In questions to ask. this case this is both tenants and landlords, if we are talking particularly about the agency market; they are Q700 Andy Sawford: By what date, or by what both players in that role. We have published guidance mechanism, will we arrive at that clarity? already in this field, and it is something where we Mr Prisk: I am working on responding to the Office have said to the industry that we would be happy to of Fair Trading’s report. We have obviously been able support an industry-led scheme to get this across. to make an initial response to that. I am keen to see Once people know exactly where they stand and they what you as a Select Committee do before I rush into know what their rights are it gives them such that, but I am also about to look at the consultation on empowerment. That is a positive area to consider, the redress scheme. Those discussions are about to absolutely. kick off with the industry, but you are right: as we move towards the redress scheme, over the next six Q698 Andy Sawford: In that spirit, we have had months or so, the logic will be to sit the industry down various suggestions from the industry, ranging from a and look to have some commonsense rules, clarity, kitemark—which I thought interesting—to a key facts transparency and active promotion around what sheet, which seemed to me a much simpler, less people’s rights and responsibilities are in this field, onerous thing to ask people to provide. Perhaps the over that period. That would be good timing from my most straightforward would be an obligation on point of view. landlords in arranging tenancy agreements to provide a clear statement of rights and responsibilities. Would Q701 Andy Sawford: Just one very specific point. you support that? We have heard different views about the extent of the Mr Prisk: What I would want to see, and what I have problem of accidental landlords. Is that something you been trying to say to the industry, and I am happy to have come across yourself in the sector, and how put firmly on the record now, is there are lots of much of a problem would you see it as? different codes of practice and different marks and Mr Prisk: I have heard about four people define it in elements, and we need some clarity and some different ways, so I have never got a straight answer harmonisation of what is there now. That is why I am as to what it is that people think they mean by that. I being cautious in saying yes to another one simply have heard three or four different definitions of an because I would like to see a clearer set of single accidental landlord. Sometimes it can literally be elements saying, “This is a lease that is legit.” somebody who maybe is doing a friend a favour and We obviously have the SAFE agent scheme in place then it becomes something a little more formalised for client money protection. That is good to use. We and suddenly they find they are a “landlord”. want to think about how, for example, when we get on to the issue of redress and letting agents, what Q702 Andy Sawford: I think we would interpret support that might be in terms of the code of practice that—and perhaps we will put some clarity in our final that underpins that so we have something that is report—as, for example, somebody might inherit a clearer and simpler. I think the area you are in is property and let it out, who had not set out to become absolutely right, which is that we need clarity about a landlord, and therefore there is perhaps a greater this. Frankly, we are very happy to support and engage need for the exchange of information about rights with that, but I really want to say to the industry as and responsibilities. well, “I think this is an area where you guys can lead, Mr Prisk: I think that is right, and that is where we and should lead.” need to look at all the parties involved, for people to be clear that if you are engaged in this process, these Q699 Andy Sawford: Just a question, Minister, are your rights and these are your responsibilities. The given your emphasis on clarity, which this Committee two together are very important. would agree with, I expect, having heard the evidence we have heard. Why are you content to leave it to the Q703 Chair: You used the term “industry” a couple industry? What confidence do you have that they will of times there. Could you just define for us what you bring something forward? Is there, for example, any mean by industry? way in which the Government is creating a framework Mr Prisk: I suppose I am thinking about the or some kind of pressure for that clarity? providers, in the sense that they may be the landlords, Mr Prisk: I have no problem in wanting to do that as the professions that work with them and for them, a partner, but if it is all Government there is a not potentially obviously the investors who are part of that unknown habit of some industries to sit back and wait process, and then obviously the intermediaries in for Government to do everything. This is where it terms of letting agents, managing agents and others. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG09 Source: /MILES/PKU/INPUT/027272/027272_o009_michelle_130520 HC 50-iv PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 117
20 May 2013 Mr Mark Prisk MP
Q704 Heather Wheeler: Minister, apologies for best practice and promote and encourage that in the coming in late, but I bagsied this question early this sector. I am generally in favour of that as a principle, morning, so the Chairman very kindly allowed me to rather than beating people over the head as to what have this one. We have heard a lot about the regulation they are not doing. You occasionally need the stick, relating to the private rented sector being too complex, but I think on the whole demonstrating why good with 50 Acts of Parliament, 70 separate pieces of practice works is very often more likely to achieve the regulation. Is it time, and how bold would it be, for change in culture you need. the Government to have a wholesale review and What is interesting is when you see comparable simplification, along the lines of the Planning authorities, with similar problems and similar Guidance Review? resources, doing things wholly differently, one very Mr Prisk: Of course there is a plan in this well, the other poorly, you realise it is about culture parliamentary Session to have a wholesale review of and process. I would say that there is a wide consumer legislation, but clearly this is much broader. variability in enforcement, whether it is trading I am always happy to talk to industry where we can standards, environmental health, planning or look at sensible simplification and consolidation of whatever, and one of the things I want to encourage law, not least because it then comes back to the point is how we can strengthen that, so that good and best Mr Sawford was making, which is that if people are practice becomes more of the norm. However, that is to know what their rights and responsibilities are, if a cultural change and quite a deep-set issue, which we the legislation is clearer and more consolidated, the need to think about. chances of them understanding what it is is there. Like a lot of legislation, naturally it tends to have been in Q707 Chair: One suggestion we had about response to a particular event that has driven us as a enforcement came from a local authority officer who Parliament to take an action, and then it steadily said that very often it was very complicated when you builds, like a set of barnacles on the bottom of a ship. had a landlord who just was not being compliant. The Occasionally you need to clear that off and have a process could be quite complicated, expensive and clear set of rules. time-consuming to get them to respond. It was suggested that we might develop a form of fixed Q705 Heather Wheeler: That is very encouraging, penalty system, where you issued a notice to a thank you very much. One of the areas where we have landlord and they may have seven days to do the heard mixed messages, red tape or misunderstandings work, and if they did not, they got the penalty. I is on the housing, health and safety rating system. wondered whether you thought that might be an Frankly, very few people understand how it works: appropriate way of a “light touch” regulation that again, should there be a simpler system with clear might be more effective. standards that landlords and tenants understand? Mr Prisk: A form of yellow or red card system can Mr Prisk: I have heard diverse views on this. I have be helpful, whether it is actually a fixed penalty notice heard some people say that it has the right robustness, or whatever. That can be helpful in clarifying what the that it is effective; others say that they are not quite rules are. I think it is more the fact that because a sure where the extent of it lies and at what point the property has a number of areas where there are rating system kicks in. I have to say it has not been at potential hazards or failures by the owner, it might be the top of the list of the representations I have genuinely hazardous or unsafe in what they are doing received, but again, if that is something that you have in terms of the condition of the building, or it might heard differently, I am more than happy to look at that be the way in which they have changed the planning more carefully. It belies the occasional suggestion that laws. the rented sector has no regulations involved. I was However, one of the problems is that it is different going back through what is there in the last 12 elements of a council needing to understand the months, and it is a pretty extensive list of different interplay and to deal with those in the round. That is regulatory forms, but as we are learning, sometimes more to do with training, in a sense, rather than people are not aware of what those are, and using necessarily the nature of the notice. If there is stronger them most effectively. This is one of the other areas evidence—I obviously want to look at the details of where enforcement is a very important question. what the Committee suggests—that some form of Heather Wheeler: You bring me on nicely to— simpler system of a yellow and red card, if you like, Mr Prisk: Oh, sorry. or a fixed penalty notice would clarify that, then I would be happy to look at the evidence. Q706 Heather Wheeler: No, no, beautifully done, Minister. I honestly did not share this with you before. Q708 Chair: Just coming on to registration schemes, My final question is: do you think local government Julie Rugg did a report in 2008 that recommended have enough powers? I suppose what I am getting at what she called a “light touch registration scheme”. It is that it is so diverse; some use them an awful lot and seems the Government have dismissed the idea, some do not. I do not know where you think levers though we have had a lot of evidence to the need to be pulled. Committee so far that some scheme that simply Mr Prisk: There is a parallel in my mind here. We obliged landlords to register, so the local authority have been looking at some really excellent work some knew who they were, for a start, would be a good step local authorities do around homelessness, and we have forward. Indeed, when we went to Leeds the other day established this gold standard principle, which is it was the landlords who said to us, very clearly, “We about using those who are really first-class to draw up are here, all of us who are present in the room at the cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG09 Source: /MILES/PKU/INPUT/027272/027272_o009_michelle_130520 HC 50-iv PRS CORRECTED transcript.xml
Ev 118 Communities and Local Government Committee: Evidence
20 May 2013 Mr Mark Prisk MP time, all members of the Leeds local authority in one particular area; we went to look at it—and accreditation scheme,” which they were very saying that they are looking to experiment in other complimentary about, “but we think all landlords areas and were testing their powers out where they ought to have to join it.” They think it is unfair might want to bring a light-touch scheme. One because the bad ones do not, basically. Have you any example: the selective scheme apparently requires thoughts? every property to be registered on a separate set of Mr Prisk: My worry here is that a national scheme forms; why do you not have a landlord registered and can be very rigid and not reflect local circumstances. then put all the properties they own down on the same I am encouraged to watch some local authorities deal form? It is that sort of thing, and Leeds were certainly with specific issues that are very particular to them. saying they were looking to target areas where they We have at the moment a mandatory licensing system were in a poor state of disrepair but had not got the for HMOs, we have an additional licensing system antisocial problems, but they still had to go through for smaller HMOs, and we have a selective licensing the complications of selective licensing. Is there a system. Those do allow local authorities to home in different approach that authorities could be enabled to on a particular problem. take in terms of registration? I have a classic example of this at the moment; it is a Mr Prisk: We have simplified the selective licensing conversation with another Member of this House, so system in terms of the consultation arrangements; I I will not say where, but in a rural area where there is think that is important. If there is a good argument a particular problem, principally around HMOs but demonstrated that a significant proportion of local potentially the rest of the rented sector in one town. authorities would welcome something going beyond They want to use the selective licensing system to low demand and antisocial behaviour—in other address that issue, and I think that is the right route words, other circumstances they are finding they for it, whereas clearly other areas—Newham has would like to approach—I would certainly be happy particularly difficult other kinds of challenges, and I to look at the evidence, absolutely. believe you had Sir Robin Wales come and talk to you. My inclination would be that the current set of Q711 Chair: And maybe look at any other licensing has the flexibility that is about right, rather complications around the number of forms and the— than adding to that with a new national register or Mr Prisk: Always happy to look at that. whatever. Q712 Chair: That is very helpful. One of the things Q709 Chair: What more than one local authority has that also came up was that all private rental properties said to us is that so far there is the ability to bring have to have a gas safety certificate, but there is in a selective scheme, but it is a very specific set of nothing about electrical safety. This Committee has requirements that local authorities have to have. They done quite a bit of work about electrical safety on have to have either low demand, or a high level of various items in the past. I wondered whether you antisocial behaviour: for no other reasons can they thought that was appropriate, or whether there ought bring it in. The process for doing that, they are all to be something on electrical safety in the regulations saying, is very expensive and time-consuming, and the as well. regulatory arrangements—I understand Newham’s Mr Prisk: Of course there is the 1985 Landlord and form is 11 pages long and 20 pages of guidance, so landlords like Grainger are saying, “This is really Tenant Act, which specifically requires that all time-consuming and expensive to us. Something more installations, whether it is gas, water or electricity, are light touch would be appropriate in the circumstances, maintained in good repair and working order. That is but this is not really fit for purpose.” a very good underpinning of the legislative Mr Prisk: It has not stopped Newham doing what they environment. That is probably the right place to stay are doing, and that is up to them. My own view is that in, in that instance; it is already on the books, and we once we go down the road of national registration, my should apply it. fear genuinely is that it would become quite rigid, and I am not wholly convinced it will stop those criminal Q713 Chair: Except that on gas, I understand, fraternities on the edge from doing the informal stuff someone has to come and check the— that they do. I am not sure we would be dealing with Mr Prisk: There has always been a slight difference the root of the problem. My preference would remain with gas in the sense that because, of course, it is for the current set of licensing, though I take the point something where—and this is again where the on the conditions. I am certainly always open to legislation has developed because of several tragic seeing whether there is another problem that the incidents, as I understand it, from previous selective licensing system might apply to, which could Governments and Parliaments, and tragically we have be used locally in that way. seen it in the last 48 hours or so—gas leaks are more prevalent in that sense, and the feeling that making Q710 Chair: Or, in the light of the spirit of localism, sure there is particular legislation there, whereas Minister, if you are not in favour of a national obviously electricity has proven to have far fewer registration scheme, would it be possible to give local incidents. I think therefore the 1985 Act probably authorities a wider range of possibilities about covers that risk as it stands. bringing local schemes in? We went to Leeds, for example, and they equally raised concerns about the Q714 Andy Sawford: This leads on very much, cost of selective licensing—which they have currently Minister, from your answers. What has the cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG09 Source: /MILES/PKU/INPUT/027272/027272_o009_michelle_130520 HC 50-iv PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 119
20 May 2013 Mr Mark Prisk MP
Government done to assess the effectiveness of as a constituency Member find individual problems. mandatory licensing of HMOs? Getting that redress in place as a mandatory approach Mr Prisk: We talk with local authorities regularly on is absolutely right. In terms of how we do this, just to this. Obviously it leads on into other issues. Most share with the Committee our thinking on this, the obvious, I would say, is the way in which we have first step is, by talking to the industry and talking to been able to use that legislation, and local authorities tenants and others, making sure that we agree on how like Ealing have used it, in tackling rogue landlords we will bring the redress schemes forward, and and beds in sheds, where although we are looking at whether there is one or more. the outer buildings, what we often find then is that the There are arguments for having more than one, and way in which the HMO is run is frankly at the heart that is because this applies not just to the letting of many of the problems we have. We keep quite a agents, but we have also sought to apply the issue in close eye on exactly how they work, and the 40,000 the parallel market of leasehold. Therefore whether or so large HMOs that we currently have. we have one or more, or whether one would encompass both, or whether we need one for each is Q715 Andy Sawford: Is there a case for extending something we are consulting on at the moment. I licensing to other types of HMOs, then? agree with you that what we do need to make sure is Mr Prisk: There is, of course, additional licensing for that there is, if you like, a genuine harmony in terms the smaller HMO. The mandatory one, obviously, is of what is expected of any ombudsman scheme, so only for the three-storey and above in that sense, or that they are all working to the same set of principles where there are five people in residence. You then and potentially code of practice. have the additional licensing arrangements for the smaller HMOs in place at the moment. Q720 Simon Danczuk: Will you make adherence to a code of practice and a client money protection Q716 Andy Sawford: We are also interested in the scheme mandatory? use of Article 4 by local authorities—York has used Mr Prisk: With client money protection schemes, I it, for example—but we had evidence from the feel there the critical issue is that the consumer be Residential Landlords Association who argue that aware of what the risks and the challenges are. That Article 4 directions and the power to impose these is where the SAFE agents scheme that we have in should be repealed. They argue that they are a place, which is increasingly used and adhered to now, restriction on supply and people should be allowed to is a good approach. In terms of the code of practice choose where they want to live. They are arguing that more generally, this is an opportunity, now that we these are an unnecessary and inappropriate have the opportunity to have a redress scheme in intervention in the market, effectively. What is your place, to look at that code of practice that underpins view of Article 4 and its use? it, and use it to weed out the cowboys and raise Mr Prisk: I have to say that when I look at some of standards. the issues around this sector, it is HMOs and the larger ones where there seem to be more and more of the Q721 Simon Danczuk: Will the money protection problems, and so I want to see a reasonably robust scheme be mandatory? regulatory framework. Mr Prisk: I am not at this stage wanting to tie my hands there, not because I want to be shifty on it in Q717 Andy Sawford: I can interpret that. any sense, to you as a Committee or to the public as Mr Prisk: By all means. a whole, but I need to talk to the sector and understand exactly what the pros and cons are of that, given what Q718 Andy Sawford: We did have a specific issue, we already have in place. which is about landlords being concerned if they let their property to a family, because of Article 4 Q722 Simon Danczuk: Can you confirm the directions they will not be able to convert it back to an timescales for the consultation and implementation of HMO at a later date. Do you recognise that concern? the secondary legislation? Mr Prisk: Yes, I have heard it, but I have to say it Mr Prisk: Yes. My game plan, which is causing some tends to be at the minority end of the equation. The challenge amongst Whitehall lawyers, as you might argument on the other side tends to be the one that I imagine, is to try to make sure that we have a defined hear more often, that you need that rule in place. scheme, so that people know exactly what it is, brought before this House in the autumn. We then Q719 Simon Danczuk: I think we are all agreed that need to have a second set of orders, which then makes the proposals the Government are setting out around it law. In other words we need to set out in law what letting and managing agents being required to belong they will have to do and what the scheme will be, but to an approved redress scheme are welcome. There you cannot then instantly have it, because they all are currently two redress schemes: the Property need to adjust to what that is. You then need what I Ombudsman and the Ombudsman Services for hope will be a relatively short—but I am relatively Property. Is this a good opportunity to create one flexible about that, as long as I know the scheme is single scheme that makes it simpler for the consumer? right and it is going to work. The moment people can Mr Prisk: This redress issue is important, because in see what the scheme is, the vast majority will start many ways it strengthens the hand of the tenant moving towards applying to join the appropriate particularly—though occasionally the landlord as redress scheme, and so on and so forth. When it well—where, as Members of this House and indeed I becomes law—I am not saying it is a secondary cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG09 Source: /MILES/PKU/INPUT/027272/027272_o009_michelle_130520 HC 50-iv PRS CORRECTED transcript.xml
Ev 120 Communities and Local Government Committee: Evidence
20 May 2013 Mr Mark Prisk MP matter, but in a sense that is the tail-end of that Mr Prisk: Yes. The idea is to make sure that someone process—that is when, going back to Mr Sawford’s takes a reasonable step to check someone’s identity, question, there is that period where we need to start and that naturally would be a passport. That is the thinking about banging the drum about, “What are purpose. your rights? What are your responsibilities?” That would be the perfect moment to do it. Q729 Chair: But not beyond that? Mr Prisk: No. Q723 Simon Danczuk: It will all be sorted by early next year, though, that is what you are saying? Q730 Chair: How does that prove whether they are Mr Prisk: It is intended to make sure that we have the entitled to be here? scheme in place by, I would hope, Christmas of this Mr Prisk: The purpose is to make sure that landlords year, with a view to its full implementation in the first take reasonable steps to check that that person is. half of next year. Clearly they are not able to be a full enforcer of that, so that would remain where it stands. Q724 Simon Danczuk: Excellent. Scotland has made it illegal for letting agents to charge tenants. Are you Q731 Chair: Finally, just on licensing, given the going to do the same, Minister? redress scheme is about putting things right that have Mr Prisk: I am generally not in favour of banning gone wrong—and we would hope that maybe some of things. What I have seen there is that some agents the letting agents who do things wrong should not be have gone out of business as a result, so it would not around and in business—are you open to an argument be my first choice, no. about extending that to a licensing scheme for letting agents? That is what most of the evidence we have Q725 Simon Danczuk: What is your reasoning had so far has said to us, that there should be a behind that? licensing scheme for letting agents. Mr Prisk: Because moving towards a redress scheme Mr Prisk: At this stage, having looked at this for all agents, having an appropriate code of practice, carefully, we want to get the redress scheme right. and working with the industry to make sure that there That is where I am at this stage. is clarity over what you charge and when, is the best route forward. Q732 Chair: Are you open to looking at something beyond that in due course? Q726 Simon Danczuk: Finally, will forcing Mr Prisk: In due course, but let us not get ahead of landlords to check the immigration status of tenants ourselves. We have quite a complex process to go encourage the private rented sector to increase supply, through, and if we can get the code of practice right or will it discourage supply, do you think? that underpins the redress scheme we probably will Mr Prisk: At the moment quite a lot of landlords do drive out the vast majority of the kinds of problems this anyway. You get your bank account details, and that our constituents face. they will want to just check that you are who you say you are, which is perfectly sensible. What we are asking for is that all landlords undertake that kind of Q733 John Stevenson: Apologies for being late. Can basic check, just to make sure that people are who I take you back to the question about the letting agent they say they are and they are entitled to be here. charging the tenant? Would you not agree that there is potentially an inherent conflict of interest if a letting Q727 Simon Danczuk: It is quite a rigmarole, agent acts for and charges both the landlord and the though. I have been an employer and having to check tenant, and therefore it should be quite clear that the it as an employer is quite a rigmarole. Do you think letting agent only acts for the landlord and should it will encourage supply, or discourage it? therefore only be entitled to charge the landlord, and Mr Prisk: The intention is to make it light touch, as not make any charge to the tenant? the Prime Minister has said. We are working on the Mr Prisk: It is worrying that you do get instances proposals at the moment and will want to make sure where agents try to charge both sides for the same that it does not become unduly onerous. activity; I think that is wrong. 60% of existing agents are either part of a professional scheme where clearly Q728 Chair: Just to follow that up, Minister: two trying to charge both sides for the same thing is points. You said that landlords will have to check that verboten, and rightly so. That is why I want to use the person who is setting themselves before them to the redress scheme to make sure that we raise those rent a property is who they say they are, and they are standards. That is where we need to address some of entitled to be here. The two are not the same checks, the questions. It is also where we need to recognise are they? It is very easy to get someone’s passport, that on the fringe of this market we have people who look at them, and say, “That looks like the person in are in lettings, informally, but they are also in an awful front of me,” but that does not necessarily show to the lot of other things informally. We just need to make landlord that the person has a right to be here. That sure that it is difficult for them to trade in that kind may be a completely different document, which the of way. landlord has no understanding of; it is sometimes difficult to get from the Border Agency a clear Q734 John Stevenson: Do you think there should be statement about whether someone is entitled to be an absolute bar, that a letting agent can only act for here, let alone from a piece of paper someone made. one client and therefore only charge one? cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG09 Source: /MILES/PKU/INPUT/027272/027272_o009_michelle_130520 HC 50-iv PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 121
20 May 2013 Mr Mark Prisk MP
Mr Prisk: I am not sure about an absolute bar. I do Mr Prisk: No. What I am encouraged by is that it is want to make sure that the key thing is that fees and relative, and what many of them say to me is that charges are crystal clear to people upfront, before they they watched their returns in commercial property fall enter into any contract. That is the critical bit. away, and they like the potential that UK residential has. They see a growing population, and they would Q735 Mark Pawsey: Minister, I wonder if I could like to see whether they can bring some of their ask you about the future financial viability of the expertise, and that longer-term investment. I think private rented sector, because we have heard from there is a real prize here, if I may say. I have nothing landlords that their ability to make a reasonable yield against people who wish to buy to let, and that is fine, on their investment depended on capital growth in the but I think the mature end of the market, where we value of residential properties. Of course, over the last have a greater spread of investors, particularly those five years or so, we have been living in an era of no who are more concerned with a longer-term yield than capital growth, and they are suggesting that on the a shorter-term capital gain, offers some real basis of the rent income alone, in the absence of opportunities. capital growth, the yields are not satisfactory for them to continue to invest in the way that we might like Q737 Mark Pawsey: One of the issues we came them to do in terms of improving quality. across again in evidence is the uncertainty around data On the other hand, we hear from the English Housing in the sector. The leader of Newham told us that there Survey that housing costs for private renters take up had turned out to be rather more landlords in his area 43% of their gross weekly income, compared to 19% than he thought there were. How can we make certain with owner-occupiers, and social renters at 29%. The that we know enough about the number of landlords feeling is that tenants are paying too large a proportion and the number of tenancies and the kind of rents they of their income out in rent in the private rented sector. are paying to get a true picture of the sector? The landlords would like to see rents go up; tenants Mr Prisk: It is a hugely diverse and dynamic market, want to see rents come down, and the long-term effect I agree with you. On rent, this is one of those areas that I found quite vexing, coming into this role seven of that is that people will not bring the properties to or eight months ago: every week a new statistic comes the market. What is the future for the sector? out, which, depending on which point you wanted to Mr Prisk: The future is relatively brighter than make, the statistic neatly either supports you or perhaps you wanted to paint that dilemma—and I condemns your argument. We have the ONS, the understand that—in the sense that I have watched it VOA, LSL, RightMove, Halifax: there is a whole raft grow and nearly double in size since 1988. That is of people giving out statistics, and because you are during a period when there was a very strong dealing with a variety of different properties in a owner-occupier market, and then, as we saw in variety of locations, they all give slightly different 2007–08, a crash, so there has been a sustained growth signals. of that. That reflects some of the longer demographic That is why we have encouraged the Office for issues we were talking about earlier, in terms of labour National Statistics to use the biggest database we are mobility and so on. aware of, which is the VOA’s, to develop a new index We also need to remember that this is a very diverse to try to gain some greater clarity about where rent market, with everything from a grandmother letting levels are and where they are in particular locations, out a little bit of lodging on one side, right the way because clearly London distorts the whole of the through to major international investors holding large statistics. blocks of properties for long-term yields, and everything in between. My view with this is that we Q738 Mark Pawsey: Is that a case for registration? have to make sure the market works effectively, that Mr Prisk: No, I think it is a case of making sure the we say to those who might invest more for yield than index is right. I do not think it is a case for needing capital gain—in other words the longer-term necessarily to try to count every landlord; that sounds investor—that there is a clarity and a constant like a very expensive process. I am not sure how it regulatory framework, because if you are looking to would actually help policy. invest for the longer term, and you are more concerned with the yield than an early capital gain, Q739 Chair: Someone said to us in evidence that if and therefore come into the market for the long term, they had a registration scheme and they had a unique they want to be certain about the regulatory number, which also went to HMRC, it might help in framework. That is one of those areas where we have the tax collection that perhaps goes under-noticed to move quite carefully to make sure we get that. amongst some landlords. It can be a market that is very sensitive to regulatory Mr Prisk: I am always wary of the words “Whitehall” changes. We saw that period when it dropped from and “computer”, I think, Mr Chairman. half of the housing market, at one stage, in this country to 9%, and it is now back. It can be a market Q740 Chair: But more effective tax collection that, if the wrong signals are sent out, can actually might help? shrink, and then we would find that our overall Mr Prisk: It could do, yes. I am cautious about the housing stock has been reduced even further. argument of a master computer system run by Whitehall that would miraculously deliver something. Q736 Mark Pawsey: Do you think the yields that There is a long history of it miraculously delivering investors are looking for are unrealistic? not a lot. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG09 Source: /MILES/PKU/INPUT/027272/027272_o009_michelle_130520 HC 50-iv PRS CORRECTED transcript.xml
Ev 122 Communities and Local Government Committee: Evidence
20 May 2013 Mr Mark Prisk MP
Q741 Simon Danczuk: Blackpool Council has called happy to engage, and indeed we are engaging with for a refined approach to the calculation of local them, but I do not want to send the signal that housing allowance, to enable it to address issues dumping 200 miles away is acceptable. It is not, and around higher numbers of benefit claimants. I think it we need to be quite robust about that. applies to other towns as well, but because the outskirts of Blackpool, where there are rented Q744 Simon Danczuk: Are you going to bring an properties, are used in calculating they have set a end to it? higher local housing allowance, which then makes it Mr Prisk: I am not guaranteeing that at all. I am very profitable for landlords to have benefit claimants guaranteeing that I will do my best to keep it to a in the area. Are you prepared to explore this with your minimum and that the law is upheld. colleagues in the Department for Work and Pensions? Mr Prisk: The LHA boundaries tend to relate to local Q745 Simon Danczuk: Sticking with London, then, authority boundaries, which makes sense, in many do you share the Deputy Mayor of London’s view that senses, in that context, but there can be anomalies and housing benefits should be linked to landlords meeting I think the Blackpool one is an interesting one. What certain standards in their properties? we have tried to do is to make sure, by applying the Mr Prisk: The tricky thing with that is how you CPI rise this year, but then putting a 1% cap thereafter, enforce it. For example, if you were a housing benefit is to try to keep a downward pressure on those rents. tenant and I was not, and we were both going for the There are some local anomalies. That is something same property, does it mean that you would have to which, as this is something that both DWP and get the local authority in the area to clear that that ourselves have an interest in, we need to keep an eye property was acceptable before you could sign up to on. I know my colleagues in DWP do that. the tenancy? Because if it does, the chances are the landlord would have signed up with me before you Q742 Simon Danczuk: Something that has been in got there. There is a practical problem, as well as a the press today, as well, is the use, particularly in significant administrative problem. The general London, of bed and breakfasts, and also the point principle that underpins his argument is that we need around moving homeless people out of London, often to make sure that we are challenging local landlords to coastal towns. Are you comfortable with that about the quality of property they are offering, and situation, Minister? that we as local authorities, if we are to use these Mr Prisk: We are very clear about out-of-London private properties, need to have clear regard to the placements, or indeed out-of- borough placements. standards. That is a perfectly acceptable way. I just do The law is quite clear: there must be no, as there was not think you can link HB directly with the standard in the 1970s, mass dumping of people tens or of an individual property without having adverse hundreds of miles from their home. In fact, last year consequences. we strengthened the law with the new suitability test, to try to make sure that is not happening. We talk Q746 Simon Danczuk: So you do not think the regularly to local authorities about this. Some have standards in a property should be linked to housing particular problems because of their own locality, but benefit, then? the law is clear on out-of-borough placement, and I Mr Prisk: I do not see how it is practical. What would expect them to abide by it. be more beneficial is to use other means, by making sure that when we do let, the standard of those Q743 Simon Danczuk: Yes, but the figures are there. properties is where it should be. There were some that were published today that showed that this is clearly happening. We had Q747 Simon Danczuk: Is there anyone else besides representations from Hastings that talked about having yourself and rogue landlords who do not share this to deal with an influx of vulnerable households. Since view? I cannot help thinking that it would not be I have been in Parliament it is a recurring theme. What difficult for a local authority to determine a simple are the Government doing to stop it happening? accreditation scheme for landlords that they have to Mr Prisk: What we have been trying to do is to make sign up to, to certain standards in terms of the sure that first of all we apply the law, and secondly property—decent home standards, call it what you we strengthen it, which is what the suitability test is. will—and if they do that they will receive housing Thirdly, I think you do need to talk to individual local benefit, and if they do not do that they will not receive authorities, because what I have been struck by, housing benefit. It does not seem that complex or particularly in the context of London boroughs, is the difficult to me. huge difference between boroughs that sit next door Mr Prisk: What you have to say is that at the to each other who nevertheless have radically different beginning of every tenancy you would have to be issues around B and B or temporary accommodation, convinced that the property in question was acceptable and yet their demographics are the same. It is trying to the housing benefit authorities, and that would to work out why it is that borough A is significantly mean having to check that before they signed up each in greater difficulties than borough B, and very often time. In some instances if they are a repeat landlord it is not the demographics or the market, it is about that might be easier to deal with, but there will be the way they are approaching the situation. many instances where there is a new landlord coming What we are doing is engaging positively with those: in, or a new property. My worry would be that as if they can demonstrate where they have a unique an HB tenant you might find yourself at a significant problem beyond their own means I am more than disadvantage when trying to get the property, because cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:51] Job: 027272 Unit: PG09 Source: /MILES/PKU/INPUT/027272/027272_o009_michelle_130520 HC 50-iv PRS CORRECTED transcript.xml
Communities and Local Government Committee: Evidence Ev 123
20 May 2013 Mr Mark Prisk MP someone who is not an HB tenant will be able to sign is underlying it is a good one, which is that we should without having to go to the local authority. There is a have good regard, where public money is effectively genuine practical problem you would have to sort out. paying the rent, to making sure that care is taken as to which properties are used. That is a sensible point. Q748 Simon Danczuk: Because the tenant could I just think that trying to link HB with a standard of report it, could they not? property will prove to be quite impractical. Mr Prisk: They could, but they would have signed up to it by then. The question is then how they unpick Q749 Chair: Minister, thank you very much indeed themselves, and whether you stop the housing benefit. for coming in this afternoon and meeting with us. That is when you get into difficulties. The point that Mr Prisk: Not at all. Thank you very much. cobber Pack: U PL: COE1 [SE] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
Ev 124 Communities and Local Government Committee: Evidence
Written evidence
Written evidence submitted by Dr Tim Brown Summary — There is a consensus among many organisations in favour of a “modern private rented sector” that provides a good standard of accommodation to meet the needs and demand of a range of type of households within their financial means. There is, however, little agreement on how to deliver this agenda in terms of quality, regulation and rents. — It depends on reaching an agreement on the future role of the private rented sector especially in relation to other tenures ie social housing and owner occupation. — The growth, diversity and changing characteristics of the private rented sector provide both challenges and opportunities in addressing this agenda in an era of financial austerity. — An inquiry into the quality, regulation and rents in the private rented sector is timely and welcome. It also tackles the imbalance in debates caused by the recent focus of interest on institutional investment in build to let. — Nevertheless, it is important to appreciate the relationship between the financing of new supply and quality & regulation. The negative image and perception of the sector impacts on potential future new provision through build to let. — There are important lessons to be learnt from North America and Western Europe. For example, there is conclusive evidence from countries, such as Germany and the USA, that it is possible to have a buoyant private rented sector with long-term security of tenure and rent control.
Introduction The Centre for Comparative Housing Research (CCHR) at De Montfort University has a track record of engaging with research, policy and practice on the private rented sector. We have undertaken a study for the Department for Communities and Local Government on “international policy comparisons on the private rented sector”.1 Dr Brown, the author of this paper, was a member of the independent Montague Review that investigated how to encourage greater institutional investment in build to let.2 CCHR staff have been involved in numerous housing market studies (including coverage of the private rented sector), for example, Birmingham, Coventry, Leicester & Leicestershire and parts of the Yorkshire and Humberside Region. From a practice perspective, CCHR, through its leading role on the development and evaluation of choice-based lettings, have investigated the opportunities and challenges of incorporating private rented properties within this type of lettings process The aim of this submission is to provide the Committee with an overview of the private rented sector so that the debates on quality, regulation and rents are located within the broader policy agenda. This paper, therefore, focuses on the following topics: — Characteristics of the private rented sector. — Policy implications. — Supply. — Learning lessons from abroad.
1 Oxley, M, Brown, T, Haffner, M, Hoekstra, J & Lishman, R (2010) Promoting Investment in Private Rented Housing Supply— International Policy Comparison, London, DCLG. 2 See https://www.gov.uk/government/news/montague-plan-offers-boost-to-private-rented-sector. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Characteristics of the Private Rented Sector The following table provides data on the private rented sector in England between 1971 and 2010.
Table KEY CHARACTERISTICS ON THE PRIVATE RENTED SECTOR IN ENGLAND Condition of Stock: Proportion of private rented Number of Percentage of properties not meeting Year Dwellings Housing Stock decent homes standard3 19714 3.1m 19.3% NA 1976 2.3m 13.6% NA 1981 2.0m 11.3% NA 1986 2.0m 10.3% NA 1991 1.8m 9.0% NA 1996 2.1m 10.1% 62.4% 2001 2.1m 10.1% 50.7% 2006 2.9m 13.6% 46.8% 2010 3.9m 17.4% (2009) 40.8% Source: Pawson, H. & Wilcox, S. (ed) (2012), UK Housing Review 2011–12, Coventry & London, Chartered Institute of Housing and the Building Societies Association, Tables 17a&band23a&b. The overall features of the sector are nearly a century of decline followed by a significant recent revival. Approximately 75% of households were in the private rented sector after the First World War, but this declined to less than 10% by 1991. By the end of 2010, this had increased to over 17% of households living in the sector. Approximately two million additional households were renting in 2008 compared with the early 1980s. The 2011 Census for England and Wales highlights that the proportion of households in the social rented sector and in private renting are approximately the same. The overall quality of accommodation, however, remains poor. Over 40% of properties did not meet the national decent homes standard in 2009. There is also a significant body of research highlighting the relationship between overcrowding/inadequate housing conditions and poor health and educational attainment,5 which is especially evident in the private rented sector. The sector is diverse and fragmented. Rugg and Rhodes6 identified ten distinct sub-markets including young professionals, students, housing benefit market, tied housing and temporary accommodation. In terms of supply, the sector can be characterised as having a few large private institutional and many small landlords. Landlords with less than 100 properties own approximately 90% of the private rented stock. Only 1% of landlords own more than 10 properties.7 Many factors have contributed to the revival of the private rented sector. These include deregulation from the late 1980, and the “buy-to-let” boom in the first decade of this century. Equally important, however, are the supply and demand trends in the housing and labour markets. Access to owner occupation, especially for first time buyers, has become less affordable, while the opportunities to become a social housing tenant have been reduced because of the increase in the size of housing registers (which nearly doubled in the first decade of the twenty-first century). Labour market factors have included greater mobility requirements in some occupational sectors especially in the early stages of working careers, for example, financial services, as well as growth in the higher and further education sectors with the number of individuals in full time education increasing from 1.4 million in 1995–96 to nearly 2 million in 2006–07 and an increase in migrant workers from Eastern European countries (often referred to as A8 countries). There are, in addition, three significant recent trends that are changing the characteristics of the private rented sector: — An increasing number of households that are in the private rented sector for the long-term— approximately 20% of households have been at their existing address for more than five years. — A growth in the number of households with children living in the private rented sector—this type of household now forms at least 25% of all private rental households. — The continued increase in “accidental landlordism” ie owner occupiers unable and/or unwilling to sell. 3 Decent homes standard definition was changed in 2006. It became a higher standard. 4 The data for 1971 includes housing association stock as part of the private rented sector. 5 See, for example, Brown, T, Baggott, R, Hunt, R & Jones, K (2004) The Impact of Overcrowding on Health and Education— A Review of the Evidence and Literature, London, ODPM. 6 Rugg, J & Rhodes, D (2008) The Private Rented Sector: Its Contribution and Potential, York, University of York, Centre for Housing Policy, available from http://www.york.ac.uk/inst/chp/publications/PDF/prsreviewweb.pdf. 7 This has major policy implications. For example, initiatives that target new institutional investment need to avoid disrupting existing supply by small landlords. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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This generates a major tension for policy makers and practitioners. Need and demand in the private rented sector increasingly centres on long term family accommodation. But supply continues to be focussed around short term tenancies based on assured shortholds. Small landlords are unlikely to want to let on long-term tenancies (see below). Thus, what is required for the need/demand side is not what is likely to be provided by the supply side.
Policy Implications The key issue is the future trajectory for the private rented sector. There are, in essence, two alternative policy scenarios. Firstly, it could become the tenure of choice for households that are unable to meet their aspirations for owner occupation as well as those unable to access social/affordable housing ie “a modern private rented sector”. Secondly, the sector could revert back to a residual function if the owner occupied housing market revives and there is a growth of new affordable housing supply. The outcome will depend principally on the strategies that are developed and implemented for the three tenures. For example, the successful development and delivery of policies to meet owner occupation aspirations would lead to a levelling off of the growth of the private rented sector. Addressing issues of quality, regulation and rents requires an explicit statement on the future role of the private rented sector. Households with children envisaging a long-term commitment to a property in the private sector will require greater security of tenure than is possible through assured shorthold tenancies. This presents a fundamental challenge to small landlords, as the ability to quickly regain possession is an essential component of their decision-making strategy. It is further supported by the activities of lenders that also favour assured shorthold tenancies as a way of reducing risk ie if the landlord defaults on payments then the lender has the “comfort” factor of knowing that tenants are on a short-term tenancy. This example illustrates the complexity of the topic. Current government strategy centres on two separate approaches for creating a modern private rented sector. Support is being provided for build to let schemes through institutional investment. At the same time, there is a reactive stance for addressing specific sub-sector issues such as “beds in sheds”. The latter is strongly focussed on the localism agenda, so enabling councils to develop approaches that focus on specific issues. This is illustrated by the recent example of the London Borough of Newham introducing a system for compulsory landlord registration. Other examples include tackling poor quality student accommodation comprising older terraced properties concentrated in inner areas of large cities such as Hull, Leeds, Nottingham and Portsmouth. Nevertheless, this poses major challenges for councils in a period of financial austerity in prioritising this type of activity as it frequently leads to conflicts between students, landlords and long-established residents who perceive a drastic decline of the quality of life in their neighbourhood. However, as the next part of the paper shows, these two approaches are, in reality, not separate. For instance, greater regulation and rent control to address problems in the existing stock could provide a negative signal to institutional investors that are looking for policy stability. Similarly, the promotion of long-term tenancies as part of build to let schemes might lead to smaller landlords existing from the sector.
Relationship Between the Existing Stock and the New “Build to Let” Model Thus, although the House of Commons Communities and Local Government Committee have indicated that this inquiry focuses on the quality and regulation of the private rented sector rather than new supply, the two aspects are interrelated. There has, of course, been considerable debate and discussion on the potential of institutional investment for build to let as evidenced by the Montague Review findings and the subsequent actions of the Government. This has, to some extent, diverted attention away from the issues of quality of the existing private rented stock and its regulation. These two apparently disparate debates are, as previously highlighted, connected. Policy makers and practitioners ignore this at their peril for a number of reasons. The popular (mis)perception of the sector remains rooted in the recent past as illustrated by frequent mentions of television comedy programmes such as “Rising Damp”. Current media coverage of problematic sub markers (for example, beds in shed) reinforces this view. As a substantial body of evidence from many groups of stakeholders to the Montage Review of the barriers to institutional investment in private rented homes highlighted,8 challenging and changing this perception is essential if institutional investment is to become a reality. Similarly, submissions from local authorities to the Montague Review demonstrated the difficulties faced by councillors and MPs whose constituency caseload contains disputes between landlords and tenants, and allegations of over-bureaucratic officers enforcing inappropriate action against landlords and at the same time a lack of action by the same officials against rogue landlords. As the leader of one local authority commented in oral evidence to the Montague Review, it is extremely difficult to actively support new build to let in the private rented sector when the “experience of my members is one of conflict and tension between tenants, landlords and communities”. Not surprisingly, therefore, one of the justifications in support of institutional investment put forward by a number of councils is that it will act as an exemplar to existing landlords to improve the quality of their product. However, without fundamental changes such as the stable rental contract proposed by Shelter in 2012, it is difficult to be optimistic on the “exemplar” effect. As many commentators have noted, the sub-markets in 8 See https://www.gov.uk/government/news/montague-plan-offers-boost-to-private-rented-sector. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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the private rented sector tend to operate independently. The demand for new build private rented sector provided through institutional investment will be households unable to access owner occupation or social housing—the forgotten or squeezed middle. This is a distinct sub-market that is different from those for students, housing benefit claimants, homeless households and migrant workers. The Montague Review, thus, highlighted the importance of “image” ie providing tenants, financial institutions and local communities with the assurance of a consistently high quality of provision. Consideration was given to establishing some sort of “kitemark”, but this was rejected as overly-bureaucratic. Nevertheless, it was recommended that the housing task force (which is currently being set up in the Department for Communities and Local Government) should work with industry bodies to develop voluntary standards covering aspects such as the quality of accommodation, including standards of construction, energy efficiency, maintenance and refurbishment and the professionalism of housing management. It is, thus, essential that debates on quality and regulation of build to let schemes be linked to those for the existing stock. This is especially because of the inappropriateness of having separate quality and regulatory systems for different parts of the private rented sector.
Learning Lessons from Abroad A number of countries have a significantly higher proportion of households in the private rented sector compared to England. These include Germany (48%), USA (32%), Sweden (21%) and Switzerland (57%). Although each of these countries has a thriving institutional investment market in the private rented sector, smaller landlords generally, dominate this tenure. In each case, there is a buoyant private rented sector characterised by long-term security of tenure and rent control. Although there are differences between countries, regulation of the sector is an important issue. It has many functions. One of these, which are common in many countries, is to ensure that that sector performs a social role. In this respect regulation and supply incentives are often combined. Research conducted by the Centre for Comparative Housing Research for the Department of Communities and Local Government showed that private sector social supply schemes, which exist in countries with large private rented sectors, encourage private sector organisations and individuals to invest in, and in some cases specifically to build, dwellings in return for a degree of regulation. The schemes provide support through measures such as grants, tax advantages and sometimes soft loans for the building or acquisition (and sometimes improvement) of real estate intended for rental with conditions attached that limit both rents and the incomes of the eligible households. Germany, France, the USA and Australia all have examples of private sector social supply schemes. They boost the size of privately owned rental sector considerably in Germany, France and the USA. In Germany the scheme is long standing, was much more significant in the past, and is an important explanation for the large private rented sector. In Australia it is new and small-scale. There are additional examples to be found in Belgium, Ireland, Spain and Switzerland. All these countries have schemes that trade incentives, in the form, variously, of long term rental contracts, rental guarantees, financial support and fiscal advantages, for constraints on rents and requirements to house people whose incomes fall within specified thresholds and ceilings. Regulation and incentives are thus closely linked. England does not have a comparable scheme. Further information on the links between regulation and incentives in several European countries can be found in a study co-authored by a member of CCHR (Professor Michael Oxley) and colleagues at the OTB Research Institute, Delft University of Technology in the Netherlands.9 This shows how private rented housing regulation works in Belgium, France, Germany Ireland and the Netherlands. The study also shows an increasing convergence between the private (market) and the social rented housing sectors across Europe. This is not to suggest necessarily that transfer of detailed policies from these countries to England is possible. Instead, an awareness of policies in other countries could be used to stimulate a debate in this country on the role of the private rented sector and the function of regulation. January 2013
Written evidence submitted by Professor Martin Partington Summary 1. The Private Rented Sector now plays a key role in the provision of housing services in England. 2. But its role could be even greater. 3. As other commentators have noted, investment in build to let must be encouraged. Reliance on buy to let is not sufficient. 4. The PRS still suffers from reputational problems, which should be addressed by a new approach to regulation that relies much less on new law and much more on making the existing law work more effectively. 9 See Haffner, M, Hoekstra, J, Oxley, M, & van der Heijden, H (2009) Bridging the gap between social and market rental housing in six European countries? Amsterdam, IOS Press. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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5. Regulation by the industry itself should be strongly encouraged, through professional regulation and accreditation. 6. Recasting the existing law in the ways recommended by the Law Commission would: — Enable local authorities, housing associations and private landlords to collaborate more effectively; — Encourage new institutional investment in the rented sector; — Help landlords and tenants better understand their mutual rights and obligations; — Increase its regulatory impact. 7. The Select Committee should inquire whether the way policy responsibilities are distributed within DCLG prevents the development of the most effective policy for the rented sector.
1. Introduction 1.1 During the last 20 years, the private rented sector has changed dramatically. It has grown in size. It has become a key player in the delivery of housing services to citizens in England. Forecasters agree that the sector will expand even further over the next few years. 1.2 Despite its importance, the potential for the development of a modern responsible private rented sector has been thwarted by the lack of a modern legal infrastructure. 1.3 This submission draws on the work I did while I was Law Commissioner for England and Wales, in charge of its major programme of work on the reform of housing law. This submission is, however, written in a personal capacity.
2. Background 2.1 Over recent years, there have been numerous reports on the PRS, some generated by Government, many by those working outside government. There have been calls: for new sources of investment; for changes to the planning regime to facilitate new development; for changes in taxation; for the greater regulation of letting agents. 2.2 Many local authorities have worked hard with the PRS through accreditation schemes to drive up standards, and in some areas to promote good tenant behaviour as well. 2.3 There have been some legislative initiatives such as the licensing of HMOs and the creation of tenancy deposit protection. There have been important changes to the rules relating to local authorities and housing associations. But many of the reports published on the rented sector have led to no government action. 2.4 While many reports have made recommendations for specific changes to the law, no organisation, apart from the Law Commission, has examined the overall legal infrastructure within which the rented sector of the housing market operates. This has had a number of serious consequences, two of which are mentioned here. 2.5 First, the law is far more complex than it needs to be. Those most affected by it—landlords and tenants— find it hard to understand their legal rights and obligations. Because of this, the existing law is not effective. It is not delivering the outcomes that successive Governments intended. 2.6 Second, the current law makes it much harder for the different sectors of the rented sector—local authority, housing association and private rented—to work together than should be the case. 2.7 The reasons why a modern legal infrastructure for the rented sector has not yet been created cannot be considered in detail here. However, three important constraints on such an initiative being taken may be noted: political, departmental, and the role of law in government. Political: Housing Ministers come and go with great rapidity. Despite the social importance of housing, Housing Ministers do not in general remain in post for long: on average, for less than 12 months. Housing Ministers are either junior ministers on their way to higher office, or in some cases, senior ministers who are on their way out of government. Whatever the realities of the housing market and indeed the wider economy, when in office their political focus has tended to be on the promotion of owner occupation rather than renting. This may be understandable. But the result is that renting in general and private renting in particular receives far less political attention than its social importance merits. Departmental: The way DCLG is organised works against the development of holistic policies for the rental sector, and in particular a reformed legal infrastructure as recommended by the Law Commission. The fact that within DCLG there is a separation between the work done on the local authority/social rented sectors, and that done on the private rented sectors has prevented policy makers from undertaking the across the board thinking which I regard as essential for the rented sector. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Thus, to give two examples: the role of the private sector in helping local authorities to meet housing need is less effective than it could be; local authorities cannot easily enter partnerships with private developers to provide new purpose built housing for rent. The role of law in government: Policy makers use law as the technical tool to deliver the policies they have devised and agreed with Ministers. Housing law is but one example of many of policies being developed over decades, being implemented through myriad legislative enactments, leaving a mass of often unnecessary, certainly over complex legislation that does not work efficiently. While publicity about the recently announced Task Force on the PRS states that the Task Force should encourage lateral thinking and new ideas, there is no hint that part of their remit should be the legislative underpinning which, as argued here, is a barrier to potential innovation in the rented sector. 2.8 While it may be beyond the remit of the Select Committee to investigate why housing ministers come and go so frequently, I think that the Committee should ask whether the internal organisation of DCLG operates to prevent the development of the most effective policies for renting in general, and the PRS in particular. It should also argue that a coherent legislative infrastructure lies at the heart of modern policy development.
3. The Committee’s Inquiry 3.1 The Terms of Reference for the Select Committee Inquiry are focussed on the PRS. The Committee has identified a number of specific issues on which it is seeking evidence. These may be summarised as follows: — Quality of accommodation. — Rent levels. — Regulating landlords. — Regulating letting agents. — Regulating HMOs. — Tenancy agreements and security of tenure. — Use of PRS to discharge local authority homelessness duties. 3.2 This list of issues raises three fundamental questions: is the market competitive enough? Are current regulatory approaches effective? Is the current law right?
Is the market competitive enough? 3.3 The issues about quality of accommodation and rent levels might be seen by some as matters of legal regulation. However, in my opinion, the improvement of standards of accommodation and making rent levels more affordable are more likely to be dealt with by new investment in the sector rather than more statutory regulation. For example, in those towns and cities where new private investment in student accommodation has been undertaken, this has had a wider impact on issues of quality and rent. 3.4 The Law Commission’s reports did not directly deal with these specific issues. It was however strongly represented to the Commission by some major investors in the property sector that a new legal infrastructure for the rental sector, such as that proposed by the Law Commission, would give comfort to key decision makers such as Pension Fund Trustees that the government was taking renting seriously and was putting in place a widely supported legislative framework against which long-term investment decisions could be confidently taken.
Are current regulatory approaches effective? 3.5 The issues relating to the regulation of landlords, agents and HMOs identified by the Select Committee raise the question whether current regulatory approaches are effective. 3.6 In its report Encouraging responsible renting the Law Commission analysed current approaches to the regulation of the PRS. It concluded that if governments thought that by enacting new legislation they would get landlord, tenant or agent behaviour to change, this was to a large extent wishful thinking. Responsible landlords, agents and tenants would of course be informed about their rights and obligations and would act accordingly. The challenge was to find effective ways to get at those who either through ignorance or a wilful desire to flout the law took no notice of the current rules. 3.7 The fact is that making rules of law to regulate behaviour and expecting those rules to be enforced by taking cases to court simply does not work (save perhaps where an order for possession is sought). Ignorance of the law, fear of going to court and expense, fear of retaliation and lack of legal expertise were all identified as factors which render so much protective legislation ineffective. 3.8 In addition, although local authorities had extensive powers to regulate sub-standard rented accommodation, they lacked the resources to use those powers effectively. It is unlikely that in the context of current pressure of local authority funding, these resources will be significantly increased. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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3.9 The Law Commission therefore asked what alternative approaches might be adopted to make regulation more effective. One option considered was a compulsory licensing scheme to which all private landlords would be required to join. The Commission came to the conclusion that this was unlikely to be cost-effective. 3.10 Instead, it proposed that there should be “enhanced self-regulation” developed by all key stakeholders: landlords, agents, local authorities and tenants. There should be much greater use of initiatives that had already been taken by the key players in the PRS: greater use of accreditation schemes; a single code of good practice for the letting and management of rented residential accommodation; regulation of letting agents. 3.11 The Law Commission recognised that there would need to be incentives put in place if landlords and agents currently not signed up to an accreditation scheme or a professional body were to be brought into the new arrangements. It identified some of the incentives that might be considered: easier to access to court for accredited landlords; preferential tax treatment for accredited landlords; preferred treatment for receipt of occupiers’ housing benefit. But it concluded that workable and proportionate incentives would be better developed by the key stakeholders in the market.
Is the current law right? 3.12 The questions identified by the Select Committee relating to tenancy agreements, security of tenure and the placing of the homeless in PRS accommodation do raise questions about the current state of the law. 3.13 In its report Renting Homes the Law Commission argued that the existing law should be restructured. It did not make recommendations for major changes to the rules of law themselves. Substantive changes to the law (for example on housing standards, or the rights of succession to tenancies) would have involved political decisions, not appropriate for the Commission. The Law Commission argued that the existing law should be recast. Adoption of the Law Commission’s recommendations would have created a legal framework that was simpler for both landlords and tenants to understand and more flexible for ministers and officials to operate. 3.14 To give some examples: First, had the Law Commission’s recommendations been taken forward, it would have created a system of written tenancy agreements, drafted in plain language, which would have provided an authoritative statement—backed by law—of landlords’ and tenants’ rights and obligations. The documents could be adapted to accommodate specific individual circumstances; but the basic core of the document would reflect the rules that Parliament has laid down. This would replace the current position where tenancy agreements are often drafted in extremely opaque legal language and do not reflect accurately the rights and obligations contained in legislation. 3.15 Second, the Law Commission did not recommend a return to the type of statutory security of tenancy that existed up till 1988. While security of tenure would be retained for tenants in the local authority and social rented sectors, for the private rented sector the Law Commission accepted the then Government’s position that rigid rules of security would reintroduce undesirable inflexibility into the legal framework. Instead, the Law Commission argued that more imaginative use of contract would allow governments to create situations in which social landlords could be permitted to let on terms that did not always guarantee long-term security of tenure. And as regards the PRS, it argued that where a landlord wanted to, there should be encouragement to use longer-term fixed term tenancies, instead of assuming that all private sector tenancies would be only for short-term periods. 3.16 In short the Commission’s recommendations would have gone a long way to addressing the issues relating to tenancy agreements and security of tenure that are referred to in the Select Committee’s Terms of Reference. They would also have facilitated the ability of local authorities to use landlords in the private rented sector for re-housing the homeless in ways that would have been more beneficial for both local authorities and those being re-housed. They would have enabled local authorities to move away from seeing use of the PRS as only a short term solution to dealing with the problems of the homeless in housing need.
Government responses: England 4.1 The response of the former Labour Government, to whom the Commission’s reports were presented were, in summary: — They were not persuaded by the arguments in favour of enhanced self regulation; instead they commissioned Julie Rugg at York University to develop proposals for a scheme of landlord registration. (This is an idea that has been resurrected in a recent speech by the Leader of the Opposition, Ed Miliband, MP); — They issued a consultation paper on the possibility of adopting a new form of compulsory tenancy agreement which would have adopted many of the principles set out in the Law Commission’s reports; — They thought that recasting the legal infrastructure would have caused too much disturbance to the renting market, so—while not rejecting the idea—set it on the back burner. 4.2 The present Government decided to end work on the first two of these initiatives. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Government Responses: Wales 4.3 By contrast, with the devolution of legislative power to the Welsh Assembly Government to make law on, among other matters, housing, the present Welsh Government has not only decided to introduce a landlord registration scheme, but has also announced that within the life of the current Parliament it will bring forward measures to implement the Law Commission’s proposals on the restructuring of housing law.
Scotland and Northern Ireland 4.4 There have also been developments in Scotland and Northern Ireland. In Scotland a landlord registration scheme was introduced some time ago; a tenancy deposit scheme was introduced last autumn. In Northern Ireland the Government has announced that a landlord registration scheme and a tenancy deposit scheme will be introduced in the spring of 2013. January 2013
Written evidence submitted by Dr Julie Rugg The Private Rented Sector: Its Contribution and Potential A major review of the private rented sector (PRS) was completed in 2008, which included an overview of the sector and assessment of policy development in a number of areas where the sector was reportedly under- performing. Since that time, the development of the PRS has taken place in a context of economic downturn and of new policy initiatives from the Coalition Government. The growth of the sector means that it is losing its role as the marginal tenure: living in the PRS is coming to be regarded as a mainstream housing option. This is not to say that the PRS is growing as a consequence of active tenant choice. The growing proportion of private renters has to be viewed in the context of difficulties in accessing the mortgage market and increasing restrictions placed on the availability of social housing. This brief submission will offer some reflections on the contribution of the PRS to the housing market in the UK; and then overview and update the principal policy areas that were covered in the Review.
The Contribution The essential role of the PRS has not substantially altered. It remains a flexible tenure that plays a multitude of roles in local housing markets. The sector now accommodates a larger share of the housing market, roughly equivalent to the proportion of social housing. A great deal of discussion has become attached to the actual size of the market, and whether it is “big enough”. Some commentators attach intrinsic virtues to particular tenures and use international comparison to argue the need for the sector to grow further. It is perhaps better to seek “balance” as a virtue preferable to size. A PRS that grows as a consequence of failures in other tenures is unlikely to remain affordable, as rents will respond to growing demand. It is possible to argue that, for the UK, a strong PRS is evidence of an unbalanced housing market. A larger PRS also has implications for welfare policy. A growing housing benefit budget reflects an increasing proportion of tenants in the private rented sector where, it might be argued, benefit is funding private pensions rather than creating commonly-held equity as would be the case with social housing. Furthermore, in the UK, the welfare system is predicated on an assumption that housing costs will disappear for the majority of owner occupied households reaching retirement in property that is no longer mortgaged. However, lifetime renting would also bring an increased burden in welfare payments to subsidise the continuing housing costs of privately renting pensioners. The Review underlined the need to view the PRS not as a single entity, but as a combination of more or less discrete sub-markets, the characteristics of which vary from area to area. Very little further research has been completed since 2008 to define those sub-markets in more detail, but some developments should be noted: — the growing incidence of “reluctant renters” matching a growth in the number of “reluctant landlords”: difficulties in the owner occupied market may be creating a growing class of “renter-landlords”; — a possible decrease in student numbers may have an impact on the viability of some large-scale student housing schemes, particularly where rents are deemed to be uncompetitive; — the housing benefit market is growing to absorb an increasing number of working households unable to pay the rent; this reflects both rent increases and under-employment/low-paid or fluctuating employment in an unsteady job market; — evidence is now emerging that some Broad Rental Market Area boundaries outside London are creating communities where the rents are no longer affordable; households moving to lower- rent area face higher commuting costs which are not taken into account when assessing household eligibility for tax credits; many households are facing a difficult task in balancing housing and commuter costs; cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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— impacts on the viability of property supply at the bottom end of the PR, as a consequence of the rent restrictions introduced under the Welfare Reform changes; and — prospective increases in demand for rental properties as, from 2014, restrictions on immigration to the UK by Bulgarian and Romanian nationals are lifted.
Issues Supply and affordability Since 2008, failings in the owner occupied and social rental markets has substantially increased demand for PRS property, whilst at the same time increasing the likelihood that properties becoming available on the open market are likely to become privately rented. The restricted supply of mortgages has reduced the ability of owner occupiers to compete with cash purchasers looking to invest in rentals, and new-build by social landlords is containing an increasing proportion of properties at market rental. The combined influence of a strong PRS and limited alternative options for households seeking accommodation means that rental affordability is compromised. According to the most recent English Housing Survey (2010–11) housing costs for private renters absorbed 43% of their gross weekly income; amongst owner occupiers the figure was 19%, and social renters 29%. The economics of the PRS are still poorly understood. Supply-side characteristics are hugely variable, and will have an impact on rent strategies of the landlords involved. It would be interesting to see whether local landlordism has remained sensitive to localised market rents, with landlords willing to accommodate low levels of rent increase in order to maintain tenancies. Larger landlords may be more likely to view yields in terms of overall return including void periods, and so prefer to seek year-on-year rent increases on the understanding that tenants will always be found. Localised impacts on changing landlord structure are not well understood. In York, the building of a large- scale private sector hall of residence has increased rents in the area, by setting a new high achieved rent. This has, in turn, increased rents across the non-student rental market. Local “stories” of how the rental market is faring are lacking in policy debate on the sector.
Institutional investment Policies to secure public subsidy for institutional investment in the private rented sector is supported by a large and vociferous industry lobby. This lobby has interpreted growth in the PRS an indicator of “positive choice” for renting amongst private tenants. Debate around institutional investment has created a substantial supply of mediated data on the sector, overshadowing an evidence gap around issues such as rental affordability, tenant choice, and market viability at the bottom of the PRS.
Professionalising rental housing management Since 2008 there have been a number of developments with regard to the registration of landlords, including the introduction of a compulsory register in the London Borough of Newham, and a landlord licensing system in Northern Ireland. Neither scheme evidences a clear commitment to improving standards in the sector by actively debarring non-compliant landlords. As yet there is still no evidence that any registration scheme currently operating in the UK or the Republic of Ireland have contributed measurably to improvements in rental housing management.
Improving property quality Overall, property quality in the sector is likely to be improving as a greater proportion of the influx of new-built properties will be privately rented. However, the current economic and policy climate has created circumstances in which existing poor-quality rental property is unlikely to be improved. Welfare Reform will have a detrimental impact on property quality: landlords’ ability to finance property improvement may be compromised by low achieved rents at the bottom of the market; and tenants’ ability to “shop” for better properties has been undermined by rent restrictions brought by the LHA. Economic migrants may choose to live in substandard property at lower rents in order to maximise their disposable income. Environmental Health Offices have not been demonstrably active in the pursuit of poor quality rented property; public sector staffing cuts are not likely to have improved performance.
Sustainable tenancies Security of tenure remains an issue. Recent commentators have discussed the possibility of tax incentives for landlords to create longer tenancies. This issue overlooks the fact that most tenancies fail as a consequence of rent arrears, which is in itself a reflection of worsening rent affordability and restrictions in levels of LHA support. In giving tax incentives to landlords to offer longer tenancies, public funds are being directed to the wrong part of the problem. There needs to be a better understanding of circumstances where landlords already offer longer tenancies, on order to learn from parts of the market that work well in this regard. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Homelessness prevention and discharging homelessness duty Under the Localism Bill, local authorities are able to discharge their duty to homeless households with the offer of a tenancy in the PRS. Demand for “LHA-friendly” properties is already high, and competition for properties is evident between organisations helping households that fall outside the homelessness legislation, and local authorities seeking to fulfil their homelessness duty. In this competition for properties, incentive payments become commonplace, skewing expectations amongst landlords at the bottom of the sector. In aiming to create a better context for working with the PRS, social lettings agencies have been established across the country. The homelessness agency Crisis has been active in creating good practice guidance for agencies, but some schemes face difficulties in terms of competition or lack of co-operation from local authorities. Social lettings agencies need scale in order to function as businesses. It seems that a more strategic, cross-agency approach to procurement is still lacking.
“Problem” private renting One recent development supported by the Coalition Government has been the introduction of planning permission for houses in multiple occupation. Local authorities are now able to define areas in which planning permission will be required to convert property for use as a HMO. However, the planning objective of containing the supply of shared property runs counter to welfare policy that increases demand for shared property. Furthermore, the intention of the policy—to restrict the proliferation of student shared property—has also had the impact of reducing the supply of property to young professionals unable to afford to rent a self- contained dwelling. Again, there has been a failure of strategic oversight. January 2013
Written evidence submitted by Shelter Summary Private renting is becoming the new normal. The sector is growing rapidly with 8.5 million people in England now renting privately, an increase of 69% over the last ten years. Renting is no longer the preserve of students and young professionals. There are now more than one million families with children renting privately. With local authorities having more power to place homeless families in the private rented sector,10 the changing shape of renting affects people from all walks of life. Yet rented homes do not provide many families with the stability they need. The rental market was not set up to provide permanent housing. It has expanded to fill the gap created by the decline in home ownership11 and the reduction in social housing stock. It has developed unintentionally and largely unchecked, creating a wholly unsuitable climate for today’s renting families. Private renters make up a disproportionate share of the people approaching Shelter for advice every day. Along with the two million people who come to our website for advice, our advisors directly help more than 90,000 people a year, supporting them to resolve their housing problems. While the private rented sector comprises 17% of all households in England, 43% of our clients rent privately. Our submission is based on this front line experience as well as our extensive policy and research work in this area.12 We welcome the committee’s decision to investigate this important issue and we suggest that members consider the following issues: — Stability. Rented homes offer little stability for families, with typical tenancies being short term, and renters having little warning of rent rises or eviction. Shelter is proposing a new Stable Rental Contract13 that would improve landlords’ returns and give renters the chance of a real home. — Affordability. As demand for rented properties grows, the sector is becoming increasingly unaffordable, pricing out those who need it most. While those in receipt of benefits are confined to the bottom of the sector, or locked out completely. As well as building more homes to bring the cost of housing down, we need to make rents more predictable by pegging rises to inflation within the term of a tenancy. — Conditions. Government figures confirm that nearly 40% of private rented homes are “non- decent”, compared to 30% of homes in owner -occupation and 27% of social rented homes.14 Shelter is calling on national government and local authorities to clamp down on rogue landlords and improve the quality of the private rented homes. 10 Please see paragraph 10 for more information. 11 Figures from the 2011 Census, released in December 2012, revealed that homeownership had fallen for the first time since Census records began in 1951. 12 This submission relates to the private rented sector in England only. 13 For more information on the Stable Rental Contract please see: Shelter, “A better deal: towards more stable private renting” (September 2012). For a copy of the report, please visit shelter.org.uk/policylibrary. 14 Department for Communities and Local Government (DCLG), “English Housing Survey: Headline Report 2008–09” (February 2010). cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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The private rented sector has been neglected by successive governments who have failed to keep up with the changes and growing challenges in the sector. Making renting work must now be a priority for Government, the industry, and everyone who cares about the well-being of families in this country.
Making Renting More Stable for Families 1. The current set-up of private renting is not meeting many people’s needs. Renters in England typically have short contracts of only six or 12 months, resulting in uncertainty for renters and high levels of churn in the sector. Millions worry about unpredictable rent increases, their contract ending before they are ready to move, and never having the certainty of knowing they will be able to make their rented house a home. 2. This is a particular problem for families with children. Renters are eleven times more likely to have moved house in the last year than people with a mortgage.15 Moving house this frequently is not only extremely expensive,16 it can have a negative impact on children’s education and well-being. Government research found that frequent movers are significantly less likely to obtain five A* to C GCSEs, or to be registered with a GP.17 3. Renters in England want a better offer: — Two-thirds of renters would like to have the option of staying in their tenancy longer term. — Four-fifths would like to know their rent cannot be increased above a certain level. — Two-thirds would like to decorate their home without fear of what their landlord will say. — 44% of families feel unable to make their rented house home.18
The Stable Rental Contract 4. A mutually beneficial rental product, the Stable Rental Contract, would: — Give renters five years in their home, during which landlords could not end their tenancy without a good reason. — Only allow landlords to increase rents annually in line with inflation during the five years. — Give renters the chance to decorate their home as long as they return it to neutral afterwards. — Allow renters to give two months’ notice to end the tenancy. — Give landlords the right to end the tenancy if they sell the property. 5. The Stable Rental Contract would meet landlords’ needs as well because: — It will give them a steadier, more predictable income. A detailed analysis of landlords’ business models conducted by Jones Lang LaSalle showed that longer tenancies with inflation-linked rent increases actually enhance landlords returns.19 — Renters on longer tenancies will be more invested in their home and more likely to take good care of the property. — Landlords will still be able to end the tenancy if they sell the property. — There is potential to improve court processes so that landlords can be more confident that they are able to evict genuinely bad tenants. 6. A more stable and balanced private renting offer can be developed from the existing legal framework. There is nothing in law to prevent the use of longer term tenancies. Contracts can also be written to ensure renters have the flexibility to take up job opportunities or respond to changed circumstances, and to make rent increases more predictable. Shelter is pleased that the Mayor of London has endorsed the piloting of longer tenancies in London20 and we are strongly in favour of landlords and letting agencies voluntarily trialling stable tenancies. 7. However, we are unlikely to see significant transformation in the market without strong political leadership and government policy intervention. National Government should consider: — Working with institutional investors, housing associations, and corporate landlords in the sector to encourage the offer of Stable Rental Contracts among larger, more professional operators, and highlighting the economic and social benefits of greater stability. 15 DCLG, “English Housing Survey: Headline Report 2010–11.” (February 2012). 16 Including fees, administration costs and deposits, setting up a new tenancy costs around £2,000 in London, and more than £1,000 in Manchester and Gloucester. Resolution Foundation, “Renting in the Dark” (December 2011). 17 DCLG, “Moving On: Reconnecting Frequent Movers” (May 2006). 18 YouGov for Shelter 2011. Base: 541 private renting GB adults. Fieldwork: 2 to 5 December 2011. 19 Jones Lang LaSalle, “Can landlords’ business plans sustain stable, predictable tenancies?” (July 2012). This analysis was commissioned by Shelter. For a copy of the report, please visit shelter.org.uk/policylibrary. 20 Mayor of London, “The Mayor’s housing covenant” (December 2012). For a copy of the report please visit: http://www.london.gov.uk/housingcovenant. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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— Requiring institutional investors to offer some form of the Stable Rental Contract as a condition for Government help in building private rented homes as part of the “Build to Rent” institutional investment fund. — Investigating ways of increasing confidence in court processes and landlords’ ability to use possession grounds to end the tenancies of tenants who breach their contract. 8. If these voluntary measures do not work politicians will need to discourage short tenancies and encourage longer tenancies through the tax system, or legislate to make longer tenancies the legal default. Shelter has outlined a package of fiscally neutral tax measures that would encourage landlords to offer longer tenancies with higher taxes for landlords offering short tenancies and positive long-term tax incentives to those offering Stable Rental Contracts.21A nudge this strong will be the only way to ensure that everyone who wants a longer tenancy can access one.
Stability for homeless families 9. Changes in the Localism Act 2011 gave local authorities more powers to place homeless families in private rented homes. Measures will need to be taken to ensure that this does not result in patterns of repeat homelessness and short-term lettings, with all the attendant financial and social costs this brings. Recent Government data shows an increase in the number of homelessness acceptances arising as a result of the loss of a private rented sector tenancy, reflecting how unstable this sector can be.22 10. Local authorities should ensure that private rented accommodation is let to homeless families on a Stable Rental Contract where possible. As the duty to re-house recurs if the household becomes homeless again, longer tenancies would be in the local authority’s interests. Furthermore, councils should: — Continue to prioritise homeless households accommodated in the PRS for an offer of social housing for five years following their homelessness acceptance. This reduces the need to procure expensive temporary accommodation but still gives unsettled households the realistic prospect of a permanent home. — Offer both start-up and ongoing tenancy support to help people to stay in their rented homes longer term. — Consider location when assessing whether the accommodation is suitable, taking into account potential disruption to the household. The legislation requires offers to be within the household’s local area where reasonably practicable. It is not clear the extent to which councils are adhering to this and it should be monitored closely. — Ensure that accommodation provided to homeless families is affordable, in line with government regulations. Councils should regard accommodation as unaffordable if, after meeting the costs of the accommodation, the applicant would be left with an income lower that they would be entitled to as per the Homelessness Code of Guidance.23
Affordability 11. The affordability of private rents is a major issue across England, and rising rents are increasingly eating into household finances. Renting is no longer the cheaper alternative to home ownership and this is preventing young families from saving for a deposit. The problem of affordability affects those at all levels of the market. Shelter’s analysis of official rent data has found that: — Median rents are unaffordable in more than half of English local authority areas. In most parts of the country the average household would need to spend more than 35% of their take-home pay to rent a two-bedroom home.24 — Rents have risen twice as fast as wages over the last decade.25 — In 2011 rents in inner London rose 3 times faster than wages. And in 2012 rents swallowed more than 50% of a typical family income in two thirds of London boroughs.26 12. The breaking of the link between Local Housing Allowance rates and rents, including the cap on up- rating,27 and the overall benefit cap, will compound the problem of affordability for low income families. 21 For more detail please see: Shelter (September 2012) pp. 39–41. 22 DCLG Housing Live Table 774, www.gov.uk. 23 Westminster Council are using accommodation costs of 40% of total income as their measure of affordability. This could leave some households with a residual income of less than income support levels once essentials and travel to work (especially where the offer is out-of-area) are taken into account. 24 Shelter “Private Rent Watch Report 1—Analysis of local rent levels and affordability” (2011). For a copy of the report, please visit shelter.org.uk/policylibrary. 25 Based on analysis of the DCLG, “Survey of English Housing 1999–2000” and “English Housing Survey 2009–10” (February 2011), and Office for National Statistics, “Annual Survey of Household Earnings” (2000 and 2010). 26 Rents are from VOA private rental market statistics, July 2010 to June 2011 and July 2011 to June 2012. Wages are from Annual Survey of Hours and Earnings, 2010 and 2011. The closest possible matching time periods are used. 27 The Welfare Reform Act capped LHA at inflation from 2013. The benefits up-rating bill, currently passing through Parliament, has proposed capping this further at 1% from 2014 onwards. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Families housed in private accommodation, which increasingly includes vulnerable families,28 will struggle to access accommodation locally and may be forced to move away from stable employment; a child’s school; and supportive family networks. 13. These households already struggle to secure private rented accommodation because of reluctance among many landlords to take on benefit claimants. The introduction of further caps will reduce the incentive to let to HB claimants, as landlords will be asked to raise rents by less than market forces will allow. The most vulnerable tenants will be forced to the bottom of the sector, and will become increasingly exposed to the practices of rogue landlords. Many renters will be put at risk of losing their home and will be forced to reduce expenditure on other household essentials, take out unsustainable debt, or move to and concentrate further in the poorest areas.29 14. As these cuts loom, Shelter are already seeing a dramatic rise in the number of families accepted as unintentionally homeless. Government figures show that local authorities accepted a duty to re-house 13,890 families in the last quarter, up from 12,860 in the previous quarter.30 Twenty% of these became homeless following the loss of a private rented tenancy, making this a leading cause of homelessness.31 15. Furthermore, local authorities are struggling to find affordable accommodation for homeless families in the local rented sector. This is having an impact on supply of temporary accommodation, which has traditionally relied heavily on accommodation leased from private landlords. Local authorities are increasingly resorting to the use of bed and breakfasts. Recent figures show a 184% increase from September 2011 to September 2012 of families living in bed and breakfast accommodation for longer than the Government’s six-week limit.32 16. High rent levels are reflective of the high cost of housing overall. The evidence suggests that landlords are increasing rents in response to market pressure—72% of landlords who increased the rent last year cited “local market conditions”.33 The only long term sustainable way of bringing the cost of renting down is to build more affordable homes. In the meantime, Shelter’s Stable Rental Contract would help to make rent rises more predictable by introducing index-linked rent increases.
Rent caps as a way of bringing costs down 17. Shelter does not support a cap on rents. Advocates of a rent cap have not been able to offer evidence that this would work as an effective way of improving renting for the people struggling the most. There are also a number of potential risks in capping rents, which include: — A deterioration in conditions, as landlords would have fewer incentives (and less cash) to improve properties. — Lower income tenants would continue to be most exposed to the bottom end of the market, as landlords are likely to continue to show preference to higher income tenants whom they perceive to be “lower risk”. This is evidenced in New York City where rent caps operate in a high pressure market. — The possibility of landlords leaving the market. If they did so, it is not certain that aspiring first-time buyers would be able to buy the vacated homes. A further shortage of rented homes would increase pressure on the market and could make it harder for lower income renters to get a decent home. — The creation of a black market in rental properties, as landlords find ways to circumvent the regulations. 18. The lack of evidence for the efficacy of rent caps stands in contrast to the strong evidence for broader stable market solutions that have worked effectively in Europe and beyond.34 The Stable Rental Contract is based on international evidence showing that restrictions on rent increases need to be tied to stable tenancies if they are to offer meaningful benefit to tenants.35
Conditions 19. As the private rented sector expands, complaints relating to the condition of properties and the behaviour of landlords are also increasing at an alarming rate. In many areas, demand for private accommodation is so high that the usual market pressures provide little incentive to improve standards. Subsequently, many tenants feel powerless to speak out as they fear being left without a home. 28 Please see paragraph 9 for more detail. 29 Cambridge Centre for Housing and Planning Research, “How will changes to Local Housing Allowance affect low-income tenants in private rented housing?” (September 2010). CAB, “No DSS: ‘Locked out of the private rented sector in Hackney’” (August 2012). 30 DCLG Housing Live Table 770, www.gov.uk. 31 DCLG Housing Live Table 774, www.gov.uk. 32 DCLG Housing Live Table 775, www.gov.uk. 33 In December 2011 Shelter commissioned BDRC continental to place three questions in their Q4 2011 Landlords Panel study. Sample: 550 landlords. Fieldwork: 9 to 19 December 2011. 34 Brenner, J, Franklin, H “Rent Control in North America and Four European Countries: A Survey, Part 3” (February 1977). 35 Shelter “Generation Rent: learning from different rental markets” (October 2011). For a copy of the report, please visit shelter.org.uk/policylibrary. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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20. Shelter has been campaigning for action to tackle the small but dangerous minority of rogue landlords who make people’s lives a misery. These landlords condemn their tenants to living in rundown, unsafe, or overcrowded properties. They will often neglect their properties, avoiding making the necessary, legal improvements. Or they will intimidate those who speak out, threatening them with eviction. Despite an increase in the number of prosecutions against these landlords,36 the problem is getting worse. 21. In July 2012 Shelter contacted every local authority in England to build a picture of the scale of the problem and what is being done to tackle it. The total number of complaints made to local authorities increased by 27% in the last three years, with over 85,000 complaints made in total over the past year alone.37 The number of complaints concerning illegal evictions increased by 13% and local authorities reported a total of 1449 private landlords who gave them repeated cause for concern in 2011–12. Even more worryingly, 62% of complaints were related to serious and life-threatening hazards such dangerous gas and electrics and severe damp. 22. The scale of these problems is a serious concern, especially at a time when the private rented sector is housing more vulnerable households and families with children. Many landlords are not receiving a clear message that poor practice will not be tolerated. Tough, well-publicised action, such as prosecutions or legally enforceable notices, is the most effective way of changing practice among rogue landlords. 23. Last year Shelter worked with the Government in developing a range of initiatives to support local authorities in tackling this problem.38 This was a good start but there is more that can be done: — We would like to see greater legal protection for tenants against retaliatory eviction, so that tenants feel empowered to highlight poor practice without risk of losing their home. — Government should also place greater emphasis on removing the judicial barriers that often deter councils and tenants from taking legal action. We suggest that the Housing Minister writes to the Sentencing Council to make the case for sentencing guidance on dealing with landlords. 24. Local authorities already have a wide range of powers that they can use to bring tough, effective enforcement action against landlords. Some pioneering authorities have shown what can be done when they choose to prioritise this issue and effectively use the powers at their disposal. However, Shelter is concerned that local authority cutbacks may derail some of this progress. Government should encourage local authorities to do the following: — Make tackling rogue landlords a priority. Political and financial support should be given to enforcement teams. Proactive property inspections should regularly be carried out. And resource should be allocated to secure effective and clear procedures for tenant complaint reporting. — Provide education programmes for tenants and landlords. This should reduce negligence and ensure that tenants are fully aware of their rights, driving up quality in the sector as landlords realise it is in their best interests to make repairs and tenants are aware of the improvements they can ask for. — Encourage local councillors and senior managers to work positively with the local private rented sector, such as through rigorous landlord accreditation schemes. Some of the most successful authorities have been those who work positively with their law-abiding landlords, building up relationships that discourage offending. — When discharging homeless families into the private rented sector, any property under consideration should be inspected by an officer trained under the Housing Health & Safety Rating System before the accommodation is offered. This would avoid accommodation being offered that has serious hidden health risks, such as fire hazards or leaking CO2.
Letting Agents 25. Shelter regularly hears shocking stories about letting agents who charge rip-off fees, carry hidden charges, and provide poor services. These practices can have devastating impact on tenants. Letting agents are used by nearly 50% of landlords, so any moves to improve the private rented sector must examine and address this problem. 26. Research last year found that almost one in four British people have been charged fees by a letting agent that they felt were unfair. In a YouGov poll of 5,000 adults, 23%—equivalent to 11 million people— said they had been charged unfair fees by letting agents in England. The fee that most people said they’d been unfairly charged for was for “administration” (14% of British people affected) followed by fees charged for credit checks (10%) and fees for renewing a contract (8%).39 36 Between 201011 and 201112 the number of successful prosecutions made against private landlords has increased by 77%. Shelter, Freedom of Information Request (July 2012). Base: 302 out of 326 Local Authorities. 37 Ibid. Base: 284. 38 The measures include the creation of a dedicated rogue landlord taskforce to support local authorities; a fund to tackle “heds with beds” the removal of limits to the fines imposed on rogue landlords; and the creation and distribution of rogue landlord guidance for all local authorities. 39 YouGov for Shelter. Sample: 5,379 adults. Fieldwork: 10—14 August 2012. The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+). cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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27. Some of the shocking cases that Shelter case studies and other research have uncovered include: — Renters charged over £150 for repeat credit checks every year and charged up to £540 for non- refundable “administration” fees.40 — People charged £100 each time they view a property. — Ex-letting agent staff who admit to fabricating fees to increase their profits. — Letting agents’ double-charging fees for the same service to landlords and tenants. 28. We will be issuing detailed policy proposals in due course and are looking at whether tenants and landlords currently shoulder the appropriate burden of fees, based on the benefits to each group. In the meantime we support: — Increased transparency of costs for tenants committing to a tenancy. Currently tenants are not able to easily see the cost of setting up a tenancy, taking into account admin fees, reference checks, check-in fees, and all other potential costs. To enable renters to budget for the full costs of a new tenancy, landlords and letting agents should also clearly state the required deposit. — Improvement to the complaints and redress process for tenants. Letting agents could be brought under the Consumers, Estate Agents and Redress Act 2007, which would compel them to have client money protection and be members of an independent complaints and redress scheme. Bringing letting agents under the Estate Agents Act 1979 would also give the Office of Fair Trading powers to ban those who act improperly.
Conclusion From homeless people seeking help from their council, to low income strivers struggling to meet their rent, and high earners locked out of home ownership, the private rented sector is the permanent tenure for millions of families. Yet the sector is woefully ill-equipped to meet their needs. The political will to bring private renting up to scratch is urgently required. As long-term renting continues to let down these families, voters will increasingly demand more from their politicians. The growing momentum behind improving the sector must be turned into action. This submission could only reflect a fraction of Shelter’s extensive experience of, and analysis on this issue. We are happy to answer further questions in more depth to assist the committee’s inquiries. January 2013
Supplementary written evidence submitted by Shelter Q54 “What percentage of landlords would you estimate to be rogue landlords?” 1. Shelter has been campaigning for action to tackle the small but dangerous minority of rogue landlords who make people’s lives a misery. 2. The private rented sector has expanded rapidly and largely unchecked. Combined with the often criminal nature of rogues’ behaviour, it is impossible to place a figure on the number of rogue landlords that exist. Shelter believes that they are a small minority of all landlords, but that their actions have far reaching consequences that can devastate the lives of individuals and communities. And create havoc for local councils. The evidence that currently exists has been drawn largely from Shelter’s own investigative work, which attempts to unpack the impact of rogue landlords and consider ways that we can end their destructive activities. 3. In July 2012 Shelter contacted every local authority in England to build a picture of the scale of the problem and what is being done to tackle it. The total number of complaints made to local authorities increased by 27% in the last three years, with over 85,000 complaints made in total over the past year alone.Itis important to recognise that: — The number of complaints from private sector tenants is rising, fast. — The complaints registered are of an extremely serious nature, the consequences of which can cause misery to tenants and surrounding residents. — A large number of complaints will go unreported or undocumented. — The low market power of private tenants often dissuades them from ever complaining in the first place. 4. The vast majority of these complaints (56,451) related to category I and category II hazards, which pose an “imminent risk to health for tenants”.41 These complaints can be related to serious damp, asbestos, poor and failing lighting, falling, and electrical hazards. 40 Resolution Foundation (December 2011). 41 The National Housing Health and Safety Rating System. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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5. Furthermore, government figures tell us that more than one in three private rented homes are “non- decent”, this is compared to 22% of homes in owner-occupation and 16% of social rented homes. Although the percentage of non-decent homes in the PRS has decreased slightly over the last five years, it is still unacceptably high. Furthermore, the number of non-decent homes increased in 2011. Clearly there are a large number of landlords who are not taking adequate care of their properties. 6. In October 2012 Shelter launched a new phase of its Evict Rogue Landlords Campaign. Through this campaign Shelter has engaged with a wide range of local authorities. Fifty one local authorities have signed up to our statement of support, pledging to get tough on rogue landlords. Shelter has also had substantial contact with a further 25 local authorities (76 in total) who have been keen to share their existing action, or seek advice and input. 7. Most of these local authorities have told us about the serious problems that rogue landlords are causing in their local communities. These landlords will often willingly break the law, creating havoc and negatively impacting the wider residential areas that surround their properties. Evidence and insight gathered through these relationships has made it clear that the impact of rogue landlords affects entire communities, not just their victims. 8. Many tenants will not report rogue activity because they are scared of retaliatory eviction, or they fear that improved conditions will push up their rent to unaffordable levels. Detailed below is just one of the many personal stories Shelter has collected from people who have been affected by these concerns. Samantha: To cut a long story short I did a runner with my children away from their abusive father and had to find a home quick, I had to rent a private property out of desperation. First they charged me a chunk of money to register with them then they took a month’s rent and then another month’s rent as a deposit and after I had signed the tenancy agreement they decided to tell me I couldn’t have the keys unless I gave them more money, when I asked why they said it was in case I ever lost my keys. I had no choice to give them everything I had as I needed a home for my kids. The problem I have now is since the first few months of being here a big damp problem became apparent, I have reported it over and over but nothing gets done. I have black mould in almost all rooms but in the downstairs rooms its thick black and white fluffy mould, I think it is bad as we all have problems with regular bad chests and if I go to the council for help to get the landlord to sort this out I will be kicked out of my home and I can’t allow that to happen as I am broke and would end up living on the streets so the only option I have is to live with it.
Q81 “Kay, you said earlier that the private sector is today playing a role it was never expected to play. Does that role extend to providing housing for the homeless?” and Q82 “In principle, you do not see any objection to the private rented sector meeting the needs of the homeless” 1. Changes in the Localism Act 2011 give local authorities additional scope to place homeless households in private rented homes. This increases local authorities’ options for re-housing homeless households, and also provides an opportunity and need to build stronger links with the PRS and raise the general standards in the sector. 2. With a growing waiting list for social housing and increased use of temporary accommodation, some local authorities are understandably looking towards the PRS to re-house homeless households by making them a single offer of a PRS tenancy, rather than allowing them to wait for a social home to become available.42 3. However, Shelter opposed the changes allowing local authorities to discharge their duty to homeless households into the PRS, because it removes the opportunity for homeless people to decide whether to accept an offer of a short-term private tenancy or wait for a social rented home. And there are serious concerns associated with housing the most vulnerable in this typically unstable and unsuitable accommodation. 4. Furthermore, the new powers will be constrained by the DWP-led welfare reform, which is likely to increase homelessness and further reduce the availability of genuinely affordable private housing by making it difficult for local authorities to find affordable homes in their area. This has been clearly evidenced by the Cambridge Centre for Housing and Planning Research, and the Citizen’s Advice Bureau’s survey findings in Hackney.43 Changes include, the £500 per week benefit cap, the breaking of the link between Local Housing Allowance and rents, the extension of the Shared Accommodation Rate to 35, and the new under-occupancy restrictions. 5. In order to avoid the necessity of using PRS offers local authorities should ensure sufficient measures are in place to prevent homelessness in the first place. The Homelessness Act 2002 requires local authorities to 42 (How will changes to Local Housing Allowance affect low-income tenants in private rented housing? Cambridge Centre for Housing and Planning Research, 2010. No DSS: Locked out of the private rented sector in Hackney, CAB, August 2012). Poor Homes: Poor Health—Private Sector Tenant Choice in 2012 (Pro Housing Alliance, November 2012). 43 How will changes to Local Housing Allowance affect low-income tenants in private rented housing? (Cambridge Centre for Housing and Planning Research, 2010) No DSS: Locked out of the private rented sector in Hackney (CAB, August 2012) cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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strategically prevent homelessness, to ensure sufficient accommodation is and will be available for people in the district who may become homeless, and to secure satisfactory provision of support (advice, information and assistance) for homeless people.
6. The National Planning Policy Framework requires local authorities to use their local evidence base to ensure that their Local Plan meets the full, objectively assessed needs for affordable housing in the housing market area. Local authorities should therefore where possible ensure an adequate supply of homes that are affordable and accessible to Housing Benefit claimants.
7. However, we do recognise that there can be no one-size-fits-all guidelines; each local authority has different pressures and resources, and each household has different needs. Recent figures show a 184% increase from September 2011 to September 2012 of families living in bed and breakfast accommodation over the DCLG’s six week limit. This is particularly true in areas of high housing pressure, such as London which saw a 216% increase over the same time period. This is indicative of the severe pressures already placed on local authorities.
8. Therefore if these local authorities decide they have no choice but to use the new powers, it will be important they do so appropriately and develop clear policies around its use (as is required by the Guidance)44 to ensure people are only offered homes that are stable, suitable, local and affordable:
9. Stable: Currently, the PRS does not provide the stability many households need. Government data shows that the loss of an assured shorthold tenancy (AST) is now the biggest single cause of homelessness. To prevent homeless households presenting as homeless year after year as they move from one unstable PRS property to another, we suggest that local authorities offer at least two year tenancies in the PRS or that the presumption of renewal for a further twelve months is written into any one year tenancies offered. In addition, they should give those placed in the PRS priority for social housing—equivalent to “reasonable preference”—for five years following their homeless acceptance, and offer tenancy start-up support.
10. Suitable: In addition to the Regulations and Guidance45 which set out the circumstances in which accommodation offered is suitable, Shelter also recommends that adequate smoke alarms and adequate electrical appliances should be installed. There should be a timeframe for review and confirmation of electrical, fire and carbon monoxide safety standards in the same way that there is for gas safety.
11. In addition, the local authorities’ PRS offer policy should indicate whether hostel-type HMO accommodation would be considered suitable for discharge of duty. Often, this sort of accommodation has no or inadequate facilities for food storage, preparation and cooking . The Authority should also consider the other occupants of the HMO, eg, a vulnerable young woman should not be placed in an all-male HMO.
12. Only accredited landlords should be considered as fit and proper for purposes of discharge of the statutory duty. At the very least, we suggest local authorities ask the local police authority to run checks for violent/sexual offences or fraud, and checking with the Environmental Health team for landlord-tenant offences, and all landlords offering PRSO accommodation should use a model tenancy agreement.
13. Local: The Housing Act 1996 requires that, in so far as reasonably practical, local authorities must secure accommodation within their own district. Where out-of-district accommodation is offered, local authorities must notify the “receiving authority” within 14 days of the accommodation being made available. We support the Regulations and Guidance which require that, where accommodation is out of the district, the distance from the district must be considered as well as the significance of any disruption to employment, caring responsibilities or education, and the proximity and accessibility of medical facilities and other support, local services, amenities and transport.
14. Affordable: An important factor in finding a home is being able to afford it without the worry of falling into debt, arrears and repossession, and without feeling trapped by benefit dependency—all of which can impose costs on the taxpayer. With the cost of rent increasing rapidly in many areas, and introduction of the housing benefit caps, local authorities must not place households in accommodation that is beyond their means.
15. While local authorities will likely be keen to explore opportunities in the PRS given the pressures facing them, we advise that this sector is only used as a last resort and in cases where it is appropriate. February 2013
44 Supplementary Guidance on the homelessness changes in the Localism Act 2011 and on the Homelessness (Suitability of Accommodation) (England) Order 2012 45 DCLG: Homelessness (Suitability of Accommodation) Order 2012 cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Further supplementary written evidence submitted by Shelter The need for Shelter’s Stable Rental Contract Private renting is becoming the new normal in England. Some 9 million people now rent from a private landlord—more than at any point since the 1960s. Almost a third of renters are families with children. Children in 1.3 million families are growing up renting privately, rarely having more than six or 12 months’ security in a home. Shelter is concerned about this lack of stability, and has developed a new policy proposal, using the existing legal framework, to better meet the needs of long term renters: the Stable Rental Contract.
What exactly does Shelter’s Stable Rental Contract do? — Lasts for five years, giving renters the chance to put down roots and make a home for themselves. — This breaks renters from the annual cycle of worrying whether their contract will be renewed or whether they will face an unaffordable rent increase in order to stay in their home. This is at the heart of the greater stability that renters would have if they had the tenancy. Other proposals, focused on annual renewals with market rent increases would not give renters the peace of mind they need to settle in their home and their community. — Limits rent increases to an annual maximum for those five years, so that renters don’t find themselves priced out of their home, and landlords can continue to get a good return on their investment. — Research by Jones Lang LaSalle showed that landlords’ approach to raising rents is currently very mixed. Some landlords do not increase the rent for years, but then charge a substantial hike, while others increase the rent to market every year. This creates uncertainty and worry for renters. — Shelter proposes CPI as the maximum annual rent increase. Landlords would not be obliged to charge it if they felt it was above rent increases in their local market. We chose CPI over RPI and wage inflation as this was a much more stable index over the long term and had more moderate highs and lows—beneficial for both landlords and tenants. — Jones Lang LaSalle’s modelling shows that indexing rents would increase landlords’ returns by making increases more steady and predictable. This is because many landlords do not increase rents for a number of years, and then when faced with a significant rent increase, renters may leave and create the risk of a void period for landlords. — Gives renters the flexibility to give notice if they need to end the tenancy, so that they aren’t locked in to fixed term contracts like many are at present. — No renter in their right mind would sign up to a five fixed contract—our research with renting families showed that many would worry about how they would cope if their circumstances changed or they needed to move for employment. Indeed, this would be bad for the labour market too. — However, by giving renters the chance to make a home in their private rented property, they are more likely to be invested in the home and stay for the long term, reducing landlords’ risk of void periods. — Lets landlords evict tenants if they break the terms of their contract, or if the landlord sells the property. — We know that landlords’ circumstances can change, and we are clear that landlords should be able to issue a Section 21 eviction notice on proof of exchange of contracts to sell the property. This can help reassure lenders and valuers concerned about selling property without vacant possession. — The law already allows landlords to end tenancies where tenants have broken the term of their agreement during a fixed term period using “discretionary” grounds. These cases go through the court system. Not enough robust evidence is available about landlords’ experience of the court system, but we believe the emphasis should be on making sure that the court system is effective at removing non-paying or anti-social, rather than depriving the vast majority of responsible renters stability in their home. — Allows renters to do some decorating to make it a proper home. — We believe that allowing renters to do some home decorating, such as painting, will allow renters to make it feel like home. By encouraging them to invest in the place, they may be more likely to stay for the long term.
Making the Stable Rental Contract happen Shelter knows that change will not happen on its own, despite it being legally possible. There a number of measures the government can take to remove barriers to longer tenancies. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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— Make sure the court system is fit for purpose so landlords and lenders don’t worry about getting stuck with a tenant who is not paying the rent or damaging the property. — Our research shows that a significant minority of landlords do still use the eviction grounds that go through the courts and that possession orders are granted at a high level overall (69%), but there is significant local variation in outcomes (ranging from 33% to 95% possession orders granted). — Encourage landlords to offer longer term tenancies by making them more attractive compared to short tenancies—this could be done through the tax system or by making longer tenancies the legal default. — Shelter has set out recommendations in “A better deal” that we believe will make longer tenancies a more financially appealing option for landlords. — We have also set out an option for making longer tenancies the legal default, while allowing shorter tenancies to be offered for those landlords that really need them. There are a range of ways of achieving this—one is to allow local authorities to license the use of short term tenancies by extending the licensing of “holiday lets” used by councils such as City of Westminster. June 2013
Written evidence submitted by the Local Government Association The Local Government Association (LGA) is the national voice of local government. We work with councils to support, promote and improve local government. We are a politically-led, cross party organisation which works on behalf of councils to ensure local government has a strong, credible voice with national government. We aim to influence and set the political agenda on the issues that matter to councils so they are able to deliver local solutions to national problems.
1. Key Points In this response we have set out some examples of the role local authorities play to raise standards and facilitate investment to meet demand. We have identified a number of ways that the Government could support local authorities’ work with the private rented sector which are summarised below: — Reduce the amount of bureaucracy involved in working with the private rented sector to raise standards and free up frontline services. — Be realistic about the scale of the challenge. Any new requirements for local authorities on the private rented sector must be properly resourced and funded, without creating additional burdens. — Streamline and improve enforcement tools so that local authorities can tackle criminal landlords, for example the rise of illegally rented outbuildings, or “beds in sheds”.
The Local Authority Role Understanding housing needs and aspirations within an area and identifying future pressures is crucial to ensure that housing investment underpins and supports locally led growth. Councils play a central role and work in partnership with investors and landlords of all tenures to raise standards and facilitate investment to meet demand. Councils do this through effective use of their planning powers, coordinating action and investment using tools such as housing and tenancy strategies and by working across geographical boundaries to join up and take a strategic approach. Councils also invest directly in new and existing housing and work closely with landlords in both the social and private sectors, using their enforcement powers as a last resort to tackle unacceptable standards and criminal landlords. The amount, cost, quality and location of private sector housing is an important issue for councils when considering overall housing need and priorities. The private rented sector is growing, and in some parts of the country is larger than the social housing sector. Approximately 3.4 million households (16% of all households) in England are now living in the private rented sector, a 30% increase since 2005. This growth can be compared with the challenges faced by those wishing to become owner occupiers; gross mortgage lending has fallen by 50% between 2007–1146 and an average deposit for first time buyers stands at over £26,00047. House building remains stubbornly low and recent government data demonstrates that starts (new construction) up to September 2012 are 85,000 units short of the 2006 peak48. In this context the private rented sector becomes an increasingly important tenure. 46 http://www.cml.org.uk/cml/statistics 47 http://www.cml.org.uk/cml/publications/newsandviews/104?complete=true 48 Housing starts reached a peak of 183,000 in the year ending March 2006. 98,020 housing starts were recorded in the 12 months to September 2012. https://www.gov.uk/government/publications/house-building-in-england-july-to-september-2012 cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Councils are responding with vigour and imagination, finding new ways to fund work in the private sector. They are also drawing on their broader assets, knowledge and powers, and those of their partners in order to do new things in new ways. Our response includes several examples of local authorities taking a proactive role with the private rented sector and supporting innovation in the development of the market. This is in a context of reduced funding, which has had an impact on all front line services including private sector housing teams. Local authorities have responded by developing innovative ways of funding their role, for example: — South Tyneside Council reinvests commuted sums acquired through planning gain into its private rented sector budget. — London Borough of Wandsworth has a joined up approach to preventing and treating falls in older people. The council received funding from public health budgets to cover their contribution which included undertaking a risk assessment and identifying 198 residents previously not known to the Health Service and that will receive additional support as a result. — Oxford City Council’s HMO licensing fees are set at levels that enable it to cover the costs of running a sizeable enforcement team.
2. Councils are Working to make sure that People have a Home New models for investing in the private rented sector Local authorities are taking a proactive role with the private rented sector and supporting innovation in the development of the market. This role was highlighted in the Montague Review of Institutional Investment in the private rented sector. For example: — Islington Council has announced plans to invest £20 million of its £800 million pension fund with residential property investment manager Hearthstone Investments. — Manchester City Council’s partnership with the Greater Manchester Pension Fund and the Homes and Communities Agency (HCA) will see more than 240 new homes built for sale or rent. — The London Borough of Newham is working with a Housing Association to raise additional housing equity, and is building on this approach to buy property and enter the market as a private landlord.
The interaction between housing benefit and rents It is too early to reach conclusions about the impact of the Government’s housing benefit changes which for the most part have yet to take effect. Nor is it possible to disentangle, at least on the evidence currently available, the effect of welfare changes from those caused by the state of the wider economy. Local authorities, and the LGA, will be monitoring the impact of benefit changes on the private rented sector and rent levels. In high demand areas there will be competition for rental accommodation which may make it difficult for those in receipt of benefits to access affordable and appropriate accommodation in the sector. Local authorities are working with private landlords to explain the changes and work with them in placing those on the waiting list and in the discharge of their homelessness duty. For example, the London Borough of Croydon has established, through tender, a panel of eight private sector landlords that will act as managing agents for HMOs,49 for placement of homeless families. They will spread the word about the scheme—the guarantee of income and expected standards—and bring forward suitable properties.
How local authorities are discharging their homelessness duty by being able to place homeless households in private sector housing The flexibility for local authorities to discharge their homelessness duty in the Private Rented Sector (PRS) is welcome. However, the scale of the challenge for local authorities should not be underestimated. Some parts of the country, particularly in London, are experiencing high rent levels and competition for affordable properties. The legislative framework requires that councils should have regard to the location of the accommodation when placing homeless households in the Private Rented Sector (PRS). Where suitable accommodation is outside the district of the housing authority they must have regard to a range of factors when taking decisions about placements.50 Local authorities will place people within their own area where this is possible. Placing out of area is always a last resort for councils. In high demand areas it will not always be possible to place within area. Where placements out of area are necessary, councils will take a responsible approach. For example councils in London share information and monitor movement across the capital using an Inter-borough Temporary Accommodation Agreement. This ensures that authorities that may receive households receive information in advance of the placement and contains important conditions relating to rental prices. The LGA is working with London Councils to explore appetite across England for a similar set of management principles that underpin information sharing arrangements. 49 HOMs—Homes of Multiple Occupancy. 50 Local authorities must have regard to the distance, the impact on employment, caring responsibilities and education. Access to support, services and other facilities must also be taken into account. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Letting agents, including agents’ fees and charges The impact of fees and charges on local communities is an area of concern and high fees could act as a barrier to the private rented sector, particularly for people on low incomes. Households who could potentially find suitable accommodation in the private sector will be blocked by the need to pay agents fees and charge. This will add to the pressure on waiting lists for social and intermediate housing. Local authorities are also being proactive in this area and some are choosing to act as local lettings agents themselves, for example Decent and Safe Homes (DASH) is now well advanced in developing a local lettings agency for Derbyshire. Help2let was the first social letting agency in London, set up by Harrow Council to match households on the waiting list with private landlords.
3. Councils are Making Sure that People are Safe, Secure and Healthy in their Homes The quality of private rented housing, and steps that can be taken to ensure that all housing in the sector is of an acceptable standard Where quality standards reach unacceptable levels local authorities have regulatory and enforcement tools available. Using these tools is often a last resort with a focus on engagement with good quality landlords through forums, accreditation schemes and training. Councils will seek a dual approach, where good behaviour is encouraged through licensing and support to follow enforcement processes. The other side of this is action against poor behaviour, for example by using powers under the Proceeds of Crime Act. Licensing the private rented sector can also be a tool for tacking specific issues with poor quality accommodation. The following case studies illustrate the value of licensing in meeting local needs and supporting targeted action. — Hastings Borough Council is targeting one of its struggling neighbourhoods with tough enforcement and a property purchase programme in collaboration with a specialised housing association. — London Borough of Newham and Oxford City Council are in the process of rolling out area-based licensing schemes across their whole area. Newham is introducing a borough wide scheme covering all private rented housing. Oxford is coverings all HMOs. Both are structuring their licensing fees to incentivise and reward cooperation from landlords.
Regulation of landlords, and steps that can be taken to deal with rogue landlords Enforcement action is always a last resort however a number of the powers available to councils are limited in their use due to a lack of clarity and disproportionate bureaucracy. These could be streamlined to reduce bureaucracy and act as a more effective deterrent to non-compliant landlords. The LGA would like to see the following amendments to existing legislation: — Ambiguity within the wording of the Housing Act 2004 can lead to Residential Property Tribunal panels making different interpretations of owners, responsibility and which properties are defined as HMOs. — Legislation should be updated and rationalised to make it accessible and understandable to local authority officers and landlords. — The Housing Health and Safety Rating System (HHSRS) is a risk assessment system for housing and forms the basis of property inspection in the private rented sector. It is recognised as an improved tool for housing standards enforcement through which local authorities can take action, but the evidence base is dated and the whole process is time consuming. We would therefore recommend that the system is reviewed to ensure that it is fit for purpose. — Court action may be the ultimate course of action with the worst landlords. Prosecution should act as the ultimate deterrent, but the fines imposed by magistrates courts are often much lower than the maximum fine. Local authorities are working at a local level to build relationships with magistrates but there is more that can be done nationally to raise awareness of the harm that can be caused to tenants from unlicensed HMOs and ensure that penalties properly reflect this. Some of the worst examples of exploitation by landlords have been seen in the rise of illegally rented outbuildings or “beds in sheds”. Pilot funding from DCLG has been useful in determining the scale of the problem in a select group of areas, mainly to the East and West of London. Local authorities have been taking action to address this issue. For example: — staff training to promote joint action across the council; — providing support through the housing options services to help people find more suitable accommodation; — more effective mapping and analysis to find problem hot spots; and — joint action with UK Borders Agency and HMRC. Outside London, Blackpool Council has closed several of the most dangerous HMOs following the introduction of selective licensing. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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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 Licensing schemes can play an important role in aiding the management of HMOs and the sector overall in an area. As noted in the introduction, the more time that private housing officers spend on forms and processing information, the less time they are able to spend on proactive enforcement and support for landlords. The LGA is therefore keen to see a focus on streamlining red tape. Clarifications and minor changes set out below to the systems and powers on HMOs would make them easier and less costly to use. For example: — A clearer definition of “HMO”, “definition of dwelling”, the “person managing” and the “person having control”. Minor changes here could end confusion and uncertainty. — The amount of information that is required upfront from landlords could be reduced without detriment to quality. The discretionary licensing schemes are useful tools but the legislation could be improved. The confusion over definitions in the legislation means that some authorities have had to issue two designations for an area in order to cover all areas. This could be remedied through giving local authorities more discretion in using selective and additional licensing powers. Article 4 directions can be used to limit the number of HMOs in an area. The use of this power is constrained by the lack of flexibility for local authorities around the notice period and compensation provisions currently required for the use of Article 4 directions. These issues, coupled with the loss of planning fee income often act as a disincentive to the use of the directions. We would like to see local authorities provided with greater flexibility and discretion on discretionary licensing schemes, and see disincentives to the use of Article 4 directions removed. January 2013
Supplementary written evidence submitted by the Local Government Association Thank you for your letter dated 11 February 2013 in respect to the figure I cited at your Committee meeting on 4 February regarding beds in sheds. It was reported to me by the Mayor of Newham, Sir Robin Wales, in December 2012 that the potential size of the challenge facing Newham could involve up to 1,800 properties. Sir Robin, through his officials, has confirmed that their revised figure regarding properties currently stands at 1,500. For example, in terms of enforcement activity in four of 40 wards (as of mid-February 2013), Newham has served 70 enforcement notices on sheds with beds (since September 2011). I hope this clarifies the points raised and I wish you every success with the vital work your committee us undertaking. March 2013
Written evidence submitted by the National Private Tenants Organisation About the National Private Tenants Organisation The National Private Tenants Organisation (NPTO) campaigns for professionally managed, secure, decent and affordable private rented homes in sustainable communities in England. NPTO participates in national discussions and consultations on the private rented sector. Members of NPTO include private tenant organisations, associate members and individual private tenants. NPTO has links with tenant organisations in other countries.
1. The Quality of Private Rented Sector Housing 1.1 Problems with the quality of housing 1.1.1 Introduction The PRS compares poorly to other tenures in relation to housing quality and there are significant concerns about the decency of a large number of dwellings. In 2010 levels of disrepair in the private rented sector were still significantly higher than in other tenures.51
1.1.2 Non-decent housing in the PRS 1.1.2.1 Privately rented dwellings had the highest incidence of non-decency (failing the Decent Homes Standard 2006) of all tenures at 37%. Of this 37%, 23.1% failed to met minimum Housing Health and Safety 51 DCLG, English Housing Survey: Homes: Annual report on England’s housing stock 2010, Chapter 3: page45, July 2012 cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Rating System (HHSRS) requirement (ie for dwelling to be free of HHSRS category 1 hazards), 16.4% failed on thermal comfort, 8.7% failed on repair and 3.3% on lack of modern facilities.52 1.1.2.2 Private rented dwellings are more likely than those in other tenures to experience damp problems, partly because they are more likely to be older stock. Some 40% of private rented dwellings were built before 1919 compared with 21% of owner occupied, 9% of housing association and 4% of local authority dwellings. Those dwellings most likely to have any HHSRS Category 1 hazard were those built before 1919.53
1.1.3 Health and safety 1.1.3.1 A freedom of information request submitted by Shelter to all councils across England showed that more than 85,000 complaints were made in the past year alone. Of those complaints, 62% were about serious and life-threatening hazards.54 1.1.3.2 Electricity kills at least one person every week in the home and almost 1,000 are seriously injured every day. The Electrical Safety Council has found that private tenants are disproportionately affected by electrical accidents.55 A rise in non-professional landlords confused over their responsibilities puts tenants at further risk.There is no legal requirement for landlords to arrange for inspection and testing of electrical appliances and installations to ensure their continued safety. Certain potentially fatal electrical problems can only be found by professional testing. For more information please see the NPTO campaign report at: www.KeepRentingSafe.weebly.com
1.1.4 Poor energy efficiency in the PRS 1.1.4.1 The PRS had the highest percentage (17%) of dwellings in inefficient Energy Efficiency Rating Bands F and G in 2010. The PRS showed the least improvement in thermal comfort and in 2010 still had a significantly higher proportion of homes failing the Decent Homes standard on this aspect than any other tenure.56 1.1.4.2 In 2010, PRS dwellings had the lowest percentage of all tenures having central heating systems. 92% of owner occupied dwellings had central heating systems, compared to 88% of social and 80% of private rented dwellings.57 The PRS along with Housing Association dwellings had highest percentage of all tenures not having cavity wall insulation. PRS had the highest percentage of all tenures not having double glazing (14.5%).58 Private rented dwellings were less likely to have mains gas. 1.1.4.3 In 2011 38% of PRS dwellings did not have an Energy Performance Certificate and the landlord had no plans to obtain one.59
1.1.5 Fuel poverty in the PRS 1.1.5.1 The PRS had the highest percentage of all tenures of households living in fuel poverty at 30% (“after housing costs” approach). The main rationale behind an after housing costs measure of income is that money that needs to be spent on housing costs is not part of a household’s disposable income, and thus cannot be spent on their fuel bill.60
1.1.6 Retaliatory eviction of tenants complaining about housing conditions 1.1.6.1 Retaliatory eviction can be said to occur when a PRS landlord seeks possession of a property using Housing Act 1988, Part 1, Chapter 2 , Section 21, in response to a legitimate request from a tenant. Please see evidence on the problem of retaliatory eviction at: http://www.npto.btck.co.uk/OurReports
1.2 Proposed measures to improve the quality of housing in the PRS 1.2.1 Non-regulatory measures 1.2.1.1 Local Authorities (LAs) should conduct more proactive inspections of PRS dwellings. In 2010 only 33% of landlords and letting agents had heard of the HHSRS, of this percentage only 58% had received an assessment for potential hazards in dwellings under their control. Of these inspections only 10% were conducted by LA Environmental Health Officers.61 Central Government should ensure LAs are incentivised and adequately resourced to conduct inspections on all PRS housing stock. 52 DCLG, English Housing Survey: Homes: Annual report on England’s housing stock 2010, July 2012 53 DCLG, English Housing Survey: Homes: Annual report on England’s housing stock 2010, July 2012 54 Shelter, “Complaints about landlords up almost 30%”, http://england.shelter.org.uk/news/october_2012/complaints_about_ landlords_up_almost_30, 4th October 2012 55 Electrical Safety Council, http://www.esc.org.uk/public/news-and-campaigns/press-releases/news/article/confusion-between- landlords-and-tenants-exposes-millions-to-serious-electrical-dangers/, March 2012 Page 2 56 DCLG, English Housing Survey: Homes: Annual report on England’s housing stock 2010, July 2012 57 DCLG, English Housing Survey: Homes: Annual report on England’s housing stock 2010, July 2012 58 DCLG, English Housing Survey Headline Report 2010–11, 9 February 2012 59 DCLG, Private Landlord Survey 2010, October 2011 60 DECC, Annual Report on Fuel Poverty Statistics 2012,17 May 2012 61 DCLG, Private Landlord Survey 2010, Annex 7.2, October 2011 Page 3 cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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1.2.1.2 Local Authorities should better enforce existing legislation
A freedom of information request submitted by Shelter to all councils across England showed that more than 85,000 complaints were made in the past year alone. Of those complaints, 62% were about serious and life-threatening hazards. There were only 487 successful prosecutions against private landlords in 2011. However, they were mostly driven by a small handful of local councils including Newham, Leeds, Salford and Manchester.62 More robust enforcement of the HHSRS is essential.
1.2.1.3 There should be better collection of data on housing conditions at LA level
There is a lack of data on housing conditions, complaints and action taken collected at LA level. Many local authorities have not undertaken any systematic surveys of their private sector stock for over a decade, despite the statutory requirement to keep conditions under review (s.1 Housing Act 2004). An example of good practice in this respect is the Bristol City Council Private Sector Housing Condition Report. See: http://www.privatehousinginformation.co.uk/site/files/Bristol%20HCS.pdf, although it is disappointing that they not intend to address the issue of non-decent housing in the PRS.
1.2.1.4 Tax regime
The tax regime for landlords should be examined to encourage longer-term investment in the PRS. In many European countries there is a more favourable tax regime for landlords.
1.2.2 Regulatory approach
1.2.2.1 Statutory minimum standard for all PRS dwellings
1.2.2.1.1 A mandatory minimum standard should be introduced this could be as outlined in 1.2.2.1.2 (extension of the Decent Homes Standard) below or based on the Scottish Repairing Standard model. The Repairing Standard, contained in the Housing (Scotland) Act 2006, brings together and extends slightly the existing statutory and contractual repairing obligations of private landlords. The landlord must ensure the house is wind and water tight and reasonably fit for human habitation. The structure and exterior, various installations, fixtures, fittings and appliances must be satisfactory. Furnishings provided must be safe. Smoke alarms are also required. Since September 2007, landlords have had to inform tenants in writing about the Repairing Standard before the start of any new tenancy. If the tenant notifies the landlord that the house does not meet the Standard, the landlord will have a duty to carry out necessary work within a reasonable time. Instead of going to court, tenants apply to the Private Rented Housing Panel63.
1.2.2.1.2 The Decent Homes Standard 2006 should be extended to all PRS dwellings not just vulnerable households and made a mandatory requirement. Adequate resources for LAs to carry out both reactive and proactive inspections and enforcement action is essential until such time as there is legislation requiring all landlords to comply with minimum standards as a condition of letting.
1.2.2.2 Health and safety
There is a dangerous anomaly whereby annual testing gas appliances and fittings is required but periodic inspection and testing of electrical appliances and installations is not (see 1.1.4.2 above). New legislation is required to require periodic inspection and testing of electrical appliances and installation by qualified electricians.The Health & Safety Executive should play a more pro-active role in monitoring adherence to the legal requirements for gas safety.
1.2.2.3 Retaliatory eviction
New legislation should be introduced to deal with the problem of tenants being evicted in response to legitimate complaints about housing conditions (See 1.1.6 above). Several countries such as New Zealand and states in Australia and the U.S.A. have introduced legislation to deal with this problem. Please see the evidence contained in our report at http://www.npto.btck.co.uk/OurReports
1.2.2.4 Housing Ombudsman Service
Membership of the Housing Ombudsman Service should be compulsory for private landlords and agents. The Housing Ombudsman Service is set up by law to look at complaints about RSLs who are compelled to join. Only a tiny percentage of private landlords and agents are also members. 62 Shelter, “Complaints about landlords up almost 30%”, http://england.shelter.org.uk/news/october_2012/complaints_about_ landlords_up_almost_30, 4 October 2012 63 Scottish Government, Repairing Standard, http://www.scotland.gov.uk/Topics/Built-Environment/Housing/privaterent/landlords/ physical/rules/repairing Page 4 cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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2. Rent 2.1 Market rents 2.1.1 Introduction All private renters should have a home at a rent that is affordable and allows long-term financial planning. Strong regulatory frameworks (including predictable rents and greater security of tenure) in other countries such as Germany have not deterred landlords from letting properties and has led to large PRS. Market rents in high demand do not have any relationship to affordability. De-regulation of the PRS in 1988 did not lead to significant growth in the size of the PRS. In 1987 the PRS comprised 9.5% of all households, eleven years later (1998) it was on 10.3%, fifteen years later (2003) it was only 10.8%.64 The buy-to-let boom, lack of social housing and home ownership being out of reach for many people, were major factors in later increases in the size of the rented sector.
2.1.2 High rent levels in the PRS 2.1.2.1 Over half (55%) of local authorities in England have a median private rent for a two bedroom home which costs more than 35% of median take home pay in that area, a level considered likely to be unaffordable in studies. 8% of local authorities are extremely unaffordable (median rent 50% or more of median full-time take-home pay); 21% are very unaffordable (median rent 40% to 49% of median full-time take-home pay) 26% are fairly unaffordable (median rent 35%—39% of median full-time take-home pay). The most unaffordable local authorities are concentrated in London.65 2.1.2.2 According to the English Housing Survey 2010–11, average weekly rents in the private rented sector continued to be well above those in the social rented sector (£160 per week compared to £79). Around 2.7 million (75%) households in the private rented sector were “market renters”.66 The comparison between social and private rents is highly relevant now that local authorities have the power to discharge their re-housing duties to homelessness households by securing private rented accommodation and in the light of the welfare benefit caps which directly impact on the ability of low income private renters to meet their rental liability.
2.2 Proposed measures to create affordable and predictable rents 2.2.1 A new model of rent determination A new model of rent determination should be introduced in the PRS which promotes long-term stability for tenants and a reliable income stream for landlords. This would increase market certainty. A new rent model would work best with longer tenancies. The model suggested below takes into account a reasonable return on landlord’s investment and ongoing costs. The model should take into account the following factors in calculating initial rents and increases: Setting initial rents: — Affordability eg taking account of geographic median income (eg rents no greater than a percentage of median income) or by reference to social housing rents for comparable properties. In Sweden rents cannot exceed 5% of the rental price of public housing. — A reasonable return on landlords investments and costs taking account of factors including depreciation and a more liberal tax regime for landlords. — Rent commensurate with the type of dwelling, this could include some or all of the following factors: — Furnished or unfurnished dwelling. — Presence of a garden. — Number of rooms. — Number of storeys. — Number of amenities. — Energy efficiency. — Disrepair (this would promote improvements in the quality of dwellings). — Modernity of facilities. — Inclusion of utility costs etc. 64 DCLG, English Housing Survey Headline Report 2010–11, Table AT1, 9 February 2012 65 Shelter, Shelter Private Rent Watch: Report One: Analysis of local rent levels and affordability, October 2011 66 DCLG,English Housing Survey Headline Report 2011–11, 9 February 2012 Page 5 cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Rent increases: — Predictable rent increases/indexed increases eg annual increases in line with inflation or cost of living (RPI or CPI) at prescribed intervals and taking into account landlord’s investment and costs and possibly offset by a more liberal tax regime for landlords. Predictable rent increases would also help landlords with long term financial planning Adjudication: — A locally based statutory third party adjudication service for rent setting and disputes. This role might be taken on by LAs.
2.2.2 Short term measures The restriction introduced by the Housing Act 1996 on applications to the Rent Assessment Committee for decisions on rent to once within six months of the beginning of an Assured Shorthold tenancy should be removed. It would also act as a deterrent to retaliatory eviction if Rent Assessment Committee decisions were attached to the subject property, not merely the subject tenancy.
3. Management in the Private Rented Sector 3.1 Lack of professionalism in management the private rented sector 3.1.1 In 2010 89% of landlords were private individual landlords responsible for 71% of all private rented dwellings. More than three quarters (78%) of all landlords only owned a single dwelling for rent, with only 8% of landlords stating they were full time landlords. Over three-fifths (63%) of all private individual landlords had no relevant experience or qualifications.67 3.1.2 Only 6% of landlords were members of a relevant professional body or organisation.68
3.2 Rogue landlords 3.2.1 Shelter has reported that LAs dealt with more than 86,000 complaints from private tenants in 2010–11; yet, wider research finds that over 350,000 private renters experienced housing problems in the same year. LAs told Shelter they are aware of some 1,477 serial rogue landlords. Yet, in the past year only 270 landlords were prosecuted.69
3.3 Proposed measures to improve professional management in the PRS and eliminate rogue landlords 3.3.1 A combination of the measures below is required to improve management standards and eliminate rogue landlords.
3.3.2 National licensing schemes 3.3.2.1 National licensing schemes are an essential tool in dealing with rogue landlords and improving management professionalism but need to be accompanied by other measures as outlined below. 3.3.2.2 The Scottish landlord registration scheme has been in operation for 6 years. All private landlords must register with their local authority to ensure that they are a “fit and proper person” to let property. It is an offence to let any house without being registered. 3.3.2.3 The Republic of Ireland has a mandatory tenancy registration scheme which requires private landlords/their agents to register details of their tenancies with the Private Residential Tenancies Board. 3.3.2.4 The Welsh Assembly has outlined a potential scheme in the “Homes for Wales” White Paper of May 2012. 3.3.2.5 The Northern Ireland Assembly The Committee for Social Development will soon consider draft regulations for a Northern Ireland Landlord Registration Scheme.
3.3.3 Use of discretionary licensing 3.3.3.1 NPTO supports the use of powers under the Housing Act 2004 by LAs to introduce additional and selective licensing schemes and welcomes London Borough of Newham’s discretionary licensing across its entire area. Selective Licensing became mandatory on 1 January 2013. NPTO would encourage all LAs to consider introducing schemes similar to Newham Council’s. 67 DCLG, Private Landlord Survey 2010, October 2011 68 DCLG, Private Landlord Survey 2010, October 2011 69 Shelter, “Asserting authority: calling time on rogue landlords”, September 2011 Page 7 cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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3.3.4 Voluntary landlord accreditation schemes 3.3.4.1 NPTO supports the establishment of voluntary landlord accreditation schemes providing there are adequate standards for entry and continuous improvement and that both are adequately monitored and enforced. The Government should encourage all LAs to establish schemes. 3.3.5 LAs should conduct inspections of all PRS dwellings. 3.3.6 LAs should better enforce existing legislation.
4. Letting Agents 4.1 Concerns regarding letting agents 4.1.1 Excessive letting agent fees Research by Shelter found that about 23% of more than 5,000 people surveyed believed they had been landed with unfairly high fees for aspects of renting in England such as credit checks, renewing contracts and “administration”. More than half (52%) of people who felt they had been ripped off, or knew someone who had been, said this was due to fees being “out of proportion” to the true cost of the work done. The housing charity said it had found cases of renters being charged more than £150 for repeat credit checks each year, which Shelter said actually cost between £8 and £25 to perform. It said some people were being charged £100 just to view a property and renters were being charged up to £540 in non-refundable “administration” fees.70 4.1.2 Regulation of letting agents Letting agents are largely unregulated with only voluntary membership of professional bodies. Fifteen percent of letting agents do not belong to a professional body.71
4.2 Options to improve letting agent service 4.2.1 Reform of letting agent fees The Scottish Parliament has voted to approve secondary legislation to clarify that all tenant charges, other than rent and a refundable deposit, are not permitted. A the same approach should be adopted in England.
4.2.2 Options for regulation of letting agents 4.2.2.1 Letting agents to be put on the same footing as estate agents Letting agents should be put on the same footing as estate agents. This would involve bringing letting agents under the definition of an estate agency which would give the Office of Fair Trading the ability to ban agents who act improperly. 4.2.2.2 National licensing scheme for letting agents A national mandatory licensing scheme could be introduced for letting agents to ensure only fit and proper businesses operate in the sector. In the short term NPTO would like to see all letting agents joining the National Approved Letting Scheme and Safe Agent schemes. 4.2.2.3 Complaints about letting agents—Housing Ombudsman Service Consideration could be given to making membership of the Housing Ombudsman Service compulsory for letting agents. The Housing Ombudsman Service is set up by law to look at complaints about registered providers of social housing. Certain private landlords and agents are also members.
4.2.3 Social letting agencies NPTO strongly supports the widespread establishment of social letting agencies which are more focused on meeting the needs of tenants and communities.
5.0 Houses in Multiple Occupation (HMO) 5.1 NPTO believes that greater use of discretionary licensing schemes will improve the quality of HMOs and their management. Proposed changes to the housing benefit shared room rate are likely to see more individuals forced to live in HMOs. 5.2 LAs need to take more robust action to ensure all HMOs which should be licensed are licensed and that the HHSRS is enforced. 70 Guardian, http://www.guardian.co.uk/money/2012/sep/04/quarter-people-ripped-off-lettings-agents-shelter, September 2012 71 DCLG, Private Landlords Survey 2010, October 2011 Page 8 cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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6.0 Security of Tenure and Tenancy Agreements
6.1 Since the introduction of the Assured Shorthold tenancy the vast majority tenants have suffered from lack of security of tenure. This does not promote sustainable communities. More secure tenancies have not impeded the growth of large PRSs in other countries eg Germany. Some 30% of private renters worry about their landlord/letting agent ending the contract before they are ready to move out.72
6.2 A new model of standard tenancy should be introduced which provides security and stability for tenants and their families and incorporates predictable rents.
Fixed five year tenancies have been suggested with annual rent increases no more than the cost of living (CPI). Tenants should be given first option if a landlord decides to sell a property.
6.3 In the short term NPTO encourages all landlords to offer Assured or long fixed-term Assured Shorthold tenancies (with break clauses for tenants). The certainty of stable tenancies benefits landlords and tenants.
6.4 Tenancy agreement reform
6.4.1 Legislation should be introduced so that all tenants receive a written tenancy agreement with a tenants information pack provided at the start of a tenancy (see 6.5.2 below). The principles set out for Consumer Contracts in the Law Commission Report, Renting Homes73 including mandatory terms should be enshrined in statute.
6.4.2 All tenants should be provided with a tenancy information pack at the start of the tenancy based on the Scottish tenancy information pack which will be introduced on 1st March 2013. The Tenant Information Pack will include information on tenancy agreements, property condition, appliance manuals and the rights and responsibilities of tenants and landlords.
6.4.3 All tenants should be allowed to decorate their homes and have pets without obtaining their landlords’ permission, but must repair any resulting damage.
7.0 Homelessness and the use of the Private Rented Sector
7.1 Families must not be forced to accept PRS accommodation if they feel social housing is the best option for their family. Social housing is better regulated, affordable and secure. A more secure, decent and affordable PRS will help prevent homelessness.
7.2 Where homeless households choose the PRS, local authorities should avoid recouping the costs of providing rent guarantee or deposit schemes from them. LAs should limit referrals to the PRS to tenancies where there is no Housing Benefit shortfall or where there is a sustainable solution to cover any shortfall.
8.0 Tenant Representation
8.1 PRS tenants should have a mandatory right to consultation and information similar to rights social housing tenants have in respect to housing management and maintenance. PRS tenant panels should be considered similar to plans for social housing tenants. The panels are a key part of government plans to give communities more power over how decisions are made locally, and will be able to refer complaints to the housing ombudsman on behalf of individual tenants and shape services and get involved in local decision making. Local authorities should encourage and support the formation of local groups of private renters and ensure that private renters are consulted when drafting local housing strategies, considering service provision, etc.
8.2 Tenant information packs (see 6.4.2 above) would help tenants be better informed about their rights and responsibilities and support services available in their local area. January 2013
Written evidence submitted by the Residential Landlords Association
1.0 About the Residential Landlords Association
1.1 The Residential Landlords Association (RLA) represents 16,000 small and medium-sized landlords in the private rented sector (PRS) managing over 150,000 properties in England and Wales. It promotes and maintains high standards in the sector, provides training for its members, runs local landlord accreditation schemes and seeks to drive out criminal landlords. 72 Shelter, YouGov 2011, base: 541 private renting GB adults. Fieldwork: 2 to 5 December 2011 Page 9 73 Renting Homes: The Final Report Vol 1 The Law Commission (Law Com No 297) cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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2.0 Summary of Points and Recommendations 2.1 English Housing Survey statistics have shown that at 17% the private and social rented sectors now comprise an equal proportion of the overall housing market. In a recent report, Savills and Rightmove estimated that by 2016 one in five households will be renting in the private sector. 2.2 The most recent English Housing Survey figures show that 85% of private tenants are very or fairly satisfied with their landlord, compared with an 81% satisfaction rate for social housing tenants. 2.3 A new banning or disqualification order should be established to prevent criminal landlords being involved in the management or letting of privately rented properties. 2.4 Local authorities should no longer be the sole sector regulator. There resources should be freed up to target non-compliant landlords through the introduction of self-regulation via accreditation for compliant landlords, run by approved independent accreditation bodies. A similar model exists under Building Control. 2.5 Ministers should work with local authorities to review the skill set of Environmental Health Officers to ensure they have the training needed to bring swifter prosecution against criminal landlords. 2.6 Underpinning all such changes is the need for measures, to boost supply since it is only through boosting the number of properties available to rent that tenants can better exercise choice. 2.7 Article 4 Directions, legal tools that local authorities can use to restrict the growth of Houses of Multiple Occupation, are being misused and should be repealed to alleviate the restriction on supply, protect the asset values of residents’ homes and allow people to choose where they want to live. 2.8 Ministers should bring together representatives from across the sector to establish a single, authoritative, common rent level survey. 2.9 Agreeing with the Business Secretary’s, assertion that rent controls “reduce supply” the RLA would strongly argue against any adoption of rent controls. 2.10 One of the most effective measures in professionalising the rental market would be to introduce greater controls on letting and managing agents. This part of the sector has remained unregulated far too long and is on occasion unprofessional. 2.11 Letting agent’s terms and conditions should be clearer along with what is chargeable and what is not, both to the landlords and tenants. Details of fees should be available to either party before signing any terms either on a web-site or by request on business premises. 2.12 Imposing statutory security of tenure is not the answer. A contractual based longer term tenancy model should be encouraged for those who need it. Many tenants, however, prefer the flexibility that the sector currently offers. Written tenancy agreements are to be encouraged but failure to use them should not be penalised; rather there could be a statutory basic fall back agreement.
3.0 Regulation of the Private Rented Sector 3.1 One of the RLA’s core objectives is to promote and maintain high standards within the sector. The provision of sub-standard accommodation that can often be dangerous is not acceptable. It should be noted however that the most recent figures available from the English Housing Survey show that 85% of private tenants are very or fairly satisfied with their landlord, compared with an 81% satisfaction rate for social housing tenant. 3.2 Key to tackling problem properties is to radically change the regulatory system and root out criminal landlords who fail to provide the service or the standard of accommodation that is legally expected of them. There needs to be a smarter system of regulation that better pinpoints those operating under the radar and who are difficult for local authorities to find, rooting out for good those who reap misery on tenants. 3.3 According to figures from Shelter, just 487 landlords in England were prosecuted last year; a figure that is remarkably low out of an estimated 1.2 million landlords in total. This is despite our analysis showing over 100 individual pieces of legislation and regulations containing around 400 individual measures affecting the sector. The problem is not a lack of powers, but the willingness and ability of local authorities to enforce their existing powers. 3.4 In his report for the RLA on investment in the sector, Professor Michael Ball of Reading University noted that landlord-tenant relations are subject to a wide-variety of housing, health and safety, planning, social policy, and environmental legislation. This, he concludes “has all developed in a haphazard, uncoordinated manner over many decades”. This, he notes, inevitably raises landlord costs; increases landlord administrative time; heightens risks because of the liabilities associated with regulations and elevates the “hassle-factor” of being a landlord. 3.5 Professor Ball concludes that “there is a wide variety of regulatory bodies, often with overlapping responsibilities. Many have risk-minimising, rather than optimal risk strategies, and do not bear the costs of their own actions. Responsibilities are spread between quangos, central, national and local government with limited or no coordination and potential negative overlap.” cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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3.6 As with building control local authorities should cease to be the only regulator. There should be a specific housing “code” which alone sets out the requirements applicable to the sector. Whoever is the regulator should take sole responsibility for their enforcement. The same minimum standards would apply under all regulators. 3.7 A new banning or disqualification order should be established to prevent criminal landlords being involved in either the management or letting of privately rented properties. 3.8 Local authority resources should be freed up to target non-compliant landlords. by the introduction of self-regulation via accreditation for compliant landlords by approved independent bodies. Given the funding difficulties they face, it is much easier for councils to target compliant landlords who can easily be found than spend the time and energy needed to pursue those operating under the radar. Robust accreditation, would act as a kite mark giving accredited landlords a marketing advantage. Scheme members should be expected to provide tenants at an early opportunity with a guide to both their rights and responsibilities with details of what to look out for and questions to ask before and after signing a contract. The RLA has developed such material. 3.9 Under the model in operation in Leeds, Fylde and East Lancashire, landlords are accredited, with an emphasis placed on Continual Professional Development (CPD) and the improvement of management standards. The property standards are essentially compliance with existing legal standards. 3.10 The RLA scheme has been developed to comply with the requirements set by the Accreditation Network United Kingdom (ANUK), which are: — Declaration—applicants must declare that their properties comply with the scheme requirements. — Verification—by a system of auditing the declaration and evidence of CPD. — Continual Improvement—the RLA is committed to ensuring that: — Standards are being constantly raised. — Benefits of membership are developed. — Scheme operations are improved and made more efficient. — Complaint Procedure—to enable a good system of redress to tenants and to assist in maintaining standards. Disputes are considered by a thorough procedure with sanctions in the worst cases of non-compliance. 3.11 Ministers should work with local authorities to review the skill set of Environmental Health Officers to ensure they have the training needed to bring swifter prosecution against criminal landlords. 3.12 Underpinning all such changes is the need for measures to boost supply since it is only through boosting the number of available properties to rent that tenants can be truly discerning in their housing options.
4.0 Regulation and Availability of Houses of Multiple Occupation 4.1 Councils now have the power to restrict the creation of new Houses of Multiple Occupation (HMOs) by making Article 4 Directions. 4.2 Previously, planning permission was not required to convert a property from use as a single family dwelling to become a small HMO lived in by up to six unrelated residents as a single household. Under regulations introduced in 2010, councils have the power to require planning permission before this change of use can be made for properties in selected districts. This procedure is regularly being misused. 4.3 A new use class has been created for planning purposes, Class C4, for small shared houses and flats in multiple occupation lived in by between three and six unrelated individuals. 4.4 Over 35 local authorities either have made or are considering making Article 4 directions to enable them to prevent family houses and flats being used as small HMOs without planning permission in designated areas. Usually these areas are where there are significant populations of students, but they also affect young professionals, such as nurses, or migrant workers. The reality is that permission will frequently be refused. 4.5 Whilst much of the case for restricting the growth of HMOs relates to the desire of a number of Councils to address the phenomenon known as “studentification”, the reality is that HMOs play a vital role to the regeneration and supply of housing in many communities. As demographics shift, landlords make better use of existing stock which would otherwise be under-utilised and poorly maintained. Article 4 Directions are motivated by sentiment against young people. 4.6 HMOs help provide a mobile workforce with necessary accommodation, vital for many local economies. HMOs are not just occupied by students but, with record social housing waiting lists and first time buyers facing increasing difficulties, are increasingly required by young professionals and workers. Due to the increase to 35 as the age for the (housing benefit) shared accommodation rate, more housing of this kind will be needed. 4.7 Areas with concentrations of HMOs are renowned for their vibrant nature with local, independent retailers and a café culture which helps promote a diverse and strong local economy. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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4.8 The Rugg Review (2008), commissioned by DCLG, into the PRS argued against the use of planning powers to limit HMO numbers with research showing problems to be confined to less than 1% of council wards. 4.9 Where Article 4 Directions have been applied, a significant decrease in property prices has been seen. In Nottingham and Leeds, up to one third has been shaved off the value of properties in areas where the council has a direction. Therefore, local owner/occupiers feel the impact. 4.10 The use of the regulations to restrict the availability of HMOs has a direct impact on the supply of new homes. Consequently rent levels increase in popular areas. 4.11 Local authorities have a duty to ensure that sufficient HMO accommodation is provided in their area but are disregarding this. If an Article 4 direction is put in place, the result is that HMOs may be established in areas where they may not be welcome, such as where there is a dominance of family units. This is likely to create community disharmony. 4.12 The imposition of the regulation takes away the freedom of people to choose where they want to live. It allows local authorities to engage in social engineering, restricting who can live where. 4.13 Instead of local authorities adopting Article 4 Directions, it would be better to address problems that may occur where there are high concentrations of HMOs using the existing powers at local authorities’ disposal including those used for tackling anti-social behaviour. 4.14 Article 4 Directions do nothing to alter the make-up of existing communities but by making them, local authorities are denying tenants the choice of where they can live, drying up supply, increasing rents and significantly reducing the value of houses owned by local residents. 4.15 These powers should be repealed to alleviate the restriction on supply, protect the asset values of residents homes and allow people to choose where they want to live. This would also force councils to be more creative and work with landlords to address any problems caused by large HMO populations.
5.0 Levels of Rent 5.1 The RLA recognises that for many tenants’ rents are simply too high for them to manage, particularly in London. Whilst there are a plethora of organisations producing data on average rent levels, each has its own methodology enabling organisations to simply cherry pick those figures that best suit their case. It is important, however, to identify real increases in rents, stripping out the inflation element. 5.2 Given the widespread public and political interest in rental levels in the private rented sector we call on Ministers to bring together representatives from across the sector in conjunction with the Valuation Office Agency to establish a single, authoritative, common rent level survey. Such discussions should establish a robust methodology which gives the most accurate and comprehensive data that can properly inform policy making in relation to the sector. 5.3 Methodologies aside, the RLA does recognise the concerns of many over the amount that tenants can find themselves paying for their properties. Ultimately though, the answer lies in boosting the supply of properties. 5.4 Any suggestion of rent controls would be a regressive step at just the moment that more needs to be done to encourage investment in new properties. As the previous Housing Minister, Grant Shapps observed, as a result of previous rent controls, the private rented sector shrank from 55% of households in 1939 to just 8% in the late 1980s. If replicated now, rent controls would cause untold damage to the sector. 5.5 Rent controls would further dissuade lenders from advancing money to purchase properties to rent and would damage the finances of many buy to let investors. Experience from the past shows that property quality suffers markedly if rent controls are imposed. 5.6 In agreeing with the Business Secretary, Vince Cable’s assertion recently that rent controls “reduces supply” the RLA would strongly argue against any adoption of rent controls.
6.0 Regulation of Lettings Agents 6.1 The dubbing by the Royal Institution of Chartered Surveyor’s recently of lettings agents as being akin to the “Wild West” highlights a major area of concerns in the sector. Around two-thirds of landlords use agents in some way. 6.2 One of the most effective measures in professionalising the rental market would be to introduce greater controls on letting and managing agents. The sector has remained unregulated far too long and as such is on occasion unprofessional. With the greater focus on increased responsibility and higher standards in the PRS, it should be led by the industry that serves it. Landlords should be receiving advice from their agents and as such these companies and their employees should not be operating until that competence is proven. 6.3 The key reason for licensing is to protect monies held by agents. There is a need for proper bonding and audit of client accounts. This should be via participating agent organisations. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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6.4 It is important that agents are brought into line to give a fair option to landlords who may consider the increased burden of management too much to operate themselves and opt instead to pass the responsibility to an agent. As it stands, there are not enough competent, qualified agents available to do this leading to landlords giving a property over to companies that may not effectively manage the property. There will be a period of time required to improve the standards of agents, especially as some of these may be using their client account to trade. Although clamping down on such agents quickly may seem a tempting option, it would be better to see these agents manage either their exit or recovery from this situation rather than disappear entirely. 6.5 Although landlords can learn by compliance with various forms of licensing, subject to proper enforcement, it is unacceptable for agents to learn at landlords’ expense. There should be a minimum qualification level for a principal and an appropriate qualification level for a percentage of the staff to licence the company. 6.6 Due to the size and unregulated nature of the market, the fee structure is not particularly homogenised or transparent. Terms and conditions of agents should be clearer along with what is chargeable and what is not, both to the landlords and tenants. The level of all fees should be available to both parties before signing any terms either on a web-site or at request on a property. We do not believe that fees should be set or influenced by government.
7.0 Tenancy Agreements and Security of Tenure 7.1 The introduction of the shorthold tenancy has been key to reviving the sector, along with market rents. At the moment we are concerned that Article 8 of the European Convention on Human Rights (Respect for the Home) may be held to apply to the private rented sector. As the Montague Report pointed out a stable regulatory regime is vital. Imposition of security of tenure or rent controls (including restrictions on rent during a tenancy) will undoubtedly lead to disinvestment from the sector. 7.2 The Association supports long tenancies to those who need them such as families and the elderly. However, the sector caters for many tenants who appreciate the flexibility of the sector and do not want long term tenancies. We have now developed a model for long term tenancies based on an option to renew for tenants. However, certain barriers need to be removed particularly requirements by mortgage lenders to limit tenancies to 12 months and the ability to evict non compliant tenants through the Court system must more quickly. 7.3 We support the use of written tenancy agreements. The RLA is the only organisation which publishes Crystal Mark Plain English compliant tenancy agreements. Making them compulsory though raises difficulties in practice and this could adversely affect tenants more than landlords. One answer could be a statutory fall back agreement setting out minimum terms rather than imposing tenancy contracts or penalties for failure to provide them. January 2013
Written evidence submitted by Citizens Advice
1. Introduction 1.1 Citizens Advice welcomes the opportunity to submit evidence to the Committee’s inquiry into the private rented sector (PRS). This sector has grown rapidly in recent years and conditions within it continue to vary widely, ranging from the excellent to the extremely poor. There are also major issues of affordability, especially for people on low incomes, with Housing Benefit (HB) increasingly inadequate. 1.2 The Citizens Advice service provides free, independent, confidential and impartial advice to everyone on their rights and responsibilities. It values diversity, promotes equality and challenges discrimination. The service aims: — to provide the advice people need for the problems they face; and — to improve the policies and practices that affect people’s lives. 1.3 In the year to April 2012, Citizens Advice Bureaux in England and Wales dealt with over 233,600 HB enquiries (private and social rented sectors); 28,000 enquiries on rent arrears in the PRS; 70,200 enquiries concerning threatened homelessness; and 25,800 enquiries concerning actual homelessness. There were also 137,500 enquiries regarding “private rented sector property”—covering issues such as disrepair; service charges; possession action (other than for arrears); security of tenure; harassment; problems with letting agents; and tenants’ deposits. 1.4 We realise that this inquiry does not embrace the question of supply of accommodation, as this has recently been addressed separately by the Committee. Nevertheless, we think that it should be noted that shortage of supply and associated lack of options are at the root of many of the problems of standards and affordability encountered in the PRS. We worked closely with Lord Whitty’s Housing Voice independent cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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inquiry into affordable homes—which reported74 last September—and found the influence of housing shortage a pervasive theme within the evidence submitted by bureaux and by other witnesses.
2. The Consultation Issues The quality of private rented housing and steps that can be taken to ensure that all housing in the sector is of an acceptable standard 2.1 CABx across England and Wales received around 10,000 enquiries on repairs and maintenance issues in the PRS last year. Disrepair is a considerable problem and clients often report feeling helpless in getting any action. The effects of poor standards on tenants and their families can affect their physical and mental health, safety and security—and sometimes all of these. A Berkshire CAB client was struggling to get their letting agency to carry out essential repairs. They had rented for six years during which time they had been excellent tenants and always paid their rent on time. The back garden door lock was broken, making the property unsecured. Someone was sent to repair it, but it still did not lock and a request to have it done again was refused. Then when an engineer came to do the gas safety certificate check, he declared the heating system unsafe and disconnected it. Nothing had been done to rectify this. There was also a serious problem with the electrics and the tenants were sent a bill for £140, the agent alleging that the problem had been caused by them. There was also serious mould in the kitchen and when the tenants complained, they were told to use a spray chemical, the smell of which so pervaded the room that they did not like being in there and instead cooked with a microwave in the sitting room. They found living in the house increasingly difficult but faced a shortage of alternative properties at an affordable price in the area. [It should be noted that a letting agent was involved in this case—see further comments on letting agents below.] 2.2 Considering what steps could be taken to ensure acceptable standards in the PRS raises the issue of investment. For private landlords there is an important balance to be struck between a return that will render attractive the levels of investment necessary to achieve and maintain good standards; and rents that tenants can afford. 2.3 At the lower end of the quality continuum, standards are also a matter for local authority environmental health functions—and possibly also a matter for regulation (see below). There are two particular difficulties with environmental health interventions: (a) staff shortages within local authorities, which means lack of time for adequate pursuit of offenders; and (b) the fear among many tenants that a complaint may result in a retaliatory eviction75—a particular problem given the scant security of tenure afforded by “assured shorthold” tenancies. 2.4 Protection from retaliatory eviction should be a feature of the operation of the PRS, whether as part of a regulatory system or not.76
Levels of rent within the private rented sector, including the possibility of rent control and the interaction between Housing Benefit and rents 2.5 CAB enquiries evidence the challenges many people face in finding affordable accommodation in the PRS. 2.6 Rising rents are a critical factor in the increase in the HB bill. Whilst we accept that HB—and in due course the rental element of Universal Credit (UC)—cannot be expected to meet any rent, however high, limits must take account of the consequences for poverty and hardship. 2.7 CABx are picking up growing numbers of cases where HB cuts are causing serious problems. Our own qualitative research (currently in progress) into the effects of PRS HB cuts as reported by bureaux shows the diverse range of ill-effects. The following table is based on the first 51 cases analysed:
74 To have or have not: taking responsibility for tomorrow’s affordable homes today, Lord Whitty [Chair], report of the Independent Inquiry into the Affordable Homes Crisis, Housing Voice, September 2012. 75 See The tenant’s dilemma—warning: your home is at risk if you dare complain, Debbie Crew, Citizens Advice, June 2007. 76 Illustrations of how this has been achieved in other countries are provided in Appendix 1 of The tenant’s dilemma—see note 2. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Table
REPORTED EFFECTS OF HB SHORTFALLS [WHERE MORE THAN ONE EFFECT REPORTED, EACH COUNTED SEPARATELY, SO EFFECTS EXCEED NUMBER OF CLAIMANTS]: Rent arrears 12 Other debt 21 Cutting down other essentials 21 Eviction threatened or in progress77 08 Other homeless risk 13 Homeless (tenancy not found at HB level) 06 Moved/moving to poor-quality accommodation 02 Moved/moving to overcrowded accommodation 01 Children’s access visits jeopardised 02 Seeking cheaper accommodation (not yet found)78 20 Total reported effects 106 Total cases 51
2.8 Stress and anxiety were also frequently mentioned as a consequence of these pressures. There was one reported relationship breakdown.
2.9 It is striking that other debt substantially exceeds rent arrears, which suggests that claimants were prioritising the rent and getting into difficulties elsewhere in their budgets. Especially where the HB shortfall is high, it may not be possible to sustain this avoidance of rent arrears indefinitely, so a different pattern may emerge overall and in a given case as time passes.
2.10 The Government has commissioned a substantial research project into the cuts (since April 2011) to HB in the PRS. This was scheduled to run from Summer 2011 to the end of 2013. An “early findings” report has appeared,79 with a fuller interim report expected by Spring 2013 and final results scheduled for the end of 2013 (likely to be 2014).
2.11 If the DWP-commissioned independent monitoring also shows that there have been substantial adverse personal and social consequences, then the question of rents eligible for HB (and UC) should be revisited by Government, this time from the perspective of tackling poverty and promoting social inclusion.
2.12 The Government’s definition, in contrast, is “up to 80% of market rents”—which many people in many areas would, in fact, not be able to afford.
2.13 We believe that the Whitty Report definition of affordable homes should be adopted as official policy: “comfortable, secure homes in sound condition that are available to rent or buy without leaving households unable to afford their other basic needs (eg food, clothing, heating, transport and social life)”.80
2.14 In relation to rent controls, there are significant arguments for and against. Landlords’ representatives and some other commentators predict a strongly adverse effect on investment, but against this, tenants’ representatives and yet other commentators argue that a continuing absence of control is rendering the PRS increasingly unaffordable to large sections of the public in some parts of the country.
2.15 It is difficult to come to a definitive conclusion—given the differences between housing markets in different historical periods and countries—without trying it. Certainly, as long as PRS rents are largely uncontrolled, affordability and HB eligible rent limits will continue to pose major problems.
Regulation of landlords and steps that can be taken to deal with rogue landlords
2.16 We think that there is a strong case for regulation of landlords (and letting agents). It needs to distinguish between small/inexperienced/“accidental” landlords and “rogues and cowboys”. There should be advice and training on offer as part of the regulatory framework, as well as an appropriate range of penalties. 77 Note that claimants at risk of eviction are not necessarily going to be homeless—they may be moving to other (albeit possibly unsuitable) accommodation. So “eviction threatened or in progress” and “other homeless risk” categories overlap but do not total. 78 This is likely to overlap other categories and to occur more often than specifically reported. 79 Monitoring the impact of changes to the Local Housing Allowance system of Housing Benefit: summary of early findings,C Beatty, I. Cole, P Kemp, B Marshall, R Powell and I Wilson, DWP Research Report no. 798, June 2012. 80 See note 1, p. 6. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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2.17 Short of full regulation, there are the options of selective licensing and voluntary accreditation schemes. The problem with any voluntary scheme is that those landlords most in need of attention will be least likely to join. The adverse inference to be drawn from non-membership is unlikely to prove a strong incentive in a market characterised by shortage of supply.
2.18 In Wales, we support the Welsh Government’s commitment to introduce statutory registration and accreditation for private landlords and letting agents as well as increased investment in the PRS, but stress that the forthcoming Housing Bill should also include measures to address the full range of factors affecting the sustainability of tenancies in the PRS—including affordability and security.
2.19 The debate around regulation is sometimes conflated with that around rent control, which can be misleading. Although rent control could be part of a regulatory system that also deals with standards, the latter can, if desired, be uncoupled from the former and the two should not be confused.
2.20 As noted above, local authorities’ limited resources to pursue environmental health breaches constitute a significant problem here.
2.21 Moreover, rogue landlords (as the following case illustrates) are most likely to engage in retaliatory eviction—so protection from this tactic is important.. A bureau in London reported the case of an unemployed couple with two young children who had had a two-year wait for a broken radiator to be repaired. Recently, the client again asked the landlord to repair it and a few days later received a “section 21” notice (whereby no reason has to be given) requiring possession. The client was prepared to negotiate with the landlord about not repairing the radiator in order to not be evicted.
Regulation of letting agents, including agents’ fees and charges
2.22 As with landlords, the standards maintained by letting agents range from the excellent to the entirely unacceptable. It seems seriously anomalous that they are unregulated. We believe that they should be.
2.23 We published research on this issue in 2009,81 illustrating poor standards, opaque and excessive charges and lack of accountability. Since then, we have provided evidence to further investigations by the Resolution Foundation and Which?—work which has confirmed our findings. We have also endorsed and publicised among our bureaux the SAFEagent “kitemark” scheme—a useful step in the right direction, although no substitute for regulation (again, a voluntary scheme will have a limited effect on the worst offenders). The case below from a Hampshire CAB illustrates both the standards deemed acceptable by some letting agents and the often obscure nature of charges. A couple and their seven year old child had to move out of their home of four years because the landlord was selling it. They went to a letting agent and signed a 12-month agreement but when they moved into the property they found it to be in bad repair and very dirty. They spent two days cleaning the property, including hiring a carpet cleaner. Neither the shower nor washing machine was working and the bathroom window was broken. There was a disgusting smell of musty damp in the kitchen and the waste pipe to the drain was broken or blocked. Someone from the letting agency came to look at the problems but there had been no action by the time the client came to the bureau. The client worked full time. His wife had to spend her days upstairs away from the kitchen smell. Their son has been unwell since they moved in. The client wishes to leave and has paid the agency £459, which he believed was for surrender of the tenancy. He has now been asked for a further £800. He is very upset by this, as it will cause him great financial hardship.
The regulation of houses in multiple occupation, including the operation of discretionary licensing schemes imposed by a local authority for a category of HMO in its area
2.24 We consider that regulation of HMOs should be an integral part of the regulatory system referred to above. There are particular issues around the HMO market, but it should not be seen as wholly separate. Meanwhile, current licensing arrangements take us only part of the way there. Mandatory licensing is limited in coverage and the use and effectiveness of discretionary schemes is vulnerable to diminishing local authority resources—a constraint which impacts also on monitoring and enforcement in general. A CAB in the South West helped a single unemployed man who lived with four other tenants in shared accommodation. He has been living there for over two and a half years, but has never received a tenancy agreement, details of which scheme his £265 deposit is protected under, nor the landlord’s full address. Rent was collected weekly in cash. Around July 2012, the client claimed HB, which met the full rent. He notified the landlord of his HB claim, to which the latter objected and threatened eviction if it were not cancelled. The client cancelled his claim and began to build up rent arrears. The landlord then gave him a handwritten note advising he wanted him to leave. The note did not include the landlord’s address, the reason for the request or a date by which to leave. 81 Let down: CAB evidence on letting agents and their charges, Liz Phelps, Citizens Advice, May 2009. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Tenancy agreements and length and security of tenure 2.25 CABx help with around 6,000 enquiries concerning security of tenure every year and it’s clear that, as illustrated by the case above, the provision of a satisfactory tenancy agreement cannot be taken for granted. This would be an elementary feature of a regulatory scheme. 2.26 Although it seems likely in the above case that the landlord’s hostility to the HB claim derived from a desire to avoid scrutiny of his own activities, there is a much wider problem reported by bureaux of landlords refusing to accept HB claimants as tenants across the PRS in general and in many parts of the country. We believe that such discrimination should not be permitted. Regulation could address this also. 2.27 The very weak security of tenure that prevails in the PRS in the UK is a major weakness. This is, moreover, a growing problem as increasing numbers of families with children, with their particular needs for stability, gravitate towards the PRS as a consequence of lack of access to other sectors. 2.28 As noted above, the current very limited security of tenure in the PRS also facilitates retaliatory eviction. 2.29 The Whitty Inquiry recommended 24 months as the norm for a PRS tenancy.82 This would move us significantly towards a more stable environment for tenants and their families whose support networks, employment, child care and educational arrangements can be seriously disrupted by frequent moves—which, moreover, can entail significant financial costs on each occasion.
How local authorities are discharging their homelessness duty by being able to place homeless households in private sector housing 2.30 The limited security of tenure makes discharging homelessness duties within the PRS an unsatisfactory option, especially if combined with poor standards and/or out-of-area relocation. We agree with the Government that this latter disruption should be a last resort—but recognise that upward pressure on PRS rents, combined with HB cuts and shortage of social housing, is leaving some local authorities with little choice. 2.31 Where the PRS is used to discharge homelessness duties, careful attention should be paid to quality and affordability. Homeless people should not be moved to accommodation that is substandard and/or leaves them below basic benefit rates after paying the rent. Official guidance on homelessness and suitability of accommodation makes these points—but is not always observed. A London bureau helped a lone parent who had had to leave her previous address because her landlord sold the property. Initially refused help from the homelessness team, she was then placed in very poor quality temporary accommodation, where cold and damp exacerbated her son’s asthma. Eventually, she received a phone call advising that a two-bedroom flat had been found. However, she was required to sign the agreement before being taken to see the property. On viewing it, she found that the walls and carpets were very dirty and that the boiler was located in one of the bedrooms. There was a pile of rubbish in a hallway outside the flat. In spite of her protestations, the housing officer said she had to take the accommodation and had in any case already signed the agreement. She was very distressed and felt she had been made to sign because of her vulnerability.
3. Conclusions 3.1 One issue not directly addressed by the consultation questions is that of advice and advocacy. Tenants facing problems such as those described above need such support, including housing and money advice. Central and local government both need to take this into account in their funding decisions if the PRS is to be seen as a realistic option for people on low incomes—possibly struggling with various benefit cuts—and/or having other vulnerabilities. 3.2 In summary, our main conclusions are that: — There is a strong case for regulation of landlords in the PRS generally and including HMOs; and of letting agents. Advice and training should be available, as well as appropriate penalties. — In Wales, we support the Welsh Government’s commitment to introduce statutory registration and accreditation for private landlords and letting agents as well as increased investment in the PRS. The forthcoming Housing Bill should also include measures to address the full range of factors affecting the sustainability of tenancies in the PRS—including affordability and security. — There should be protection from retaliatory eviction, whether as part of a regulatory system or otherwise. — We believe that the Whitty Report’s definition of affordable homes should be adopted as official policy. — If the independent monitoring shows that there have been substantial adverse consequences arising from HB cuts, then the question of rents eligible for HB (and UC) should be revisited, from the perspective of tackling poverty and promoting social inclusion. — Discrimination against HB claimants in awarding tenancies should not be permitted. 82 See note 1, p. 11. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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— We support the Whitty Inquiry’s recommendation of 24 months as the norm for a PRS tenancy. — If using the PRS to discharge their homelessness duties, local authorities should pay careful attention to quality and affordability. — Central and local government funding strategies for advice and advocacy services should take account of the growing role of the PRS. January 2013
Further written evidence submitted by Citizens Advice
Inquiry into the Private Rented Sector (Letting and Managing Agents) Thank you for your letter of 17 April 2013, in which you ask for our views on the Government amendment to the Enterprise and Regulatory Reform Bill, aiming to provide for consumer redress in respect of letting and managing agents in the private rented and residential leasehold sectors. We see the amendment as welcome as far as it goes, but continue to believe, for the reasons given in our written and oral evidence to the inquiry (in which we cited, among other things, our 2009 report, Let Down) that there is a strong case for a regulatory framework. This is because such a framework would provide a means of constructing an agreed set of standards and code of recognised good practice, rather than simply provide the possibility of redress when things go badly wrong. Of course, a regulatory framework would include a redress mechanism, so the amendment takes us a useful if limited step in the right direction. We would also argue that a properly regulated lettings agency industry would greatly facilitate effective direct regulation of landlords in the private rented sector, in that regulation of landlords could then concern itself only with those not operating through a letting agent. While the content of secondary legislation may be relatively straightforward, we think that there will be some important questions to be addressed in relation to: (a) ensuring agents’ compliance in providing effective access to the redress mechanism and in implementing its findings; and (b) ensuring a high profile for both initial and ongoing publicity concerning the existence of the new redress provision and its remit and scope. We also think that there would be considerable merit in setting this up as part of a single system that provides for consumer redress whether the problem relates to estate agency or lettings agency work. I hope that this is of help. May 2013
Written evidence submitted by the UK Association of Letting Agents
Background 1. The UK Association of Letting Agents (UKALA) exists to protect and promote the legitimate interests of commercial letting and management agents working in the private-rented sector (PRS) 2. UKALA is a non-profit professional association dedicated to promoting a healthy and viable lettings market. 3. In partnership with the National Landlords Association (NLA), it is the only trade organisation committed to working with agents, landlords and tenants to ensure complete peace of mind throughout the rental process. 4. UKALA seeks a fair legislative and regulatory environment for the private-rented sector while aiming to ensure that agents observe and promote best practice in operation of their businesses.
UKALA Evidence Summary 5. Given the nature of its business and the interest of its members, UKALA has sought to limit its evidence to the following areas of inquiry outlined by the terms of reference: (i) Regulation of letting agents within the PRS. (ii) Tenure duration and stability. (iii) Rent levels. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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6. UKALA contends that: — The Quality of service and financial protection for landlords and tenants using letting agents can be assured through industry efforts without the need for a new regulator to be established, although Government encouragement may become necessary. — Amendment of tenure arrangements put in place by the Housing Act 1988 is unnecessary to influence stability. The existing provisions are flexible enough to meet current needs if used to their full extent. — Efforts to artificially control private rents would prove damaging to future investment and could therefore create additional barriers to accessing good quality rented accommodation.
(i) Regulation of Letting Agents within the PRS 7. UKALA does not necessarily recognise the registration of letting agencies as an effective tool to ensure standards are met and maintained. Regulation must be proportionate to the issues or problems it seeks to address and it appears that a more targeted response is necessary to challenge the negative experience of some and perception of many in the wider community. 8. Rather, we believe that all of those living and working within the PRS should be able to expect certain minimum standards from professional agents providing letting and management services. This must include: — professional indemnity insurance; — comprehensive client money insurance; — commitment to professional development; — a robust complaints process with an independent provision for appeals; — transparency and clarity of all terms, conditions and potential charges; and above all; and — excellent customer service. 9. UKALA ensures that its members provide all of these reassurances to landlords and tenants and believes that all other agents should do the same. 10. While we do not believe that a central regulator is essential to ensure these standards are met, we would support moves to make these features a mandatory part of all letting and management services. 11. In practice these elements exemplify the type of practices and security at the heart of most calls for statutory regulation. They also form the core of UKALA’s membership offering to letting agents and that of the other reputable trade associations operating within the PRS. Given the inevitable cost of any intervention intended to provide an assurance of minimum professional standards, it would be beneficial to reduce the cost to be borne by firms in the industry and potentially consumers. Furthermore, it stands to reason that using appropriate existing bodies to deliver positive outcomes should represent better value for money than attempting to construct an overarching regulator. 12. The existing trade and representative bodies working within the marketplace are also able to offer the positive strands of regulation which are sometimes overlooked when identifying consumer detriment. In the case of letting agencies, much of the perceived detriment to landlords and tenants can be traced to ignorance or a failure to keep up to date with changes in best practice and regulation rather than deliberate negligence or malice. Bodies like UKALA are well placed to deliver the informative communications and continued commitment to professional development which will make a tangible difference to the experience of those using agents which are not currently affiliated to such a body. It is arguable that such positive business support could not effectively be delivered by a central oversight body with limited practical experience of providing letting and management services to the market. 13. UKALA would argue that this complete package of support, insurance and assurance would have the greatest impact on the image of letting agents, the experience of their users and the overall functioning of the PRS.
(ii) Tenure Duration and Stability 14. The existing tenure arrangements, established by the Housing Acts 1988 and 1996, provide a considerable degree of flexibility previously absent from the PRS and arguably facilitate the functioning of the marketplace within which UKALA’s members trade. The ability to negotiate a tenancy which meets the needs of both landlords and tenants on an individual basis whilst establishing a contractual agreement underpinned by statute, provides a foundation upon which letting agents provide a useful service for those living and investing in the PRS. 15. It is UKALA’s belief that there is no need for significant changes to the framework provided by these Housing Acts, as the flexibility provides return on investment with the ability to create relative security which does not bind parties to the extent of increasing financial risk. However, it is arguable that the full extent of cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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this flexibility has yet to be fully explored by the market, given a number of limitations and the relative youth of the PRS in its current form. 16. Currently, the majority of tenancies (74.7%83) established by private landlords and their appointed agents are based on agreements for an initial fixed term of no-more than 12 months, renewable or extendable upon expiry—despite the fact that most tenancies run for a much longer period. According to a recent survey of private tenants conducted by the National Landlords Association, 66% of those questioned had been resident in their current rental property for longer than two years84 despite initially agreeing a shorter fixed period. 17. Traditionally landlords have demonstrated limited demand for longer initial tenancies in their dealings with letting agents, although the majority desire reliable tenants who wish to remain in situ throughout multiple renewals. Resultantly letting agents have generally been asked by their clients to negotiate these types of tenancy—perpetuating their status as the default duration. However, this is not to say that there is not a strong case for promoting variation and flexibility where appropriate for all parties. Well-informed, professional letting agents can play a role in educating the market and facilitating acceptance of different arrangements. Many landlords are reliant on their agent for advice on managing their portfolios and may not be fully aware of their options. 18. It should be noted however that many landlords who have bought property with the aid of buy-to-let mortgages are not free to offer tenancies of any duration. In fact it is the norm for lenders to limit tenancies to a maximum fixed term of 12 months. It would therefore be irresponsible of letting agents to promote the offering of longer duration tenancies to landlords and tenants without verification of the terms of any relevant lending. This can become complicated to administer and additionally challenging to match those tenants in search of a long-term tenancy with a landlord able to provide such terms. 19. Matters would be greatly simplified were lenders to remove this prohibitive term across the board allowing landlords and agents to negotiate tenancy terms freely and without concerns about breaching lending conditions. 20. It is also important to be mindful of the risks associated with establishing a new tenancy between parties who have not otherwise done business. It would be argued by many landlords that it is unwise to offer a long- term tenancy to a new applicant without first trialling the relationship. It may be seen as more responsible, or prudent to continue to offer tenants an initial 12 month agreement, with a view to negotiating longer terms if all parties are agreeable at expiry. As such tenancies can be more complex than those of minimum duration, skilled letting negotiators would have an important role to play.
(iii) Rent Levels 21. Rents in the PRS are set according to market conditions and negotiated accordingly. Letting agents have a duty to their clients to obtain the best possible return in relation to what the market can sustain. However, this is not simply a case of achieving the highest possible return on day one of a new tenancy. A responsible letting agent negotiator will evaluate the market on the basis of sustainability as well as what levels of demand will support given local supply. It is important that an agent considers whether demand is likely to remain constant and if the agreed rent is likely to allow a long-term sustained tenancy in the future. 22. It is understandable, given the inflation in rent levels witnessed in some parts of the UK, that there is a desire to increase the affordability of private accommodation. However, in order to adequately assess the value of property and ensure the proper functioning of the lettings market agents require a thorough understanding of local market conditions, the local economy and property availability. Any intervention in pricing levels can lead to instability and a difficulties in planning investment. 23. Realistically, UKALA believes that the only way to influence market prices in a sustainable and responsible fashion is to affect supply relative to demand. As demand is increasing in much of the UK and looks likely to continue to increase over the course of the next decade, a significant increase in supply of private accommodation is required in order to influence the level of rents down-stream. 24. Historical attempts to influence rent levels by means of direct intervention, ie rent control and capping legislation, have caused considerable detriment to the market. Following a series of attempts at regulating rent levels and increasing security of tenure in the PRS to levels which created imbalance between the needs of suppliers and consumers, investment in residential accommodation ceased to represent a viable return. It has taken more than 20 years since the liberalisation of the PRS by the Housing Act 1988 for the proportion of households renting from a private landlord to reach parity with those in the social sector, having hit an historic low of 9.1% of all housing stock in 1991.85 25. UKALA is concerned that a return to intervention oriented housing policies aimed at artificially restricting the ability of the market to set rent levels would deter future investment and introduce enough uncertainty about returns as to erode the confidence of those currently committed to the PRS. Despite the intention to increase access to accommodation this could in fact result in a reduction of overall supply, a 83 National Landlords Association Tenant Index, Wave Two, Autumn 2012 84 Ibid 85 Labour Force Survey, Department of Environment, 1981–91 cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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contraction in the overall size of the sector and consequently significantly higher barriers to entry which would favour low risk tenants at the expense of those potentially in greater housing need. 26. The effect of a loss of investor confidence in residential rental property would stretch much further than the PRS. According to DCLG statistics, 68% of new household creation takes place within the PRS.86 Furthermore, current government efforts to restart stalled construction projects and increase the overall housing supply are heavily linked with implementation of the recommendations of the Montague Review which seek to encourage large-scale institutional investment. Given the difficulties already encountered in relation to bringing such investors back into the residential market, a perception that policy makers could inject further uncertainty into the PRS could be extremely unsettling and stall new investment. This is particularly concerning in view of the way in which these institutions exited the market following the Rent Act 1965 and its subsequent regulation of the sector. 27. Those investors who remain active in the sector are likely to have their cash flow appreciably reduced resulting in less available funds to conduct continued maintenance and periodic renovation. As witnessed throughout the 1970s and 1980s this represents a serious risk to the quality of housing available privately which has been improving steadily since the relaxation of restrictions provided sufficient return to enable investment. 28. UKALA agents encourage their clients to view investment in residential property as a long-term activity, most landlords plan their portfolios over a 15–25 year period and require relative stability to assess their investments. In many cases this forms the basis of their pension planning, if not their principle income. The type of uncertainty outlined above would sincerely jeopardise the investments made by these individuals and companies without significantly improving outcomes for private residential tenants. January 2013
Written evidence submitted by the Association of Residential Lettings Agents Introduction to ARLA ARLA was formed in 1981 as the professional and regulatory body for letting agents in the UK. Today ARLA is recognised by government, local authorities, consumer interest groups, and the media, as the leading professional body for agents operating in the private rented sector. ARLA is a sister organisation to the NAEA, the ICBA, and the NAVA. All of these professional bodies come under the umbrella of the National Federation of Property Professionals. ARLA currently has a total of over 6,000 members. All ARLA members are governed by ethical and professional standards which are set at a level far higher than the law demands. ARLA has its own disciplinary procedures so that any complaint is dealt with efficiently and fairly. In addition members who are PPDs are obliged to contribute to a client money protection scheme, provide an annual accountant’s reports, ensure that their firms are covered by professional indemnity insurance, and join a redress scheme. New entry into membership of ARLA requires a relevant Level 3 qualification.87 ARLA has a continuous and constructive dialogue with politicians and government departments involved with the PRS. The broad policy themes chosen by the Select Committee are familiar to ARLA and reflect some of ARLA’s own areas of concern. As part of its preparatory work for providing this evidence ARLA surveyed its members using questions it felt went to the heart of the matters being considered by Committee. A summary of main survey responses is attached as Annexes 1–12. However we can disclose the full survey results to the Committee if that would be of assistance. Copies or web links for the documents we have referenced are also available on request. Given ARLA’s emersion in this area it is very much hoped that ARLA will be given an opportunity to provide oral evidence to the Committee, in order to expand on some of the ideas outlined in this written submission and to answer any questions the Committee may have.
Glossary Term Definition Agents Property agents who deal with letting residential property. ARLA Association of Residential Lettings Agents CEARA Consumer Estate Agents Redress Act (2007) CPR Consumer Protection from Unfair Trading Regulations (2008) DCLG Department of Communities and Local Government EAA Estate Agents Act (1979) HHSRS Housing Health & Safety Rating System ICBA Institution of Commercial and Business Agents Landlords: Landlords operating in the private rented sector NAEA National Association of Estate Agents 86 English Housing Survey, Household Report 2009–10, DCLG, July 2011 87 Level 3 in accordance with the Qualifications Credit Framework. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Term Definition NAVA National Association of Valuers and Auctioneers OFT Office of Fair Trading PPD Principal, Partner, Director PRS Private Rented Sector TPO The Property Ombudsman TPO Code Code of Practice for Residential Lettings Agents
Theme 1
The quality of private rented housing, and steps that can be taken to ensure that all housing in the sector is of an acceptable standard.
1.1 We would like to draw the Committee’s attention to the following:
Legal requirements
HHSRS
1.2 HHSRS is a risk-based evaluation tool designed to help local authorities identify and protect against potential risks and hazards to health and safety from any deficiencies identified in private rented sector dwellings.88 Landlords can be prosecuted for breaching HHSRS.
1.3 If an ARLA agent was found to have breached HHSRS by statutory body then ARLA could take disciplinary action itself, which may result in the members being expelled from ARLA.
1.4 ARLA believes that clarity of expectation and national consistency would help consolidate compliance with HHSRS. On this basis ARLA welcomes the current proposal to extend the Primary Authority scheme towards HHSRS.89
1.5 The Primary Authority scheme is designed to provide consistency for organisations operating in more than one local authority area. It allows an organisation to form a partnership with one local authority which provides “assured advice” on how to fulfil regulatory obligations. This advice can be relied upon across all of the organisations’ operations throughout England and Wales. ARLA is currently considering whether to enter into one of the new Primary Authority schemes for professional associations, the idea being that one local authority would provide assured advice to all ARLA members in England and Wales. It would greatly assisted ARLA’s awareness raising and educational role, as well as NFOPP Qualifications, if all ARLA members received consistent advice.
CEARA
1.6 ARLA feels strongly that one of the ways to achieve acceptable housing standards is for lettings agents to be made subject to the EAA. This would mean that all lettings agents would be subject to a number of legal requirements including declaring a personal interest, holding client money in a designated client account, and keeping basic accounts. In addition the OFT could apply for prohibition orders for rogue agents, and most importantly CEARA would apply and therefore all lettings agents would have to join an approved redress scheme. Providing the public with an additional route of redress is particularly important given the cost of taking matters to court, and at this time of scarce local authority/trading standards resources.
1.7 In fact many lettings agents already belong to the biggest of the approved redress schemes, perhaps 50%-60% of the sector. As a condition of their membership of ARLA PPDs must ensure that their firms are members of an Ombudsman’s scheme, and the most popular scheme is TPO. Non-ARLA agents can also voluntarily join TPO.
1.8 The TPO Code members of the scheme to comply with the law. One of the Code’s requirements is that agents must respond promptly to communications, particularly where these relate to statutory repairing, maintenance obligations, or safety regulations.
1.9 Baroness Hayter introduced an amendment to the Enterprise and Regulatory Reform Bill concerning bringing lettings agents within the scope of the EAA.90 Her amendment was debated by the House of Lords Grand Committee on 16 January 2013. In fact making redress compulsory for lettings agents has been raised at parliamentary level on a number of previous occasions but unfortunately failed. 88 The equivalent for HHSRS for the social housing sector is the Decent Homes Standard. 89 Better Regulation Delivery Office. Department of Business Innovation & Skills. Current consultation: Extending the range of regulations covered by Primary Authority. 90 Amendments 28 (ZH) and (ZJ), currently withdrawn but likely to be reintroduced at report stage. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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CPRs
1.10 There is potential for the CPRs to have an impact in the area of housing standards in the private rented sector. The public can already make a complaint to an Ombudsman if they suspect that a lettings agent has been breached the CPRS, given that the TPO Code covers general breaches of the law, but only if that agent belongs to an Ombudsman scheme. This route of redress should made automatically available to the public whenever they deal with any lettings agent. An important factor to bear in mind is that tenants don’t choose the lettings agent they have to deal with.
1.11 The CPRs have the potential to significantly enhance consumer protection, in particular by virtue of regulation 6 which is a new offence of “misleading omission.” It an offence for a trader (such as a lettings agent) not to disclose material information which causes, or is likely to cause, the average consumer to take a transactional decision he would not have taken otherwise (say the decision to view or rent a property).
1.12 During September 2012 the OFT published guidance about the regulations in the context of property sales, and ARLA understands that the OFT is about to commence work on guidance about the CPRs in the context of the rental of property. See paragraph 4.4 below.
1.13 These regulations apply to “traders”. Whilst it is clear that lettings agents are traders and therefore they are covered by the regulations, the position of landlords is less clear following the case of Office of Fair Trading v Foxtons ( 2009) EWHC 1681 (Ch). The Office of Fair Trading has said that individual that landlords are not traders if they: (i) Let out their property whilst travelling abroad (ii) Let out part of their property in order to fund their mortgage (iii) Their property investment represents part of their pension plan or other long term saving.91
1.14 On this basis we believe that institutional landlords who let multiple properties are likely to be traders. Landlords who let out a single property, perhaps because they need to relocate but have been unable to sell, are presumably more likely to be consumers. However there are many landlords that fall between these two extremes as they let out more than one property but still operate on a relatively small scale.
Licensing
1.15 See Theme 5 below for comments on HMO licensing.
1.16 Compliance with HHSRS could be linked with landlord/letting agent accreditation/regulation, HHSRS is already tied in with HMO licensing and therefore could be linked with licensing schemes for all PRS properties. However all forms of scheme have the potential to provide local authorities with the information they need in order to monitor and control the sector, and also to provide the revenue to finance enforcement of the legislation that applies to the PRS.
1.17 A voluntary accreditation scheme for landlords has been operating in Wales for a number of years. One of the scheme requirements is that landlords work within the legal rules relating to lettings and management, which includes HHSRS. There is currently a proposal that the scheme should become compulsory for all landlords and lettings agents.92 If this goes ahead then breaches of legislation could ultimately lead to the offending individuals being unable to act as landlords or lettings agents.
1.18 The London Borough of Newham has taken a dual approach. Newham has recently made licensing of all private rented properties compulsory (the license holder may be somebody other than the landlord, such as an agent). One of the intentions of this scheme is to help Newham to identify and penalise rogue landlords who are responsible for creating poor housing conditions. Newham also runs a voluntary licensing scheme for landlords. We understand that in appropriate circumstances a landlord could be forced to join the accreditation scheme if this was made a condition of their property licenses.
1.19 ARLA is very much in favour of some form of compulsory control of lettings agents and a number of studies support this argument.93 The expansion of the PRS and the vast sums of public money held by lettings agents are two of reasons why a scheme is long overdue. At present the vast majority of agents who do not belong to ARLA are not subject to any form of control unless they voluntarily join TPO. An exception to this general position is the Isle of Man which has statutory requirements for lettings agents including client money protection.94 91 http://www.oft.gov.uk/OFTwork/consumer-enforcement/consumer-enforcement-completed/foxtons/qandas. Viewed 16 January 2013. 92 Home for Wales- A White Paper for Better Lives and Communities. 93 The private rented sector: its contribution and potential, Rugg & Rhodes and the Carsberg Review of Residential Property; Standards, Regulation, Redress and Competition in the 21st Century. 94 The Isle of Man Estate Agents Act (1975) covers letting agents as well as sales agents. The Act is currently being reviewed and one of the amendments under consideration is the regulation and registration of private landlords, as well as managing agents. Meanwhile a voluntary scheme for private landlords is about to be launched. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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1.20 ARLA accepts that imposing its high standards on all lettings agents may not be realistic as a first step. However there is concern that the local authority landlord and lettings accreditation schemes are extremely light-touch in terms of consumer protection. The Welsh legislative proposals are that lettings agents and landlords must attend a one day training course, at the end of which there a short test, with retesting at regular intervals. Voluntary schemes are likely to impose even fewer conditions.
Sources of information 1.21 English Housing survey is published annually by DCLG. The survey includes statistics which are formally designated as National Statistics. 1.22 The 2010–11 survey includes a chapter concerning the circumstances of vulnerable and disadvantaged groups. This chapter includes information about housing conditions, and related issues, for the following groups: — Older households. — Long term sick/disabled groups. — Ethnic minority groups. — Households in poverty. — Larger households. 1.23 The Scottish House Condition Survey is also informative.95 1.24 In 2008 the Centre for Housing Policy published an independent report which includes a sub-section concerning improving property quality.96
ARLA Member Survey 1.25 Please see Annexes 1–4.
Theme 2 Levels of rent within the private rented sector- including the possibility of rent control and the interaction between housing benefits and rents. 2.1 Rent controls were originally used as temporary measures around the time of the first and second world wars. They were intended to deal with evictions of tenants at a time when landlords could obtain more for their properties because of the acute lack of housing and increasing numbers of homeless. Some of the controls were complemented by prohibiting lenders to increase interest rates. 2.2 There has been a history of problems with rental control and it being lacking viability for landlords. Financial institutions, including pension funds and sovereign wealth funds, would be very likely to lose interest in investing in the private rented sector if rent controls were introduced. Overall rent controls have the potential to significantly damage stock availability and housing standards. However if rent control is introduced in some form, perhaps in particular geographical areas, as a minimum it should be linked with Retail Prices Index and the Consumer Prices Index.97 2.3 Trends in Local Authority Housing Allowance are relevant to this issue. The market is pushing beyond the limits of the allowance meaning that the most vulnerable are being forced into the worst property. These properties and lets are probably being managed being handled by landlords themselves without the use of an agent. The absence of an intermediary agent may make it harder for tenants to complain about any issue, including the standards of their rented home. Some buy-to-let mortgages do not allow to tenants who are in receipt of Housing Allowance, or they place conditions such as dictating the length of tenancies. Landlords who let to Housing Allowance tenants may also have problems obtaining buildings insurance.
ALRA Member Survey 2.4 Please see Annex 5.
Theme 3 Regulation of landlords, and steps that can be taken to deal with rogue landlords 3.1 Our response to Theme 1 deals with licensing/regulation of both landlords and lettings agents. ARLA sees the two are inextricably linked given the close relationships which landlords form with their agents. 95 Available from www.scotland.gov.uk. Viewed 16 January 2013. 96 The private rented sector: its contribution and potential, Rugg & Rhodees. 97 The Rent Act (1977) applies to PRS tenancies that began before 15 January 1989. Approximately 100,000 tenancies are thought to be rent controlled. Rent levels are linked with the Retail Prices Index. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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ARLA Member Survey 3.2 Please see Annexes 6–8.
Theme 4 Regulation of lettings agents, including agents’ fees and charges 4.1 See our response to Theme 1 in relation the regulation of lettings agents. 4.2 ARLA feels strongly that neither landlords nor tenants should be charged fees that they aren’t expecting because they weren’t made clear at the outset. The TPO Code includes a number of relevant provisions including: — All fees and charges to be clearly stated to landlord clients, and drawn to their attention. — Transparency in relation to the commitments of each party. 4.3 There is an exception concerning property standards, in particular the necessity for emergency repairs. Normally agents cannot repair without instructions from their landlord client.98 Some agents take a risk and act without instructions, in the hope that their landlord client will retrospectively agree to pay. If the tenant has been at fault then the agent could try and recover from them. If the agent is an ARLA agent then they must bear the cost whilst the dispute and attempted recovery take place, and ultimately if they are unable to recover the cost then it remains with them. In other words ARLA agents are unable to utilise their client accounts to subsidise these circumstances. 4.4 The CPRs, particularly regulation 6, may enhance tenants protection in areas such as renewal fees if the fees weren’t made clear to them from the outset. 4.5 In Scotland all fees to tenants were recently made illegal under the Private Rented Housing ( Scotland) Act 2011. As this only became enabled law at the end of November 2012 the full impact is not yet know, however the likely result is increase of fees payable by landlords and rising rents. As there is an increasing number of benefit claimants within the PRS which could ultimately mean these costs falling on the state.
ARLA Member Survey 4.6 Please see Annex 9.
Theme 5 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 5.1 The Housing Act (2004) defines what HMOs local authorities must licence. The Act also includes two other definitions of HMOs which local authorities may wish to licence. It is not uncommon for local authorities to choose one of the broader alternative definitions rather than the minimal mandatory definition. 5.2 Licensing of HMOs is compulsory for landlords whatever definition is adopted. Landlords who rent out properties in a number of local authority areas may find that some of their HMOs must be licensed and others not. 5.3 The main rationale for HMO licensing was poor quality property, tenants being illegally evicted, and severe overcrowding. The HMO system should make it easier for local authorities to take action for improper behaviour by landlords, however this very much depends on the attitude and resources of the local authority. By law lettings agents must ask to see copy of the HMO licence, but it is unclear how this provision is being enforced.
ARLA Member Survey 5.4 Please see Annex 9.
Theme 6 Tenancy agreements and length and security of tenure 6.1 The focus on longer tenancies reflects the fact that the PRS has changed, but there is some concern about what longer tenancies mean for landlords in respect of: — The attitude of mortgage lenders. — Shorter tenancies have earlier break points, which is effective way of dealing with rent arrears and anti-social behaviour without resorting to legal action. The only route for landlords dealing with longer tenancies will be the court system which is rife with uncertainties and delay, and commonly unrecoverable lost income for landlords. 98 The doctrine of “agent of necessity” is an exception which applies in emergency situations when immediate action is the landlord client’s best interest. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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— Costs of deeds for tenancies of more than three years. 6.2 Whilst in the past the PRS primarily services the geographically and economically mobile. However the PRS now also caters for those who cannot access social housing, those who cannot afford to buy a home, and specialist sectors such as students.
ARLA Member Survey 6.3 Please see Annex 11.
Theme 7 How local authorities are discharging homelessness duty by being able to place homeless households in private sector housing. 7.1 The lack of social housing has resulted in local authority having to rely on the private rented sector and the Localism Act will consolidate this.
ARLA Member Survey 7.2 Please see Annex 12. January 2013
Annex 1 Do you ever reject property because of HHSRS (Housing Health & Safety Rating System)? *335 responses.
Note: It is encouraging that nearly half the respondents reject property on the basis that it is non HHSRS compliant. It is possible that at least some of the respondents who do not reject property on this basis have not had to address the issue because the properties offered to them are already HHSRS compliant. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Annex 2 Has your local authority enforced the HHSRS? *335 responses.
Note: It is impossible to know whether or not the lack of enforcement reflects a lack of breaches. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Annex 3 If your local authority has enforced the HHRS please indicate the number of prosecutions or other types of lower level enforcement, such as warnings, over the past three years. *99 responses.
Note: Some respondents have included health notices as a form of enforcement action. Such notices are used by local authorities as a first step. One reason for this may be that if a local authority wishes to pursue a prosecution it must take into consideration all 29 HHSRS hazards. The Committee may wish to consider whether this is unnecessarily burdensome bearing in mind that category 1 hazards are widely thought to be of most concern. A number of respondents also referred to landlords’ newsletters produced by local authorities, eg in Cardiff and Oxford. Agents felt these were important educational tools.
Annex 4 Please provide ideas about other steps that could be taken to ensure acceptable housing standards. *126 responses The underlying problem is that the lack of stock is causing pressure in the market. The Local Authority Housing Statistics, England, 2010–2011, record that there were 1.84 million households on local authority waiting lists on 1 April 2011, an increase of 4.5% on 1.76 million on 1 April 2011.99 The willingness of landlords to invest in their rental properties has been negatively impacted by a number of factors. Housing benefit has been squeezed and once the allowance is paid direct to tenants as opposed to their landlords this is likely to lead to greater arrears. At present the mortgage rate mirrors rental yield. However if the base or mortgage rate increases then rental becomes uneconomic. Despite these underlying structural problems, ARLA has sought positive suggestions from its member and hopes that some or all of the following are of interest to the Committee: — The majority of responses received to this question from ARLA members referred to the need for licensing/regulation of landlords and their lettings agents. Compulsory membership of ARLA was one of the options mentioned. One respondent commented as follows: “Ensure all agents have Client Money Protection Insurance, have annually audited client accounts and pass a qualification such as the ARLA Technical Award. You have to be careful with all this that costs don’t get piled onto the landlord who then can’t afford to own and rent a property. The housing market doesn’t have enough transactions as it is, so if we make it too 99 www.gov.uk. Viewed 15 January 2013. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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expensive for landlords to be landlords they will get out or be repossessed and there will no housing stock for people to rent. Banks could repossess, bring up to standard and link with the best local qualified professional to act as their agent”. — Training was another common theme, although it would be easier to ensure that training is delivered if landlords and lettings agents were captured under the auspices of a licensing/ regulatory structure. — The provision of simple check sheets for prospective and existing landlords and easily accessible information for tenants. The Private Rented Sector Scotland Act (2011) will make Tenant Information Packs compulsory, commencing sometime in 2013. — Tenants may worry that making a complaint will result in them having to leave the property at the end of their tenancy, ie if it is an Assured Shorthold Tenancy the landlord may serve a s.21 notice.100 Therefore landlords should be unable to serve a notice if their tenant seeks the local authority’s assistance. The landlord would only be able to serve a notice after the repairs have been made. It is appreciated this change could be exploited by tenants who are unwilling to leave their rented properties making vexatious complaints but this risk should be manageable provided local authorities are adequately resourced to deal with complaints swiftly. — The Electrical Equipment (Safety) Regulations (1994), and the requirement for portable appliance testing, are too vague and not prescriptive enough. Electrical safety certificate to become a legal requirement (similar to gas safety certificates). — Smoke alarms to be made compulsory as they are in Scotland. Similarly carbon monoxide alarms, fire blankets, and extinguishers, should also be required all rented properties. — Properties being let to recipients of Local Housing Allowance should be inspected before this benefit is granted. This would stop the state subsidising poor properties. — Local authority improvement grants, but with proper controls on contractors to prevent the abuses of the system previously encountered.
Annex 5 In your view is there a correlation of levels of rent and Housing Benefit limits? *308 responses.
100 Section 21, The Housing Act (1988). cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Annex 6 Do you think landlords should be regulated if acting without an agent? *335 responses.
Annex 7 Do you think landlords should be regulated if acting through a regulated agent? *335 responses.
Note: The reference to regulated agents is intended to reflect the difference between ARLA members and other agents. See our introduction concerning ARLA’s requirements which are significant commitments. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Annex 8 If landlords are regulated which of the following do you feel is appropriate? *311 responses.
Note: Other suggestions made by respondents were: — Checking if the landlord is the owner. For example, when a person is long term absent from their property because they are ill or go into a nursing home there is a risk that their property will be let without their knowledge or permission eg by a family member who has access. This offending could prejudices the position of tenant as their right to occupy could be uncertain.101 — The perception was that there is a greater need to regulate landlords if the aren’t using an lettings agent, or they are using an agent who is not a member of a professional body such as ARLA. — Some respondents felt that local authority registration could only ever be a starting place, but in itself it is too easy and a compulsory training element should be added. — Landlords Associations should take on regulatory activities. — Whistle blowing helpline for tenants. — Local authority point of contact for tenants. — Financial checks to ensure that landlords have financial capability in regard to expenditure on maintenance, eg a credit reference check.
101 There is a nexus with the issue of subletting by local authority tenants. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Annex 9 Should level of fees paid by tenants be controlled? *335 responses.
Annex 10 How are HMOs licensed by your local authority? *335 responses.
Note: Reactive is intended to mean that local authorities respond to complaints, whereas proactive means that local authorities initiate checks. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Annex 11 If longer term tenancies become compulsory measures should be introduced to protect landlords and their agents? *335 responses
Note: An expedited procedure should be possible if an eviction is not contested by a tenant, eg they admit their rent arrears. One suggestion is that longer tenancies of say 36 or 60 months should not require a deed, which tends to involve a solicitor. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Annex 12
Do you work with your local authority on housing homeless?
*335 responses.
Supplementary written evidence submitted by the Association of Residential Letting Agents
Communities and Local Government Committee: the Private rented sector
Thank you for allowing ARLA to give evidence to the Committee. This letter follows ARLA’s written submission and the oral evidence given to the Committee by Mark Hayward, Managing Director of the National Association of Estate Agents (NAEA). Mr Hayward promised to provide you with more information about the regulatory activities undertaken by ARLA and I hope that what is outlined below is of assistance.
It may help if I begin by providing some background information about ARLA, and about the standards expected of ARLA members. Both ARLA and the NAEA are divisions of the National Federation of Property Professionals (NFOPP). NFOPP also includes two other divisions, the National Association of Valuers and Auctioneers and the Institution of Commercial & Business Agents. Some of the regulatory information provided below only relates to ARLA members, whilst some of the information also relates to members of NAEA and members of the other divisions of NFOPP. I do hope we have differentiated the information clearly enough for your purpose.
In our written evidence we mentioned that ARLA has over 6000 individual members. In fact to be more precise ARLA has 6448 individual members made up of 3864 employee members and 2584 Principal, Partner, Director (PPD) members. PPDs are subject to more stringent standards because of their more senior position. PPDs must provide our regulation department with an annual accountant’s report and proof of professional indemnity cover. They also contribute towards our Client Money Protection (CMP) scheme. The committee may be interested to know that between March 2012–March 2013 one hundred and fifty five ARLA PPD members were terminated for failure in one or more of these areas, and some of them may have rejoined when they could prove compliance.
Landlords and tenants who use an ARLA agent can rely upon our CMP scheme to rectify losses incurred through misappropriation or insolvency. Enclosed is an up to date table of claims which reflects all of the divisions of the NFOPP. Naturally in these circumstances the member usually fails to renew their membership, but if this is not the position then we will terminate membership.
ARLA employee and PPD members are bound by our standards of conduct. If there is an allegation that these standards have been breached that the matter can be dealt with by way of a fine or caution/warning. These powers are regularly used and further information covering the last three years is available upon request. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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More serious cases are referred to our disciplinary tribunal. Details of 13 tribunal cases which relate to lettings are publically available from our web sites (see http://www.nfopp.co.uk/complaints/disciplinary-hearings/ or let us know if you’d like us to send you this paperwork).
One of the themes which is of interest to the Committee is transparency of letting agents’ fees. The Committee may be interested in a recent ruling by the Advertising Standards Authority (ASA) on 6 March concerning Your Move, in particular than an insufficient amount of information had been provided for the consumer to establish how a letting agent’s charges would be calculated. We understand that the ASA intends issuing guidance for letting agents and we expect this guidance to say that all lettings agents must clear what non negotiable fees are charged with letting a property, and that they should do this from the start. We also understand that the Office of Fair Trading intends issuing guidance about the Consumer Protection from Unfair Trading Regulations (2008) specifically aimed at letting agents.
I hope that the information provided underlines that ARLA is committed to raising standards across the lettings market. ARLS’s proposal for regulation of the property sector is enclosed. ARLA also strongly supports the proposed amendment to the Enterprise and Regulatory Reform Bill which would make consumer redress a compulsory requirement for all letting agents. ARLA sees this an important first step in the journey towards formal statutory regulation of the sector. April 2013
Further supplementary written evidence submitted by the Association of Residential Letting Agents
I would thank you for your letter of 17 April addressed to my colleague Mark Hayward, who deputised for me at the oral session earlier this year. We welcome the opportunity to respond to the two issues raised in your letter.
1) Points to be considered in advance of secondary legislation under the Enterprise and Regulatory Reform Act 2013
We are concerned that his has not been recognised as consumer legislation as it leaves open the possibility of one business being regulated by two different Consumer Redress Schemes. Many estate agents offer Residential Lettings. They already belong to a redress scheme for their sales activities and we cannot risk the consumer being confused by there being a different scheme for their lettings activities out of the same office.
The Act does not address the major problem of clients’ monies being misappropriated which rightfully belong to the landlord or the tenant. Whilst a tenant has some protection under the scheme introduced in 2007 as part of the 2004 Housing Act the landlords have no statutory protection.
ARLA is further concerned that it has not been recognised, as the Welsh Assembly is proposing, that a minimum educational standard is required. There are many pieces of legislation that an agent requires to have knowledge of, but at present anyone can start trading tomorrow, putting at risk a significant asset of their client landlord or the health and safety of the tenant. The Welsh Assembly Government recognises that this should across the board for staff employed in the industry and at different, levels dependant on the level of responsibility of the individual. The new Act does not see the individual as important and merely places responsibility on the business to belong to a redress scheme.
Finally we feel that this was an opportunity to provide industry specific legislation around the issues intended to be covered by the Consumer Protection from Unfair Trading Regulations 2008. These Regulations are causing issues around an existing industry code, approved by the OFT, which the new Act also indicated will be required. We have to question why the wheel is being reinvented and how long the consumer will have to wait to get a clear, simple and transparent lead from Government. Something which Government expects the industry to provide.
2) How the Estate Agents Act 1979 and the Consumer Estate Agents Redress Act 2007 has raised standards
There are several benefits for the consumer as a result of these pieces of legislation. These include but are not exclusive to, a requirement to make a client aware of any interest of the agent in the transaction, it allows the agent to be banned from practising, (but does not currently not stop them from carrying on as a letting agent), and vastly improved the transparency and quality of the property details provided to an interested party. This is achieved through the liking with the soon to be repealed Property Misdescriptions Act. Whilst it is felt by the Government that the Consumer Protection from Unfair Trading Regulations 2008 provide this protection these have already started to cause confusion in the sector.
The threat of being able to be banned and the knowledge that agents have been banned has acted as a deterrent and standards have generally risen and whilst the Ombudsman Scheme gets several thousand complaints in a year the consumer does have somewhere to go without going to court and many awards are cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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made against the agents in favour of the complainant. However it has to be recognised that agents do not which to require to deal with a formal complaint and therefore take greater care to explain matters and also the obligation on all parties. This is an area which will greatly benefit the private rented sector which is a far more complex and ongoing transaction, but where it is likely to struggle due to lack of educational requirements. May 2013
Written evidence submitted by the Office of Fair Trading Summary 1. The Private Rented Sector (PRS) is one which generates many complaints. In recent years the PRS has grown, largely due to a general housing shortage and reduced mortgage lending, with a consequence being that demand may be outstripping supply. Generally tenants choose properties not agents or landlords and it is often hard for consumers in the market to make fully informed decisions.102 These factors mean that incentives on providers to be customer focused are not as strong and consumers are sometimes forced to make unwilling choices for what is a high cost necessity. There are therefore complex policy considerations when considering interventions. 2. Our view is that a number of problems are covered by existing consumer protection laws and general housing law, many aspects of which can be enforced by local authorities and should improve if enforcement and compliance activities were prioritised more consistently at a local authority level. 3. However we also think government (including enforcers) and industry should consider taking further steps to improve a number of problems we, and others, have identified. These include: — improving transparency of pricing further, to tackle high or unexpected fees; — initiatives which make it easy for consumers to assess quality and compare one agent’s service against another; —ageneral arbitration/redress mechanism so landlords and tenants can sort out problems when they do occur without incurring expensive legal fees; — more consistency within the industry—so that common principles are applied throughout the industry, for example on how tenants are considered for suitability; — mechanisms which protect money, specifically more widespread use of client money protection mechanisms and the mandatory Tenancy Deposit Scheme; and — an agreed enforcement strategy. 4. The OFT has identified these steps following our assessment of complaints data which we have set out in an Intelligence Report (previously submitted to the Committee) and an assessment of the main issues in the lettings market.103 5. We also think it would be useful for the UK Government to consider whether the level of consumer protection law coverage is right in the context of the lettings market, and if not whether any legislative changes should be made to deal with this. This could be in the context of a wider review of consumer protection law and should include assessment of the effectiveness of the reforms enacted by the Devolved Administrations, in order to consider whether any aspects of these would be appropriate in England. 6. However, any changes must be assessed carefully against the risk that they might aggravate the already problematic supply side problems leading to increased consumer detriment.
Introduction 7. The OFT is currently producing a report on problems that we have seen reported in the lettings market. This focuses on the role of agents in the relationship between landlords and tenant, but also discusses the responsibilities of professional landlords towards tenants. The lettings report will reflect the OFT’s views, as set out in this submission, based on a review of nearly 4,000 complaints made to Consumer Direct (CD) during 2011 and maps out issues raised by consumers and sets out OFT thinking on how standards can be raised.104 8. We are of course very happy to discuss these views with the Committee and more widely with other stakeholders and are keen, so far as our remit allows to play, a role in supporting the development and 102 In our work we have considered the “lettings market” to include the relationship between the tenant and landlord and the role of the letting agent in the relationship 103 The main issues identified in the OFT’s forthcoming report include: (1) Behavioural biases exploited by drip pricing, which affects the decisions of consumers in the market;(2) Information asymmetries between the letting agent and landlord and letting agent and tenant regarding additional fees charged after the tenant has paid a deposit or signed a lease and after the landlord has signed a contract with the letting agent; (3) Principal agent problems, which may mean agents provide what the landlord deems to be poor service (such as delayed or substandard repairs) if landlords’ and agents’ interests are not aligned. 104 Complaints about fees and charges were the main areas of concern for landlords and tenants. Agents providing poor service was the second most complained about area and complaints about security deposits the third. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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implementation of any strategy to bring about improvements. We will forward a copy of our report to the committee. 9. The OFT is responding to an invitation for written evidence issued by the Communities and Local Government Committee on its inquiry into the PRS. This paper sets out: (a) the role of the OFT; (b) an overview of OFT’s work in the lettings market; (c) an overview of CD complaint data from 2011; (d) the relevant consumer protection law which applies to the lettings market; (e) our thoughts on the key features of a well functioning market; and (f) proposals as to how, in our view, the lettings market could be improved.
Role of the OFT 10. The OFT’s mission is to make markets work well for consumers. Our goal is for competitive, efficient, innovative markets where there are high standards of consumer care; consumers have choice and are empowered and confident about making choices. We also aim for markets where businesses comply with consumer and competition laws but are not disproportionately burdened by regulations, or restricted and harmed by market abuse. We achieve this goal by using tools within consumer and competition law regimes which enable us to look at all aspects of markets to ensure that they are working well for consumers and taking appropriate, proportionate enforcement action.
Overview of OFT work in the lettings market 11. The OFT has done a significant amount of work to raise standards in the lettings market, besides our current review of the market.105 This has looked at the problems faced not just by tenants, but also landlords. We have: — provided sector specific guidance on the fairness of terms in tenancy agreements;106 — worked with The Property Ombudsman (TPO) on an industry code of practice for agents;107 — held an industry event in September 2011 on “Fairness and Transparency in letting agents’ charges”; and — tackled problems faced by consumer landlords as a result of unfair commission fees charged by agents.108
Overview of CD Complaint Data From 2011 12. In order to have a better understanding of the problems in this sector the OFT reviewed a sample of 3,951 consumer complaints about letting agents made to CD in 2011.109 The complaint figure rises to 5,194 if each issue is considered as a separate complaint in circumstances where complainants reported multiple problems. These represent complaints made by both tenants and landlords (who may in some circumstances be considered consumers, see paragraph 16). 13. The five main areas and number of complaints raised by landlords and tenants about letting agents were: — Fees and charges (1,557, 30%) — Agents providing poor service (1,211, 23%) — Security deposits (1,015, 20%) — Delayed and substandard repairs (668, 13%) — Unfair business practices (565, 11%) 14. More detailed information is in the Intelligence Report previously forwarded to the Committee.
Relevant Consumer Protection Law 15. Law governing the lettings market is complex and comprises both housing law (which is generally outside OFT’s remit) and law which provides economic and general fairness protection (“consumer protection law”).110 105 See Annexe A for further details of work by OFT in the lettings market 106 Guidance on unfair terms in tenancy agreements (OFT356) September 2005 107 www.oft.gov.uk/news-and-updates/press/2011/88–11 108 www.oft.gov.uk/news-and-updates/press/2010/19–10; www.oft.gov.uk/OFTwork/consumer-enforcement/consumer-enforcement- completed/foxtons/ 109 Combined CD/Citizens Advice complaints about letting agents for the period 1/1/2012 to 31/12/2012 totalled 3585 110 Strictly speaking the BPRs for the most part provide protection for businesses who are misled by another business (they deal with comparative advertising to consumers as well as businesses, but not advertising generally). However for ease of reference we include this law in the definition of ‘consumer protection law’. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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16. Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs), the Supply of Goods and Services Act 1982, the Consumer Protection from Unfair Trading Regulations 2008 (CPRs), and the Business Protection from Misleading Marketing Regulations 2008 (BPRs). 17. The UTCCRs protect consumers against unfair standard terms in contracts with traders, which are subject to a fairness test under the regulations. Examples include terms that reduce consumers’ statutory or common law rights and terms that seek to impose unfair burdens on the consumer, for instance, over and above the obligations of ordinary rules of law. An unfair term is not binding on the consumer. Only the courts can finally decide whether a term is or is not unfair.111 18. Consumers also have protection under the Supply of Goods and Services Act 1982, which implies a term into contracts for the provision of services that services will be carried out with reasonable care and skill and within a reasonable time unless agreed otherwise.112 19. The CPRs were introduced alongside the BPRs in 2008. The CPRs prohibit traders from using unfair commercial practices, (whether occurring before, during, or after a contract has been made), including misleading and aggressive practices that either do, or are likely to, cause the consumer to take a different decision. The CPRs contain a general prohibition of unfair commercial practices and also prohibit 31 specific commercial practices. The BPRs prohibit businesses from advertising in a way that misleads traders, and set out the conditions under which comparative advertising is permitted. 20. The CPRs and BPRs can be enforced by the OFT, and TSS through civil and criminal enforcement powers. This law also forms a significant basis of the Code of the Advertising Standards Authority (ASA). 21. It is important to note that private landlords can be and frequently are professionals for the purposes of consumer legislation. All landlords who are companies, and individuals who let numerous properties, or who operate professionally, fall into this group. But though consumer landlords may not account for most tenancies this does not mean that they are few in number. Many private citizens from time to time let their home, or parts of it, on a non-professional basis. A significant proportion of landlords are, therefore, considered to be consumers, at any rate in their dealings with traders and professionals such as letting agents and solicitors. 22. Whilst it is possible to take a view on when a landlord is a consumer and when a trader, there is no clear marker as to where the line falls. In practice this means that there is a lack of clarity regarding important rights and obligations leading to uncertainty for landlords, agents and tenants. 23. Scotland has specific laws that apply to all types of private letting. In November 2012 the Scottish Government took steps to prohibit all tenant charges, other than rent and a refundable deposit. In addition, all private landlords must register with their local authority to ensure they are a “fit and proper person” to let property.113 24. In July 2011 the Welsh First Minister announced the Welsh Government’s Legislative Programme for 2011–16, including an intention to legislate to “Improve the quality of accommodation in the private rented sector.” In May 2012 the Welsh Government published a Housing White Paper for consultation, which includes proposals to licence and register landlords and agents.
Lettings Market—Enforcement of Consumer Protection Legislation 25. It is the OFT’s view that in most cases local TSS are best placed to investigate breaches of consumer law by individual letting agents or landlords, many of whom have a local/regional presence , and to take action in respect of those breaches. This is because local TSS have in-depth knowledge of local markets, businesses and housing issues. Coupled with their wider fair trading functions, such as business advice on compliance, they are often able to secure quick behavioural change from individual traders and to achieve resolution for consumers. However, it should also be recognised that local TSS are under significant funding pressures. 26. In general the OFT takes enforcement action where there are issues of national significance or market- wide concern. We also take cases on specific issues to create legal precedents which have wider impacts across the economy. 27. In the new consumer landscape following the Department for Business Innovation and Skills (BIS) consultation,114TSS will have more capacity and responsibility for taking national cases, prioritised and coordinated through the National Trading Standards Board (NTSB) in England and Wales and by the Convention of Scottish Local Authorities (CoSLA) in Scotland, and working closely with the Department of Enterprise Trade and Investment in Northern Ireland (DETINI). However, the OFT, which will become part of the Competition Markets Authority in the new regime, will retain a leadership role in relation to the UTCCRs. 111 A term may be challenged by the consumer or by an enforcer. Traders who seek to rely on an unfair term may also commit an offence under the CPRs. 112 The Supply of Goods and Services Act 1982 has been specified as a domestic infringement for the purposes of Part 8 of the Enterprise Act 2002. Part 8 of the Act enables specified enforcers to apply to the courts for an Enforcement Order to stop a business from breaching certain legislation, where the breach harms the collective interests of consumers. 113 www.scotland.gov.uk/Topics/Built-Environment/Housing/privaterent/landlords/registration 114 www.bis.gov.uk/Consultations/empowering-and-protecting-consumers cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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28. Priority areas for intervention will increasingly be guided by the recently established Strategic Intelligence Prevention and Enforcement Partnership (SIPEP) which brings together key stakeholders in the consumer landscape. The OFT and TSS work in partnership and will assist each other on appropriate cases, which will increasingly be focussed within these prioritised areas. The OFT is committed to working with TSS to ensure coordinated enforcement action. To achieve this we plan to discuss and agree an enforcement strategy with TSS for traders who do not comply with the law in the lettings sector.
Key Features of a Well Functioning Market 29. Even though the current regime has well regarded self regulatory initiatives, the lettings market is a sector where almost all stakeholders consider changes are necessary, with representatives of both traders and consumers lobbying the UK government for some reform. 30. We believe it is important to consider what a healthy lettings market looks like to help identify what changes, if any, may be needed. In our view any market is healthy where active consumers (here, tenants) make informed choices from fair-trading businesses (here, landlords). In a healthy lettings market agents play an important “market making” role bringing together informed tenants and fair-trading landlords to help match supply and demand, and competition between agents (and from other sources) ensures landlords and tenants are clear up-front regarding the structure and level of fees they may be charged for this. But when demand outstrips supply in the lettings market, incentives on landlords to provide high-quality lettings and on agents to be customer-focused are not as strong. 31. In a healthy lettings market, landlords and tenants will also receive the desired level of quality from the letting agent, at a price they are willing and able to pay. Landlords and tenants should be able to judge the level of quality they will receive before signing a contract or starting a tenancy agreement. 32. It is our view that participants in the market should also have access to an adequate redress mechanism so that any problems that may arise are dealt with quickly and easily. In addition, there would need to be clarity about the level of protection such a redress scheme provides, so that all participants in the market understand what their position is if things should go wrong, and they can plan accordingly. 33. We believe the lettings market needs a number of key features to make it work more effectively and to ensure minimum standards. In summary these include: 34. Better compliance with legislation already in existence and in particular better up front information: agents should provide landlords and tenants with full information of the charges payable including when they are payable, how they are calculated and what they are for. In the OFT’s view in order to avoid problems of all kinds, legal and otherwise, these fees should ideally be set out and described in a clear tariff of charges, before any contract is signed. 35. The OFT supports initiatives which make it easier for landlords and tenants to assess quality and compare one agent’s services against another, such as recognised logos which signify minimum standards are met.115 As indicated above, our view is that it would be beneficial for there to be a general redress mechanism so landlords and tenants can sort out problems when they occur.116 This is supported by a number of industry players. Consideration needs to be given to the cost this would impose on traders and the extent to which it would restrict new entry to the lettings market. 36. More consistency within the industry so that common principles are applied throughout the industry, for example agreement on how tenants are considered for suitability, what information is used for pre tenancy checks, and which of this information the tenant can supply themselves. 37. We support mechanisms which protect money ie more widespread use of client money protection mechanisms and better compliance with the mandatory Tenancy Deposit Protection Schemes. We think that greater transparency about these requirements would be helpful, so any additional steps the UK Government, industry and consumer groups can take to raise awareness would be particularly useful. 38. The fragmented nature of the market requires an agreed enforcement strategy, to identify where enforcers should focus their efforts, such as protecting consumers who are most vulnerable and tackling agents who could be considered a higher risk, especially in relation to problems that will not be solved by established industry schemes. 39. In our view the UK Government, industry and enforcers need to work together, to devise and deliver an agreed strategy to raise standards within the letting sector. To achieve this we think it would be useful: — For the UK Government to consider: (a) whether it would be beneficial to require agents to sign up to a code of practice, or join a redress scheme, and give some thought to what sanctions would be required to support this obligation. Whilst such a requirement may have obvious benefits in terms of providing redress, there would also be implications such as the financial burdens this might 115 This is particularly important in relation to client money protection, where schemes are not consistent in the level of cover they require of members. 116 We would include disputes both between the agent and landlord or tenant, and between the landlord and the tenant. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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place on business (and attendant potential increase in costs for consumers and reduction in competition). We think it is also important to consider this in light of the European Commission’s draft Directive on alternative dispute resolution for consumer disputes (Directive on consumer ADR) and a draft Regulation on online dispute resolution for consumer disputes (Regulation on consumer ODR). (b) whether the level of consumer protection law coverage is right in the context of the lettings market, and if not whether any legislative changes should be made to deal with this. This could be in the context of a wider review of consumer protection law. (c) the impact of introducing any elements of other regulatory regimes into the lettings framework in England. This should include assessing the effectiveness and impact on the market of the reforms enacted by the Devolved Administrations, and in particular whether greater regulation of landlords would be likely to constrain supply of properties to tenants, which could lead to higher prices for tenants. — For UK Government and industry to: (a) discuss if more could be done for landlords and tenants to understand and compare what existing codes offer, so they can more easily make informed choices and know what to look for when trying to find a good letting agent. (b) think about the feasibility of “portable” reference checks, so that consumers could provide and reuse reference and credit checks, instead of paying for this service each time they try to secure a property. — For industry bodies to think about the feasibility of introducing common principles to achieve more consistency, so tenants’ experience in the renting process is more predictable, and it is easier to shop around for properties. 40. The OFT is keen, so far as its remit allows, to play a role in supporting development and implementation of any overarching strategy, and we very much want to discuss our current thinking with interested bodies. We will be holding a round table event in February to do this, along with arranging various other meetings to discuss our recommendations. These will inform our views on next steps. 41. In addition to producing our Lettings Report and accompanying Annexes, the OFT will seek feedback on sample “Quick Guides” for tenants and landlords (and other information sources for tenants and landlords to help them engage better with the lettings process), consult on UTCCRs/CPRs/BPRs Guidance for letting agents, and review the substance and accessibility of existing OFT Guidance on unfair terms in tenancy agreements. 42. We also intend to launch a UTCCRs Hub, similar to the Distance Selling Regulations (DSR) and Sale of Goods Act (SOGA) Hubs, which we hope will be a useful resource for agents and professional landlords. 43. We will also discuss and agree an enforcement strategy with Trading Standards Services for traders who do not comply with the law. January 2013
Annex A OVERVIEW OF OFT WORK RELEVANT TO THE PRIVATE RENTED SECTOR The OFT has undertaken numerous activities to tackle many of the problems associated with the Private Rented Sector. The table below provides an overview of these. Additionally we provide a significant amount of case support and advice to Trading Standards Services (TSS) in the localities to enable TSS to carry out their regulatory and enforcement activities effectively. 2005 Produced sector specific guidance on Assured Shorthold Tenancies ie “Guidance on unfair contract terms in tenancy agreements” 117 February 2008 Issued High Court118 proceedings against Foxtons Limited under the UTCCRs regarding concerns with Renewal Commission, Third Party Renewal commission and Sales Commission. May 2008 Jointly with BIS, produced Guidance on the Consumer Protection from Unfair Trading Regulations (CPRs) 2008 July 2009 Secured a High Court judgment in which Mr Justice Mann ruled that certain terms in Foxtons’ contract are unfair under the UTCCRs December 2009 Secured a High Court Order against Foxtons, which prohibited sales commission and third party renewal commission and which required greater transparency in contracts re renewal commission. 117 www.oft.gov.uk/news-and-updates/press/2005/169–05 118 www.oft.gov.uk/OFTwork/consumer-enforcement/consumer-enforcement-completed/foxtons/ cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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February 2010 Wrote to industry bodies (ARLA, NAEA and TPO) to inform them of the judgment and advised them to inform their members of the Foxons judgment. December 2010 Published a market study into the Advertising of Prices.119 February 2011 Considered the Private Rented Sector as part of the Consumer Contracts Market Study.120 July 2011 Undertook an evaluation of the Foxtons case and published its findings.121 August 2011 The Property Ombudsman (TPO) TPO Code Letting Agents obtained OFT Consumer Codes Approval Scheme Stage 1 Approval.122 September 2011 Hosted an industry event “Fairness and transparency in letting agents’ charges” which sought to engage with letting agents, consumer groups, trade associations and government about problems in the market. June 2012 Circulated an Intelligence Report on lettings to stakeholders, to seek feedback on whether OFT analysis was an accurate reflection of problems in the market. This Report was produced after reviewing almost 4,000 complaints made to Consumer Direct. September 2012 Published guidance on property sales to help estate agents understand their responsibilities under the regulations. The guidance specifically covers CPRs and the Business Protection from Misleading Marketing Regulations 2008 (BPRs).123
Supplementary written evidence submitted by the Office of Fair Trading Likely Impact of this Amendment 1. We welcome the proposals to increase access to redress in this sector, following the recommendation in our recently published report on the lettings market.124 The introduction of a mandatory redress scheme has the potential to increase confidence for both landlords and tenants when dealing with letting agents and property managers and raise standards across the lettings market as a whole. 2. The Act creates a power for the Secretary of State to require letting agents and property managers to join a redress scheme. The actual impact of this reform will therefore depend on how the Statutory Instrument is drafted. We consider there is therefore great potential in the Act, and we include in our comments below some observations which will be relevant also to the content of the SI.
Extent to Which the Amendment Addresses the Issues Raised in our Evidence 3. Our Intelligence Review of almost 4000 Consumer Direct (2011) complaints identified five overarching problematic areas shown in the table below. Fees and charges 1,557 30% Agents providing poor service 1,211 23% Security Deposits 1,015 20% Delayed, substandard repairs 668 13% Unfair business practices 565 11% 4. We believe that an effective redress scheme should be able to deal with the majority of complaints identified in our report, where the issue involves an allegation of misconduct by a letting agent. For example we think it should deal with issues such as: — Disputes between the tenant and agent about pre-tenancy holding deposits, agents charging tenants fees they didn’t expect to pay, disputes about notice periods, agents not passing on rent to the landlord, delayed and substandard repairs experienced by the tenant where the agent is responsible — Disputes between the landlord and the agent around fees and charges and the agent failing to undertake repairs for the landlord as per the contract 5. However, in some circumstances, such as complaints relating to security deposits, agents providing poor service and substandard repairs, it is not always clear whether it is the landlord or the agent who has failed to act and may therefore be responsible for any misconduct. 6. For example, where a security deposit has not been protected, in some cases this is because the landlord relied on the agent to do it, whereas in others it is because the landlord simply failed in their duties. Likewise in the case of poor service and delayed repairs, sometimes there is a dispute between the agent and the landlord about who is actually obliged to carry out the repair—and so the tenant may not get a satisfactory outcome if they bring their complaint against the agent only. 119 www.oft.gov.uk/news-and-updates/press/2010/124–10 120 www.oft.gov.uk/OFTwork/markets-work/completed/consumer-contracts#named1 121 www.oft.gov.uk/news-and-updates/press/2011/82–11 122 www.oft.gov.uk/news-and-updates/press/2011/88–11 123 www.oft.gov.uk/news-and-updates/press/2012/81–12 124 The Lettings Market. An OFT report February 2013. OFT 1479. http://www.oft.gov.uk/OFTwork/publications/publication-categories/reports/consumer-protection/ cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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7. There are some issues identified in our report which will not be dealt with by this amendment. These include: — instances where letting agents are involved in fraudulent activity and are therefore very unlikely to participate in a redress scheme; and — disputes between landlords and tenants who do not use a letting agent. 8. We think that these potential problems can be minimised by ensuring that the benefits of using an agent that is a member of a redress scheme are sufficiently publicised, and that there is robust enforcement against agents that do not join a scheme. Please see Annexe 1 for an analysis of the issues from our report. 9. In relation to enforcement, we would note that it is important that enforcement officers have the formal powers to be able to efficiently identify the traders behind websites offering letting agent services. This is because we would foresee that it is most likely to be in the online field that agents, who do not wish to join a redress scheme, will advertise for business, take fees and then fail to provide an adequate level of service. 10. In 2006 only 66% of all private renting arrangements involved a letting agent. Disputes between landlords and tenants who do not use a letting agent require tenants and landlords to attempt to resolve their disputes by other means (usually the courts, or the arbitration systems provided by the various deposit protection services). We believe that it would be useful to consider the impact of providing a forum for landlords and tenants to resolve disputes in a cost effective way—perhaps by widening the remit of the deposit protection schemes to cover allegations of disrepair brought by tenants against landlords, for instance. 11. We would add that given that some deposit disputes can be settled either by recourse to arbitration by the deposit protection scheme, or by bringing a claim in the county court (where the deposit was not protected at all), it is important that tenants benefit from clear signposting and/or a referral mechanism to ensure that complaints are directed to the appropriate mechanism. 12. We consider that a redress mechanism is likely to be most beneficial to the two top areas of complaint found in our evidence—lack of clarity about upfront fees and poor levels of service/substandard repairs. However, we believe that the remit of the redress scheme should be broad, so that it deals with the full range of conduct by agents.
How far the Amendment will go in Raising Standards in the Letting Agent Industry 13. We believe most letting agents aim to provide a good service, but there are occasions when things go wrong where the intervention of a third party to reach a resolution will be of benefit. In our view any mechanism which puts right harm is a valuable, practical tool. In many cases access to redress mechanisms may result in better outcomes for complainants, who may not always receive recompense where enforcement action is taken, and the availability of such a system is likely to have the effect of improving standards amongst agents, because of the ease with which it can be accessed by consumers. Easy access by tenants/landlords to a user friendly redress scheme may also provide an incentive for agents to improve their service to get it right first time. 14. A requirement for all letting agents and property managers to be a member of an approved redress scheme should provide a level playing field for agents and ensure equal access for all complainants to redress in this market. We think it is important that the same minimum standards apply to all agents. We are aware for example, that self-regulatory schemes in this sector currently apply different requirements for membership, and may offer different remedies. For example, some ombudsman schemes will not offer recompense if an agent misuses clients’ money (that is, they do not have Client Money Protection), and only offer redress where there is a service issue. This creates some confusion for consumers, and makes it more difficult for them to know in advance what their rights will be if things go wrong. However we believe there should also be opportunities for redress scheme providers to exceed any minimum standards and to highlight these to potential users. 15. In addition, some schemes set out clearly the sanctions they can impose on members as a result of a complaint, whereas others do not. Different schemes also have different in-house complaint handling requirements for members. Some schemes set strict deadlines for members dealing with complaints in-house, whereas others do not. These differences make it more difficult for letting agents to compare the elements of each scheme and make a fully informed choice of redress provider. 16. To ensure that an approved redress scheme meet the needs of this sector, the criteria for approval and proposals for monitoring the effectiveness of such schemes will need to be sufficiently robust. The EU Directive on Alternative Dispute Resolution (ADR), when implemented, will provide for minimum standards for redress schemes. In areas such as the letting market where specific problems have been identified, we would wish to see appropriate standards which reflect this. For example, we consider that it would be useful to clarify that all agents should keep client money safe, and not use it for funding the operating expenses of their businesses— so it would be best if protection of client money were a requirement of being able to join any redress scheme. 17. We consider that a mandatory redress mechanism will provide an incentive to letting agents to improve their standards. Prospective tenants do not select properties on the basis of the agent handling the process and the level of customer service, but by the property they wish to rent. Landlords may select agents based on their cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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commission rates rather than standards of service such as the prompt collection of rent, repairs/maintenance or charges that are imposed post contract. Therefore we consider that it is important that any redress scheme also publicises its outcomes, naming those agents adjudicated against, as this will be an important incentive to letting agents to provide a good service. 18. It may also help to raise standards within the sector by more easily identifying and excluding rogue letting agents who will be unlikely to choose to sign up to a redress scheme. However there will need to be effective monitoring of membership and sanctions/penalties to ensure there is a sufficiently strong deterrent for those who operate without being a member of a redress scheme. 19. The law in this area is complex and we believe few tenants/landlords/agents are clear about their rights and obligations. Therefore a key aspect in ensuring that standards can be raised is to ensure that all parties to a lettings agreement know their rights and responsibilities—this would make it easier for all to be able to articulate their concerns clearly and confidently. We are aware of the information published by the Department for Communities and Local Government for landlords and tenants. As this provides useful guidance for all parties, we suggest that this is reviewed regularly and publicised widely. 20. We also note that Scotland has recently introduced a new system for regulating standards in the letting sector. We suggest that the government should consider and evaluate how effective these measures are and what could be implemented to raise standards in the rest of the UK.
Points for the Government to Consider in Advance of Issuing Secondary Legislation 21. We consider the government should take the following into account in advance of issuing secondary legislation: — To ensure the approval mechanism, criteria and monitoring procedures will result in effective redress schemes being in place, there should be a full consultation exercise on the proposed approval criteria and monitoring proposals. The minimum standards for all schemes will need to be very clear, in particular in relation to client protection, sanctions, levels and types of redress etc. — Clear and accountable performance targets should be agreed between an approved redress scheme and the approving body. Schemes should be required to independently measure levels of customer satisfaction on at least an annual basis and take remedial action when they fall below agreed levels. — The scope of complaints/disputes to be caught within the redress schemes should be as comprehensive as possible to ensure access to redress is universal and not unnecessarily restricted. — There should be a simple enforcement process for non membership—penalties should be set at levels to provide a strong deterrent. — The interaction between the letting agent/property management redress schemes and deposit protection schemes should be considered. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Annex 1
ISSUE125 EXTENT THE ISSUE COULD BE ADDRESSED BY ACCESS TO A REDRESS MECHANISM
Agents non-refund of (pre- Yes—this would be helpful for tenants in England. tenancy holding) deposit + deposit disputes Delayed/substandard repairs by Access to a redress mechanism as proposed by the amendment would not landlord/agent be helpful if the landlord alone is responsible for delay or substandard repair. But in circumstances where the contract between the landlord and agent specifies the agent is responsible for repairs, it could be helpful. Agents not fulfilling their Yes, for example where agents fail to undertake the required reference/ contractual obligations/poor credit checks resulting in an unsatisfactory tenant access to a redress service mechanism could be helpful. Charging tenants a fee they Yes, if fees are hidden in the contract and there is a dispute access to a didn’t expect to pay redress mechanism could help Agents not passing on the Yes, unless this is a fraudulent activity where it is unlikely to help. tenants rent to the landlord If mandatory membership of a redress scheme ensured mandatory ‘client money protection’ this could assist in circumstances where agents go out of business and do not pass on rent. Advertising misrepresentation/ Yes providing false information Tenant requesting advice about Yes, in relation to fees charged by the agent, not the landlord. fairness of charges Agents not using a Tenancy May be helpful where the landlord relies on the agent, and the agent fails Deposit Scheme (TDS) to properly protect the deposit. Access to a redress scheme would not be of assistance where the landlord fails to protect the deposit. Existing Tenancy Deposit Schemes are clearly defined but may need wider promotion to ensure adherence by all. Agents not contactable/have gone Where an agent has gone out of business it may be more difficult for out of business landlords and tenants to seek redress. But if agents are required to be a member of a redress scheme with Client Money Protection and Professional Indemnity Insurance (such as the SAFEAgent requirement) to be a member of a redress scheme could assist. Excessive charging for services Yes, access to a redress mechanism could assist with disputes. eg Reference/credit checks Disputes about notice periods Yes, access to a redress mechanism could assist with disputes. Unfair business practices Yes, although complaints regarding fraudulent activities and rent scams may not be covered. Landlord requesting advice about Not directly, unless a dispute has occurred with an agent. fees and charges Rent scams/Fraudulent activity Fraudulent agents are unlikely to sign up to a redress scheme. However, if they do so and the redress scheme requires that agents also have client money protection this could be helpful. Failure or delay in agent finding Yes. For example if the failure or delay is as a result of misleading the tenant a house/flat advertising by the agent, access to a redress scheme to resolve a dispute could be helpful. Agent not undertaking repairs for Yes the landlord as per contract Insufficient clarity around fees/ Yes, for advertising provided by the agent services in advertising or website Landlord renewal Commission Yes charged where no ongoing service is provided Harassment by agent/landlord Yes , where there is harassment by an agent towards the tenant or landlord (Depending on the circumstances)
125 Categories taken from the OFT Intelligence Report cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Written evidence submitted by the Royal Institution of Chartered Surveyors RICS—Royal Institution of Chartered Surveyors—is pleased to respond to the above Select Committee inquiry. RICS is the leading organisation of its kind in the world for professionals in property, construction, land and related environmental issues. As an independent and chartered organisation, RICS regulates and maintains the professional standards of over 91,000 qualified members (FRICS, MRICS and AssocRICS) and over 50,000 trainee and student members. It regulates and promotes the work of these property professionals throughout 146 countries and is governed by a Royal Charter approved by Parliament which requires it to act in the public interest.
Introduction The latest UK Residential Lettings Survey126 for the three months to October 2012 shows rising levels of tenant demand driven by the rising number of would-be first time buyers entering the rental market. RICS members expect rents to rise by 4% in the next 12 months and suggest that the lack of available mortgage finance to first time buyers is a key factor supporting the rental market. Demand from tenants rose at a greater pace over the period, with 15% more surveyors indicating demand rose rather than fell. The increasing level of demand is exerting sustained upward pressure on rents, and this in turn is attracting would-be sellers into the lettings market. Against this background and with 1 in 5 households are predicted to be in the rental sector by 2016 and with some predictions suggesting that by 2020, this could represent 25% of all tenures, the Committee’s inquiry is extremely timely. Government action to deliver better quality rental homes in a fully functioning market is urgently needed to ensure a better deal for tenants and landlords and to ultimately deliver much needed institutional investment into the sector.
RICS Offers Responses to the Committee’s Questions as follows Regulation of letting agents, including agents’ fees and charges RICS considers the regulatory framework in the lettings market and the ever-increasing number of registration schemes offers limited protection for the consumer and costs business money, hitting the many microbusinesses and sole practitioners in the sector particularly hard. The sector has changed since 1979 with current regulation perpetuating an artificial distinction between sales and lettings which does not reflect how businesses are now organised or how consumers interact in the sector. This creates more red tape for business and more confusion for consumers. The current arrangements do not target regulation where the risks are greatest thereby leaving consumers poorly protected. For example, whilst residential sales agents are currently required under the terms of the Consumer, Estate Agents and Redress Act 2007 to provide consumers with access to a free redress scheme, lettings agents are not. Lettings agents who are members of the RICS are, however, required to have such a redress framework in place as part of compliance with RICS rules of conduct for firms. The existing legislation is no longer fit for purpose and is hurting consumers and damaging small business. The following three examples illustrate how the existing legislation is no longer fit for purpose and is hurting consumers—whether they be buyers, sellers, landlords or tenants—and damaging small businesses: 1. Whilst residential sales agents are currently required under the terms of the Consumer, Estate Agents and Redress Act 2007 to provide consumers with access to a free redress scheme, lettings agents are not, so landlords and tenants do not have statutory safeguards that enable them to seek redress if things go wrong in the lettings process. Lettings agents who are members of the RICS are, however, required to have such a redress framework in place as part of compliance with RICS rules of conduct for RICS member firms; 2. A residential sales agent can be forced to cease trading by the Office of Fair Trading for being in breach of the Estate Agents Act 1979 or wider consumer protection legislation, but can continue to trade as a lettings agent, or set up a lettings business instead; and 3. Lettings agents are not required to meet minimum professional standards in order to start trading. As a result, there is considerable potential for consumer detriment. For example, lettings agents not being fully aware of all their responsibilities under existing landlord and tenant legislation, such as the need to undertake annual gas safety checks of their rental properties, with potential fatal consequences for tenants. Consumers want change. Independent research commissioned by RICS found that: — 89% of voters agree it should be compulsory for agents to register with a regulatory body. — 87% of renters supporting a single compulsory regulation scheme for all letting agents. — 93% support lettings agents being required to meet an industry code of practice. 126 http://www.rics.org/us/knowledge/research/economics/global-market-surveys/uk-residential-lettings-survey-october-2012/ cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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— Three quarters of tenants think it is the lettings agent, rather than the company they work for, that is responsible for the agent’s actions. — At least four out of five renters think that if compulsory regulation were to be introduced there would be: — Better protection for tenants regarding unethical and unfair practices (89%). — Greater consumer understanding of the process involved in renting property (83%). — Levels of trust between the letting agent and renter would improve (80%). — An overall improvement in the level of service provided by letting agents (84%). RICS recognizes and welcomes the Government’s focus on reducing red tape for business and consumers but cautions that this should not preclude reform to introduce better regulation which introduces a more joined up and less complex approach beneficial to all parties. RICS would argue that the current situation where there are a number of different landlord and letting agent accreditation schemes emerging in the devolved administrations, London and local authorities is creating confusion, inconsistency, red tape and unnecessary cost for the consumer and business. The nationwide situation is: — The Welsh Assembly is seeking to introduce an accreditation scheme for private sector landlords and letting/management agents. — The Scottish Government recently consulted on a new strategy for the Scottish PRS which included questions on whether regulation of Scottish lettings agents was required. — The Mayor of London is committed to establishing the London Rental Standard which aims to accredit 100,000 private landlords by 2016. — The London Assembly are investigating the potential for developing the regulation of lettings agencies using existing borough and voluntary sector schemes as a model. — Local authorities, for example the London Borough of Newham and Oxford City Council, are establishing their own voluntary schemes with others such as Liverpool City Council consulting on following suit. The Government does not need to introduce a new regulatory framework to ensure better consumer protection and improved conditions for business. RICS believes that two minor legislative changes will raise standards and expectations to benefit landlords and tenants as well as buyers and sellers. — Amend the definition of “estate agency” in Section 1 of the Estate Agency Act 1979 to include lettings and managing agents, and make associated changes to Section 53 (1) and Schedule 6 paragraph 2 subsection 1 of the Consumer Estate Agents and Redress Act 2007: — This will give the OFT powers to ban sales, lettings and managing agents who act improperly; require all such agents to treat their clients fairly, clearly and promptly, including having separate client money handling arrangements; and, require all such agents to have clear redress mechanisms available free to consumers in the event of a dispute that cannot be resolved through the agent’s own internal complaints handling arrangements. It will also prevent sales agents who have been banned from trading to immediately set up a new business as a lettings and/or managing agent. — Enact the existing Section 22 of the Estate Agency Act 1979: — This will require sales, lettings and managing agents to abide by statutory minimum professional standards before they start trading. RICS considers these standards could reasonably be set at NFOPP/NAEA technical qualification (NVQ level 3) or equivalent, and could be enforced via a relaunched and joint industry standards board. This would create a level playing field for all agents. The industry is ready to work together and with Government to develop these minimum standards and an associated independent enforcement regime. The first of these two changes formed amendments to the Enterprise and Regulatory Reform Bill tabled by Baroness Hayter and debated on Wednesday 16th January 2013. These amendments have cross-industry support from RICS, ARLA, Shelter, Crisis, ARMA, CIH, Which?, Federation of Private Residents Associations, BPF, Institute of Residential Property Management, NFoPP, Sir Robin Wales—Mayor of Newham and the NAEA. Independent research commissioned by RICS to understand the potential costs and benefits of these two legislative changes has found that there is a strong economic argument in favour of introducing them. This study, which focuses on sales and lettings agents, is not intended to present a full monetised Impact Assessment. Rather, it uses current impact assessment methodologies to present a case for change for further consideration by Government. For example, RICS fully recognizes the need to explore further the potential costs and benefits in relation to managing agents. The summary of anticipated costs and benefits of extending scope of the Estate Agents Act 1979 and enacting Section 22 of that Act are as follows: cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Regulation change Estimated costs Extending EEA79 One off costs £41,022,000 Annual costs £639,000
Enacting Section 22 One off costs £4,792,000 Annual costs n/a
Overall costs Total one off costs £45,814,000 Total annual costs £639,000
Total costs £46,452,000
Source: TBR 2012. Note: figures may not sum due to rounding.
SUMMARY OF BENEFITS Regulation change Estimated value Extending EEA79 Annual benefits £3,277,000
Enacting Section 22 Annual benefits £17,796,000
Total benefits £21,073,000
Source: TBR 2012. Note: figures may not sum due to rounding. Values associated with costs and benefits are drawn from a range of sources and factors, including costs of implementing systems, procedures, administration, training, professional fees, costs of joining redress schemes, cost of regulation, time savings for tenants, landlords and agents, savings to redress schemes, efficiency gains and productivity gains. This summary analysis does not include the potential consequential benefits associated with improvements in health, education and crime and which may be significant. An illustrative estimate values these at between £2.87 million to £5.09 million per annum. Drawing on these figures, the payback period of the proposed two legislative changes is 2.2 years. Moreover, using the BIS Impact Assessment Calculator, a Net Present Value of £130 million is returned, when annual costs and benefits are considered over a ten year horizon. This represents a benefit to cost ratio of 2.8:1. The research suggests that there are many lettings agents who are in favour of the proposed changes. Gaining the support of those who will have to bear the principal costs should prove particularly effective. Likewise, landlords, who may be perceived as having to pay higher fees and so opposed to any change, are potentially valuable supporters. Against this background of a short term payback of the cost of the change and a clear economic benefit over a 10 year horizon coupled with widespread industry and consumer support, it is RICS’ view that the case for change is overwhelming. RICS and other industry bodies stand ready to work with Government to further make the case for change. RICS is due to publish this research shortly after the closing date for written evidence (17 January). RICS would be pleased to share a copy with the Committee ahead of publication and would be pleased to brief the Committee and officials on its findings as soon as possible and ahead of the oral evidence sessions. RICS recognises that there is a great deal of work for RICS, the wider sector and Government to do to improve consumer awareness of their rights when letting property. RICS’ consumer research (ref) found a significant lack of awareness from tenants about what they should expect from their agent which is compounded by a lack of effective regulation. For example, four out of five renters believe lettings agents are required to abide by a government, ombudsman or regulatory body code of practice—demonstrating a lack of accessible information on lettings agent’s legal requirements. RICS does not believe that SafeAgent offers a workable solution to better protecting consumers and raising standards in the sector. SafeAgent is simply a logo which denotes whether agents use client money protection schemes adding to the confusing plethora of logos that agents already display in their windows or on their website. SafeAgent is not a regulatory body, a standards setter, a disciplinary body nor a redress scheme and therefore provides no protection to the consumer. RICS stand ready to work with other industry bodies and Government to better promote the consumer protection offered by RICS and ARLA qualified agents. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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RICS would not support regulation of agent fees as this would be a restriction of the market. Fees are for the market to determine through competition. However, fees should be transparent and easily accessible for the consumer so that the consumer can then make informed judgments about whether such fees are proportionate and reasonable. This is a requirement of the RICS UK Residential Property Standards (commonly referred to as the “Blue Book”) and guidance for RICS members.
The quality of private rented housing, and steps that can be taken to ensure that all housing in the sector is of an acceptable standard For reputable landlords, the quality of properties is generally linked to the rents they are able to achieve and the length of voids between lettings. This provides a clear incentive to maintain properties to a good quality. Quality has generally improved since the end of rent control and has been driven up by tenants expectations although RICS is concerned that current high demand and shortage of properties is leading to tenants accepting lower standards. With renting the only long term housing option for many, more than ever, renters want decent, well-maintained property. For less reputable landlords, RICS believes that the Housing Act 2004 along with the Landlord & Tenant Act 1985, fire and gas safety regulations and Tenancy Deposit Scheme Rules provide the required legislation to ensure rental properties are maintained to an acceptable standard. The Housing Act 2004 gives Local Authorities the necessary powers to intervene and to carry out works if the landlord will not. Local Authorities need the resources to be more proactive in this area and to apply the Act consistently and with rigour. The responsibility for enforcing the Housing Act 2004 and the Environmental Protection Act 1990 (where premises are prejudicial to health) is that of Private Sector Housing Officers. It is essential that Officers understand building construction and defects and energy efficiency issues. Cuts in funding to Local Authorities mean that Officers are often not appropriately qualified property professionals with no diagnostic building survey skills and are not capable of executing complex ,technical surveys and writing useful Improvement Notices. This situation is compounded by letting agents now being legally responsible for serious hazards such as falling boundary walls under HHSRS requirements. As letting agents are not required to meet minimum professional standards nor are subject to any form of licensing regime, many letting agents will be unaware of their legal responsibilities and may therefore let housing of an unacceptable standard.
Levels of rent within the private rented sector—including the possibility of rent control and the interaction between housing benefit and rents RICS would be strongly opposed to any introduction of rent control. Rent levels are market driven and any attempt to interfere with this would reduce the number of properties available for rent and result in institutional investors abandoning sector as they will be unable to make the required returns. RICS has anecdotal evidence that investors are already struggling to obtain average yields of 5%—any restriction on rents will make this impossible and lead to an exodus from the sector. Rent control would reduce choice and availability. This is precisely the opposite outcome that the Government is seeking to achieve and that is required to house the growing numbers of people in the sector. The simple solution to solving the issue of rising rents is to build more, high quality rental property on a large scale.
Regulation of landlords, and steps that can be taken to deal with rogue landlords RICS supports the principle of the registration and/or regulation of landlords. Any scheme must follow Better Regulation principles and be proportionate to minimise additional burdens on landlords, and targeted where the risks are greatest to provide enhanced consumer protection. Registration and/or regulation of landlords would also provide tenants with redress mechanisms. There is a clear need for an educational programme to be made available to landlords who have a duty of care to their tenants but often do not seek help.
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 RICS members believe a clearer definition of a HMO is required which will provide clarity on where the legislation is applicable. A centrally agreed framework and conditions would provide clarity for consumers, agents and investors. The definition must be suitable for the market, the situation in Scotland where the strict requirements of a maximum of two non-related occupiers in the property is deterring landlords from the market must be avoided. RICS is of the view that discretionary licensing should be maintained across the board as this gives local authorities the tools to satisfy local needs. For example, discretionary licensing has dramatically improved the housing stock and driven rogue landlords out of Oxford. However, there needs to be consistency between Local Authorities about how they implement the rules, the current situation is perceived as confusing for both valuers and lenders. Consistency and clearer definitions would ensure valuers are more able to accurately reflect value and whether a property is a mortgageable security. A number of lenders want to lend only where there is a cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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ready demand for owner occupation and investment properties not just investment properties. Sections of towns and cities are now no go areas for owner occupiers.
Tenancy agreements and length and security of tenure RICS members view the existing Assured Shorthold Tenancy (AST) arrangements with a minimum of six months but no upper limit as providing the flexibility that both landlords and tenants generally require. Feedback from RICS members suggests that tenancies last, on average, 12–18 months and are dealt with adequately by existing legislation. However, this feedback also suggested that the average length of tenancy is increasing with tenancies more regularly lasting over 18 months. Members see ASTs giving all parties clarity and certainty for landlords and lenders who are able to get possession if required. Many private Landlords are enforced or buy as investments, they will want to keep their assets as liquid as possible and therefore long lets will be unattractive to them. The current AST arrangements give this reassurance. Providing alternative arrangements with greater security of tenure will potentially result in investors abandoning the market. Furthermore, greater security of tenure will serve to better protect bad tenants. RICS does recognise that the changing nature of the rental sector means that new groups such as families who may require longer term security are now entering the sector. RICS is committed to working with Government and the sector to raise awareness of the benefits to landlords and consumers of granting Assured Shorthold Tenancies for longer than 12 months. For example, families could be offered three or five year tenancies with rent increases linked to RPI to maximise income for investors by minimising voids and removing market risk. Many mortgage companies require properties to be let only for a maximum of 12 months on a buy to let mortgage. A number of insurance companies often place similar restrictions on landlords. RICS recommends that Government work with the mortgage and insurance sectors to allow landlords more flexibility on tenancy length in their mortgage agreement. This will provide improved security of tenure for tenants and security of income stream for landlords.
How local authorities are discharging their homelessness duty by being able to place homeless households in private sector housing The rental sector is keen to co-operate with local authorities but require local authorities to pay rent promptly, not penalise landlords for fraudulent tenant applications for support nor insist on court orders before rehousing tenants. Local Authorities must support private landlords who house homeless households as many are often not properly prepared to house these tenants. RICS members have cited incidences of where Local Authorities have advised tenants to ignore Section 21 notices and in some cases court orders before vacating. This kind of incorrect advice deters landlords from housing these tenants. Social housing must be developed in the rental sector RICS would be pleased to provide further written or oral evidence to the Committee. Please do not hesitate to contact me if you require further detail or briefing. January 2013
Supplementary written evidence submitted by the Royal Institution of Chartered Surveyors Further to the Committee Chair’s letter of 17 April 2013, RICS is pleased to provide a supplementary memorandum. RICS is the leading organisation of its kind in the world for professionals in property, construction, land and related environmental issues. As an independent and chartered organisation, RICS regulates and maintains the professional standards of over 91,000 qualified members (FRICS, MRICS and AssocRICS) and over 50,000 trainee and student members. It regulates and promotes the work of these property professionals throughout 146 countries and is governed by a Royal Charter approved by Parliament which requires it to act in the public interest. RICS has welcomed the Government’s amendment to the Enterprise and Regulatory Reform Bill requiring all lettings and management agents to sign up to a redress scheme as a good first step in ensuring tenants and landlords are comprehensively protected. The Government is to be commended on engaging constructively with industry on the issue in a short space of time. However, this is only a first step in raising standards in the sector. The Government’s amendment will only give consumers support and access to redress after the damage has been done, leaving them still unprotected throughout the whole transaction with their letting or managing agent. It does not address issues around extortionate fees charged throughout the transaction, misleading adverts, professional indemnity insurance and a generally dysfunctional market that is treating tenants and landlords poorly. The Government’s amendment does not address the wider regulatory issues in the UK’s residential market. Government needs to take a joined up regulatory approach to the whole of the UK property market with principles based regulation which is targeted where the risks are the greatest. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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The current regulatory environment is problematic in the following ways: 1. No sales, lettings or managing agents are currently required to meet minimum professional standards in order to start trading. As a result of this poorly targeted regulation, there is considerable potential for consumer detriment. For example, lettings agents not being fully aware of all their responsibilities under existing landlord and tenant legislation, such as the need to undertake annual gas safety checks of their rental properties, with potential fatal consequences for tenants. 2. A residential sales agent can be forced to cease trading by the Office of Fair Trading for being in breach of the Estate Agents Act 1979 or wider consumer protection legislation, but can continue to trade as a lettings agent, or set up a lettings business instead; 3. Enforcement of existing legislation, including consumer protection law, is poorly targeted and under resourced, leaving tenants poorly protected. A joined-up approach from Government Departments and Agencies is required to tackle these issues. RICS believes that there is a very strong business case for better targeted regulation which requires sales, lettings, and managing agents to sign up to a professional regulation scheme that would raise standards across the sector. The first steps to simplifying the current regulatory framework would be to: — Amend the definition of “estate agency” in Section 1 of the Estate Agents Act 1979 to include lettings and managing agents. — This will give the OFT powers to ban agents who act improperly, require agents to provide client money protection, professional indemnity insurance and clear redress mechanisms in the event of a dispute. It will prevent sales agents who have been banned from operating from starting up a new business as a lettings and/or managing agent. — Enact Section 22 of the Estate Agency Act 1979 — This will require all sales, lettings and managing agents to acquire statutory minimum professional standards before they start trading. RICS considers these standards should be set at NVQ level 3 (equivalent of ‘A’ level). This would be enforced via a relaunched joint industry standards board. This will level the playing field for all agents. The benefits of introducing clear, consistent, and targeted regulation covering all aspects of the UK residential property market will include: — consolidated and reduced legislation/regulations; — a simplified regulatory framework—easier for consumers and businesses to understand; — reduced costs associated with business compliance; and — enhanced consumer protection. RICS is working with the Property Ombudsmen, the Chief Ombudsman and other industry bodies to establish a Property Standards Board. This will ensure the industry moves forward together to raise standards in sector.
Benefits of bringing lettings agents within scope of the Estate Agents Act 1979 and enacting Section 22 of that Act RICS has undertaken (Autumn 2012) detailed research into the costs and benefits of bringing lettings agents within scope of the Estate Agents Act 1979 and enacting Section 22 of that Act (statutory minimum professional standards, which RICS considers should be NVQ level 3 or above for all agents). This research is based on a methodology compliant with relevant Government guidance for impact assessment work, and included consultation with business practitioners and consumer organisations to test and further inform the initial desk research. A high level breakdown of the costs and benefits contained in this research is shown in tables overleaf. Using the BIS Impact Assessment Calculator over a 10 year horizon, simplifying existing lettings agent legislation will be worth £130 million to the UK economy against the initial cost of £46.5 million. This research, by identifying ongoing net benefits of over £20 million per year, directly challenges Government’s concerns about the increased costs on landlords, tenants and the industry which a new mandatory regime might bring and presents an overwhelming case for change. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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HIGH LEVEL BREAKDOWN OF PRINCIPAL COSTS One off costs of bringing Lettings Agents within scope of the EAA79: Costs to “Lettings only” Agents not regulated or signed to a redress scheme £24.3m (mainly introduction of accounting systems, training, additional IT, and professional fees) Costs to “Lettings only” Agents who have voluntarily signed up to redress £16.7m schemes and/or are members of a professional body/trade association but who require additional investment to become fully compliant (mainly introduction of accounting systems, training, additional IT and professional fees) Total one off costs of bringing Lettings Agents within scope of the EAA79: £41.0m
One off costs of enacting Section 22 of the EAA79: Total one off costs to Sales and Lettings Agents of enacting Section 22 of £4.8m EAA79 (additional training costs) GRAND TOTAL ONE OFF COSTS £45.8m
Annual costs of bringing Lettings Agents within scope of the EAA79: Costs to Lettings Agents £0.639m (annual costs of joining a redress scheme) GRAND TOTAL ANNUAL COSTS £0.639m
HIGH LEVEL BREAKDOWN OF PRINCIPAL BENEFITS Annual benefits of bringing Lettings Agents with scope of the EAA79: Benefits to Tenants £1.1m (time/cost savings at start/end of tenancies because Lettings Agents adopt better procedures) Benefits to Landlords £2.2m (time/cost savings at start/end of tenancies because Lettings Agents adopt better procedures; improved health & safety advice from LA’s, and fewer call outs by tradespeople) TOTAL BENEFITS OF BRINGING LETTINGS AGENTS WITHIN SCOPE £3.3m OF EAA79
Annual benefits of enacting Section 22 of the EAA79: Benefits to Tenants £3.3m (more competent Lettings Agents to deal with) Benefits to Landlords £8.7m (more competent Lettings Agents, providing better guidance/advice) Benefits to Lettings Agents £0.4m (improved staff competency and associated productivity gains) Benefits to Sales Agents £2.1m (improved staff confidence and associated productivity gains) Benefits to Buyers/Sellers £3.3m (reduced failed transaction rate) TOTAL BENEFITS OF ENACTING SECTION 22 of EAA79 17.8m GRAND TOTAL ANNUAL BENEFITS £21.1m
A copy of the full report is available to download from:
www.rics.org/uk/knowledge/research/research-reports/regulation-of-sales-and-letting-agents-report/
Secondary legislation introducing statutory redress for lettings and managing agents
RICS will be engaging fully in the forthcoming consultation exercise on proposals to introduce secondary legislation requiring all lettings and managing agents to be members of a redress scheme.
RICS considers that this secondary legislation should build on the existing statutory redress arrangements for sales agents to avoid the potential for confusion and unnecessary duplication. Many sales agents also operate a lettings/managing agent business and will be familiar with the existing statutory redress arrangements. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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In addition, some lettings/managing agents are already voluntarily members of one of the existing redress schemes for sales agents. May 2013
Written evidence submitted by The Property Ombudsman Summary TPO welcomes the CLG’s decision to conduct an inquiry into the private rented housing sector. To assist the CLG Committee’s inquiry, this response includes comprehensive data relating to disputes referred to TPO by consumers in 2012. Last year saw a total of 14,017 letting related issues being reported to TPO with the Ombudsman formally investigated 2,018 issues and made a judgement in each instance. A full breakdown of these issues can be found in Appendix 1. In addition, the Ombudsman has drawn on his extensive experience of dealing with letting disputes to provide the CLG Committee with detailed commentary concerning the problems and inconsistencies currently present within the private rented housing sector and has provided potential solutions where appropriate. In responding TPO has also taken the opportunity of reiterating the anomaly which persists between sales agents who are obliged under law to join a redress scheme and letting agents who are free to operate under their own set of standards and who are not required by law to offer their consumers any route to redress if things go wrong. The Ombudsman would welcome the opportunity to provide oral evidence to CLG’s Committee to assist their inquiry.
1. TPO Overview History and Purpose 1.1 The Property Ombudsman (TPO) scheme was originally established in 1990 as the Ombudsman for Corporate Estate Agents. In 1997 the scheme was renamed as the Ombudsman for Estate Agents and then changed to TPO to reflect its broader jurisdiction covering disputes relating to sales, lettings, personal search organisations, residential leasehold management, international sales (through UK based agents), chattels auctions and commercial property. In June 2008 TPO was the first redress scheme to gain the status of an OFT Approved Estate Agents Redress Scheme under the provisions of the Consumers, Estate Agents and Redress Act 2007. 1.2 The Property Ombudsman Limited is a “not for profit” company limited by guarantee which provides an alternative dispute resolution service to consumers within the property sector. There is no cost to the consumer or the taxpayer for TPO’s services. 1.3 TPO provides consumers with a free, impartial and independent alternative dispute resolution service for complaints against TPO scheme members. The Ombudsman’s resolutions are designed to achieve a full and final settlement of the dispute and all claims made by either party. The Ombudsman can, where appropriate make compensatory awards in individual cases up to a maximum of £25,000 for actual and quantifiable loss and/or for aggravation, distress and/or inconvenience caused by the actions of a registered firm.
Membership, Standards and TPO’s Codes of Practice 1.4 TPO’s Code of Practice for Residential Estate Agents has received full approval from the OFT’s Consumer Codes Approval Scheme (CCAS) and is followed by 11,570 estate agent branches who are members of TPO. We believe this equates to approximately 95% of the estate agents trading in the UK. 1.5 TPO’s Code of Practice for Residential Lettings Agents received Stage 1 approval from the OFT’s CCAS in July 2011. Compliance monitoring activities required for full approval have been carried out since this date. 1.6 Despite no legal requirement for letting agents to be registered with a redress scheme, the TPO Code of Practice for Residential Letting Agents is voluntarily followed by 9,748 letting agent branches who are members of TPO. We consider this equates to approximately 60% of letting agents trading in the UK. 1.7 TPO’s Codes of Practice are widely used throughout the property sector by other industry bodies. For example the National Association of Estate Agents (NAEA) and the Association of Residential Letting Agents (ARLA) use TPO’s Codes as the basis for their own judgements regarding their members conduct. In addition, TPO’s Codes have been replicated by other trade bodies to use as their own membership codes, for example the UK Association of Letting Agents (UKALA). 1.8 Customer satisfaction and compliance surveys carried out as part of the OFT’s CCAS requirements have shown a year upon year increase in consumer (buyer and seller) satisfaction with member firms and the firms’ compliance with the TPO Code of Practice for Residential Estate Agents. Similar positive results have been cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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received for CCAS monitoring carried out on TPO letting agents who voluntarily follow the Code of Practice for Residential Letting Agents. 1.9 As well as sales and letting agents, the Ombudsman’s jurisdiction also covers disputes relating to commercial property agents, residential leasehold management agents, international sales agents (based in the UK) and valuers and auctioneers conducting chattels auctions. 1.10 The Ombudsman can only investigate disputes relating to registered firms. However, as at 31 December 2012, over 11,933 sales offices and 9,748 lettings offices were registered with TPO. We estimate that these figures represent approximately 95% of sales agents and 60% of lettings agents operating within the UK.
Governance, Independence and Principles 1.11 The Ombudsman provides redress, where appropriate, to consumers whose complaints are supported after consideration on a case by case basis. Redress is intended to put the consumer back into the position they were before the complaint arose. The Ombudsman is not a regulator and does not have the authority to take regulatory or legal action against a registered firm. The Ombudsman does not have the power to impose fines or dictate the way in which firms conduct their business. 1.12 Whilst the scheme charges its members an annual subscription and the fees collected by the Board of TPO, the Ombudsman reports to the independent Council, the majority of which is made up of non-industry members. The Council is chaired by Lord Richard Best. It is the Council who appoints the Ombudsman and sets his Terms of Reference, (ie how the complaint process operates). The Ombudsman is accountable to the Council. 1.13 TPO is an ombudsman member of the Ombudsman Association (previously named the British and Irish Ombudsman Association—BIOA) and operates in accordance with the organisation’s principles of good governance: — Independence. — Openness and transparency. — Accountability. — Integrity. — Clarity of purpose. — Effectiveness.
2. TPO’s Work in 2012 2.1 During 2012, TPO received 8,019 individual complaint enquiries from members of the public who were either tenants or landlords. Many enquiries concerned multiple issues and a full breakdown of the different types of issues can be found in Appendix 1. Overall, 2012 saw tenants and landlords report over 14,017 issues to TPO. 2.2 The vast majority of complaint enquiries referred to TPO were resolved by providing consumers with further information, signposting to appropriate bodies and/or directing the letting agent to deal with the complaint in accordance with the in-house complaint procedure set out in the TPO Code of Practice. 2.3 Just over 1,800 individual enquiries related to letting agents who were not registered with TPO. As a point of interest, over the last five years, 29% of enquiries received by TPO concerned the actions of non- registered letting agents. 2.4 TPO resolved 210 disputes were via our early resolution process whilst the Ombudsman carried out a full formal investigation of 871 disputes which covered 2,028 different letting issues. A full breakdown of these issues can be found in Appendix 1. 2.5 In order to assist and advise the industry on matters of best practice and to encourage higher standards, the Ombudsman produced over 30 articles for the trade press, published nearly 150 case studies, made a number of television and radio appearances and spoke at numerous events and conferences. 2.6 TPO asked the eminent academic, Professor Michael Ball, to conduct an investigation into the issues surrounding the regulation of residential letting agents in England and his thought-provoking and cogent report “Regulating Residential Letting Agents: The Issues and the Options” was the outcome. The report was officially released at a forum arranged by TPO which took place at the House of Lords on 23 November 2012 and was attended by a representative of CLG and 33 other individuals from key organisations including ARLA, ARMA, CAB, NAEA, NALS, NLA, OFT, RICS, Shelter, TDS, UKALA, Crisis, Which?, and several lettings agencies in addition to senior personnel from TPO. 2.7 TPO responded to consultations and requests from Which?, Shelter, the Welsh Government and the OFT by providing detailed commentary and extensive letting data to assist their inquiries into the private rented sector. Using the OFT complaint grouping system employed in their Letting Agent Intelligence Report consultation, TPO data from 2012 relating to letting complaint enquiries and formal investigations have been included in Appendix 1. Data relating to specific regions within the UK can be made available upon request. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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3. The Select Committee’s Inquiry
3.1 The Committee has asked for submissions from interested parties covering the quality and regulation of private rented housing, and levels of rent within the sector. Specifically the Committee has asked for submissions to include comment on the following issues: (a) The quality of private rented housing, and steps that can be taken to ensure that all housing in the sector is of an acceptable standard. (b) Levels of rent within the private rented sector—including the possibility of rent control and the interaction between housing benefit and rents. (c) Regulation of landlords, and steps that can be taken to deal with rogue landlords. (d) Regulation of letting agents, including agents’ fees and charges. (e) 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. (f) Tenancy agreements and length and security of tenure. (g) How local authorities are discharging their homeless duty by being able to place homeless households in private sector housing.
4. TPO’s Responses
(a) The quality of private rented housing, and steps that can be taken to ensure that all housing in the sector is of an acceptable standard
4.1 The quality of private rented housing is an issue which is currently underpinned by existing “safety” legislation. The property is the landlord’s responsibility as well as his investment and, whilst TPO receives many complaints concerning property conditions, these are matters which, on the whole, fall outside the Ombudsman’s Terms of Reference as they are landlord/tenant issues falling under the terms of the tenancy agreement. However, the Ombudsman can, and frequently has, investigated the conduct of a letting agent in respect of their responsibilities under the Code of Practice to ensure that issues of repair and maintenance reported to them have been referred to their landlord clients and any instructions received thereafter carried out.
4.2 Letting agents who follow the TPO Code of Practice are also obliged to inform their landlord clients, at the market appraisal stage, of any obvious items of repair or maintenance required in order to prepare the property for the intended letting. Furthermore, they are also obliged to inform their clients of the need to comply with safety legislation and regulations and verify the validity of any necessary certificates. This is an important requirement as current market conditions have seen many inexperienced and “reluctant” landlords enter the private rented sector.
4.3 Given the obligations placed on TPO letting agents by the Code of Practice, it could be argued that landlords are more likely to improve their overall knowledge and performance (resulting in a better outcome for tenants) when dealing with letting agents who operate to a set of defined common standards. Logically, it would therefore follow that problems concerning the condition of the property are less likely to occur if a letting agent registered with TPO is involved in the transaction.
4.4 TPO is unable to comment in relation to landlords who choose not to use letting agents or instruct letting agents who are not registered with a redress scheme and who operate to their own set of standards.
(b) Levels of rent within the private rented sector—including the possibility of rent control and the interaction between housing benefit and rents
4.5 TPO receives many letting disputes which concern the issue of rent arrears. In a number of cases it was apparent that the tenant was in receipt of housing benefit but has failed to pass these monies on to the landlord/ letting agent. The subsequent response from the landlord was to usually start proceedings to remove the tenant from the property. These proceedings can often be a long and complicated process where the tenant’s chances of being re-housed by the local authority may increase if they are evicted rather than if they leave the property of their own accord. The impact on landlords is that they are less inclined to let their property to tenants in receipt of benefits or, if they do, may consider increasing the rent or seek other guarantees to offset potential future losses.
Such a scenario could be easily avoided in the first instance if local authorities made housing benefits payments direct to the landlord or to the landlord’s letting agent.
4.6 Regarding the issue of “rent control”, attempting to restrict profit margins for landlords is likely to dissuade potential landlords from entering the market. It may also have the undesired impact of encouraging landlords to “cut corners” in order to save money which could impact on many areas of the tenancy such as repairs and maintenance matters or the level of fees and potential penalty charges levied at tenants. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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(c) Regulation of landlords, and steps that can be taken to deal with rogue landlords 4.7 Due to current market conditions, some people have found themselves taking on the role of landlord in addition to their normal everyday profession. It is often the case that in an effort to save costs, many landlords elect to manage the tenancy themselves. Whilst experienced landlords understand the complexity and responsibilities of that undertaking, new landlords are often less aware of the full extent of their responsibilities and have less experience in conducting a mutually beneficial landlord/tenant relationship in-line with their responsibilities as set out in the tenancy agreement. 4.8 The service offered by letting agents who have agreed to follow TPO’s Code of Practice has improved over the years, as shown by our compliance monitoring. It should also be recognised that the TPO Code of Practice is not only a means by which the Ombudsman measures standards but is also a document which provides letting agents with a blueprint for best practice. It could, therefore, be argued that if landlords were required to act in accordance with a similar code of practice, standards employed by private rental sector landlords would improve. Furthermore, if landlords were also required to undertake some sort of initial basic training it would assist in helping them to understand their responsibilities. 4.9 Existing legislation may also present a method of dealing with rogue landlords providing sufficient resources available to enforce its requirements. 4.10 As a point of interest the Welsh Government is currently considering the further step of a compulsory licensing system for landlords and letting agents, whilst the Mayor of London is also consulting on a similar, yet voluntary scheme.
(d) Regulation of letting agents, including agents’ fees and charges Regulation of letting agents 4.11 TPO recognises that the UK Coalition Government is, in general, opposed to the introduction of regulation and, therefore, that regulation in the property sector is not currently a priority. 4.12 TPO believes that consumers should be entitled to expect a route to redress when things go wrong. However, the anomaly that currently exists within legislation means that, whilst the sales activities of an estate agent’s office are required to be covered by a redress scheme, there is no such requirement for their lettings activities. 4.13 Sales agents are required by the Consumers, Estate Agents and Redress Act (CEARA) 2007 to be registered with an OFT Approved Redress Scheme and are now used to working in such a regime. Since CEARA, the customer satisfaction and compliance surveys carried out by TPO have shown a year upon year increase in consumer (buyer and seller) satisfaction with registered firms and the firms’ compliance with the TPO Code of Practice for Residential Estate Agents. 4.14 TPO estimates that around 60% of letting agents trading in the UK have voluntarily registered with the scheme and follow the TPO Code of Practice for Residential Letting Agents. However, this leaves approximately 40% of letting agents who are operating under their own set of standards and which present a greater risk to consumers. Consumers who use non-registered letting agents are not afforded a route to free and independent redress should things go wrong. 4.15 Market conditions have seen many sales agents broaden their business into lettings. It can, therefore, be argued that making compulsory registration with an Ombudsman scheme applicable to every letting agent would not present (for the majority of firms) anything different and it would remove this clear inconsistency for consumers. 4.16 We believe this inconsistency could be resolved by an amendment to the Estate Agents Act 1979 to bring letting agents within the scope of CEARA to oblige them to join a redress scheme and follow a Code of Practice. This would ensure that all letting agents would have to operate to industry recognised standards and consumers would be provided with access to a redress scheme should things go wrong. 4.17 In the absence of a formally structured regulatory regime, the Ombudsman (in his 2011 Annual Report) discussed the concept of an Industry “Council” with the key objective of ensuring that consumers understand why they should avoid letting agents who refuse to sign up to independent redress through TPO, or who do not seek out membership of a recognised industry body such as ARLA. The industry bodies who may make up such a Council (with a consumer stakeholder contribution) could ensure that firms within their membership or influence could attract the consumer because they display certain confidence measures, specifically: — Membership of an independent redress (Ombudsman) scheme. — Licensing of firms’ representatives by an appropriate body. — Proper facilities for the protection of client money. — Common standards, applied through adherence to Codes of Practice. — Adherence to Tenancy Deposit protection regulations. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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In addition, the Council’s role could extend to consumer education, by putting in place a structured and consistent approach to the information provided by firms to consumers who fall within its influence. However, in order for such an initiative to work, the Council would require support from the Government and specifically CLG, along with obtaining the appropriate financial commitments for the Council to function.
Fees and Charges
4.18 The issue of fees and charges, especially those levied on tenants by letting agents is a topic which has recently received widespread publicity. Shelter’s campaign in Scotland was successful in motivating the Scottish Government to enforce existing legislation that prevented tenants being charged anything other than rent and deposit monies. However, there is no such existing legislation in England and Wales which could be enforced.
4.19 From the cases referred to TPO it is clear that letting agents utilise a range of fees charged to both the tenant and the landlord and that these vary from agent to agent depending on their particular business offering.
4.20 TPO recognises that the lettings market is an extremely competitive environment and that agents should not be restricted in the development and innovation of their offerings in order to gain business. However, the TPO Code of Practice places the obligation on the agent to ensure that all fees and charges are actively flagged to both the landlord and the tenant before they have committed themselves by signing an agreement. In all cases fees must be presented clearly and unambiguously to enable the consumer to make an informed decision. TPO believes that these obligations should apply to all letting agents.
4.21 Concerning the topic of potentially capping or removing tenant fees altogether, TPO is concerned that such an initiative may result in adverse consequences. For example, letting agents may seek to recoup their potential income losses by increasing the level of fees charged to landlords. Landlords may then react by increasing the level of rent to mitigate the increased cost which would result in little benefit to tenants who, whilst have not paid fees, would be required to pay a higher rent. Alternatively, faced with higher fees, more landlords may decide to manage the tenancy themselves which raises issues about experience, knowledge and standards previously discussed in part c) of this Section.
4.22 Overall, TPO would be willing to assist in any initiative which aims to make fees clearer, easier to understand and comparable for consumers.
(e) 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
4.23 Currently there are many inconsistencies across the licensing schemes being operated by various local authorities in respect of HMOs.
4.24 It is TPO’s view that, in order to avoid confusion and to promote universally acceptable standards, there needs to be consistency across all of the schemes in force and those which are currently being considered by local authorities. For landlords operating a portfolio of properties across multiple local authority boundaries, the differences between the different scheme requirements could lead to unnecessary and avoidable confusion which could also have an indirect impact on their tenants.
(f) Tenancy agreements and length and security of tenure
4.25 TPO recognises that there is a need for both short and long term tenancy agreements to be offered to tenants. For groups such as students, the current six to 12 month Assured Shorthold Tenancy is suited to their circumstances. However, for families who are settled in the area, with children attending local schools and parents employed nearby, such a tenancy period is unlikely to be suitable. Indeed, the potential for families to have to move on a regular basis is unsettling and can also lead to disputes arising. Tenants, therefore, need to be better educated to understand that they can request a tenancy for a period of time which suits their circumstances and not feel that they have to accept the period of the tenancy offered to them without question.
4.26 From a landlord’s point of view, their circumstances can also dictate the length of the tenancy agreement which they are willing to agree. The property could be their own home which they let during an extended period away. They may wish to let in the short term with a view to selling when the market improves. Alternatively, the property might be one of many in a portfolio where the desire for longer term tenants may be greater.
4.27 Regardless of the tenant or the landlord’s circumstances, if a letting agent is involved in the transaction they should assist by using their experience to provide advice suitable to the circumstances of the parties entering into that transaction.
4.28 TPO would therefore be willing to support and assist any initiative which seeks to educate and inform consumers about the options open to them when negotiating a tenancy. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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(g) How local authorities are discharging their homeless duty by being able to place homeless households in private sector housing 4.29 This is a matter which TPO is unable to comment upon.
5. TPO Recommendations 5.1 For the reasons already stated, TPO would strongly recommend amending the Estate Agents Act 1979 to bring letting agents within the scope of CEARA to oblige all agents to join a redress scheme and follow a Code of Practice. This would ensure that all letting agents would have to operate to industry recognised standards and consumers would be provided with access to a redress scheme. 5.2 In the absence of such an amendment or a formally structured regulatory regime, TPO would request CLG and Government to support the proposal to form an Industry Council. 5.3 The OFT’s approach under CEARA has been to approve two schemes for redress provision. The current arrangements under which TPO and Ombudsman Services: Property effectively compete in that provision, work without detriment to the consumer (because both schemes set out to ensure consistency of treatment etc). However, there is always a danger of agents seeking to use the threat of transferring to another scheme as a lever to influence decisions. No Ombudsman would be swayed by such an approach but the ensuing exchanges between scheme and agent simply delay redress for the consumer. A single scheme could also avoid any potential confusion in the mind of the consumer about who to contact when they have a dispute against an agent. 5.4 TPO has considerable experience in the field of dispute resolution within the lettings sector and would be happy to provide additional information, clarification or any further assistance to the CLG Committee throughout its inquiry process. Furthermore, the Ombudsman would welcome the opportunity to attend Committee hearings and provide oral evidence to assist with their inquiry. January 2013
APPENDIX 1 THE PROPERTY OMBUDSMAN Lettings Workload 1 January 2012 to 31 December 2012 2012 SUMMARY Lettings Workload—An Overview 2011 2012
Individual Complaint Enquiries 7,641 8,019 Issues Reported 11,253 14,017
Early Resolutions 101 210
Investigations (Formal Reviews) 756 871 Issues Reviewed 1,817 2,028 Complaint Supported* 67.4% 70% Average Award £307 £325
* Complaint supported either in whole or in part.
Lettings Offices Registered with TPO 2011 2012 As at 1 January 7,851 8,701 As at 31 December 8,701 9,748 cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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OFT LETTING AGENT GROUPINGS Groupings are based on the OFT’s Letting Agent Intelligence Report consultation of 2012–13.
ISSUES REPORTED TO TPO IN 2012 OFT Groups Issues Percentage Group 1—Fees and charges 1,713 12.22% Group 2—Agents providing poor service 7,553 53.88% Group 3—Security deposits 878 6.26% Group 4—Delayed and substandard repairs 791 5.64% Group 5—Unfair business practices 2,676 19.09% Other 406 2.90% Total 14,017 100%
ISSUES FORMALLY INVESTIGATED BY TPO IN 2012 OFT Groups Issues Percentage Group 1—Fees and charges 401 19.77% Group 2—Agents providing poor service 1,022 50.39% Group 3—Security deposits 183 9.02% Group 4—Delayed and substandard repairs 180 8.88% Group 5—Unfair business practices 70 3.45% Other 172 8.48% Total 2,028 100%
LETTING COMPLAINT ENQUIRIES 1 January–31 December 2012 TOTAL INDIVIDUAL COMPLAINT ENQUIRIES 8,019 ISSUES Number Percentage OFT Group Communication Failure 3997 28.5% 2 Duty of Care 2197 15.7% 5 Deposit 878 6.3% 3 Repairs and Maintenance 740 5.3% 4 Management Failure 738 5.3% 2 Administration 729 5.2% 2 Complaints Handling 619 4.4% 2 Rent 528 3.8% 1 Check In/Check Out 412 2.9% 2 Tenancy Agreement 297 2.1% 1 Holding Deposit 291 2.1% 1 Other Fees 256 1.8% 1 Instruction Failure 243 1.7% 2 References 238 1.7% 2 Other 220 1.6% Inventory 190 1.4% 2 Not known 186 1.3% Inspections 181 1.3% 2 Rudeness 178 1.3% 5 Let Details/Advertising/Marketing 173 1.2% 5 Management Fees 125 0.9% 1 Management Agreement 100 0.7% 1 Keys 84 0.6% 2 Renewal Fees 74 0.5% 1 Viewing 67 0.5% 2 Gas Safety Certificate 42 0.3% 4 Harassment 42 0.3% 5 Lease Agreement 42 0.3% 1 Eviction 32 0.2% 2 Conflict of Interest 29 0.2% 5 Discrimination 19 0.1% 5 Energy Performance Certificate 15 0.1% 2 Racial 13 0.1% 5 Unfair bias toward other Party 13 0.1% 5 cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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TOTAL INDIVIDUAL COMPLAINT ENQUIRIES 8,019 ISSUES Number Percentage OFT Group Disability 9 0.1% 5 Electrical Test 9 0.1% 4 Let Board 6 0.0% 2 Gender 3 0.0% 5 ID 2 0.0% 2 TOTAL ISSUES REPORTED 14,017
LETTING INVESTIGATIONS (FORMAL REVIEWS) 1 January–31 December 2012 TOTAL INVESTIGATIONS (FORMAL REVIEWS) 871 ISSUES Number Percentage OFT Group Communication Failure 261 12.9% 2 Complaints Handling 236 11.6% 2 Deposit 183 9.0% 3 Other 172 8.5% Repairs & Maintenance 164 8.1% 4 Rent 125 6.2% 1 References 114 5.6% 2 Tenancy Agreement 96 4.7% 1 Inspections 87 4.3% 2 Check-in/Check-out 76 3.7% 2 Inventory 56 2.8% 2 Administration 54 2.7% 2 Other Fees 49 2.4% 1 Holding Deposit 45 2.2% 1 Management Failure 39 1.9% 2 Management Agreement 39 1.9% 1 Management Fees 39 1.9% 1 Duty of Care 32 1.6% 5 Lettings Particulars/Advertising 31 1.5% 2 Keys 26 1.3% 2 Rudeness 20 1.0% 5 Gas Safety Certificate 16 0.8% 4 Viewings 13 0.6% 2 Instruction Failure 13 0.6% 2 Harassment 8 0.4% 5 Energy Performance Certificate 8 0.4% 2 Renewal Fees 7 0.3% 1 Conflict of Interest 7 0.3% 5 Eviction 6 0.3% 2 Unfair Bias 2 0.1% 5 Let Board 2 0.1% 2 Withdrawal Fee 1 0.0% 1 Racial 1 0.0% 5 Electrical Test 0 0.0% 4 OTOR 0 0.0% Offer of Financial Services 0 0.0% 5 Gender 0 0.0% 5 Disability 0 0.0% 5 TOTAL ISSUES INVESTIGATED 2,028 cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Contact Christopher J Hamer The Property Ombudsman Milford House 43–55 Milford Street Salisbury Wiltshire SP1 2BP Direct Tel: 01722 430027 Fax: 01722 332296 Email: [email protected] Twitter: @TPOmb The Ombudsman’s Terms of Reference, the Codes of Practice, Consumer Guides and other documents about the operation of the scheme are available on our website (www.tpos.co.uk), together with previous annual and interim reports, further explanation of governance arrangements and a full list of registered firms.
Supplementary written evidence submitted by the Property Ombudsman
1. The potential impact of the Government’s amendment to the Enterprise and Regulatory Reform Bill in relation to TPO’s previous evidence.
The Government’s decision allow the Secretary of State to utilise order making powers to establish an approved redress mechanism for letting and management agents in secondary legislation is a welcome development. The potential impact of this amendment is not only positive news for all tenants and landlords, but also for letting agents who have already voluntarily joined TPO as it will assist in helping to level the playing field with other agents currently operating to their own set of standards, outside of the existing redress arrangements.
It is a matter of public record that I favour an all-encompassing regulatory regime for the lettings sector. The Government’s amendment provides the first step in this direction. However, it does not address important issues such as client money protection insurance and training and qualifications, both of which would contribute towards an increase in consumer protection and establish true professionalism in the sector.
2. How far will the Government’s amendment go in relation to raising standards within the letting agent industry
Redress schemes can only considers matters which have been subject to a complaint that has not been resolved between the agent and consumer in question. As a result, the standards employed by individual letting agents will initially continue until such times as complaints arise which are then referred by the consumer to the redress scheme. There is a clear distinction between redress and regulation. The redress scheme can therefore only deal with the specific issues complained about meaning that other elements of the service provided by the agent will not be subject to scrutiny.
The Government’s amendment will nonetheless assist in raising standards across the industry, but, as the complaint process outlined above shows, it will take a significant amount of time to achieve an overall improvement given the various different services provided by individual letting and management agents across the UK in relation to the relatively small proportion of consumers who are willing and able to pursue their grievances through the agent’s internal complaint process and thereafter to a redress scheme.
3. Points that the Government should consider in advance of issuing secondary legislation
As already indicated, a note of caution must be sounded when discussing the potential of secondary legislation to harmonise and thereafter raise standards across the industry.
Under the Consumers and Estate Agents Redress Act 2007 (CEARA), sales agents are required to register with an OFT approved redress scheme but adherence to an approved code of practice was not made a mandatory requirement. However, the industry itself recognised that a consistent set of standards was required which is why 11,571 of the 11,940 sales agents registered with TPO have voluntarily agreed to follow the (OFT approved) TPO Code of Practice for Residential Estate Agents. The benefit of approximately 90 to 95% of UK sales agents following one code of practice is that the standards expected are consistent and clear to agents and consumers alike. If complaints arise they are judged against that same benchmark encouraging a consistency of decisions. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Currently all of the 9,956 letting and managing agents already signed up to TPO have voluntarily agreed to operate in accordance with the standards set out in the TPO Code of Practice for Residential Letting Agents. Furthermore, as stated in the previous evidence submitted on 16 January 2013 (1.7), the TPO Lettings Code has achieved Stage 1 OFT approval (and I expect the new approval arrangements to be operated by the Trading Standards Institute to apply to the same approval criteria), is recognised by the industry as the primary set of standards and is used by industry bodies such as ARLA and UKALA. TPO’s Codes are regularly updated to take into account changing markets, new business initiatives and legislation. This constant evolution ensures that the Codes’ benchmark standards are always relevant to agents and their consumers. The Codes are operated separately from the Ombudsman’s redress process and agent compliance with the Codes is monitored. They are freely available to any agent, consumer, trade body or alternative redress scheme. There is no difference in the cost of TPO membership for sales agents who register as full members to follow the Code and for those who register for minimum redress under the provisions of CEARA. From TPO’s experience of operating its Codes and providing a redress mechanism for property agents for over 20 years, the following points should be considered in relation to the potential for a mandatory code of practice for letting and managing agents: — Where complaints are raised against an agent who has registered for the minimum redress requirements, the Code cannot be applied. In these cases, the Ombudsman can only judge the complaint on what he considers to be fair and reasonable in the circumstances. — Agents who do not follow a code of practice are still able to operate to their own set of standards. Whilst the services complained about will be called into question when a dispute is referred to a redress scheme, the fact remains that the complaint has to occur before the nature of the service could be considered. Operating in accordance with a mandatory code of practice actively encourages agents to adopt better and consistent standards from the outset, not after a complaint has occurred and, thereafter, has been investigated by the redress scheme. The compliance and consumer satisfaction tables set out under point 4 support this argument. — A mandatory code of practice would assist consumers’ understanding of the role of the agent and the level of service they should expect at the outset. This would aid consumer education and consequently encourage a reduction complaints based on unreasonable expectations. — A mandatory code of practice would ensure that all letting and managing agents work to the same set of standards and are judged against those prescribed standards by the consumer (at the point of making a complaint), by the agent (in responding to the complaint) and by the redress scheme (when reaching a decision on the complaint). The absence of a mandatory code would mean that neither the consumer, agent nor redress scheme could utilise such a benchmark thereby encouraging differing points of view, increasing the potential for areas of uncertainty, and overall elongating the complaint process. — Given the obligations placed on TPO letting agents by the Code of Practice, it could be argued that landlords are more likely to improve their overall knowledge and performance (resulting in a better outcome for tenants) when dealing with letting agents who operate to a set of defined common standards. Logically, it would therefore follow that problems concerning the condition of the property are less likely to occur if the letting agent involved in the transaction was bound by a mandatory code of practice. While the Government’s amendment will set up a basic redress mechanism for letting and managing agent consumers, if an adherence to a code of practice is not made mandatory, for the reasons already stated, there is a real concern that letting agents will continue to operate to their own set of standards until such times as they are brought into question. This would mean that, for the foreseeable future, consumer confidence in relation to the service provided by letting and managing agents may remain low.
4. How the requirement to register with an approved redress scheme had improved standards within the sales agent sector Monitoring adherence to the Sales Code (required by the OFT’s Consumer Code Approval Scheme—CCAS) has produced year on year increases in agent compliance with the Code and consumer satisfaction, underlining that standards across TPO sales agents have measurably improved. The monitoring results (out of an overall score of 10) for TPO sales agents are set out below: Satisfaction Sellers Buyers Overall 2004 8.8 8.2 8.5 2005 8.8 8.4 8.6 2006 8.9 8.4 8.7 2007 9.0 8.5 8.8 2008 9.2 8.6 8.9 2009 9.3 8.8 9.1 2010 9.3 8.9 9.1 cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Satisfaction Sellers Buyers Overall 2011 9.4 9.0 9.2 2012 9.3 9.0 9.2 Average 9.2 8.8 9.1
Code Compliance Sellers—% Buyers—% Overall—% 2004 87.1 78.8 83.6 2005 88.3 82.0 85.7 2006 88.6 82.2 85.9 2007 88.8 82.0 86.0 2008 89.9 81.6 86.5 2009 89.4 82.4 86.4 2010 89.6 82.8 86.8 2011 89.9 84.4 87.1 2012 89.9 83.7 87.5 Average 89.4 82.85 86.45
Regarding letting agents following the TPO Code of Practice for Residential Letting Agents, although similar monitoring has only occurred for two years, the results show a similar trend to their sales agent counterparts: Satisfaction Tenants Landlords Overall 2011 9.0 9.4 9.2 2012 9.1 9.3 9.2 Average 9.05 9.45 9.2
Code Compliance Tenants—% Landlords—% Overall—% 2011 77.0 80.0 78.5 2012 80.1 88.1 84.1 Average 78.6 84.1 81.3
The compliance monitoring results show that standards amongst TPO agents who follow our Codes have consistently risen, promoting a better consumer experience. It may also be the case that the standards employed by those sales agents registered for the minimum redress requirement have not increased in the same manner. However, without a code to measure standards against it is simply impossible to provide any accurate comment.
Summary Whilst the Government’s proposal for mandatory access to redress is a step in the right direction, if there is a real desire for standards to be raised across the letting agent sector then a benchmark for those standards must be applied. The TPO Code of Practice for Residential Letting Agents is already followed by approximately 60% of the industry and encouraging those agents currently outside of redress arrangements to follow the same Code when redress becomes mandatory would present neither additional cost nor compromise individual businesses. Such a measure would ensure that all letting agents in the UK are obliged to operate to the same standards, thereby encouraging a consistency of service for consumers. The Ombudsman would be happy to contribute to any discussion with the aim of encouraging higher agency standards across the sector. May 2013
Written evidence submitted by Which? 1. Introduction to Which? 1.1 Which? is a consumer champion. We work to make things better for consumers. Our advice helps them make informed decisions. Our campaigns make people’s lives fairer, simpler and safer. Our services and products put consumers’ needs first to bring them better value. We are an independent, not-for-profit consumer organisation with over 750,000 members—the largest consumer organisation in Europe. Independent of Government and industry, we are funded through the sale of Which? consumer magazines, online services and books. 1.2 Which? has a history of work in the home purchase market; we were instrumental in bringing estate agents into redress through the Consumer Estate Agent and Redress Act (CEAR 2007). With the growth of the private rented sector, and the loophole created whereby letting agents remain outside the scope of the CEAR, we have conducted research and are currently lobbying for greater consumer protection in the lettings market. While our research was predominantly focussed on the role of letting agents our response also touches on issues relating to length of tenancy and the quality of properties in the market. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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2. Summary of Findings and Recommendations
2.1 Choosing a letting agent is an important consumer decision: For the 1.2 million consumer landlords, agents are responsible for managing a valuable investment—their property. For the three million plus UK households who are renting through an agent they play an important role in determining how secure and comfortable they feel in their home.127
This makes choosing the right agent an important consumer decision, particularly in a market where there is such wide scale poor practice and limited consumer protection. Roughly 40% of agents are not signed up to an approved body or redress scheme. The Property Ombudsman found that complaints were up by a quarter this year compared to last; 25% of these could not be dealt with because they related to agents who were not a member.
2.2 It is a decision in which consumers are not engaged. We conducted extensive research during May- October last year including diaries with landlords and tenants, focus groups, nationally representative surveys and an analysis of a year’s worth of complaints about letting agents to Citizen’s Advice Bureaux. Our research found that tenants are disempowered throughout the process. 73% of tenants shopped for the property rather than the agent, which means they have little control over which agent they end up with, and are unable to switch agents without losing their home. Whether they ended up with a good or a bad agent was a gamble. This puts all of the onus on the landlord to make a “good” choice, but our research found that just 37% checked whether their agent was a member of a professional scheme before hiring them.
2.3 Making poor choices results in significant consumer detriment for both the landlord and tenant. Our research identified numerous examples of poor practice which could result in substantial financial losses. We refer to a number of case studies in our evidence.
2.4 Recommendations: — To increase price competition in the market and help inform choice fees need to be available to tenants at the point of sale alongside the rent in a clear and standardised format, for instance in adverts on internet portals and on agent websites. Landlords should also be provided with information on fees charged to the tenant so that they can asses the full cost of the service. — In order to increase consumer protection in the market and to create consistency with protection in the estate agency market, legislation relating to estate agents should be extended to cover letting agents. In particular all agents should be required to sign up to a redress scheme, but the OFT should also have the power to give an agent a warning or ban them from practicing. To help protect against losses it should be a condition of an ombudsman’s code for agents to have Client Money Protection. — In order to reduce the likelihood of tenants unfairly losing upfront fees, agents need to provide full details of the terms of the agreement before any fees are paid, and there needs to be much greater clarity on the conditions under which, and the amount of, money that might be withheld or refunded. — Awareness needs to be raised among both landlords and tenants to help them make informed choices in the lettings market. Local authorities, universities, colleges and central government should more actively disseminate information to help raise levels of awareness particularly among first-time renters.
3. Main Findings
3.1 The private rented sector is becoming an increasingly important market for consumers. It provides a home to 4.7 million UK households, and an investment for more than 1.2 million consumer landlords who are letting as a part-time activity, for example to pay the mortgage or provide a pension.
3.2 Letting agents play a critical role in managing consumer experiences of this process. 66% of all private tenancies involve an agent. From the landlord’s perspective they are responsible for managing a valuable investment, their property. From the tenant’s perspective they can determine how comfortable and secure they feel in their home. This makes choosing the right agent an important consumer decision. It is particularly important given the levels of poor practice in the market. The Property Ombudsman found that complaints were up by a quarter this year compared to last.
3.3 Which? conducted research between May and October of this year to see how tenants and landlords make this decision. We wanted to listen to the experiences of the typical consumer landlord and tenant, and to understand how problems in the market impact on both sides. 127 There are 4.7 million UK households who are renting, 66% of these tenancies involve an agent. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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3.4 The research included: Qualitative diaries with tenants and landlords We recruited 15 tenants and six landlords who were in the process of looking for a property to rent or agent to manage the let. Participants were asked to complete an online diary for a month and to record their experiences. Participants were drawn from three areas—London, Nottingham and Mansfield. Qualitative focus groups Which? conducted four focus groups among landlords and tenants who were renting or letting a property through a letting agent. The groups were held in London on 11 July 2012 and in Nottingham on 17 July 2012. Quantitative research among tenants Populus, on behalf of Which?, conducted an online survey of 1,006 tenants who had rented through an agent in the last two years, between 4 and 10 September 2012. Populus is a founder member of the British Polling Council and abides by its rules. Quantitative research among landlords Populus, on behalf of Which?, conducted an online survey of 506 landlords who had let their property through an agent in the last two years, between 4 and 6 September 2012. Secondary analysis of Citizens Advice complaints data In May 2011/May 2012 CABs in England and Wales advised on 5,181 enquiries relating to letting agents. CAB staff also recorded 181 qualitative case studies about cases which they considered highlight an underlying social policy problem. Which? conducted detailed analysis of these 181 cases. Mystery shopping exercise Which? Money conducted a mystery shopping exercise of landlord and tenant fees across 32 letting agents in Nottingham, London, Birmingham and Leeds in October 2012.
The Tenant perspective 3.5 The research found fairly high levels of dissatisfaction among tenants. One in five were dissatisfied with their agent. When we applied Which?’s customer satisfaction score—which allows comparison across 50 consumer markets—letting agents ranked second from the bottom, with only financial comparison websites worse. 3.6 It also revealed that tenants are disempowered throughout the process. With the growth of internet portals, and in a market where demand outstrips supply, tenants shop for a property rather than an agent. The majority of tenants in our research didn’t have a particular preference to use an agent and hadn’t chosen to use their agent over any other. 73% approached whichever agent was listing the property they liked. This meant that whether tenants ended up with a good or bad agent was a gamble. Where tenants ended up with a bad agent they were unable to switch agents, and were reluctant to complain, without risking the loss of their home. 3.7 Problems in the market included: — agents not safely or fairly handling the security and holding deposits, which could result in tenants losing large sums of money through no fault of their own; — missed appointments, aggressive sales tactics, poor customer service and out of date and misleading adverts all of which hampered rather than helped the search process; — opaque and variable fees which tenants thought were unfair given that they also thought that renting through an agent meant paying higher rent, and that they could end up paying frequently because of high levels of churn in the market. 36% of tenants didn’t think fees were value for money. 41% thought upfront fees weren’t fair. Our mystery shopping exercise found that out of 32 agents none had information about tenant fees on their website. We estimate that tenants are paying in the region of £175 million in agent fees each year, and that the potential loss from not shopping around is in the region of £76 million;1 — agents letting properties in poor condition. The general condition of properties at the visit was a common cause for complaint among tenants in the diaries and also came out in the survey: only 40% of tenants agreed that conditions in the sector were good. This, in part, reflects the quality of properties in the private rented sector as a whole but also the fact that some agents don’t ensure that the property meets certain conditions or standards when it is let. Many tenants thought that agents should play a greater role in letting properties in good condition if they are offering a professional service. £600 tenant deposit lost A CAB in the south east reported the case of a tenant who had signed up for a 12-month tenancy with a six-month break clause with letting agency X. The landlord has subsequently informed her that the letting agency has gone out of business and her £600 deposit has been cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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lost. The landlord claims no responsibility for the deposit and gave the tenant no information about where or if the deposit was lodged with any deposit protection scheme. The tenant is at a loss to know how to go about recovering the deposit without lengthy court action. £360 tenant holding fee lost A CAB in the south east reported the case of a tenant who wanted to move into private rented accommodation sourced by letting agent X. She paid a deposit of £1,000 plus a holding fee of £360 to prepare the paperwork and take the property off the market. The landlord subsequently changed his mind and the offer was withdrawn. The tenant’s deposit was returned but not the £360. When the client queried this, the agent told her that she would have to take it up with the landlord and not them as it was not their fault. The tenant feels this is unfair as she paid a considerable sum of money to the letting agent in good faith and it was not her fault that the tenancy was not completed. Poor conditions A CAB in the South West reported the case of a student tenant has rented a property with five other students from letting agency X. They each paid £180 to the agency as an administration fee. On entering the property the tenants found it to be severely affected by damp and mould in nearly every room and consider the property to be a health risk. The letting agents said that the condition of the property is a matter for the landlord. The landlord is aware of the problem but unwilling to provide any assistance. Tenants feel that the letting agency has some responsibility to vet the properties that they are letting out, especially when they charge the tenants a large fee for finding them a suitable property. 3.8 Tenants were also reluctant to complain because they were concerned about the implications this would have for their tenancy. In our survey 38% of tenants said they would be confident about making a complaint about their agent without it having repercussions for their tenancy agreement. This is connected to the lack of security in the private rented sector which can stem from the use of the Assured Shorthold Tenancy. This entitles the tenant to a six-month period during which the tenant can’t be evicted without taking the matter to court; after this period the landlord can give two months’ notice requesting a tenant to leave. 45% of tenants in our survey said they do not worry about having to leave before they want to.
The landlord perspective 3.9 Problems with letting agents were not exclusive to tenants. The landlord customer satisfaction score was sixth from the bottom across 50 markets. While landlords had more power to chose their agent, few landlords were considering the level of consumer protection their agent offered. Just 37% checked whether their agent was a member of a professional body. In a market where approximately 40% of agents are not signed up to a professional body, are not a member of a redress scheme, and don’t have insurances in place in the event that the agent misappropriates their money, landlords and their tenants are both vulnerable when things go wrong. 3.10 Problems in the market included: — agents not passing on rent to landlords and then disappearing; — agents not putting the tenant’s deposit in the protection scheme and then the landlord being liable; — agents not carrying out tenant vetting procedures, or carrying out inadequate procedures, which can result in “bad tenants” being let the property; — agents not conducting regular inspections of the property, or adequate check-out procedures, resulting in serious disrepair going unnoticed. These issues could result in thousands of pounds worth of losses. Many landlords were also carrying out activities that they had paid the letting agent to do as a means of “keeping them on their toes” and to check that the terms of the contract were being met. 60% of landlords we surveyed were fully or partially carrying out activities the agent was paid to. £3,600 rent owed to landlord A CAB in the South East reported the case of a landlord owns a house that he rents out using letting agency X. For the last three months, tenants have been making payments to letting agency X, but landlord has not been receiving any rent. She sent emails to the agent, phoned them and visited their offices. They have not responded and the office is always shut. The landlord is out of pocket on rent by up to £2,400 and is liable for the tenants’ deposit of £1,200. £7,897 Amount landlord had to pay in repair bills A CAB in the East reported the case of a landlord who decided to rent out her house using letting agency X. The agency found a tenant to rent the property for one year. The landlord paid 10% of the rent as a management fee to the agency every month. The tenant caused considerable damage to the property and even took the curtain rails with them when they moved out. The letting agency failed to produce an inventory when the tenant moved in. They did not carry out any inspections and returned the tenant’s deposit without inspecting the property. The landlord complained to the agency, which admitted negligence but failed to offer compensation or mediation, saying she would cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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have to take them to court. In addition to the fees paid to the agency for “management” the landlord has had to pay £7,897 in repair bills to restore the property to a rentable condition following damage by the tenant. 3.10 The research also found that many landlords weren’t aware that their tenants were likely to be paying fees to the agent, too. Some landlords had children with first-hand experience of renting a home, which they said provided good insight into the tenant’s experience. These landlords showed empathy for tenants in terms of the fees they pay and their rights within assured short-hold contracts. Only half of landlords (49%) agreed that tenants should pay a contribution towards agent fees. January 2013
Attached: Renting Roulette: Consumer experience of the lettings market Letting you down? Which? Money article, December 2012
Supplementary written evidence submitted by Which? 1. Introduction Which? sent evidence to the Committee in January of this year and subsequently gave oral evidence in March. Since then we have conducted another round of mystery shopping and have written to the four agents, who we believe are acting unlawfully by not disclosing fees early enough, to try and encourage them to change their practice. This submission details the main findings from this research.
2. Main Points 2.1 Which? conducted research in November last year which suggested that the two thirds of tenants who let through an agent find out about fees at or after a visit to a property. Of these 14% found out about the fees at the point of signing a contract or when the fees were payable. This makes it difficult for consumers to shop around—we estimated that this was costing consumers as much as £76 million per year. 2.2 In order to look at fee practices in more detail we carried out further mystery shopping to look at four agents in particular: Barnard Marcus, Foxtons, Martin and Co and Your Move. We looked at four branches per chain, and contacted each office by calling the agents, looking on their websites, calling to arrange a visit, emailing to register, going into the agents to register and looking on agent adverts on Rightmove. We focussed in branches in London because London has 20% of the lettings market. 2.3 In our snapshot research we found: — None of the letting agents provided information about fees in any property listings on their website, on Rightmove.co.uk or after tenants had registered online. — Only one tenant (at a Foxtons’ branch) was proactively given fee information when they registered in branch or called to arrange a viewing. — No tenant was provided with a written schedule of charges. — In some cases tenants were either not given fee information even when they asked, or they were not given the complete details. 2.4 In terms of the fees paid all agents require tenants to pay administration and referencing fees. The average across all agents was £310 (roughly equivalent to one week’s rent in central London)—the highest was £420. Some tenants could also face check-in and check-out fees, bringing the total closer to £600. Check and check out fees are not always compulsory but will be charged by some agents or landlords. 2.5 We wrote to the agents to say that we thought they were acting unlawfully by not being upfront about the fees that tenants can expect to pay when renting a property. This means that renters face unexpected charges, are unable to compare prices and don’t always know what they are signing up to until it is too late. By failing to disclose fees upfront or during their first contact with a customer, we believe that letting agents are breaching consumer law by not providing material information in a manner that is clear and timely. 2.6 We think that letting agents need to be much more open about expensive fees in advance. We want written information on fees to be provided up-front, in adverts, on websites or at the first point of contact with an agent. 2.7 This is a market which also has an alarming lack of consumer protection and redress. As a bare minimum we also want all agents to sign up to a redress scheme. Lettings agents should be covered by the same legislation as estate agents, which would require them to sign up to an independent ombudsman scheme. This could be achieved by amending the Enterprise Bill, which is currently before Parliament. March 2012 cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Further supplementary written evidence submitted by Which? 1. Introduction Which? is delighted about the Government’s decision to make it a requirement for letting and property management agents to sign up to a redress scheme via an amendment to the Enterprise and Regulatory Reform Act (ERR13) (Sections 83–88). This was one of the key recommendations we made in our report about letting agents (Renting Roulette, November 2012). We will be developing a full position on the detail of the new scheme when the Government produces it consultation in the summer. In this response we outline: (a) Our views on whether the existing amendment goes far enough; and (b) Points that the Government should consider in advance of issuing secondary legislation.
2. The Existing Amendment The need for mandatory redress in the lettings market was one of the key policy recommendations we made following the research we published at the end of last year. This revealed that both consumer landlords and tenants are vulnerable to poor practice in the market because: 40% of agents are not signed up to a redress scheme; tenants shop for the property and therefore have little control over which agent they rent through; and landlords often aren’t checking for membership of a professional body when they sign up with an agent. Just 37% of landlord’s checked for this before hiring an agent. We think that the amendment has the potential to bring protection for consumers but also to raise standards in the market. We are encouraged by the application of the Consumers, Estate Agents and Redress Act 2007 (CEARA07) to the sales market: non-compliance is low with nearly all agents signed up to The Property Ombudsman or the other, smaller, OFT approved scheme run by Ombudsman Services. Complaints in the market are also fewer than in lettings: there were 4,186 complaints relating to sales in 2011 compared to 7,641 in lettings. The new legislation that will be applied to letting agents does not go as far as that for estate agents. In addition to requiring estate agents to sign up to a redress scheme, the Estate Agents Act 1979 gives the OFT the power to ban an agent where it has been found to breach regulations, but it also makes it a requirement for agents to have professional indemnity insurance. We supported this being extended to cover lettings agents to provide parity between the two markets and to avoid a potential situation where the OFT bans a sales agent who could in theory set up in the lettings market. The differences between the two markets are set out in this table below. Regulatory area Estate Agent Letting Agent Membership of independent redress Yes (CEAR Act 2007) No scheme Providers may be banned for bad practice Yes (EAA 1979, strengthened by CEAR Act No 2007) Professional indemnity insurance Yes (Condition of membership of redress No scheme (required by CEAR Act 2007)) Must have an approved complaints Yes (Condition of membership of redress No procedure scheme (required by CEAR Act 2007)) Code of Practice for members No. The Property Ombudsman has a No voluntary code of practice which is signed up to by the large majority of its members. Those who are not signed up to it are assessed on the basis of what is fair and reasonable. Entry requirements No No Professional qualifications No No
While this is still our preference, we think that the most important feature is access to redress to ensure that where consumer experience problems they are resolved. In the future, there may be scope for reviewing standards in the lettings market and considering what more might be needed. For example, there may be a good case for at least one person in a lettings or sales agency to have a qualification given the level of skills and knowledge requirements of effective agents. Others have also supported a move towards positive licensing which may help address existing challenges to enforcement due to financial pressures facing Trading Standards. We welcome the work that the sector has done and is trying to do to raise standards in the market, including the proposed Property Council that may be established by the existing ombudsman schemes. This will provide a useful forum to discuss further measures to raise standards in the market.
3. Points for Consideration Advance of Issuing Secondary Legislation We will be developing a detailed view of the points that the Government should consider ahead of issuing the secondary legislation over the summer. However, our overall comments are as follows: cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Timing We would urge the Government to implement the legislation as soon as possible to provide more consumers with protection from the earliest date possible. If this needs to be in line with common commencement date procedures then our preference would be that it is implemented by 1 October 2013, but certainly no later than 1 April 2014. This is particularly important given the rate at which the sector is expanding at the moment and the amount of churn within it.
Client Money Protection As referred to above we think that it is very important that agents are required to have Client Money Protection. Our research identified numerous cases where both tenants and landlords had lost money because the agent had misappropriated it and this could not be reclaimed. Some examples are provided below. This predominantly affects the landlord but can also affect tenants where the agent is holding a security, a holding deposit or other cash sums. A CAB in the South East reported the case of a landlord owns a house that he rents out using letting agency X. For the last three months, tenants have been making payments to letting agency X, but landlord has not been receiving any rent. She sent emails to the agent, phoned them and visited their offices. They have not responded and the office is always shut. The landlord is out of pocket on rent by up to £2,400 and is liable for the tenants’ deposit of £1,200. A CAB in the East reported the case of a landlord who decided to rent out her house using letting agency X. The agency found a tenant to rent the property for one year. The landlord paid 10% of the rent as a management fee to the agency every month. The tenant caused considerable damage to the property and even took the curtain rails with them when they moved out. The letting agency failed to produce an inventory when the tenant moved in. They did not carry out any inspections and returned the tenant’s deposit without inspecting the property. The landlord complained to the agency, which admitted negligence but failed to offer compensation or mediation, saying she would have to take them to court. In addition to the fees paid to the agency for “management” the landlord has had to pay £7,897 in repair bills to restore the property to a rentable condition following damage by the tenant. A CAB in the South East reported that a landlord hired a letting agency to mange a new intake of tenants to her property, including carrying out reference and ID checks. The landlord discovered that the reference checks had clearly not been carried out correctly as the tenant’s stated previous address was in fact a shop. The tenant has now sublet the property to at least two other people, the landlord is no longer receiving rent for the property and it is in a state of disrepair. He is now faced with the prospect of legal procedures to get his property back due to the negligence of the letting agent.
The problems with a two-tiered membership route As it stands, estate agents who are signed up to the Ombudsman by CEARA07 can choose whether or not they also sign up to the Ombudsman’s Code of Practice. This is not a requirement of CEARA07. While the majority of estate agents are signed up to it, those that are not are simply assessed on the basis of what is “fair and reasonable”. In contrast letting agents who are voluntarily members of the Property Ombudsman are required to sign up to the Code of Practice. Our concern is that this will not be a requirement of a new scheme, in line with rules relating to the scheme for estate agents. Signing up to a code of practice provides a means to raise standards in the sector—it makes clear in writing the standards that agents should adhere to and provides a means for consumers to assess where they have been subject to poor practice. It also prevents two tiers of practice coming into effect. For these reasons we would rather that, as part of the new scheme, letting agents had to follow a specified code.
One complaints body In line with the above, we think it would be fairer and more effective if one Ombudsman scheme for letting agents was in operation. Our concern with having more than one scheme, as is the case presently, is that there is no agreed set of standards for the market and there is greater potential for a race to the bottom as agents choose whichever complaints scheme that makes the least requirements upon them. It would also be far simpler for consumers, and therefore would be helpful in raising awareness of the scheme which would in turn enable consumers make better use of the legislation by acting as enforcers of it. Our research found that consumers had low awareness of the existing bodies and were confused by the different codes of conduct and standards that each applied. The Property Ombudsman is currently the largest in the market with 10,000 letting agent member covering about 60% of the market.
Publishing data—Transparency We think that it is important that data on complaints about particular agents is transparent. This means an open publication policy. This would serve to “shame” companies who don’t deal well with consumer complaints, warn consumers against using these companies and also provide some level of good publicity to well behaved traders. The Financial Ombudsman has recently mentioned that banks will use the data published cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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by FOS in press releases as a means to demonstrate how well they are doing/how they have improved, thereby encouraging improvements in the market. May 2013
Written evidence submitted by Blackpool Borough Council This submission has been prepared by Steve Matthews, Head of Housing and Planning at Blackpool BC, and Andrew Foot, Fylde Coast Housing Strategy Manager. Steve Matthews is responsible for the delivery of housing and planning services by Blackpool Borough Council, and has worked for local authorities to improve the quality of the private rented sector in coastal towns for many years, first in Morecambe, and for the last five years in Blackpool. Andrew Foot is responsible for housing strategy and has also worked in the area for five years, after a career working for housing associations and the Audit Commission in housing development and regeneration.
1. Introduction 1.1 Blackpool Council welcomes this opportunity to contribute to the debate on the future of private rented housing which has a profound impact on this area. In Blackpool, private renting has become nearly as prevalent as homes owned by owner occupiers with a mortgage, and it is vital for the future of the town that there is are a wide range of high quality and well managed properties in the sector to meet the requirements of local people.
2. Summary and Recommendations 2.1 The submission sets out the characteristics of private rented housing in Blackpool and the associated challenges for the local authority. The private rented sector is very large but mostly poor quality, with over 80% of private rented tenants receiving Housing Benefit. Our main recommendations for action for the Select Committee to investigate are: — Consideration of the impact of benefits calculations on local housing markets and greater sensitivity to local market conditions. — Provision of financial support to local authorities to empower the facilitation of balanced housing supply in areas with dysfunctional housing markets; especially where to do so it is reasonable to expect longer term reductions in public expenditure and economic growth. — Continuing control of conversions to residential use through the Planning system where required to ensure sustainable development. — The introduction of mandatory codes of practice for lettings agents. — Continuing support for selective licensing. — Ensuring appropriate resources for effective local authority enforcement of standards in the private rented sector.
3. Blackpool Context 3.1 Blackpool has had a population of around 142,000 people for the last 10 years, but there are relatively high numbers of people moving into and out of this coastal resort every year—5 to 7% of the population at any one time has arrived within the last 12 months. This reflects the seasonal nature of some employment in the tourism industry and the attraction of the resort to people moving in from other urban areas, especially those of the North of England and West of Scotland. A large private rented sector facilitates this movement. 3.2 The housing stock has an older profile than average and is especially characterised in the inner parts of the town by former guest houses that have been converted into residential use as the demand for that type of holiday accommodation has declined since the 1970s. Past conversions have tended to be poor quality and to small flats and bedsits that are privately rented. 3.3 The private rented sector in Blackpool is large and is focussed on letting to people reliant on benefits. Census 2011 found that 17,479 households were housed in the private rented sector in Blackpool, up from 12,366 at the time of Census 2001. The private rented sector houses 27% of all households. 3.4 The population of the town is also relatively deprived. Over 30% of all households in the borough— over 20,000 out of over 64,000 households—are currently reliant on Housing Benefit. This is the highest proportion of households on Housing Benefit in the North West of England outside of Liverpool and Manchester. The number of households receiving Housing Benefit in Blackpool increased by 57% in seven years between December 2004 and December 2011—from 12,700 to 20,290. Most of this increase is attributable to new claimants living in the private rented sector. In March 2011, 14,000 private rented sector tenants received Housing Benefit, equivalent to over 80% of all private rented tenants. 3.5 The affordable housing stock owned by the Council and local housing associations is just over 10% of all 70,000 homes in the borough, which is significantly less than the NW regional average. In contrast to most cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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of the rest of the North of England, 70% of households on Housing Benefit find their home in the private rented sector. Private renting is the principal housing option available for households excluded from home ownership, and despite relatively low house prices, this is increasingly the case, given low and insecure incomes. 3.6 Census 2011 showed that 4,976 household spaces were vacant out of a total of 69,343 household spaces in Blackpool—7.2% of all homes. This reflects the predominance of the private rented sector with higher turnover rates than other tenures, generally poor stock condition, low values, and the moribund state of the local housing market. 3.7 The nature of the private rented sector in Blackpool enables people who are economically inactive to come to Blackpool and easily find somewhere to stay. The dominance of poor quality private rented accommodation in inner neighbourhoods leads to intense concentrations of deprivation, and an environment that fosters poor health and a lack of opportunity for residents. Low life expectancy and mental health problems in these areas are amongst the worst in the country, with associated high costs to the public sector. The poor environment and endemic social problems in the inner town have a serious negative effect on tourism, which continues to be the town’s major economic sector. Investment is reduced and skilled individuals who could drive investment in the local economy live elsewhere.
4. Challenges in Improving the Private Rented Sector (i) Interaction between Housing Benefit and rents 4.1 The dominance of Housing Benefit within the large private rented sector in Blackpool means that it is difficult to establish a market rent when calculating the Local Housing Allowance (LHA), simply because so few properties are let to people paying their own rent without assistance through LHA. Also, the LHA is calculated across a Broad Rental Market Area that covers a wider suburban and rural area of the Fylde Coast that has much lower rates of benefit claimants and higher market values than Blackpool. So the LHA rate applied to Blackpool tends to be higher than might be expected from just looking at the quality of accommodation on offer to benefits claimants in Blackpool itself because it is based on the few best properties that aren’t let to benefits claimants, and market rents in better areas. 4.2 Landlords letting to people on Housing Benefit tend to set their rents at the LHA rate. This means that it is very profitable for landlords to buy and let out accommodation to benefits claimants in Blackpool, demonstrated by the doubling in HB claimants in the private rented sector seen in the last 10 years, from around 7,000 ten years ago to 14,000 now. This trend continues, with most property sales in the inner parts of Blackpool to investors rather than to owner occupiers. 4.3 The artificially high levels of LHA mean that it is far more financially advantageous for property owners to rent to Housing Benefit claimants than to improve their homes to enable sales to owner occupiers. The demand from Housing Benefit claimants is effectively unlimited because of continuing in-migration of people on benefits from other parts of the country. 4.4 This dynamic of in-migration of people reliant on benefits tends to focus on the inner parts of Blackpool where there are most former guest houses, and de-stabilises local neighbourhoods. There is a vicious circle where economically in-active residents in poor privately rented accommodation make neighbourhoods less attractive to people looking to buy a home, and this in turn further entrenches the pattern of property owners in those areas renting to benefits claimants because owner occupiers will not live there. 4.5 Government (DWP) operates nationally consistent benefits policies that take no account of the impact on communities with unusual local housing markets like coastal resort towns. Blackpool Council has in the past sought to persuade DWP to change the way that it calculates the Local Housing Allowance to reduce the incentives for letting to tenants on Housing Benefit, but taking a refined approach to reflect particular local housing markets has been refused. The problems faced in Blackpool are the polar opposite of those faced in higher value markets that have strong demand from working people for homes to rent, where landlords are reluctant to let to people on Housing Benefit because it offers lower returns than the alternatives. 4.6 The move to Universal Credit in October 2013 will make local sensitivity even more difficult to achieve, and is therefore likely to further distort the market, leading to some areas where benefits claimants cannot afford to live (in the suburban/rural parts of housing markets) and further concentrate poor people in urban areas dominated by private renting to people on benefits. If Universal Credit sets benefits to meet housing costs on an even wider basis—for example whole regions—then there will be displacement of people from more affluent areas to poor areas. It is clear that people on benefits will not be able to afford to live in the most expensive parts of the country—for example many areas of London—and there is likely to be a much wider displacement of people on benefits from one part of the country to another. 4.7 The change that took place early in 2012 to only pay LHA Single Room Rate to single people under 35 (instead of under 25) has reinforced demand for houses in multiple occupation (HMOs) in Blackpool. The local authority is working hard to reduce the supply of HMOs and achieve a more balanced housing supply from conversions of former guest houses, but this change works against these key local priorities by bolstering demand for the unacceptable accommodation that we’re seeking to remove. The challenge in Blackpool is that cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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this policy is likely to lead to greater concentrations of people with social and welfare needs being driven into to the town due to insufficient accommodation elsewhere. 4.8 It is recommended that in the introduction of new benefits regimes, there is more consideration of the impact of benefits calculations on local housing markets and communities rather than just focusing on the impacts on individuals. There needs to be willingness by DWP to recognise the wider impacts of their policies on local areas, and support the objectives of CLG in promoting prosperous and sustainable communities. The detail of benefits for housing costs needs to allow sensitivity in calculation to local market conditions, and not pursue an inadvertent, or deliberate, policy of further concentrating the most deprived citizens in already deprived neighbourhoods and towns.
(ii) Improving the range of homes available in the Private Rented Sector 4.9 The private rented housing stock in Blackpool consists predominantly of small flats. Around 60% of all privately rented homes available are bedsits or 1 bedroom flats, with most of these converted, especially from former guest houses, rather than purpose built. There are comparatively few larger properties available to rent privately. Most accommodation seeks to meet the most basic standards to comply with the Housing Act 2004 requirements, but is still very undesirable accommodation. 4.10 The private rented sector is most concentrated in the inner town, which has the smallest homes in the poorest condition. In some inner neighbourhoods, over 50% of homes are privately rented, and given the focus of renting to transient benefits claimants, this makes it difficult to establish functional and self-sustaining communities. 4.11 The Council is seeking to control the on-going conversions of former guest houses to residential accommodation through new Planning policies, and especially the adoption of the New Homes from Old Places policy that imposes higher quality design standards on conversions from former guest houses. It also requires that conversions are to houses rather than flats wherever possible to provide a more balanced range of homes. The policy is proving to be effective where owners apply for planning approval, although can’t deal with the legacy of decades of illegitimate or poor quality conversions. Most converted properties are rented out in the private rented sector. 4.12 The Council’s approach to control the further propagation of poor quality privately rented flats through Planning policy is threatened by Government proposals to de-regulate property conversions to stimulate housing growth. While the Council welcomes initiatives to promote new housing supply, it is not appropriate to enable the development of very poor quality private rented accommodation in areas that already have too much of it. Blackpool Council is seeking to allow the development of additional homes through the conversion of surplus guest houses, but getting the quality of newly converted homes right is vital to the town’s future, and this is reliant on the ability to control conversions through the Planning system. 4.13 The particular proposals that cause most concern are the proposals to allow unrestricted change of use from commercial buildings to residential accommodation. In Blackpool, permitted development rights to allow conversion from retail to poor quality flats would be problematic, and any further extension to allow unrestricted conversion from guest houses to residential use would be catastrophic. The Government has also introduced a permitted development right to allow changes of use from C3 dwelling house use to C4 HMO use. While the Council is pursuing an Article 4 direction to remove this right within the Blackpool area, there is uncertainty on whether this important control measure can be achieved, and it takes resources to put back in place essential controls that were formerly generally available to local authorities. 4.14 It is recommended that Government retains the ability for local planning authorities to control changes of use to residential accommodation where this control is a critical tool in promoting sustainable development and a mix of homes attractive to a range of households in the local private rented sector. The Government must recognise that local areas have diverse conditions and that changes in the regulatory regime that lead to positive outcomes in some areas may not be appropriate in others. 4.15 It is difficult for property owners to fund conversions from former guest houses to high quality residential accommodation. If guest houses are converted to a wider range of homes, rather than just very small flats, the rental yield is less for owners and may not cover the costs of the better quality conversions. Property owners and developers currently struggle to find any development finance from banks, for what are perceived to be high risk investments. Gap funding and loan funding support are required to achieve more extensive conversions from redundant guest houses to high quality accommodation that is essential to Blackpool achieving a more prosperous future.
(iii) Improving standards of management and property condition 4.16 As the private rented sector in Blackpool is predominantly let to people on benefits who have few other choices, there is little consumer pressure to maintain good standards. Some landlords are conscientious and keen to manage and maintain their properties to a good standard, but too many properties are unsatisfactory through deliberate inaction or ignorance. There has been a rise in buy-to-let amateur landlords, investors living away from the area buying cheap properties and struggling to manage them from a distance, and owners of property portfolios deliberately ignoring standards. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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4.17 The Council’s enforcement team has struggled to address poor conditions with very limited resources relative to the extent of the problems. This has been exacerbated since the removal of capital funding to address private sector housing conditions that was formerly allocated through regional agencies in the North West. 4.18 Poor conditions and management are closely associated with tenant anti-social behaviour. With the growth in private renting we have seen a pronounced increase in anti-social behaviour and disruption to existing communities. 4.19 The Council has developed an area-based approach that balances action to improve property standards, assistance for landlords to meet their obligations to manage tenants’ poor behaviour, and support services for vulnerable or disruptive tenants. The overall objective is to establish a more stable community and an area that becomes increasingly attractive to a wider market beyond benefits claimants. This “transience strategy” is currently focussed in one small area of inner Blackpool that contains around 850 privately rented properties. It is resource intensive but is cost effective because it identifies and deals with problems rather than just moving them on to other areas. It can only be rolled out to other areas once the problems of the initial area have been substantially addressed, unless additional resources are made available. 4.20 This area-based approach is under-pinned by selective licensing, that gives the ability to undertake a comprehensive inspection programme and identify all landlords and their properties in an area. It is important that Government continues to support the introduction of selective licensing approaches in areas with the worst private rented sector management and conditions. Selective licensing across neighbourhoods and mandatory licensing of HMOs are effective tools. We welcome the Government’s previous decision to delegate final designations approvals for selective licensing, and urge Government to continue to support the licensing of the highest risk elements of the private rented sector. 4.21 Addressing the poor standards and behaviour of some private lettings agencies is essential. A Code of Practice similar to that required for Estate agents or Banks with an independent complaints procedure is necessary. Acceptable standards should be recognised by a kitemark standard which provides a quality and safety certification. 4.22 The Select Committee should take account of the impact of Government cuts on the ability of Councils to undertake their statutory enforcement of housing standards and taking action against unscrupulous and poor landlords. Some of the costs should be recovered from landlords through licensing, but there also has to be better financial protection for Councils to oversee better regulation locally in view of the continuing growth of private renting. January 2013
Written evidence submitted by Bristol City Council Strategic Housing Service deals with private sector housing in Bristol including housing standards, homelessness prevention and tenancy relations. We have operated an HMO mandatory licensing scheme since 2006 and declared a discretionary licensing scheme is a part of the City in September to run for five years from April 2013. The private rented sector in Bristol is growing rapidly and according to Census 2011 figures, accounts for 22.1% of housing stock in Bristol, an increase of 10% in the last ten years.
Issue 1: The quality of private rented housing and steps that can be taken to ensure that all housing in the sector is of an acceptable standard. The housing market across Bristol is changing and more people are now moving into the Private rented sector to make it their long term home where once owner—occupation was the tenure of choice. Bristol’s housing strategy recognises the important role that the private rented sector plays and seeks to make the best use of it. Bristol City Council holds data relating to private sector housing as a result of its day to day activities of dealing with complaints, HMO licensing and renewal activity. We have also undertaken a recent Private Sector House Condition Survey 2011 which indicated that the private rented sector accounted for 20.6% of all housing in Bristol and suggests that 29.3% of this stock is non decent . This compares to the Census 2011 figure of 22.1%—an increase from 12.2% in 2001. With this rapidly growing sector it is important that we use all the tools at our disposal to bring these properties up to standard including advice and guidance, self regulation through an accreditation scheme, enforcement and prosecution and both mandatory and discretionary licensing where appropriate. It would help Local Authorities if the tools available were simplified and for example enforcement activity on non compliant landlords made easier by introducing Penalty Charge Notices. The Housing Health and Safety rating System is not well understood by those who do not use this assessment process and perhaps more information and advice could be provided for landlords to help explain the system.
Issue 2: Levels of rent within the private rented sector—including the possibility of rent control and the interaction between housing benefit and rents. Rent levels have continued to increase over the last few years and we believe rent control would not work in a market where demand far outstrips supply. Changes under Welfare Reform and reduced levels of benefit cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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available to some households is not likely to force landlords to moderate rent levels where someone else is looking for housing and willing to meet the rent demanded. Local Housing Allowance affects the most vulnerable people who are forced into the poorest quality housing and lack the ability to negotiate rents. The single room rent restriction could result in landlords converting their properties to bed sits to meet demand for housing and this in turn could result in higher likelihood of anti social behaviour as housing becomes more concentrated.
Issue 3: Regulation of landlords and steps that can be taken to deal with rogue landlords.
Our first comment is that “rogue” needs to be defined. The Rugg Review recommended that all private landlords should be registered centrally to make it easier to identify and target those responsible for properties in the private rented sector. Perhaps this report should be revisited and its recommendations considered. As a very minimum standard all landlords should pass the Fit and Proper Person Test (Housing Act 2004). A problem here is that Fit and Proper needs to be more clearly defined and guidance for Local Authorities on how to administer this would be helpful. One Local Authority may decide a landlord is not Fit and Proper where another may issue a licence as there is no common register to refer to. There should be no minimum fine levels set for poor accommodation so fines need to be a better deterrent and enforcement procedures simplified. The Housing Health and Safety Rating System is a risk based assessment rather than a set standard so it is difficult to make landlords understand what this means for them. There should be better education available to others including landlords into this assessment and its implications. Proceeds of crime and the ability to seize assets should be applied to those landlords who are successfully prosecuted. The very worst landlords who do not meet the minimum standards should be forced out of the market and their properties managed by someone else. If Local Authorities had better knowledge on where the private rented properties and who is letting them, the information would help identify rogue landlords and resources could be targeted at them. Sanctions could be applied limiting their behaviour.
Issue 4: Regulation of letting agents, including agents’ fees and charges.
At present anyone can be a Residential Letting/Management Agent as there are no qualifications or competencies required to set up as one. The worst agents would not be interested in using a voluntary scheme so it must be mandatory. Voluntary Agents Associations self regulate but they have no teeth to do anything about poorly performing agents. There should be a minimum standard or qualification needed to practice as a Letting Agency. The fees need to be controlled as agents currently charge for everything at high rates with no regular fee applied. The agents are therefore in some cases abusing their position and rarely publish a list of charges. Agents should all follow the law regarding what the landlord’s status is but this is not followed in practise.
Issue 5: The regulation of HMOs including the operation of discretionary licensing schemes imposed by a local authority for a category of HMO in its area.
Licensing of larger Houses in Multiple Occupation (HMOs) is mandatory. Under The Housing Act 2004, Parts 2 and 3, discretionary licensing can be used in an area meeting the definition and criteria to deal problems relating to wider issues with this housing sector but the legislation and guidance for introducing such a scheme needs to be simplified and the criteria easier to meet. The cost and number of public notices that must be published following designation are not sensible in the cash strapped environment being faced by Local Authorities. This process in Bristol cost £25,200 and some Local Authorities may have difficulty in meeting this legal requirement due to this high cost. The process is too dictatorial and should be balanced with the needs of meeting concerns of interested parties and the overall objectives in housing strategy. For example it is very difficult to prove anti social behaviour is being committed by private rented tenant when the Police who would provide some of this evidence do not collect evidence on tenure when an individual is arrested.
Issue 6: Tenancy agreements and length and security of tenure.
We believe a twelve month default tenancy would be preferred to help some tenants set down roots and settle into their community. Landlords report a difficulty in evicting problem tenants and perhaps are ill informed of the correct procedure to follow or evidence required to legally evict a tenant. Tenants are advised to stay put when notice is served or they will not meet qualifying criteria for homeless intervention. There appears to be an imbalance in power that a tenant has where tenancy agreements have been breached so better tenancy should be written with consequences of breaches clearly included particularly around anti social behaviour. Landlords should also be required to issue tenancy agreement as there are some who abuse their position and tenant has little understanding of their rights. Both landlords and tenants need information and support and this should be made easily available to them to help deal with and resolve issues before they escalate into eviction. Bristol is considering a Tenant Accreditation Scheme so landlords will have more confidence that the potential tenant is less likely to cause them a problem. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Issue 7: How local authorities are discharging their homelessness duty by being able to place homeless households in private sector housing. Bristol has not used PRS to discharge its duty under the Localism Act to house homeless people. However we do use the PRS in the prevention to homelessness but the LHA is a problem where a tenant cannot afford to meet the difference in rental being charged and the allowance they are given and no alternative option is available to them. The Council has a Homeless Prevention Fund which funds deposit bonds and Rent in Advance Loans in order to ensure access to the private rented sector and to try to attract landlords to let their properties to LHA claimants and reduce the impact of low supply of low cost housing. The accommodation must also be suitable and the standards required to discharge duty are less than those of enforcement standard but these should surely be the same? There should be a minimum property standard and a minimum one year tenancy agreement. This could be a default position unless both parties opt out. Rent guarantee schemes would be a good idea but although these would attract landlords this could prove costly for the council if a tenant leaves before the end of their tenure. Direct payments to landlords would attract more landlords to participate in the scheme. Where overcrowding is a problem it would be helpful if there was more flexibility to discharge the duty by offering two properties where the households are willing and is appropriate. January 2013
Supplementary written evidence submitted by Bristol City Council PROBLEMS OF DECLARING A DISCRETIONARY LICENSING SCHEME USING THE HOUSING ACT 2004 POWERS Summary of Proposed Changes to Discretionary Licensing Powers — Reduce regulation and red-tape. — Simplify the schemes. One discretionary licensing scheme covering all private housing not covered by mandatory licensing. — Easing requirements on area eligibility and definitions. If an area is shown to be suffering poor housing conditions or anti-social behaviour or low housing demand, then it should be eligible for the scheme. — Ensuring all licensing costs can be included in the fee structure, including publicity and enforcement. — Lower standards of data required to declare a scheme. It is currently time-consuming, difficult and expensive to ascertain levels of private rented accommodation and demonstrate they meet the current criteria to declare discretionary licensing in a particular area.
Discretionary Licensing—Issues with Current Legislation Identification of the area — Local authorities do not know where all private rented properties are in their areas—some records are held by various teams across Local Authorities, but this can quickly get out of date: — Private Housing/Environmental Health who may have received complaints from private tenants. — Housing Benefit Teams who will process Local Housing Allowance applications. — Council Tax Teams may collect details of tenure as part of their application process although this will not be conclusive. Without detailed research it can be time consuming and costly to establish conclusively where high concentrations of private rented accommodation is. The reality is that housing tenure statistics are an ever changing picture so what previously had high concentrations of Private Rented Accommodation when evidence gathering is undertaken, may not be when a discretionary licensing scheme is declared.
Definitions — Gaps in definition: “Selective licensing” does not cover all private rented properties that fall outside of mandatory licensing scheme definitions. Properties with two or more tenancies or licence agreements occupied by people who share some facilities are excluded.128 “Additional licensing” does not pick up all those properties not covered by Selective Licensing. Both Additional and Selective schemes need to be amended to ensure the entire Private Rented Sector is included. 128 Housing Act 2004, Part 3 section 79(2)(b)(ii) only allows a house to be granted a Selective Licence where it is : “under two or more tenancies or licences in respect of different dwellings contained in it..” A number of Houses in multiple occupation are let on two or more tenancies to a group of people sharing facilities in a house which would not be considered a “different dwellings”. Hence these properties cannot be licensed under part 3 of the Housing Act 2004. Additional licensing only applies to Houses in Multiple Occupation which amongst other criteria, must have three or more persons occupying to be an HMO*. So properties occupied by two persons of separate households on two tenancies who share facilities (i.e live in the same dwelling) cannot be licensed under Discretionary Licensing provisions. *(Schedule 14 para. 6(1)(c) Housing Act 04 and Reg 6 (2) SI 2006 No.373). cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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— Properties let in this way may suffer poor management, be in very poor condition or have ASB linked to them, but actually fall outside of both Additional and Selective licensing scheme definitions under the Housing Act 2004.
We are sure that this cannot be the intention of the discretionary licensing functions under the Act?
Discretionary Licensing—Qualification Criteria — It can be difficult to meet set criteria to declare a Selective Licensing area. This can be declared when: — The area is, or is likely to become, an area of low housing demand; and — Making a designation will contribute to the improvement of the social or economic conditions in the area. or — The area is experiencing a significant and persistent problem caused by anti-social behaviour; — Some or all of the private sector landlords who have let premises in the area (whether under leases or licenses) are failing to take action to combat the problem [persistent ASB]; and — Making a designation will lead to a reduction in, or the elimination of, the problem [persistent ASB].
It can be extremely difficult to prove that significant issues around ASB are caused by private rented sector by tenants.
Specifically limiting Selective Licensing powers to the specified criteria does not reflect one of the principle issues with the sector, which is the poor condition of the stock ie levels of non decent accommodation, poor energy efficiency and serious hazard (English Housing Survey 2010).
Qualification Conditions — It can be extremely difficult and time consuming to collect suitable evidence from the police and other agencies in respect of Anti-Social Behaviour (ASB), linked to tenure, in an area. ASB information can be obtained for each area, however tenure details are infrequently collected to enable cross tabulation of results. As a result, it can be extremely difficult to show that ASB as being carried out by private sector tenants and as such that a Selective Licensing Scheme may be an option to help deal with these issues.
Publicity and Public Registers — Legislation on publicising an area once this has been approved is specified, in explicit detail, in regulation.129 This informs Local Authorities how, where and when Public Notices are to be published. The publicity requirements are cumbersome and expensive to use and do not generally reflect how local authorities communicate with their customers in 2012. Advertisements have to be placed in two local newspapers as soon as possible after a decision has been taken to implement the scheme and these adverts must be repeated six times over a ten-week period, in two local newspapers. In Bristol the publicity alone has cost the local authority £25,000 and these costs cannot be included/ recovered from licensing fee income. This communication method is out of date now with the use of the internet, the use of our own web pages, local residents and community meetings to advertise Local Authority decisions. — The same regulations have unnecessary detailed requirements to maintain public registers. The extent of information specified is unnecessary.130 — Complexity and resources necessary to declare an area are burdensome.
General Issues — Landlords mostly responded to consultation exercise and are naturally against the idea in most cases. It can be difficult to obtain representation and engage local tenants in the consultation. — Realistically recovering the full cost of operating a scheme can be difficult, as Local Authorities cannot include enforcement costs into the licensing fee costs. — The current Licensing regime specifies in detail conditions that Local Authorities have to require landlords to meet. It does not provide any local discretion to deal with local housing related problems. — Enforcement sanctions need to be swifter and easier to use. 129 SI 2006 No.373 Reg 9. 130 SI 2006 No 373 REgs 11–13. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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— Local Authorities should have the flexibility to include all costs linked the licensing function within the fee structure including the enforcement elements. An option would be to issue Penalty Charge Notices for non compliance with licence conditions. This means the non compliant landlord can be tackled more effectively and costs borne by them rather than the compliant landlords. March 2013
Further supplementary written evidence submitted by Bristol City Council
LICENSING AND MEETING THE “FIT AND PROPER PERSON TEST”
Summary of Issues with “Fit and Proper Person” Definition
Where licensing of rented properties applies a key power Councils have to tackle the root cause of poor management and housing conditions which may effect tenants and residents is whether the landlord or agent is “Fit and Proper” to manage a rented property.
When deciding whether to grant or refuse a licence the Council needs to decide whether someone is a “fit and proper person” (section 66 & 89 Housing Act 2004) to manage the property. We can also revoke a licence if we become aware of issues which may effect someone’s “Fit and Proper” status.
As well has having a major impact on tenants and residents, a decision that a landlord or agent is not fit and proper has a significant impact on their business. This can range from an individual with on licensed property to a management agent with several hundred properties where a part or whole of their business may be dependant on being “fit and proper”. A decision that a person or company is not fit and proper may also have an impact on other parts of a person’s business such as being a company director or appointment as a public trustee.
Local Authorities can also decide a person is not “Fit and Proper” as a result of them being associated with persons who would not be considered “Fit and Proper” and that would effect the management of a rented property.
The combined effect of the impact of a decision on whether someone is fit and proper means that Local Autorities must be cautious when making a decision that someone is not “Fit and Proper”. Decisions must be evidence based, reasonable and proportionate. Otherwise, in our experience, there is a high risk of expensive and damaging litigation such as Judicial Review and or Libel action.
Summary of Proposed Improvements
There is no central register of decisions that a person has been found not to be “Fit and Proper” so a landlord or agent with properties across the Country may hold a “Fit and Proper” status in one area but have been refused in another Local Authority Area.
Whilst Bristol has its own policy on “Fit and Proper Persons” but Local Authorities have been provided with no formal guidance by Government on Licensing under the Housing Act (draft guidance was drafted but never adopted).131 This lack of guidance on critical areas reduces the effectiveness of the legislation and Parliament’s wish for Councils to tackle poor management in licensed properties.
In particular guidance on the following is essential: — How to approach decisions where multiple properties are owned or managed and where there is multiple ownership a property. — The weight given to convictions or contraventions under Housing and other legislation. Eg If someone has been prosecuted for running an unlicensed property, would it in principal be proportionate for an Council to consider deciding someone is not fit and proper (We appreciate each case must be judged on its own merits). — How to consider whether a legal entity such as a limited company is “Fit and Proper” including directors interest in other companies involved in licensable properties. March 2013
131 A guide to the licensing and management provisions in Parts 2, 3 and 4 of the Housing Act 2004—Draft https://www.gov.uk/ government/publications/licensing-and-management-provisions-in-the-housing-act-2004-draft-guidance cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Written evidence submitted by Westminster City Council The quality of private rented housing, and steps that can be taken to ensure that all housing in the sector is of an acceptable standard Westminster has one of the largest private rented sectors in the UK at an estimated 40% of the stock according to recent census results. It is made of a range of sub markets including a luxury sub-market at one end of the market, comprising less than 10% of the sector, and at the other end houses in multiple occupation including hostels. It is therefore a very diverse market but the largest component is what may be described as the “middle-market”. A survey of 330 private tenants in 2010 found that 90% of tenants overall were satisfied with the quality of their property and 82% with the general condition and repair of the property. Our 2010 Stock Condition Survey found more decent homes failures in the private rented sector (39.1%) than the owner occupied (31.9%), but that private rented sector rates were below the national average of 45.4%.132 The City Council inspected 1,712 private rented properties in 2011–12, served 206 legal notices, removed 771 category 1 hazards, made 461 homes decent and did seven prosecutions. Additionally, 111 HMOs were improved and 35 new HMO licences were issued. The residential environmental health service is well known across the city with referrals for inspections coming from a range of sources including tenants themselves. It also has a neighbourhood engagement role and local partnerships are developed (particularly with health professionals). This helps to raise awareness of the service and to make links between a poor quality home and poor health. Additionally proactive partnership work is carried out with the Portman and Spirit Group to improve properties HMO above restaurants and pubs. The Council’s view is that existing legislation (principally the Housing Act 2004) is adequate to ensure the private rented sector is of an acceptable standard where it is adequately enforced through a good balance and combination of local authority pro-active and reactive work to address poor conditions.
Levels of rent within the private rented sector—including the possibility of rent control and the interaction between housing benefit and rents Westminster has some of the highest private rents in London which are reflective of the high cost of market housing generally in the City (property prices are the second highest in London). Rent control is not supported as this could restrict the essential supply of private rented housing which is particularly important when mortgage finance is restricted. Private landlords need to get a return on their investment which can compare favourably with other investments. It is worth noting that research carried out by Savills and Rightmove133 has shown that investment yields (excluding capital appreciation) tend to be lower in high value areas. The London Mayor’s findings in the recent Housing Covenant relating to the private rented sector highlights that rent controls are not the answer to affordability issues in the private rented sector. We however support the London Mayor’s proposals to work with landlords to pilot more flexibility and choice in tenancy agreements which could include tenants having greater certainty over rent increases. Also innovative partnerships between investors in private rented housing and social landlords may help to reduce some of the high costs associated with private renting, for example high management costs. Social landlords could offer significant management efficiencies such as reducing costs for void periods and lower cost repairs and maintenance. These reduced costs would in turn increase yields and these types of partnerships may also help to cushion rent increases and to raise quality and standards, as properties would be required to meet social sector standards. The implementation of the LHA caps on existing Housing Benefit claimants in April 2011 impacted over 5,200 households in Westminster. The strength of the private rented sector market in Westminster means that the overwhelming majority of private rented sector accommodation is let at rents above the LHA caps and thus is unaffordable for households on benefits. Whilst there will always be some properties let to households on benefits, the majority of these will be studios and one bedroom properties and there is little family sized private rented sector accommodation affordable to households on benefits. This situation will be worsened as the Household Benefit cap is introduced in April 2013. One effect of this is that at a time of increasing homelessness authorities are expected to lease Temporary Accommodation from the private rented sector to meet their statutory obligations to provide Temporary Accommodation for households for whom they have a statutory duty to provide housing. This housing must be suitable and affordable and the lack of supply of such accommodation in high value areas means that authorities will have to look increasingly to cheaper areas in and outside London, or subsidise accommodation through their own resources, for those households who have to be housed within the local area. This is exacerbated by the lack of certainty over the Temporary Accommodation Subsidy Regime, its likely reduction in future years in high value areas, and the fact that it has not allowed the procurement of sufficient volumes of self-contained accommodation to meet the increased demand, has led to increased use of bed and breakfast emergency accommodation 132 English House Condition Survey 133 Special Report: Rental Britain, Savills and Rightmove, (Spring 2012) cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Regulation of landlords, and steps that can be taken to deal with rogue landlords Existing legislation is in our view adequate to deal with criminal landlords. Local authorities have the power to prosecute landlords for unlawful eviction/harassment (1977 Protection from Eviction Act) and also the power to prosecute landlords for failing in their responsibilities (1985 Landlord and Tenant Act). The City Council carries out prosecutions but they are rare (around one each year) and normally the issue can be addressed through negotiation with the landlord. Local authorities already have an existing power to inspect properties, carry out assessments, issue statutory notices and prosecute landlords in relation to the quality of the property (principally Housing Act 2004). There is also a statutory duty for local authorities to intervene and take action if category 1 hazards are identified in a property. Mandatory landlord registration is also not supported as it is likely to become burdensome and costly to administer and there is a danger it would become a tick box exercise without bringing any real benefits. While there can be lower membership of voluntary accreditation schemes in high demand areas as there are fewer business reasons for joining schemes, the Mayor’s voluntary accreditation scheme (the London Rent Standard) and self regulation is supported as an alternative to mandatory accreditation. The scheme will have the advantage of being strongly promoted and branded for London as a whole, which will help to address different local authorities having different approaches towards promoting accreditation schemes and as many landlords work across borough boundaries. We support the London Rent Standard clearly highlighting the business reasons for accreditation such as access to advice, information and training at a relatively low cost.
Regulation of letting agents, including agents’ fees and charges As with private landlords, the City Council does not support the mandatory regulation of letting agents and instead supports the type of voluntary accreditation and self regulation proposed by the Mayor (highlighted above). Tenants will also have the option to avoid non accredited agencies.
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 The current regulatory framework is considered adequate.
Tenancy agreements and length and security of tenure The private rented sector caters for a range of sub markets—for some tenants it is their long term home while others are attracted to its flexibility. Equally for some landlords it is a long term investment while others only want to rent out a property for a short period. The current legislative framework is adequate as it provides for both scenarios as an assured shorthold tenancy can be periodic and run indefinitely with the consent of both parties or be for a fixed term. Many tenancies last much longer than the statutory minimum. A survey of 330 private tenants in Westminster found that while 32% of tenancies had lasted less than one year, for the over 65 age group over half had been living in their homes for at least ten years. The survey also found 95% to be satisfied with their security of tenure. While many tenants may prefer greater security, requiring landlords by law to offer longer tenancies may restrict the supply of private rented homes, if landlords aren’t able to exit the market when they want to. In Westminster there are high numbers of landlords owning only one or two properties and a survey of 72 landlords found 47% owned one property and another 21%, one or two properties. The survey also found the tenancy term preferred by the majority of landlords was 12 months. Bringing more institutional investment into the private rented sector and subsequently a more mixed landlord structure will help to improve security of tenure.
How local authorities are discharging their homelessness duty by being able to place homeless households in private sector housing The City Council’s first aim is to prevent homelessness by offering a range of options, including discretionary housing payments to secure the customer’s current private rented tenancy. Where prevention fails and a full homeless duty is owed, applicants will be assessed for discharge of duty via one suitable offer of private rented sector housing. This must be affordable so it may be some distance from Westminster depending on the number of bedrooms required. There will be some applicants however for whom the sector will not be suitable, for example those with disabilities requiring adaptations to the home, or those with chaotic mental illness and they will not be offered accommodation in the private rented sector. January 2013 cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Written evidence submitted by Grainger plc Executive Summary 1.1 Privately renting in the UK is set to continue to rise, and we applaud the Committee’s continued interest in the sector. 1.2 The past year has seen a significant increase in interest among institutional investors in the private rented sector (PRS). While a few have formally invested in the market, a significant number have been closely monitoring and actively exploring opportunities in the market. It is important for the future of the UK housing market, in order for it to increase housing supply and improve the quality of the sector (see comments below), that this interest is maintained and converted into real investment in the PRS. Efforts to improve the sector through regulation must not discourage potential institutional investors from entering the market. There are a number of possible routes, which are more market-driven than regulatory, which could address the many of the problems in the sector. We would strongly encourage exploring these in the first instance. 1.3 Makeup of the PRS—It is important to note that the private rented sector is not homogenous and that any examination of the sector recognises this diversity and does not assume that a certain solution that works for the more recognised Assured Shorthold Tenancies (ASTs) will work for the other tenure types in the PRS. Among the different tenure types within the PRS not all are let at a market rent. Regulated Tenancies, for instance, are typically set below market rent. Regulated Tenancies in particular have very different characteristics than the more widely recognised AST. The creation of new Regulated Tenancies ended with the Housing Act 1988, however a significant number still exist today, because under a Regulated Tenancy a tenant has security of tenure (with the right to live in the property until the end of their life). In addition, Regulated Tenancies typically have a sub market rent which is set by a local rent officer, and the tenant has substantially more responsibility in terms of repairs and maintenance than in an AST. These characteristics mean that the landlord has less scope to improve the quality of the property during the tenancy and that the tenant must keep up the property themselves to a greater extent. 1.4 It is important that the Committee recognises the diverse tenures within the PRS throughout this inquiry and when considering its recommendations. 1.5 We fully support the ambition to drive up the quality of rental accommodation, but believe that much of this can be done through market-led initiatives rather than regulation. 1.6 We believe that many of the problems in the PRS are a result of the significant lack of supply and therefore lack of choice for the consumer. 1.7 We believe many of the problems can be eased through increased supply in the PRS and greater institutional investment in the sector. 1.8 Furthermore, we believe that a very real positive impact can be made in the PRS simply through greater awareness of rights, responsibilities and best practices among landlords, agents and tenants. Many difficulties arise in the sector because of lack of understanding among all parties, and an educational marketing campaign would go a great way to improving the sector. 1.9 A number of policies and measures introduced in 2012 are due to take effect in 2013, which are aimed at supporting greater institutional investment in the PRS, including the £200 million equity fund for Build to Rent projects and the £10 billion government guarantees for new built PRS and the Government’s PRS Taskforce. We encourage the Committee to consider this inquiry in the context of these forthcoming changes. 1.10 Any examination of regulation of landlords and agents (managing and lettings agents) must be careful to draw accurate distinctions between both roles. It is important that landlords are not set expectations which more clearly fall to the responsibility of agents, and vice versa.
About Grainger plc 2.1 Established in Newcastle upon Tyne in 1912, Grainger is the UK’s largest listed residential property owner, manager and developer, and has a substantial business operation in Germany. Grainger directly owns over £2 billion of residential property assets and a further c.£900 million residential property assets under management. 2.2 Grainger owns or manages nearly 40,000 properties in the UK and Germany. Grainger’s business, focused solely in the residential property sector, includes trading investment, property management, fund and asset management, development and refurbishment. Grainger is also a leading provider of equity release products through its subsidiary brand, Bridgewater Equity Release. 2.3 Grainger is a co-investor in and the fund and asset manager for one of the UK’s largest, institutionally- backed, private rented sector residential investment funds, G:res, which has approximately £400 million of residential assets in UK. 2.4 Grainger is a constituent of the FTSE 250 index on the London Stock Exchange and the FTSE4Good index. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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2.5 Grainger is an active member of the British Property Federation. We have reviewed the Federation’s written evidence for this inquiry and we commend it to the Committee.
The quality of private rented housing, and steps that can be taken to ensure that all housing in the sector is of an acceptable standard 3.1 We fully support the ambition to drive up the quality of rental accommodation, but believe that much of this can be done through market-led initiatives rather than regulation. 3.2 Poor quality rental accommodation is in many ways made possible by the severe lack of supply, which forces many individuals to live in accommodation that they would otherwise not have chosen but for the lack an any suitable alternatives. By significantly increasing the supply of newly purpose-built rental accommodation (also known as Build-To-Rent or Build-To-Let), demand would eventually erode at the poor quality, bottom end of the market, forcing those landlords to invest in their properties in order to attract tenants. 3.3 Quality in the private rented sector (PRS) can be split into two categories: (a) quality of the building and dwelling; and (b) quality of the management and service received by the tenant(s). 3.4 The quality of the building/dwelling can in many circumstances be improved up to a decent minimum standard through better enforcement of existing regulation, such as building regulations and environmental health regulations. In addition, the introduction of the Green Deal, and the clear “carrot and stick” approach taken by the Coalition Government, could be a strong driver for improving the existing stock of rental accommodation. Grainger is hopeful for the Green Deal’s success and is actively exploring ways of using the Green Deal to make energy efficient improvements to some of our eligible properties. Furthermore, the funding available for hard to treat properties through the Energy Company Obligation (ECO) provides further support for improving poorer quality, and less energy efficient properties. ECO funding could also go a long way to improving the quality of the poorest stock in the rental sector. It is important that both the Green Deal and ECO are promoted sufficiently to the sector so that take up is as great as possible, thereby making the biggest positive impact on quality in the sector. 3.5 The quality of management in the private rented sector is also very important. As the UK’s largest listed landlord, with our own in-house property management team, we pride ourselves in our professionalism and we recognize the importance of our relationship with our tenants and the communities where we operate. This is an integral part of our Corporate Responsibility programme. As part of our general course of business we regularly survey our tenants to monitor satisfaction levels, we have an established formal complaints process, we follow best practices and we have a very active professional development programme, whereby employees get training and are able to pursue a number of different qualifications in residential property. 3.6 Investing in developing our people is a key part of what Grainger does, because our business relies on having a skilled, qualified and capable team. Opportunities to develop professionally at Grainger are comprehensive, including internal and external training on a range of property-related and more general business-related topics such as influencing and assertiveness, negotiation skills, dampness in buildings and Japanese knotweed; on-the-job experiences via involvement in cross divisional projects; and participation in seminars and other educational events. 3.7 Grainger also provides staff with further education assistance and support to achieve relevant professional qualifications, with the majority receiving 100% sponsorship from Grainger. Grainger sponsors a wide range of courses, including accounting (AAT, CIMA), degrees, masters and MBAs. One of the most popular is the Royal Institution of Chartered Surveyors (RICS) Assessment of Professional Competence (APC), which is the main route for property professionals to become Chartered Surveyors. Grainger employees have achieved a 100% first time pass rate for this qualification. 3.8 Management standards in the PRS are highly variable. There are many small landlords that provide very high quality management, but there are still a significant number of sub-standard operators who provide a poor quality service. 3.9 One way the overall level of management standards can be improved in the PRS is through greater institutional investment in the sector. Management standards for institutionally-owned accommodation will be required to meet certain standards by the institution and there will be very little tolerance for sub-standard management by institutions for reputational reasons. 3.10 It is also important that professional qualifications and professional development, including training, is encouraged throughout the sector. Professional development in the residential sector has improved greatly in the last decade, but more should be encouraged and it is likely that greater interest in the sector by institutional investors, which in turn will create greater job opportunities, will drive it even further. An industry-led, government-backed kitemark system could support this drive for professionalism and minimum standards in residential property management. 3.11 Deposit protection—Take up of tenancy deposit protection schemes among landlords and agents is one area which could be improved. Despite efforts to make tenancy deposit protection a requirement in the private rented sector, there are still many cases where deposits are not protected in an approved scheme. These cases inevitably give the sector a poor reputation. 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deposit protection schemes, and that tenants are clearly made aware of their right to having their deposit protected, but also under what conditions so that they do not expect the full deposit returned to them if the accommodation is not returned in an acceptable state.
Levels of rent within the private rented sector—including the possibility of rent control and the interaction between housing benefit and rents 4.1 We believe that market rented housing provides an acceptable alternative to individuals that are unable to afford home ownership. Although there are a growing number of households being forced into private renting whereas previously they would have purchased a home, PRS is also growing as tenure of choice among individuals that prefer the flexibility of privately renting and simply don’t want to own and take on the associated commitments and responsibilities. 4.2 Recent figures from the Valuation Office Agency (VOA) show that over 60% of local authorities in England have seen market rent increases below CPI, demonstrating that the perception of rapidly rising rents is not occurring in every location across England. 4.3 In those specific locations where rent levels are increasing faster than inflation, we believe local authorities should address this through a more favourable housing supply policy for rental accommodation as well as homes for sale. Encouraging increased supply would be much more preferable for various reasons, both economic and social. 4.4 Rental growth is a key consideration for potential investors in the sector, and regulating market rents in any way would significantly discourage potential investors in the sector, at a time when the sector is in need of greater investment and increased supply.
Regulation of landlords, and steps that can be taken to deal with rogue landlords 5.1 It is as important to tackle rogue landlords as it is to ensure that there continues to be a business-friendly regulatory environment, which will continue to support and encourage institutional investment into the private rented sector. 5.2 The financial proposition for investment in the PRS in the UK is fragile and quite new for many institutions. It is not easy to structure a Build to Rent investment opportunity that is commercially viable and further regulation will make that difficulty even greater. It would be detrimental for future growth and investment in the PRS at the present time—when we are at the cusp of significant institutional investment in the PRS—to introduce greater regulatory burdens.
Regulation of letting agents, including agents’ fees and charges 6.1 We support the amendments to the Enterprise and Regulatory Reform Bill tabled by Baroness Hayter, which would make it compulsory for letting agents to offer third-party redress, and bring them within scope of the 1979 Estate Agents Act. The campaign has been led by RICS and WHICH. 6.2 We strongly believe that agents should be part of either ARLA or another similar body with powers to drive up standards and encourage best practice.
The regulation of housing in multiple occupation (HMOs), including the operation of discretionary licensing schemes imposed by a local authority for a category of HMO in its area 7.1
Tenancy agreements and length and security of tenure 8.1 The Montague Review recommended that local authorities support Build-To-Rent projects by reducing the level of Section 106 obligations on such schemes, because of their more difficult economics. In return for a reduced Section 106, Montague suggested that local authorities demand that the developer or institution building the rental accommodation makes a commitment that the properties will be rented (and not sold) for a 10–20 year period. 8.2 This covenant, commitment or guarantee will mean that these new rental homes will not compete with the supply of for-sale homes, and will be purely additional to the UK’s housing supply. 8.3 As so few Build To Rent projects go ahead today because of viability issues, a reduced Section 106 obligation will not therefore decrease the total number of affordable homes delivered through Section 106 as they would not have been delivered anyway if the Build To Rent project did not go ahead. 8.4 The power for local authorities to consider lower Section 106 obligations because of viability issues is already in place and we would encourage greater use of this power among local authorities to encourage Build To Rent cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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8.5 It also means that the landlord will be able to more easily offer longer term tenancies and stability in tenure since the properties will only be available for renting for that period and landlords will want to reduce void periods as much as possible. 8.6 It is important however to provide the necessary flexibility in tenancy agreements to allow the market to operate effectively. Any future longer-term agreements will need to protect the landlords’ right to gain possession in the case of arrears, anti-social behaviour and the sale of the property. Failure to protect these rights will have a significant detrimental impact on investment in the sector. 8.7 In addition, one of the biggest barriers to longer term tenancies is the significant negative impact they could have on property valuations. Any future long-term tenancy agreements will need to be drafted in such a way as to avoid this, otherwise take-up among landlords will be very minimal. 8.8 Growth in the private rented sector is not just by force, there is also a growing cultural acceptance and preference for privately renting in the UK. To many individuals, one of the attractions of privately renting is its flexibility. In an economy with a growing fluidity in the labour market and changing lifestyle behaviours, a growing number of individuals prefer not to get tied into long term contracts.
How local authorities are discharging their homelessness duty by being able to place homeless households in private sector housing 9.1
Conclusion 10.1 The private rented sector has seen more growth than any other sector in recent years. It has been capable of absorbing this large number of new households because of its flexibility and its increasing interest among investors, especially institutions. 10.2 It is critically important that the sector continues to be able to grow, as well as improve (both in the quality of accommodation and management). 10.3 Any proposals to improve the sector must be done so carefully to ensure that investment into the sector will continue. 10.4 There are a large number of investors and operators in the sector that are very supportive of improving quality in the sector, including Grainger, and it is important that these organisations are involved and take a leading role in discussions around ways to improve the private rented sector. 10.5 Grainger is very willing to take a leading role in these discussions with the Government, Parliamentarians, third sector organisations and others in order to lend our perspective and private sector expertise. January 2013
Written evidence submitted by the National Landlords Association Background 1. The National Landlords Association (NLA) exists to protect and promote the interests of private residential landlords. 2. With more than 20,000 individual landlords from around the United Kingdom and over 100 local authority associates, it provides a comprehensive range of benefits and services to its members and strives to raise standards in the private-rented sector. 3. The NLA seeks a fair legislative and regulatory environment for the private-rented sector (PRS) while aiming to ensure that landlords are aware of their statutory rights and responsibilities.
NLA Evidence Summary 4. The National Landlords Association welcomes the Committee’s inquiry, which we hope will encourage vigorous debate and lead to a wider understanding of how the sector works. A thriving private rented sector is essential in the current housing market, and we hope that the Committee’s recommendations will focus on how best to ensure a fair balance for between landlords, agents and tenants. 5. Our evidence concentrates on the following areas: (i) Regulation of activity, individuals and organisations within the PRS. (ii) Tenure, characteristics and stability. (iii) Access to accommodation. (iv) Quality of stock and management & the discharge of homelessness duties into the PRS. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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6. The NLA contends that: — The PRS is subject to extensive regulation, although this is not enforced effectively. — Licensing of HMOs and discretionary licensing cannot be judged or expansion justified without proper evaluation of what has already taken place. — A lack of supply of housing relative to demand across all tenures is at the root of the high cost of housing — Intervention in rent levels will damage investor and financier confidence to such an extent that it would affect supply. — Landlords would not be able to absorb the financial impact of rent control. — The existing tenure legislation provides much greater flexibility and variation than is commonly realised. Much more can be done to provide suitable tenancies without the need for statutory changes. — Engagement with landlords and tenants through initiatives such as landlord accreditation will help improve standards and confidence in the PRS.
(i) Regulation of activity, individuals and organisations within the PRS General 7. It is frequently stated that the letting of private residential property is unregulated. This assertion appears to disregard the existing legislation, regulations and guidance which empower a range of enforcement agencies to intervene in the sector. 8. While much of the restrictive tenancy regulation of the 1960s and 70s was indeed liberalised by the Housing Acts 1988 and 1996, these Acts did not provide property investors and private landlords licence to ignore the quality of their stock, the comfort and safety of their tenants or their financial responsibilities. 9. Failure to comply with regulation in the PRS often leads to criminal sanctions. For example, unlike any other area of private business in the UK, the ability of private landlords to end their contractual relationship with a client is restricted by the necessity of involving the courts in the possession process.
HHSRS 10. The quality of all privately rented-property is assessed and evaluated against the Housing Health and Safety Rating System (HHSRS) which is designed specifically to allow local authorities to protect against harmful deficiencies in residential dwellings. HHSRS is underpinned by a simple principle: “Any residential premises should provide a safe and healthy environment for any potential occupier or visitor”.134 11. The system identifies 29 potential hazards, classified as: — Dampness, excess cold or heat. — Pollutants, including asbestos, radon, lead. — Environment, including space, security, lighting and noise. — Hygiene, ie sanitation and water. — Accidents, the likelihood of shocks, fires, falls, burns etc. — Collisions, explosions or structural failure. 12. Failure to maintain the standards required by HHSRS, or respond satisfactorily to an enforcement notice can result in significant sanctions, including prescriptive improvement notices and immediate repair works, emergency prohibition notices and ultimately prosecution. 13. However, we question whether enforcement is being undertaken at an appropriate level to ensure that standards are maintained across the board.
Licensing 14. Larger properties, which house a greater number of residents and present a risk which is generally higher than an average residence, are further regulated by mandatory HMO licensing introduced by the Housing Act 2004. 15. Every privately let property comprising of three or more floors and housing five or more individuals is required to hold a valid license granted by the relevant local authority. Landlords of these properties are required to pass a “fit and proper person” test and the building is inspected for safety and suitability. 134 HHSRS Operating Guidance, ODPM, February 2006 cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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16. The Housing Act 2004 sets out in detail the tests of fitness, suitability and management which should be applied when deciding whether a property may be let by an individual landlord, as well as conferring the authority to impose conditions and prescribe certain standards which must be satisfied in order to obtain a license. 17. While most landlords of large HMOs accept and understand the need for additional measures in relation to fire safety and amenity in these properties, there is a growing awareness that there has been very little review or assessment of the effectiveness of mandatory licensing since its implementation. 18. As one of the most visible and distinct elements of regulation present in the sector, a comprehensive review of licensing would be greatly welcomed by those investing in shared accommodation and could assist in guiding policy making in the future. 19. The 2004 Act also provides local authorities with discretionary powers to license particular types of property and/or specific “selective” areas within their jurisdiction beyond large, mandatory licensable HMOs. 20. Such discretionary schemes take the form of Additional Licensing, which defines a type of property to be subject to license conditions in addition to those defined in the Act, while “Selective Licensing” identifies a specific geographical area within which all privately let property must be licensed. 21. The NLA is aware of at least 34 local authorities currently managing discretionary landlord licensing schemes and a further 17 formally considering doing so in the near future. 22. In order to justify Additional Licensing, the relevant local authority must be able to demonstrate that a significant amount of the shared housing in a given area is poorly managed and likely to give rise to problems for the occupants or wider community. Selective Licensing may only be implemented where an area can be identified as subject to low housing demand, or: (a) that the area is experiencing a significant and persistent problem caused by anti-social behaviour; (b) that some or all of the private sector landlords who have let premises in the area (whether under leases or licences) are failing to take action to combat the problem that it would be appropriate for them to take; and (c) that making a designation will, when combined with other measures taken in the area by the local housing authority, or by other persons together with the local housing authority, lead to a reduction in, or the elimination of, the problem.135 23. We acknowledge that discretionary schemes can be useful in tackling specific localised problems in particular areas and communities. However, there is minimal evidence to demonstrate that the schemes currently in place are achieving their objectives or doing so more effectively than would have been possible by more traditional monitoring and enforcement.
Landlord Accreditation 24. The NLA strongly advocates landlord accreditation as an alternative to licensing. The Association attempts wherever possible to work with local authorities to address local issues by using the council’s existing powers and encouraging greater engagement with the landlord community. 25. Landlord accreditation is by no means a substitute for proper enforcement against those who flaunt the rules, but it can make the job of enforcement bodies much simpler. Developing a landlord’s property management skills and knowledge will enable them to improve their approach to their portfolio. This raises standards across the entire sector, helps identify compliant landlords and empowers tenants to identify good practice. It should also enable local authorities to target their enforcement resources more effectively. 26. The NLA provides a landlord accreditation service, which includes a comprehensive online library of information and guidance, impartial complaints process and searchable database of accredited landlords to local authorities at no charge. We are currently working with 32 local authorities as exclusive accreditation partners, while all bar three authorities in England and Wales recognise the scheme.
(ii) Tenure characteristics and stability 27. In order to function adequately, the PRS requires a clear, transparent and equitable balance between the needs of the property owner and those occupying the property. However, we do not need to look very far into the history of housing legislation to see the impact of getting the balance wrong. 28. The first “Increase in Rent and Mortgage Acts” were a necessary reaction to an almost complete lack of tenant rights and the abuse of position by land owners. However, the sequence of legislation which culminated in the Rent Acts 1965 and 1977 focussed too heavily on the desire for security and price intervention without sufficient consideration of the needs of the supply side. 135 Housing Act 2004, s80(6) cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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29. The Housing Act 1988 introduced the Assured and Assured Shorthold Tenancy (AST), the latter of which became the default private-rented tenancy following the Housing Act 1996. The principle underlying the 1988 Act was set out in the 1987 White Paper which preceded it, which clearly outlined the balance which had to be achieved for the new tenure legislation to be effective: “It is right that landlords should be able to secure a reasonable return on their investment when they let property. It is equally important that tenants should enjoy reasonable security in their own homes.” 30. Given the scale of the recovery of the sector since the AST became the default tenancy, from a low point of only 9% of housing stock to today’s figure of 17.5%,136 we believe that overall a working balance has demonstrably been achieved, and this has led to viable investment and the provision of homes. 31. The key to this recovery was the ability of a landlord to be confident in a return on their investment, which had been limited prior to 1988 by the combination of rent control and secure tenure. 32. The 1987 white paper described the situation as: “Rent controls have prevented property owners from getting an adequate return on their investment. People who might have been prepared to grant a temporary letting have also been deterred by laws on security of tenure which make it impossible to regain possession of their property when necessary.”137 The relaxation of tenure legislation made the investment in residential property more appealing to a small investor. Crucially, it also resulted in a significant reduction in the perceived risk of financial institutions which were reluctant to lend on rental property without the reasonable expectation of vacant possession should repossession become necessary. But the mortgage industry only revised its approach to private rented property after the Housing Act 1996 with the development of the modern buy-to-let mortgage which plays such an important part in financing private housing today. 33. It remains vitally important that landlords, and lenders, can be assured of vacant possession should things go wrong because of the way in which residential property is valued. Unlike some forms of non-residential property, or even residential homes in other countries, a tenanted property is likely to achieve a considerably lower sale price than one which can be marketed vacant. This is mostly due to the fact that the majority of demand for residential property continues to come from owner-occupiers rather than investors, thereby reducing the potential market and suppressing prices. 34. A property which cannot be sold for its “full” value represents a major investment risk by many landlords and most potential mortgage lenders. 35. Currently, a tenant’s security of tenure is balanced against the landlord’s need to mitigate these risks. Their security is assured throughout their fixed term tenancy, which can be any period up to seven years (leases longer than this carry different rights and responsibilities, and are generally considered outside the PRS). The only reason a tenancy may be brought to an end during the fixed term is breach of tenancy, judged against 17 grounds for possession outlined in the Housing Act. Only a Judge may order possession or eviction. 36. Outside a fixed term tenancy, both parties may choose to end the tenancy at any time by serving the prescribed notice period. Tenants are expected to provide one month’s notice, landlords two months. 37. It is this flexibility makes the PRS attractive to those who want a relatively flexible housing arrangement without the need to make a long-term commitment. It also reduces the risks to lenders, giving them the confidence to offering the investment products which have enabled the sector to respond to the changing circumstances of recent years. 38. We are aware of calls for changes to this tenure framework to create more long-term tenancies to give a greater sense of security and stability as more people and families expect to remain in the sector for longer. The existing tenancy structure is more flexible than many realise, and the NLA believes that this can be achieved without new legislation. However, we do recognise that there is a lack of understanding in all quarters about what can be achieved with the Assured and Assured Shorthold Tenancy. 39. The majority of tenancies established in the UK are of relatively short duration, ie six or twelve month initial fixed-terms. However, NLA research indicates that once established they last much longer. A recent survey of private tenants found that while 74.7% of tenants initially signed either a six or twelve month agreement, 80.1% had been in their current home for more than 13 months and 42.4% had not moved in four years or more. 138 40. Approximately 45% of respondents would have preferred a longer initial tenancy, but only 24.5% had actually made such a request. Of those who did negotiate, 78.8% were granted a longer fixed term. 41. We are concerned that letting agents very rarely discuss the possibility of longer fixed-terms with their landlord clients or applicants. 136 English Housing Survey, Headline Report 2010–11, Department for Communities and Local Government, February 2012 137 Housing: The Government’s Proposals, CM214, HMSO, September 1987 138 NLA Tenant Index, wave 2, October 2012 cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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42. There is a need to educate the market to create a better understanding of the potential and benefits of tailoring tenancies to meet the needs of landlords and tenants. This is a challenge for industry organisations such as the NLA. 43. Many buy-to-let lenders prohibit the establishment of tenancies longer than 12 months in their lending conditions. This has the obvious effect of restricting the number of landlords who are able to offer longer tenancies.
(iii) Access to accommodation 44. The principal barriers to accessing decent accommodation in the private sector, whether the household wishes to purchase their own property or rent from a private landlord are financial. In the rented sector, this generally means the ability to raise a security deposit and to satisfy a landlord or agent that household income is sufficient to meet the rent. 45. Rent levels in the PRS are dictated by market forces, which can vary in local and niche markets. Calls for intervention to control housing costs are understandable, given the exceptional demand experienced by some parts of the country, particularly London and South-East England . However, every housing market experiences demand differently, depending on its needs, and that the cost issues present in a small number of expensive areas are not replicated elsewhere. 46. Most private residential landlords set rents based on their fixed and variable costs and an expectation of a return. There may be some scope for negotiation with potential tenants. This informal formula results in a net yield roughly equivalent to an alternative financial investment, although it carries considerable extra risk and workload. Very few landlords make sufficient net profit from their portfolio to absorb the losses which they would face if rents were restricted or to cope with the risk of being unable to regain vacant possession. 47. Any form of price control is a potential short-term solution to the symptoms of the housing crisis. They cannot address the root cause, the disparity between the demand for and supply of housing in general. Nor do they take into account the potentially damaging consequences for the supply of rented housing. The culture amongst landlords and investors is such that any intervention will be seen as the first step towards full re- regulation. This would derail efforts to encourage new investment in rental housing, particularly from the institutions, and could prompt a landlord exodus.
(v) Quality of stock and management & the discharge of homelessness duties into the PRS 48. As explained in section (i), the quality and safety of property is regulated by legislation which provides significant sanctions for failing to comply. However, local authorities in particular are frequently unable or unwilling to use these powers to their full potential. This is often due to funding or capacity issues which are becoming more prevalent as central funding is reduced. 49. The NLA supports industry-led landlord accreditation as the most effective means of improving management standards. The Mayor of London’s proposal to link accreditation to a recognisable brand or “kite- mark” which tenants can recognise and look for when searching for a new home, could provide the impetus towards more landlords coming forward for accreditation. 50. The discharge of authorities’ homelessness duties into the PRS is a positive step. It shows that the Government sees the PRS as part of the housing solution rather than part of the problem and that the PRS is no longer a short-term stop-gap but a source of long-term housing. It represents progress towards improving the perception and reputation of the sector. January 2013
Supplementary written evidence submitted by the National Landlords Association 1. The National Landlords Association (NLA) exists to protect and promote the interests of private residential landlords. 2. With more than 20,000 individual landlords from around the United Kingdom and over 100 local authority associates, we provide a comprehensive range of benefits and services to our members and strive to raise standards in the private rented sector. 3. The NLA seeks a fair legislative and regulatory environment for the private rented sector while aiming to ensure that landlords are aware of their statutory rights and responsibilities. 4. The National Landlords Association (NLA) would like to thank the Select Committee for providing the opportunity to provide the additional evidence on the two issues arising from our oral evidence. We would also like to offer some further evidence on two other points discussed during the evidence session to the Committee, namely the appetite for longer tenancies and the proportion of landlords who might be considered as “rogue”. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Work with CRISIS PRS Access Development Programme 5. In oral evidence (Q388), Richard Lambert, NLA Chief Executive Officer, referred to work which the NLA had undertaken with Crisis on PRS access schemes. The Committee subsequently asked for further details on this. 6. Private renting access schemes were developed to help those tenants who find it particularly difficult to access the private rented sector to find housing. Rather than offering financial incentives, they focus on the practical steps that are required for the more challenging groups to get accommodation and the support that they require, by managing the risks to landlords and giving tenants the skills to manage their own independent tenancy. 7. The major obstacle to developing PRS Access Schemes is the difficulty obtaining start-up funding. DCLG is funding a three-year (2011–14) Private Rented Sector Access Development Programme through Crisis in an effort to tackle this. Under the programme, schemes apply for funding for their first-year. 25% of the total grant is held back until the scheme demonstrates that it has met its agreed targets in terms of the number of tenancies created and the number which have sustained beyond six months. The successful schemes can be offered a second year’s funding, set at a maximum of 75% of the initial grant to encourage them to seek matched funding elsewhere. 8. The NLA sits on the Programme’s selection panel, which selects the schemes to receive funding, alongside Crisis, DCLG, Homeless Link and the Ministry of Justice. There is a wider advisory panel which includes representation from the Greater London Authority and the National Treatment Agency. 9. The schemes have been successful in working with some of the more challenging people to house, for example, seeing great results in supporting rough sleepers into private rented accommodation and in housing former offenders. Schemes have also seen some results in housing under-35s in shared accommodation, although there is recognition that this takes considerably more time and resources both to set up and sustain. The following are examples from the first year’s funding round: — NOMAD in central Sheffield takes a holistic approach to housing young people by constantly reviewing their approach and providing more for clients such as an employment mentor, financial mentor and peer mentoring. — Derventio in Derby city includes PRS tenancies as one step in a full suite of housing provision and has an impressive commercial focus, using profitable activities to cross-subsidise its housing of people with assisted incomes. — Brighton Housing Trust has exceeds its first year targets in its Eastbourne prevention scheme despite working in a very competitive housing market. — Reigate and Redhill YMCA is finding tenancies in the suburbs of London in a highly effective partnership model. — Whitechapel Centre in Liverpool, which has an exceptional record for housing entrenched rough sleepers, created 43 tenancies and sustained 23 of these beyond six months (compared with a target of 30 and 16 respectively). 10. By May 2013, 153 schemes had received support from the Programme in all regions of England. 94 schemes are currently receiving funding. A total of 5,073 tenancies have been created so far, with an 89% sustainment level attained (tenancies sustained for at least six months, or which ended for positive reasons, eg a tenant finding a job in another area and the move being successfully managed). The Programme’s first year report noted that of the tenancies which were not sustained beyond six months, the majority ended for positive reasons. The main reasons for tenancies failing were abandonment and the tenant being taken into custody. 11. From the experience of the schemes funded during the first year of the Programme, Crisis identified several factors which were common to the most successful schemes. These are: — Knowing the local PRS market—researching the local housing market and the competition, preparing a viable operational model and making a compelling business case to local landlords. — Tenant training—pre-tenancy training and post tenancy support and mediation where required, tapering off as the tenant-landlord relationship becomes established. — Recruitment—having the right scheme worker is crucial, as the success and reputation of the schemes depends on the relationships established and maintained. — Reputation—a strong reputation with local landlords may have started in formal networks such as landlord forums, but landlords are increasingly recruited through word of mouth. — Flexibility—constantly applying others’ learning and experience to local markets, adapting their services and anticipating changes to the housing market over the coming years. — Clarity—being honest with both clients and landlords about what they offer so that expectations are managed and neither party is disappointed. — Sharing experience and learning from others—enthusiastically sharing learning with other schemes and seeking support from Crisis when required. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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— Staffing—These success factors are achieved through having effective staff—the core element the ADP pays for. The strongest staff are able to combine knowledge, experience and understanding of both landlords and potential tenants, to build the partnerships and have a focus on delivery whilst remaining flexible and able to adapt to changing circumstances. 12. Equally, schemes which struggled in their first year also had clear common elements, many of which are an inversion of the success factors: — A defensive and inward-looking culture with a reluctance to work with others, either local partners or Crisis Development Officers to improve services. — Reluctance to share and learn from others, failing to see connections between their situation and others’ and repeating common mistakes as a result. — Taking an inflexible approach, resulting in an inability to take advantage of new opportunities in a local market, such as a new referral route or a potential partner agency. — Lack of commercial awareness, making it difficult for schemes to give landlords confidence in their services and to attract additional, transitional funding streams. — Reliance on financial incentives, setting up unsustainable relationships with landlords, which will become less and less affordable for tenants as welfare cuts impact and wages stagnate. — Working with younger tenants, where difficulty procuring appropriate shared properties, and affordability and lack of renting experience intensify the risk of tenancy failure. Crisis has already worked with schemes to produce a toolkit on housing young people in the PRS and develop detailed guidance on the shared accommodation rate, but more work is needed to create and support models of effective working with young people in varying housing markets. — London: The London market presents a specific combination of problems resulting from high demand. 13. The report on the first year of the Programme is available on the Crisis website (http://www.crisis.org.uk/ data/files/Private_Rented_Sector/PRS_Year1Report.pdf). The second annual report on the Programme will be published in July this year.
Redress within Accreditation Schemes 14. The Committee also asked if the NLA was aware of any accreditation schemes by which tenants can access redress if the landlord (rather than the letting agent) did not meet their obligations in the tenancy agreement, and whether tenants should be given access to redress in such cases rather than having to go to the courts. 15. The National Landlords Association’s accreditation scheme allows tenants to seek redress if the landlord does not meet their obligations in the tenancy agreement. If the NLA receives a complaint from a tenant, we will investigate, and if we find that the landlord has fallen short of the standards expected in our Code of Practice, will recommend the action that they should take to rectify the situation. We may also recommend appropriate further professional development work for the landlord to ensure that the problem does not recur. If the landlord does not respond to our complaint investigation, we can pass the case to an independent adjudicator. All NLA accredited landlords are aware of this, as it is detailed in the scheme rules and they agree in applying for NLA accreditation to adhere to the recommendations of the adjudication process. Similarly, any tenant wishing to take their case to the adjudicator must also agree that the adjudicator’s decision would be binding. 16. We are conscious that the NLA is not a regulatory body and membership is voluntary, so we have the power to persuade, but not to compel members to follow our recommendations. Our aim is to secure a fair and reasonable resolution to a dispute which is acceptable to both sides, and to work with the landlord to ensure that they have the skills and knowledge to prevent a recurrence of the issue. Nevertheless, if the landlord refused to accept or act on the decision of the complaint investigation, they would face removal from the accreditation scheme and potentially expulsion from membership of the NLA. 17. The National Landlords Association code of practice is attached as an Appendix. 18. We are aware that many council accreditation schemes offer redress for tenants. The NLA believes that a redress mechanism is essential for an accreditation scheme to be credible.
Other Issues—Tenant Attitudes Towards Longer Tenancies 19. Richard Lambert also referred to the findings of the NLA’s tenant survey (Q361). It may be useful for the Committee to have further details. 20. The survey was conducted online in October 2012, using an independently sourced database of over 20,000 private tenants, acquired through a business information agency. The findings are based on the answers received from 589 respondents, and largely correlate with a previous survey undertaken in April 2012, which received over 2,000 responses from a database (again independently sourced) of 41,000 private tenants. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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21. The October survey asked a series of questions exploring attitudes towards tenancies: How long was your initial tenancy: — Six months—35.4%. — 12 months—39.3%. — No fixed duration—18.5%. — 24 months—4.5%. Were you happy with this agreement length? — Yes—80%. — No—12%. — Unsure—7%. Would you have preferred a longer tenancy? — Yes—39.4%. — No—45.4%. — Unsure—15.3%. Have you ever asked a landlord for a longer tenancy? — Yes, and she/he agreed—19.1%. — Yes, and she/he refused—5.3%. — No, I’ve always been happy with the tenancy offered—51.0%. — No, I’ve never felt comfortable negotiating—14.4%. — Other—10.3%. How long have you lived in your current home? — Less than six months—10.9%. — Seven to 12 months—9.3%. — 13 months—two years—14.1%. — Two to four years—23.7%. — More than four years—41.9%. Has your rent gone up in the last 12 months? — Yes—25%. — No—75%. 22. The survey also explored wider attitudes towards renting: — 70% of respondents rent because they cannot afford to buy. However, 10% say that they do so because of the flexibility or absence of commitment, and 10% because they believe that they can rent a better property than they could afford to buy. — When asked about their long-term housing plans, 37% expected to remain in the private rented sector. 26% would look to buy a home and 16% hoped to obtain council or social housing. — 89% see the property they rent as “their home”. — 73% think they are secure in their home, but 50% worry about their landlord ending their tenancy and 48% do not feel they have control of their home. — 65% say they are free to personalise their home. — 57% enjoy the flexibility of renting. — 63% do not see renting as a barrier to family life. 23. We believe that the survey findings indicate that for the majority of those living in the sector, private renting is much more stable and less uncertain than is often portrayed. They also suggests that the demand for longer tenancy terms is less clear-cut than some would argue. We believe that it strengthens the case for retaining the flexibility within the current tenure system to enable landlords respond to the changing needs of renters.
Rogue Landlords 24. Jacky Peacock of Brent Private Tenant’s Rights Group said in her oral evidence (Q55) that, based on her personal experience, she estimated that the percentage of rogue landlords was as high as 50%. 25. We asked in the October 2012 tenants’ survey: “Have you ever rented from someone you considered to be a rogue landlord—ie, who has appeared to act in a criminal manner?” 12.9% of respondents considered that they had. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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26. The survey form allowed those who responded that they had dealt with a rogue landlord to expand on the problems and the action they took. While we were told of some truly shocking behaviour, it appears that some of what was perceived as “rogue” behaviour was essentially poor-quality management. 27. The NLA would be happy to share further details of our surveys of landlords and tenants if the Committee would find them helpful. May 2013
Written evidence submitted by the London Borough of Newham Executive Summary The London Borough of Newham welcomes the opportunity to share our experiences and concerns over the Private Rented Sector (PRS) with the Committee. The PRS is on an upward trajectory across the whole of London. Nowhere is this more apparent than in the London Borough of Newham where more than one in three properties are privately rented. The 2011 Census revealed that 34% of households in Newham are in the PRS compared to 19.9% a decade earlier. While the majority of landlords in Newham operate professionally and rented accommodation can support labour market flexibility and be a positive choice for many households, there are clearly many emerging challenges and we believe these require a robust response from both local authorities and Government.
Quality The huge expansion of the private rented sector in Newham has led to a situation where poor management practices are growing increasingly more common. Newham has found that voluntary accreditation for landlords, which has been running for more than 10 years, has yet to deliver tangible improvement; despite financial and other incentives fewer than one in 10 landlords are involved. Tenants as consumers do not look for accreditation and too few landlords sign up to make a difference to overall standards. Yet there is a clear need to improve private rented housing conditions and tenancy management, and specifically to address and reduce planning contraventions, environmental crime and increasing levels of anti-social behaviour associated with those rented properties that fail to meet satisfactory levels of tenancy and property management. That is why this month we were the first local authority in England to introduce compulsory licensing for all landlords in the PRS following a successful two-year pilot. Once a property has been licensed the licence holder is bound by a number of conditions around levels of permitted occupation, standards of tenancy management (in particular managing anti-social behaviour, rubbish in front gardens and noise nuisance) and standards of property management. There are numerous other advantages not least access to one or more named persons responsible for the property. Councils already have the ability to designate areas for licensing if they so wish, but the legal framework is relatively complicated and together with required conditions can act as a barrier.
Affordability The introduction of caps to the Local Housing Allowance (LHA) rates will make the PRS across London even less accessible for low income families. In Newham 1,500 households have already lost some of their housing benefit because of the change from LHA at 50th to the 30th percentile of the market. We estimate that around a further 1,000 households in the PRS will be affected by the overall benefits cap for workless households. The cap will impact most severely on those in temporary accommodation for whom the cost of their rent alone will exceed the benefit cap. In the context of the shortage of supply it is likely that many families will remain in temporary accommodation that is simply unaffordable, representing a significant financial risk to the council. We are further concerned that, following high profile coverage of Newham’s and other London boroughs’ decision to place homeless households out of borough, the Government has sought to restrict local authorities’ ability to place families in stable accommodation outside of their area through statutory guidance. We are committed to creating a stable community and housing people outside of the borough is always a last resort. But the shortage of affordable properties means sadly we have no alternative. It is unhelpful for the Government to criticise this approach when it is the direct result of Government policy.
Recommendations — Private renting should be based on a set of clear and transparent rights and responsibilities between all parties mostly enforceable by the local authority. — Current legislation should be simplified and strengthened to enable easier and more effective enforcement. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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— Landlords should be incentivised to provide stability through longer term tenancies. — Local authorities should be more involved in the PRS offer, including management of properties. — Lettings agents should be bound by the same kind of regulation as estate agents. — There should be a higher overall benefit cap and housing benefit cap for London to take into account the higher costs of living in the capital. — Where out-of-work benefit claimants are doing all that they can to find work, and are recognised as such by benefit requirements, they should be exempt from the cap. — All households placed in temporary accommodation should continue to be exempted from the cap. — Allow people employed on zero hour, short term or temporary contracts to avail of the grace period before the benefit cap is implemented.
1. Introduction 1.1 The London Borough of Newham has a strong vision for housing based on building the resilience of residents, the community and the economy. Stable and secure housing is key to ensuring residents are able to live fulfilled lives, to work and be a part of their community. 1.2 The Private Rented Sector (PRS) is on an upward trajectory across the whole of London. Nowhere is this more apparent than in Newham where more than one in three properties are privately rented. There is no doubt over the importance of the sector—not only because of its size, but because it has the potential to provide people with flexible, affordable and good quality homes at a time when home ownership is increasingly out of reach for many. 1.3 Newham now has an estimated 10,000 landlords. Many of them run good businesses and take their responsibilities to tenants and the community seriously. As a local authority we want to do everything we can to help and support decent landlords as they play a vital role in providing good quality accommodation for our residents. However, we have serious concerns about the management standards and quality of accommodation being offered by a large number of landlords in the borough. 1.4 In Newham, we estimate that around £100 million public subsidy is spent annually via housing benefit for residents living in the PRS. We are determined to drive up the offer on quality and standards to ensure public money is well spent. However, we also recognise that rents are much higher in London than the rest of the country. Two thirds of residents claiming housing benefit in Newham are working, but are simply unable to earn enough to cover their rent. The average rent for a one-bed property in Newham is £875 a month,139 compared to the average gross monthly salary of around £1,599.140
2. Quality and Standards 2.1 The London Borough of Newham wants to ensure that all private rented properties in the borough offer residents a choice of safe, quality and well managed accommodation. We realise the majority of landlords operate professionally and that rented accommodation is a positive choice for many households, but the Council is concerned about increasing levels of anti-social behaviour associated with those rented properties that fail to meet satisfactory levels of tenancy and property management. The benefit of having a mandatory scheme is it will ensure poor landlords have nowhere to hide so we can target our enforcement action on them. We will also be creating a level playing field for good landlords, where they will no longer be undercut by landlords who do not manage their properties correctly. 2.2 Some of the practices we are seeing in the private rented sector are completely unacceptable—people living in illegally constructed sheds and garages; overcrowding; rubbish overflowing in front gardens and properties overrun with vermin. This behaviour has a real human cost with vulnerable people who have little buying power forced to live in squalid conditions that do not befit one of the wealthiest cities in the world. 2.3 In Newham we have seen an explosion of construction and conversion of sheds and garages into residential lettings with no planning approval and with little thought for the safety of the tenants. Our environmental health officers have found a house where two men were living in a commercial freezer in the basement, tenants sleeping in an operational kitchen with mattresses pushed up against a decaying cooker, and shanty-town constructions of bedsits nestled in warrens at the back of high street shops. 2.4 Newham has found that a voluntary accreditation scheme for landlords has had little tangible impact on the sector. Tenants as consumers do not look for accreditation, too few landlords sign up and there are too few obligations which are not policed or enforceable. In Newham less than 10% of landlords were accredited under the voluntary scheme. This is despite the fact that the Council has run a Landlords Forum for 10 years to help their business, and have provided free training and other financial incentives for landlords who sign up to the scheme. 139 Valuation Office Agency (2012) Private Rental Market Statistics 140 ONS (2012) Annual Survey of Hours and Earnings (provisional) cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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2.5 That is why we have introduced compulsory licensing for all landlords in the PRS from January 2013. Private landlords pay £150 for a five-year licence if they register before 31 January, 2013. Otherwise the full fee is £500. By the end of 2012 more than 14,000 licensing applications had been received by Newham. Landlords who fail to licence will face fines of up to £20,000. The Council and tenants are able to seek repayment of up to 12 months benefits/rents paid during the period a property has not been licensed; landlords who are found not to be fit and proper or continuously fail to licence a property can have control of their property taken away through a “Management Order”. 2.6 Once a property has been licensed the licence holder is bound by a number of conditions around levels of permitted occupation, standards of tenancy management (in particular managing anti-social behaviour, rubbish in front gardens and noise nuisance) and standards of property management (in particular health and safety). Any breaches of these can lead to a reduction in the licence duration, the licence being revoked and/ or legal action and fines of up to £5,000 per breach. 2.7 A two-year pilot of the scheme began in March 2010. By March 2012, all 257 private properties in the Neighbourhood Improvement Zone in Little Ilford were licensed. As a result of our activity there was a significant reduction in the volume of anti-social behaviour reported to the council. Thirty prosecutions were made and there was a 99% compliance rate with clearing up waste from front gardens. This is alongside a number of pending crime act applications and rent repayment orders. 2.8 Councils already have the ability to designate areas for licensing if they so wish, but the framework for licensing is relatively complicated and may put councils off. We would like to see a simplified framework that gives local authorities the freedom to tailor a licensing approach to their area and sets out rights and responsibilities for both tenants and landlords. 2.9 Newham also believes a significant number of new local authority entrants into the PRS market will have the effect of driving up quality and improving choice. Newham’s Private Rented Vehicle for example, is a local authority company which will both purchase existing PRS properties and build new properties for rent outside the Housing Revenue Account and allocation process.
3. Affordability and Tenure 3.1 The introduction of caps to the Local Housing Allowance (LHA) rates will make the PRS across London even less accessible for low income families. In Newham 1,500 households have already lost some of their housing benefit because of the change from LHA at 50th to the 30th percentile of the market. 3.2 We expect more households to feel the impact of the overall benefits cap for workless households. We estimate around 1,000 households in the Private Rented Sector will be affected. Many of those will struggle to pay their rent. This will result in an increase in people turning to the Council for help with their housing. This is in the context of a London-wide shortage of social homes. Not only do we have a severe lack of temporary accommodation in the borough, it is an expensive option that is unsatisfactory for the family and community stability. Newham has significantly decreased the number and length of stay of households in temporary accommodation. We will continue to find alternative housing offers for as many of these households as possible. However in the context of the shortage of supply it is likely that many families will remain in temporary accommodation that is simply unaffordable for them, representing a significant financial risk to the council. 3.3 In addition, it is thought there will be large population shifts across London, particularly in relatively cheap areas like Newham. The PRS is already Newham’s largest tenure and continuing to grow. The PRS is likely to grow further to keep up with these unsettled populations, which we believe could lead to high rates of churn with a negative impact on community cohesion. 3.4 The impact of benefit caps and increased competition is likely to include further over-crowding, sub- letting and division of family homes into Housing of Multiple Occupation. Landlords can receive high rates of returns from illegal conversions or letting out poorly managed properties. 3.5 We agree that stability and longer-term tenancies would better serve families living in the PRS. Our borough-wide licensing serves to professionalise the sector and encourage landlords and tenants alike to take their responsibilities seriously. We hope this will lead to an increase in stability, however problems with the welfare reforms as detailed above remain. 3.6 We are further concerned that, following high profile coverage of Newham’s and other London boroughs’ decision to place homeless households outside of the borough, the Government has sought to restrict local authorities’ ability to place families in stable accommodation outside of their area through statutory guidance. While we recognise that location of the property must be taken into account, there are simply not enough properties in our borough that fall within the new LHA rates, much less the overall benefit cap or private rented sector landlords who will consider benefit claimants as tenants. Newham carefully considers each housing decision and has clear policies to ensure that vulnerable households are prioritised for the small amount of affordable housing wherever possible. It is hugely unhelpful for Government to put restrictions on what local authorities can do when our work in this area is simply concerned with mitigating against the consequences of Government policy. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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4. Recommendations
Quality and standards
4.1 A review of the current system of regulation and control of the PRS should be launched to simplify the current framework and enable easier and more effective enforcement. Existing regulations are difficult to use, court action is cumbersome and fines are not big enough. Newham would like to see a new “fit for purpose” legal strategic framework for the PRS with clear rights and responsibilities for all parties. Minimum standards for letting and management will improve quality and safety and drive out rogue landlords.
4.2 Lettings agents are currently not regulated at all unlike estate agents. Introducing the same kind of regulation for lettings agents would make a big difference as they are often the ones managing properties badly. Currently, anyone can set up a lettings agency without any qualification.
4.3 Local authorities could be more involved in the PRS directly, including management of properties in the PRS. By removing fiscal and legal constraints local authorities should be enabled to solely or in partnership with others finance, build, issue a range of tenancies and manage new housing supply to meet the needs of local populations.
4.4 Landlords should be incentivised to offer longer term tenancies in order to create more stability through new financial and regulatory regimes.
Affordability and Tenure
4.5 The London Borough of Newham has written to Government on repeated occasions highlighting the problems with welfare reforms. We have made a number of suggestions for how the impact of the reforms on London could be mitigated:
4.6 A different London cap
London living costs greatly exceed those in other parts of the country and this is particularly true of housing. As such the London Borough of Newham suggests there should be a higher overall cap and housing benefit cap for London.
4.7 Exempting those seeking work
There are already robust requirements on out-of-work benefit claimants at a time of significant levels of unemployment. Under the current proposals households where adults are doing all they can to find work, and are recognised as such by benefit requirements, will have their benefits capped. We suggest where these conditions are met by claimants they are exempted from the cap. Alternatively, we would support London Councils’ proposal for a job support fund administered by local councils to support those affected.
4.8 Exempting those in temporary accommodation
One of the biggest concerns for local authorities will be the inability of families living in temporary accommodation to afford their very high housing costs. If local authorities are expected to continue to discharge their homelessness duty (in or out of their own borough) it is arguable that all households placed in temporary accommodation should continue to be exempted (perhaps for a fixed period). However the most immediate pressure is on those in such accommodation at the time the cap is introduced.
4.9 Grace period for those in insecure employment
One of the key problems for Newham residents who are working is that their employment is insecure. They might be employed on zero hour contracts and be unable to predict how much work they will have in the coming weeks. While in theory Universal Credit should work well for these residents, the overall benefits cap will disadvantage them because they will not be eligible for the nine month grace period. Instead they will immediately be subject to the cap because they cannot meet the requirement to have worked 52 weeks out of the previous 52. In addition many local people work a series of short term and temporary jobs with frequent gaps in their employment. They will also find themselves immediately subject to the cap when a contract ends.
5.1 It would be helpful if the Committee were able to raise these issues with the Government, as the impact of increasing unaffordability on Londoners’ living standards and housing will be significant. January 2013 cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Supplementary written evidence submitted by the London Borough of Newham Legal Requirement for Landlords to Complete Separate Forms for each Property — Licensing legislation specifically Parts 2 and 3 of the Housing Act 2004 (s61–63, 68 and 85–87) refers to a house, HMO, licence and licence holder in the singular tense and as such each application needs to be unique to the individual property to determine a licence as a unique entity. — Properties have their own individual circumstances and to determine a licence for each property, the licensing authority needs all of the information for each property. — Factors that must be assessed against each unique property are the variances in size, room numbers, amenity (kitchen and bathroom) provisions, use (HMO or single family etc) and third party interests (mortgage lenders etc) before a licence can be determined and issued. — If not it would be impossible to determine the correct licensing standards/conditions, hence the need for individual applications as the current legislation is written. This is a burdensome requirement but legal interpretation of the law requires this approach. Newham would advocate simplification of the licensing process. — We would like to see a significant decrease in the burden placed on landlords and local authorities in administering licensing applications. However we are also mindful that we need to have enough information to allow us to determine licence applications effectively and apply the correct type of regulatory conditions to tackle problems that licensing is set to address. — The London borough of Newham does realise however that for portfolio landlords all of the personal information, contact details and fit and proper assessment data is usually consistent across all applications. Therefore our automated e-form accounts for this by offering to pre-populate the form with the same data.
Fines Issued during the Little Ilford Pilot and Licensing Application Form Enclosed is a copy extract of Newham’s prosecutions spreadsheet which includes the sentencing and levels of fines from the Little Ilford Neighbourhood Improvement Zone. Please note the maximum fine for these offences is £20,000. Also attached is the application form that must be completed for a property licence. This form is mostly guided by the requirements of the Housing Act 2004 and supplementary provisions. Also included is our Guidance document for landlords and managing agents that assists with making applications and helps to explain some of the wider background to licensing. May 2013
Annex FINES/SENTENCE/UPDATE The Defendant pleaded guilty to both charges and was sentenced to a Fine of £500 for each offence, Compensation for £1100 for the licence fee, Costs of £500 and Victim Surcharge of £15.00. A collection order was made and the Defendant was ordered to pay the total amount of £2615.00 in monthly instalments of £150.00 starting from 1 August 2011. The Magistrates fined the Defendant £525.00 and ordered the Defendant to pay the Council’s legal costs in the sum of £831.52. The Defendant was further ordered to pay £15.00 victim surcharge and a Collection order was made. The Defendant was given 28 days to pay. The Magistrates fined the Defendant £700.00 for the first offence (failing to licence the property in a selective licensing designation) and £300.00 in respect of the second offence (failing to return a completed section 16 requisition for information in relation to a property). The Magistrates ordered the Defendant to pay the full costs of the Council in the sum of £929.87 and a Collection order was made. The Defendant was given 28 days to pay. Total £1,929.87. The Magistrates granted the Defendant a Conditional Discharge in respect of both charges for a period of 12 Months. The Defendant was ordered to make a contribution towards the Council’s legal costs in the sum of £340.00. The Magistrates further made a Collection Order. The Defendant offered to pay the full costs today. The Magistrates fined the Defendant £700.00 for the first offence (failing to licence the property in a selective licensing designation) and £300.00 in respect of the second offence (failing to return a completed section 16 requisition for information in relation to a property). The Magistrates ordered the Defendant to pay the full costs of the Council in the sum of £929.87 and a Collection order was made. The Defendant was given 28 days to pay. Total £1,929.87. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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The bench found the matter proved and the Defendant was sentenced to a fine of £2,500, Compensation £200, Victim Surcharge £15, and Costs of £929.66. The bench ordered 28 days for the Defendant to pay the full amount. Total £3,644.66.
The Magistrates gave the Defendant a Conditional Discharge for 6 months and ordered the Defendant to make a contribution towards the Council’s legal costs in the sum of £200.00. The Magistrate made no compensation order in this case. A Collection order was made. The Defendant agreed to pay the £200.00 by the 8 August, 2011.
Each Defendant fined £1,3500.00 and each Defendant ordered to pay the Council;s legal costs in the sum of £1,143.31. Each Defendant further ordered to pay £15.00 victim surcharge and a Collection order made.
He was given 28 days to pay the total of £1,679.00 and a collection order was made.
Fine £320.00, Costs £455.00, Victim surcharge £15.00—Total £790.00. 14 days to pay. Collection order made.
Further supplementary written evidence submitted by the London Borough of Newham
Thank you for your letter regarding correspondence you have received and the opportunity to appear before the Committee as part of your enquiry into the private rented sector. I have addressed each of your points in turn below and I hope this information proves useful to Committee members.
Conservatories, the Four Year Rule and Housing Health and Safety Rating System — Under the Town and Country Planning Act 1990 there are time limits set out under section 171B (2)—which states: “Where there has been a breach of planning control consisting in the change of use of any building to use as a single dwelling house, no enforcement action make taken after the end of the period of four years beginning with the date of the breach.” — The use becomes lawful after four years whether or not the room sizes meet London Plan Space Standards, there is adequate light or that the building is fully accessible. However as I said at the Committee hearing, I do not view the four year rule as problem for legitimate conservatory structures where the neighbours have no concerns. But in Newham if you are using an extension or outbuilding to house people and make money out of it, we would argue that the four year rule should not apply and the construction should remain in contravention of planning law. — In terms of the recent changes to the GPDO which took effect from 30 May 2013—this will create further problems in the private rented sector in Newham. The additional prospect of 6 metre long extensions does little but create further options for conversions of dwellings to flats or more cramped HMOs. The policy is ill thought out due to the possible consequences in less affluent urban areas. In Newham the changes will lead to more poorly built extensions, but now much larger. — In Newham, permitted development rules do not often relate to conservatories but to the change of use of a building or the conversion of a house into flats or another residential dwelling. Under current arrangements the time limit for conversion of any building to a residential dwelling is four years without any consideration of the state of the structure. The time limit should be removed where landlords are profiteering from illegal structures.
Newham has a huge and growing private rented sector that needs to work for all of our residents. The private rented housing market as it stands is not working well for tenants, particularly for young people and increasingly for families with children who are more likely to be priced out of home ownership, ineligible for social housing and reliant on private renting. Partly this is an issue of housing supply across sectors, but it is also a consequence of the complex and generally weak regulatory framework which particularly fails those in the weakest position in the PRS. We have seen terrible standards of management in some areas, so we need to take action. The tools we’ve had so far have been fully utilised but do not comprehensively deal with the major problems of the sector. — Health and safety/housing management interventions only cover a small part of the wider anti- social behaviour and poor property management we witness in the PRS which includes planning contraventions, noise and nuisance, illegal evictions and harassment, criminal activity and environmental crime. — In terms of improving and maintaining housing conditions, it is an unsatisfactory tool for local authorities. It is overly complex, poor understood, time consuming, costly and rarely satisfied tenants or landlords. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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— It would be better if local authorities were able to use a version of the existing provisions for ensuring the maintenance and repair of dwellings—such as the straightforward obligations and responsibilities for repair and maintenance contained in S11 of the Landlord & Tenant Act 1985 and s4 of the Defective Premises Act 1972. These can only be used in civil proceedings at present and are rarely applied in the PRS now except in the case of statutory tenancies. — The HHSRS does allow us to take enforcement action where a category 1 or 2 hazard is present in the structure for example excess cold, damp and mould where a “Beds in sheds” unit is poorly insulated. The HHSRS enforcement action usually requires the landlord to carry out improvement works to the structure to reduce/remove the deficiencies causing the hazard(s) such as installing insulation, heating or damp proof course etc. — Where the long term sustainability issue arises is that these structures are illegal in planning law and do not have planning permission for residential use so although HHSRS brings about improvements to the habitability of the structures, they are still illegal and HHSRS does not change this fact. — In some extreme circumstances where there is a Category 1 (severe) hazard and reasonable works cannot be carried out to improve the structure, then we do have the option under HHSRS to either prohibit the structures use for living and sleeping accommodation or in extreme cases we can demolish the structure. This type of action can only be used in certain cases and these are rare as a number of these illegal structures are constructed to a standard that means severe Category 1 hazards do not exist. However they are still illegal structures with out residential use planning permission.
Landlord Accreditation Scheme — A voluntary accreditation scheme has been in operation for over 10 years in Newham. As I presented to the Committee, it did not prevent the appalling standards we come across in the sector as less than 10% of landlords signed up, despite the offer of training and other financial incentives. Through implementing the mandatory licensing scheme which came into effect at the beginning of the year, we now know there to be at least 15,000 landlords in the borough whereas before we though there to be 5,000—therefore far less than 10% of landlords were accredited. — The Newham accreditation scheme trained over 600 landlords and there is extensive information of the scheme on our website. It is also advertised at Newham housing events and through our widely distributed council magazine, the Newham Mag. As part of the scheme, Newham also held quarterly forum meetings with landlords to which over 800 landlords attended. The model used for the accreditation scheme is used London wide (http://camden.gov.uk/ccm/content/housing/information-on-private-sector-housing/landlords/london- landlord-accreditation-scheme.en:jsessionid+81EFABFEE3A64FB718676116CD5F7 and there is a multi-borough training website. — The scheme was far from being a “well kept secret” and was targeted and publicised strategically at landlords of all types with a cross-section of tenants. If you require any further information, then please do not hesitate to contact me. June 2013
Written evidence submitted by the Greater London Authority In December 2012, the Mayor published a comprehensive set of proposals to empower tenants and landlords in London’s private rented sector. The consultation paper, which also includes an evidence base and a draft “London Rental Standard”, is enclosed with this letter. Please accept this document as the GLA’s submission of evidence to support the Committee’s inquiry into the private rented housing sector. A quarter of Londoners are now private renters, more than in any other region. The Mayor acknowledges that with a growing private rented sector comes a requirement to empower landlords and tenants to promote consistent standards and more choice. The private rented sector can also do even more to support new housing supply in the capital. To achieve these aims the Mayor proposes to: — Publish a “London Rental Standard”. With a large number of landlord and letting agent accrediting organisations, the Mayor wants to establish a set of voluntary yet ambitious standards that renters should expect from any accreditation scheme operating in the capital, matched with benefits for landlords and agents to join. The draft London Rental Standard, which has been developed in consultation with the accreditation bodies, is today published for full public consultation. — Boost custom-designed, purpose-built private rented housing. To help meet increasing demand for private rented accommodation, the Mayor will be targeting funding from the Government’s forthcoming £200 million equity fund to accelerate housing supply. He also wants to explore ways in which the design of new homes can better reflect the needs of renters as well as launching a design competition to seek out the best ideas for new developments. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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— Pilot to explore longer, more secure tenancies. With research showing that longer term tenancies can improve people’s economic prospects and be in landlords’ longer-term interests and significant growth in the number of families in the private rented sector, the Mayor will also be inviting major landlords to participate in a pilot to test out how they can offer tenants longer contracts and greater certainty over rent increases. — Promote standards. The vast majority of landlords and agents offer a professional service to their tenants, however they are let down by a small minority who do not. All of the legislation to deal with this issue is already in place—but the Mayor believes that use of this legislation can and should be improved. More detail on these and other proposals can be found in the consultation document. January 2013
Written evidence submitted by Delancey Real Estate Asset Management Ltd 1.0 Background 1.1 Delancey Real Estate Asset Management Ltd (Delancey) is a private company that provides investment advisory services through exclusive mandates to major international family and institutional investment houses and is a leader in the UK real estate investment sector. 1.2 Delancey is advising QDD Athletes Village (UK) Ltd, a company set up to acquire for £557.5 million the private homes in East Village, the former Olympic Village, being developed by the Olympic Delivery Authority. QDD is a 50/50 joint venture between Qatari Diar, the Qatar sovereign wealth fund, and Delancey’s principle client fund. Handover of the 1439 private homes ( there are a further 1,379 social rented homes in East Village) is anticipated to begin towards the middle of this year and continue to the early part of 2014, together with six development sites with outline consent for a further 2000 homes. 1.3 QDD’s business plan is to make at least 1,000, and possibly all, of these homes available for the private rented sector, and to set up its own on-site letting and management operation to ensure a high level of service is provided to its tenants. This will create the first major commitment of scale to the private rented sector since this investment opportunity was opened up with the introduction of the Housing Act 1988. 1.4 For Delancey clients, it is anticipated that further significant investment will be made into the private rented sector to expand the portfolio of mid-market homes in a variety of locations around London, and possibly elsewhere in England, with a significant commitment to the quality and expertise of letting and management operations. 1.5 Delancey therefore has particular experience of the attitude of major investors towards the private rented sector, and an interest in ensuring that this market prospers, and these comments focus on the issues that are particularly relevant to that market.
2.0 Introduction 2.1 In the 25 years since the Housing Act 1988 came into effect, providing private residential property owners and occupiers with choice and flexibility to agree tenancy lengths at open market rent levels, the private rented sector has grown to approximately 15% of all household tenures from a low approaching 7%, at which time properties were held on regulated tenancies giving security of tenure to occupiers at rents set by Rent Officers. Over the previous 35 years, there had been a substantial and rapid decline in the private rented sector from in excess of 50% of all household tenures. 2.2 In the 1970s and 1980s, political emphasis was on owner occupation, with private landlords even being described as becoming almost as extinct as the dinosaur. It is little surprise that, as a result of experiences prior to 1988, institutions have been slow to become involved in the private rented sector, in which they used to be major participants. That is now beginning to change with confidence returning to private renting as a longer term investment opportunity. 2.3 This improving investor perception comes at a potentially opportune time. The UK is going through a seismic socio-economic change post the financial crash. House prices particularly in London continue to escalate with chronic supply shortages whilst availability of finance to support house purchases is increasingly constrained. The average deposit for a homebuyer in London is now around £100,000; a figure out of reach to many on average earnings and first time buyers. Little is set to change in the short to medium term and the solution for many is to turn to renting as a long term housing solution. This growing demand from people in good jobs earning decent salaries creates an interesting investment proposition for large scale investors. If the political, fiscal and economic environment is made accommodative we believe this institutional capital could begin to finance new housing delivery of considerable scale for rental and through large scale, dedicated professional management businesses. 2.4 With probably all Assured Shorthold Tenancies being for terms of less than seven years, responsibility for, and the cost of, operating residential rental properties falls to landlords, including all structural and external cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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maintenance, repairs and redecoration, all sanitary and heating installations, everything in the common parts of blocks of flats such as lift maintenance and utility costs, and insurance. In its 2011 UK Residential Index, IPD identified non recoverable operating costs accounting for over 27% of gross rental income. 2.5 In reviewing the private rented sector at the present time and considering any changes to it, it is important to keep in mind lessons learned from previous attempts to influence this market.
3.0 The Quality of Private Rented Housing 3.1 Only 16% of the private rented sector involves post–1990 property, with 40% being pre–1919. Even though older property is generally more onerous from a maintenance perspective, for which landlords remain responsible, a recent survey found that 72% of private tenants were satisfied with the level of maintenance and repairs provided by landlords. There was a similar percentage for housing association tenants, with a lower percentage for local authority tenants and owner occupiers. 3.2 With the high level of operating costs referred to above there may be temptation, for some landlords, to attempt to limit expenditure on maintenance and improvements. Incentives, such as capital allowance for improvements and reduced VAT, should be considered, possibly where linked to longer term tenancies as proposed by Shelter in its recent report, or where landlord licensing schemes, such as those implemented by a local authority, are in place. 3.3 It is fully recognised that there are landlords who are unsatisfactory, and a 72% satisfaction level provides room for improvement. The nature of the residential rental market is that it requires considerable management involvement by landlords, with requisite skills, and, with tenants having the ability to move relatively easily, landlords need to ensure they provide a good level of service to retain tenants. Increasing the overall supply of housing, and availability within the private rented sector, will create more competition between investors and give occupiers greater choice, and is the most likely way of raising standards.
4.0 Levels of rent within the private rented sector—including the possibility of rent control 4.1 Gross income returns from residential property, as a percentage of capital value, are generally low by comparison with other forms of property investment. With potentially higher non recoverable operating costs than other forms of investment property, net income returns can be even lower. 4.2 Investors in the private rented sector have differing aspirations. Institutional and corporate investors seek income, and the low income returns from residential property are sometimes cited as a barrier to entry. Private investors include those in need of income as well as those for whom income is less of an issue, as they are more concerned with the preservation of capital and the prospect of capital appreciation. 4.3 Rent levels within the private rented sector are entirely a function of the open market, with rents on a initial letting reflecting all the relevant circumstances at that time. A curiosity for landlords can be that there may be little difference in rent level for a property whether it is let on a furnished or unfurnished basis. It can be more difficult to reassess rents during the course of a tenancy or at lease renewal. Although demands by landlords for high rent increases are sometimes quoted, it is considered that these are unusual, and it is not uncommon for tenants to demand lower rents as a condition of renewing a tenancy or remaining in occupation where they have a break. 4.4 With shorter leases of, say, a year, where a tenant renews the lease a landlord may consider the level of passing rent but may decide not to adjust it or may make only a marginal adjustment. In other situations, possibly with longer leases, rent levels may be adjusted in line with a predetermined formula such as a fixed percentage or linked to RPI. The Shelter report, and the findings of the JLL research paper that formed part of it, make recommendations to encourage private investors to consider alternatives to open market increases. 4.5 One of the strengths of ASTs and their application to the rented sector is the opportunity that they provide for different landlords to offer choices, including ones that apply to rent levels and means of reassessment. 4.6 It would be a retrograde step for government to attempt to interfere in this market. Any suggestion of the introduction of rent control would repeat the effect from the past, with the type of landlord that should be encouraged to participate in the market making the decision to have no involvement.
5.0 Regulation of landlords and of letting agents 5.1 We appreciate why some local authorities are attracted by the prospect of regulating landlords, as illustrated by Newham, but question the real benefit of introducing a scheme that involves all private landlords, yet excludes social landlords, and is borough-wide or even potentially country-wide unless a very simple solution is proposed. There is a risk that resources are spread too thinly to do little more than act as ineffective administrators, rather than concentrating on enforcing existing rules and on poor landlords, who may well be agile enough to attempt to avoid detection unless pursued vigorously. 5.2 We would support the regulation of letting agents. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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6.0 Tenancy agreements and length and security of tenure
6.1 The flexibility of lease lengths that is a feature of ASTs may not be widely appreciated. With buy-to-let investors being a significant part of the market, and many mortgage lenders requiring buy-to-let investors to offer tenancies of no longer than 12 months, it can be assumed that this is the length of an AST. There are however landlords who have, for many years, granted tenants longer leases providing them with security for, say, three years, whilst at the same time enabling tenants to give 2 months’ notice to vacate at any time after the initial six months.
6.2 Investors have differing requirements, varying form “accidental” landlords resulting from of an inability to sell, people working away from home for a period of time, retailers letting out residential accommodation above a shop, those seeking a medium term alternative to the stock market and longer term professional investors and institutions. ASTs enable all of these differing requirements to be met, and encourage as much accommodation as possible to be made available for occupation.
6.3 The introduction of ASTs opened up the possibility of shorter term lettings for those in need of housing without wanting to purchase. More recently renting has begun to be seen again as providing choice and an alternative to purchase, for a home over the longer term. It is anticipated that this will be matched by some investors being attracted by the opportunity to achieve longer term commitments from tenants. For some investors, a concern about granting longer leases is the length of time it takes to achieve vacant possession where it is necessary to follow court proceedings for arrears of rent or other breaches of a lease, including anti-social behaviour impacting on other residents.
6.4 For some landlords, there would be attractions in having longer term tenancies of, say, five years as proposed by Shelter, but without a tenant’s ability to vacate on two months’ notice, to give greater certainty of income that is more similar to commercial property. However residential tenants generally appear to prefer their ability to retain their flexibility.
6.5 It is most unlikely that any investor would be willing to consider leases of as long as 10 or 25 years, as has at times been aired as a way of reducing rent levels with tenants encouraged to take on responsibility for maintenance. Any lease over 21 years is enfranchiseable, and not therefore something a landlord will create. A 10 year lease with service charges would be subject to the consultation requirements of long leasehold property, and a management challenge for landlords. Experience demonstrates tenants’ reluctance to spend money on maintenance unless they have very long leases.
6.6 Even long term investors will wish to retain the ability to achieve vacant possession at some stage when planning a disposal. Unlike commercial property, residential property generally has a lower capital value when tenanted by comparison with values for vacant possession. Investors will therefore want to be able to obtain vacant possession when anticipating a sale.
6.7 Any indication of a statutory imposition to introduce security of tenure for tenants would result in the majority of existing investors abandoning the private rented sector, and discourage potential new entrants to the market.
6.8 We believe that the market, left to its own devices, will continue to evolve and offer a wider choice to reflect the changing, and varying, requirements of occupiers. That is not to suggest that all owners will offer a range of options for occupiers, but rather that owners may establish their own opportunities in response to the market.
7.0 Summary
7.1 The private rented housing sector is beginning to be accepted as providing an alternative to ownership for residents considering longer term occupation, as well as retaining its attractions for those with short or medium term requirements. Investors need to have confidence that there is a long term future without the prospect of government intervention, and without a return to the sort of controls that existed not all that long ago, to be encouraged to participate in the sector. If the political, fiscal and economic situation is accommodative we believe we are at a point where significant new institutional capital could begin to finance new housing delivery of considerable scale for rental and through large scale, dedicated professional management businesses.
7.2 Improvements to the quality of accommodation and standards of management can certainly be made, but the way to do this is by way of incentives rather than restrictions and increase the amount of available property. At the same time, it would be beneficial for more information to be made available to landlords, tenants and professional advisers covering such matters as the range of lease lengths that can be granted under ASTs, differing options for reviewing rent levels, the extent of landlords’ repairing obligations and the level and cost of services that can be provided by letting and managing agents. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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7.3 The private rented sector can play a valuable part in helping to increase the amount of accommodation that is created, but it will only ever be one choice for occupiers and the creation of more homes whether for sale or to rent is essential. January 2013
Supplementary written evidence submitted by Delancey Real Estate Management Ltd We have announced that our tenancies will be for up to three years. After six months, tenants may give two months notice if they wish to bring the tenancy to an end. This is a rolling break, exercisable at any time after six months. Rents will reflect CPI uplifts on the first and second anniversaries of the commencement of the tenancy. The reason for adopting three years rather than something longer is that: (a) anything longer is a deed, requiring signatures to be witnessed, and therefore potentially a little more hassle for tenants, apart from anything else; and (b) we wish to avoid tenants having any SDLT liability on the net present value of the rent payable. Although unlikely, a five year lease for example for our largest apartments might just trigger the threshold and we are keen to ensure we do not come anywhere near this level. We expect to discuss new leases with tenants as the three year period gets close to its term, when rents will reflect market levels. Another important point is that we will not be charging fees to tenants at the outset. They are assured shorthold tenancies. Should somebody be particularly keen to take only one or two year tenancies, we will respond positively to them, and these may be necessary where somebody has, say, a one year visa for example. June 2013
Written evidence submitted by Genesis Housing Association Genesis is aiming to lead the way in developing and shaping the future role of housing associations in building vibrant, mixed communities. Stratford Halo is a large mixed tenure scheme less than 500 metres from the Olympic Stadium and park. The tenure split is: — Affordable Rent-138 units. — Shared ownership- 91 units. — Market rent -410 units. — Extra Care-65 units. Genesis sought investment in the market rent units at its Stratford Halo development from an institutional investor in order not to utilise its Balance Sheet capacity in relation to the delivery of market homes on this mixed tenure regeneration. Retention of Genesis Balance Sheet capacity is important to ensure that it can continue to develop more much needed new homes. The sale to M&G on a 160 year lease has released Genesis’ original investment. Genesis decided to enter into a lease back of the market rent properties for a 35 year period. This was considered important for three reasons. First, undertaking the management of the market rent units and taking on the associated operating lease made the sale attractive to the investor. Second, Genesis is developing a new community at Stratford and retaining management control over the market units is important to the achievement of this objective. Third, Genesis expects to make a surplus from operating a market rental business from the properties it has leased back, which will be used to fund further regeneration projects. Although the PRS market is associated with generation rent, there is mounting evidence to suggest that the tenure is increasingly occupied by older households and families, due to difficulties in accessing other housing tenures. According Genesis is seeking to shape the “multi family” market. We want Genesis market renters, renting for the long term, so that they can have a decent stable property that they can make their home. We want them play an active role in the community and places that we are creating. We will offer the following: — Tenancies up to five years with yearly agreed increases. — Tenants will be able to move to larger or smaller units within a scheme or within the market rent portfolio. — Tenants can decorate their home; hang up pictures, as long as the property is returned to Genesis in the same condition as when the tenancy started. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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— Named Property Manager. — 24/7 emergency repair service. — 24/7 contact centre. — Menu of additional services. We will need to demonstrate to potential tenants that private renting can be a secure and high quality option. We also recognise that tenants have real choice, if we don’t provide excellent services and value for money— tenants will not stay with Genesis long term. January 2013
Written evidence submitted by British Property Federation Introduction 1.1 Thank you for this opportunity to contribute. 1.2 In 2008, the previous Government commissioned a comprehensive review of the private rented sector (PRS).141 It recognised some challenges, but also the sector’s positive contribution to housing the nation. 1.3 An expanded PRS has been critical to important objectives for successive Governments: — The growth in higher education would have been nigh impossible without it. — Labour mobility would be more constrained and unemployment therefore higher. — Fewer people would have been housed and fewer houses built. — It has helped support important inward migration and investment. 1.4 To ensure the PRS continues to grow and contribute to Government objectives one of the BPF’s priorities has been encouraging greater institutional investment in the sector and through it a contribution towards building more homes for rent. We welcome the cross-party support that has received.142
The quality of private rented housing, and steps that can be taken to ensure that all housing in the sector is of an acceptable standard 2.1 People should have private rented accommodation that is fit for purpose. The vast majority of landlords and agents agree with that and deliver it. 2.2 The quality of the sector is mainly determined by two factors—properties, and the skills of those who manage them. We have set out in appendix 1 statistics on the sector’s standards and quality improvement.
Levels of rent within the private rented sector—including the possibility of rent control and the interaction between housing benefit and rents Rental statistics—the true picture 3.1 At present, growth in market rents is undershooting CPI in over 60% of local authorities across England. This is according to reliable figures, produced by the Valuation Office Agency, and based on nearly 500,000 measurements. Between Sept. 2011 and Sept. 2012 (the latest data available): — Average rents grew by 1.31% in England. — Regionally, average rent was down by 1.41% in the North East. Most other regions saw small average rental growth. London was an exception, where average rents were up 3.32%. — In 198 out of 324 local authorities (LAs), rental growth was below 2.7% (current CPI). — In 98 out of 324 local authorities, rental growth was negative. TABLE SHOWING RENTAL GROWTH ACROSS THE REGIONS Region LAs with negative LAs with positive LAs where rental growth exceeded rental growth rental growth 2.7% North East 7 5 1 North West 16 23 10 Yorks & Humber 7 14 8 East Midlands 8 32 13 West Midlands 10 20 13 East 14 33 21 141 The private rented sector: its contribution and potential, Julie Rugg and David Rhodes, Centre for Housing Policy, University of York, 2008. 142 The BPF also supports the response by the Investment Property Forum (IPF). cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Region LAs with negative LAs with positive LAs where rental growth exceeded rental growth rental growth 2.7% London 4 29 24 South East 20 47 25 South West 12 23 11
3.2 Even in London (see chart), rents have undershot RPI for most of the past decade. Whilst in the past two years they have been greater than RPI, the cumulative effect over the decade is still significantly below RPI growth.
3.3 The main contribution to recent “unaffordability” in London is not rampant rental growth, but slow wage growth, with average earnings growing significantly below trend.
Rents in London (Source: GLA) 170 House Prices 160
150
140 Inflation Rent 130
120 Index (2002=100) 110 Earnings 100
90
80 2002 2004 2006 2008 2010 2012
3.4 The presentation of “rents” in the media often draws on flawed “surveys”. They can be based on advertised rather than realised rents, on small samples, and only take account of properties being re-let and therefore not with tenants in situ. This latter point in particular is a large contributor to overstated rental inflation. Landlords will tend not to invoke a rent rise every six or even twelve months for tenants in situ, but rebase their rent to market when a tenant moves on, which on average is every 20 months.143
Rent controls
3.5 There has been a near consensus in the UK that rent controls do untold damage to the market rented sector, harming investment, contributing to poorer property conditions, and leading to other perverse effects. We are therefore concerned to see the issue being put back on the policy agenda.
3.6 We are hesitant to draw on international comparisons, because there is often a multitude of different factors to take account of. One interesting aspect to illustrate, however, is rent controls in New York. There, perhaps the most perverse outcome is that by suppressing rents it has just attracted even more people to want to rent in central New York, and many of those enjoying rent controls are not on lower incomes, but the relatively well off looking for a weekly “crash pad”. The New York experience illustrates that rent controls are a crude way of helping those on low income as there is no control over who benefits and so the main beneficiaries may be the relatively well off looking for a “cheap” home in the centre. Social housing in the UK is at least person-specific and largely occupied by those in need. 143 As reported by ARLA. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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If not market rent, then what? 3.7 We have illustrated in appendix 2 some of the flaws with other methods of rent review, probably the worst being indexation. It is worth reiterating that in nearly two-thirds of local authorities indexation would have left tenants worse off last year.
Rents and housing benefit 3.8 There is not scope to cover the reforms in detail here. We have focused on four specific issues, which are covered in appendix 3.
Regulation of landlords, and steps that can be taken to deal with rogue landlords; regulation of letting agents, including agents’ fees and charges. 4.1 The Federation treats every regulatory proposal on its merits. We are not anti-regulation, in the “less” rather than “more” camp, but most of all want effective regulation. 4.2 Effective regulation requires three aspects: well-drafted legislation, which is promoted well and enforced rigorously. Our experience is that the first of these is generally done well. 4.3 However, the second is generally done very badly. In the last financial year of the previous Government, DCLG spent less than 3 pence per household in the PRS on communicating their rights and responsibilities. We expect under the current Government, with its marketing moratorium, that figure will be less. For context, £126.5 million has been spent on communicating digital switchover, over £4 per household in the UK. Nearly every household (23 million) will have been communicated with. Through inadequate promotion budgets Government condemns much regulation to fail. 4.4 The final aspect—enforcement is also under-resourced, and contributes to a feeling amongst landlords that the compliant comply, whilst the non-compliant get away with it. 4.5 The Federation was willing to support a simple registration scheme, as part of the Rugg Review package. It seemed to offer some prospect of improved communication with landlords and tenants, rationalisation of local schemes (important for larger landlords), and effective enforcement. This was to be achieved by landlords and tenants having to quote the landlord’s registration number in all their transactions with the state—access to the courts, tax returns, benefit claims, tenancy deposit lodgement, etc. It required the support of several departments, which did not seem forthcoming. 4.6 We also remain supportive of the Rugg recommendation that agents should be licensed within a framework that builds on existing self-regulation. We would like to see all agents offering independent redress and client money protection, which the members of RICS, ARLA and NALS do. 4.7 We do not believe in caps on fees, but are very supportive of full disclosure of all fees and charges up front. Some of our exemplar landlords are very vigilant at monitoring what fees are passed on to tenants via their agents, but more landlords could do this.
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. 5.1 With benefit changes now only offering 25–34 year olds support for shared accommodation, the importance of HMOs in housing a part of our community cannot be overstated. Single people are rarely a priority for social housing, and a room in an HMO may be their only housing option. In a world of constrained housing supply HMOs are also an extremely efficient way of using limited housing stock. 5.2 We are therefore concerned about the extent to which some local authorities are seeking to restrict the number of HMOs in their locality, often in the name of preventing the growth in student housing. The Rugg Review showed that only 59 out of 8,000 council wards in England had student densities of ten% or more of all households. 5.3 Decisions to constrain the growth of HMOs are often taken without an evaluation of the need for such accommodation in a local area. Shared houses do not form a part of authorities’ strategic housing market assessments. A more evidence-based approach is desperately needed. 5.4 The licensing of larger HMOs is mandatory, and for other types of PRS accommodation local authorities have a discretionary power enshrined in the Housing Act 2004. There has been little evaluation of the effectiveness of such powers, and whether they are helping local authorities identify the worst properties and landlords. 5.5 Local authorities’ ability to introduce discretionary licensing schemes has been made easier with the introduction of a general consent in 2010. Local authorities, however, still have to abide by the qualifying criteria/processes set out in the Act. If this is not done properly the only way to challenge it is via judicial review. That does not seem a particularly productive use of High Court time. As a deregulatory measure appeals against a licensing designation should be taken in the first instance to the Residential Property Tribunal Service. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Tenancy agreements and length and security of tenure. 6.1 When this issue was looked at as part of the Rugg Review it was concluded there was not a significant problem;144 that although most tenants in the sector were on assured shorthold tenancies, there was a variety of lengths of stay and for example, for the lowest-quartile income group, 36% had stayed at their current address for five years or more. Rugg concluded: Attention paid to the legalities of tenancy agreements has distracted attention from exploring the issue of why tenancies end against the wishes of the tenant, because it is assumed that—in the PRS— tenancies generally do. In actuality, tenancies fail for specific reasons, such as rent arrears, poor quality property making a tenancy unsustainable and issues relating to anti-social behaviour. It is perhaps more appropriate to focus policy intervention on these reasons for tenancy failure, rather than on a tenancy framework that appears—for the most part—adequate for purpose. 6.2 English Housing Survey data shows that the length of stay of private rented sector tenants broadly splits into thirds: one third staying less than a year, a further third staying between one year and less than three years, and the final third staying for three years plus. This supports the evidence of our membership that the vast majority of tenants stay for as long as they want and are welcome to. Indeed there will also be wide regional differences, with one of our larger landlords in the Midlands, having an average dwell time of 4 years. Length of Residence of Private Renters—English Housing Survey 2010/11 less than 1 year 35.0% 1 year, under 3 years 32.3% 3 years, under 5 years 14.0% 5 years, under 10 years 9.2% 10 years, under 20 years 4.9% 20 years or more 4.7% 6.3 Data would therefore suggest that variety in tenure length is being delivered. We can understand, however, that some tenants want the permanence of knowing their tenancy is for “x” years. We therefore want to be helpful to Shelter and others seeking to encourage longer offers. This chimes with some of our work on institutional investment, which is about creating a more sophisticated range of rental accommodation offerings from a professional cadre of landlords who have built or acquired properties purely for the purpose of renting. 6.4 However, the only way to make major progress in the wider adoption of long-term tenancies is to tackle the barriers and incentives to their use, and failure to attract landlords to use them will not be down to any failure on landlords’ part, but a failure to address the barriers and incentives. 6.5 There are several reasons why longer tenancies are not used more by private sector providers: — Valuation—We live in an uncertain world. There will always be occasions when investors want, or need to sell investments relatively quickly. A property with a tenant will be valued at less than the same property with vacant possession. The valuation impact of a tenanted property when a landlord needs to refinance is a similar issue. — Competing assets—Market rented housing competes for capital with other investment assets. For the smaller investor, one buy-to-let investment property will often be their only source of major saving or investment. Greater security of tenure tends to mean having to have some sort of rent review mechanism and court sanction for disposals. There are not many other investment assets where you have to go court to sanction a disposal. — Debt clauses—There is a very specific issue, which is the restrictions lenders place on tenancy type and length. This is a manifestation of the valuation issue again, and lenders’ fears of having a property on their books that has to be sold at less than full vacant value. — Lack of stability—Unlike the commercial property sector, stability tends to be lop-sided. The tenant gets a longer tenancy, but unless there is a stipulation that they are liable for the rent to the end of the tenancy the landlord is not getting the security of income that would make it more compatible with say investment in a commercial property lease. — Going to court—“Bad-tenants” exist and long-term fixed contracts create another hurdle that a landlord must overcome to get an investment generating a viable return. Landlords often defer action and rely on the tenancy coming to an end to save costs associated with potentially more complicated litigation. 6.6 The private rented sector needs to continue to grow and to attract a breadth of capital if it is to meet the pressures it faces. Current investors in the market rented sector invest in it for its market rented characteristics. The use of tenancies offering a different form of return, such as index-linked rents tied to a longer tenancy, would be a leap of faith, perhaps attracting new investors, but jeopardising investment from what has proved a reliable source over the past twenty years. There is a fear amongst landlords based on past experience that once governments interfere in the terms of a tenancy it tends to snowball. Stipulating length of tenancy tends to lead to some stipulations on how rents are reviewed and set, and in turn how tenancies can be ended. 144 There has been other extensive work done on tenancy reform, for example The Rented Homes Bill by the Law Commission, which suggested replacing all existing tenancies with just two model agreements, one short, one long, with the short having no minimum tenancy period. 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6.7 There is also a careful consideration that affects tenants if the market was forced on to index-linked rents. As shown elsewhere in our evidence, rents are undershooting inflation in two thirds of local authorities, in some by significant margins. So not only would such a policy be a gamble on investment, but would leave constituencies up and down the country with tenants paying more rent. Taking a couple of examples, in Brighton and Hove last year the average rent fell from £999pcm to £947pcm. If it had been linked to RPI (3%) it would have risen to £1029. In Durham, the average rent fell from £459pcm to £454pcm, but would have risen to £473pcm if index-linked. 6.8 There are simple things that could be done to promote longer tenancies. — Better and more readily available information for landlords and tenants about the performance of different rental terms—market, RPI, CPI, etc. — Dealing with anti-social tenants in a long-term tenancy can be daunting prospect for landlords. One of our larger landlords that offer longer-term tenancies employs a welfare officer, but that is not realistic for smaller investors. Local authorities providing such a service might help. — Possible tax reform—it is counterintuitive that short holiday lets currently attract a better tax treatment than longer-term tenancies. 6.9 Beyond these relatively simple measures, if a longer-term offer is to become more commonplace the perceived drawbacks we have set out in 6.5. must be tackled. The following might help: — The ability to terminate tenancies swiftly on landlord sale or redevelopment, and rent arrears or anti-social behaviour, without having to go through full Court sanction. — Gaining the support of debt providers for longer-term tenancies. — Providing mechanisms that also give landlords a genuine stable tenancy, for example through a trusted intermediary. — Providing some incentives. Landlords could elect to provide longer tenancies in return for tax preferences, eg access to lower VAT on their repairs, maintenance and management.
How local authorities are discharging their homelessness duty by being able to place homeless households in private sector housing. 7.1 This only took effect in November 2012 and it is too early to say what is happening.
Conclusions 8.1 The Rugg Review in 2008 was generally well received by all for its coherent and sensible package: (a) To improve data on the PRS, and hence our understanding of it. (b) To introduce a very simple registration scheme for landlords, but one that was enforceable as set out elsewhere in our evidence. (c) To license agents, but building on existing self-regulation. (d) To treat landlords in a business-like fashion for tax purposes. (Changes to SDLT recommended by the Review have since been implemented by the present Government). (e) That there was little evidence of landlords evicting tenants on a whim. Most tenancies ended because of changes to tenants’ circumstances. (f) That significant concentrations of HMOs were limited to very few wards and planning powers on HMOs were likely to be misused and constrain a needed form of housing. 8.2 Unfortunately, Rugg was published in October 2008 as attentions on housing policy were diverted elsewhere by the developing economic crisis. 8.3 Governments ask very learned people to conduct reviews. It would be sensible if future policy at least started from the basis of looking at “what the last person had said and recommended”. 8.4 As we have highlighted, a challenge that Rugg faced was getting buy-in across Government. The PRS is rightly mainly a DCLG issue, but the Review recommendations required the co-operation of HM Treasury, BIS and DWP. That didn’t seem forthcoming. 8.5 On rent controls, we can’t stress enough how ill-informed some commentary is on what is happening to market rents at present and the damage that careless talk and policymaking could do to investor confidence, the sector and ultimately housing provision. There is unprecedented institutional interest in the sector, which is translating into action. Careless talk on rent controls will throttle this. 8.6 On longer-term tenancy offers, we remain willing to be helpful, but the only way to achieve more long- term offers is via addressing the barriers and incentives to their use. Compulsion would pose a huge risk to a reliable source of housing investment, constrain supply, and alongside probable policy failure indexation would result in lots of tenants paying a lot more rent. 8.7 On standards, we share a deep desire to see all tenants enjoying a standard of accommodation and service that is received by the majority of those who live comfortably in the sector. We remain very willing to work cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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with anyone seeking to tackle “rogue landlords, or agents”, but if pursuing regulation, only if well-advertised and widely enforced and sufficient resource is made available. January 2013
APPENDIX 1 STANDARDS IN THE PRS A1. The sector is extremely polarised between new property (16% is post-1990) and very old (40% is pre- 1919). The old stock in the PRS can fail modern standards and there are further policies in the pipeline, which seek to offer a “carrot and stick” to the owners of such property, offering them and their occupiers access to Green Deal finance for energy efficiency improvements, but a ban on property being let out with an F or G energy performance rating from 2018. Dialogue on the detailed regulations that implement this will start shortly. It is worth stressing, however, that the growth of new property in the sector has already made a significant difference. The average SAP rating of PRS stock is now 53.5, compared to 52.8 for owner-occupied property. The sector’s SAP rating has also seen the greatest change over the past 15 years, up from 37.9. A2. On management, evidence145 suggests that tenants are generally satisfied with the management of their properties. For example, 71% of tenants are either very satisfied or satisfied with the way in which their landlord carries out repairs and maintenance, a higher proportion than for social tenants, with less dissatisfaction expressed in the PRS than amongst housing association tenants. Recent statistics published by the GLA, however, show that 60% of landlords have no property management qualification. Seeking to bridge that gap over the past decade has been the voluntary accreditation movement. It was burgeoning with local authority support, but is now challenged by local authority budget cuts, and needs some rationalisation, which London’s Mayor is pursuing.
APPENDIX 2 IF NOT MARKET RENT, THEN WHAT? A3. The Federation represents a variety of property sectors and there is no “perfect way” of setting rents. It is often presumed that a better way is to link to an inflation index—RPI or CPI. The last 20 years has illustrated however, that RPI and CPI, even although they are targeted by the Bank of England, have not been stable or predictable. It is why the business community has complained about their business rate increases, which are linked to RPI. A couple of years ago there was also a furore in the social rented sector, first in 2010 when September’s RPI was negative and therefore rents in the social sector would have fallen, with consequences for social landlords’ investment plans; or in 2011, when September’s RPI was 5.4% and impact on tenants’ already stretched budgets. Recent history therefore shows that index linking is neither stable or predictable, flitting between -1.6% and 5.6% over the past three years, and with what might appear to be quite small annual increments compounding into a far larger increase than people might anticipate. A4. A very stable and predictable way of setting rents is simply to set a fixed uplift in an occupiers’ tenancy or lease agreement, for example the rent will increase by 2% per annum. This is sometimes used in both sectors but represents a gamble for landlords or tenants about what is going to happen in the wider economy. A5. Rent inflation tends to correlate very strongly with average earnings (with some lag), and therefore linking rents to average earnings might be a good way of setting rents and would mean that rents would have the same “affordability” at some date in the future as they do now, but only for the “average” person. A6. To reiterate, it is not a case that every tenant sees their rent rise every year. It is very common practice in the market for private landlords only to rebase their rent when a tenant moves out.
APPENDIX 3 RENTS AND HOUSING BENEFIT A7. We conducted analysis with the CIH earlier in the recession to seek to understand what was causing the increase in the nation’s PRS housing benefit spend. Our analysis between November 2008 and February 2010 is dated now, but found that almost all of the increase in that period was attributable to the increase in caseload, and the relative shift in caseload to more expensive housing areas of the country. The Government in its portrayal of benefit claimants tends to give the impression that claimants are long-term, and that there is a structural issue of getting these people back to work. Whilst that may be true for some, the growth in housing benefit over the recession is mainly attributable to the cyclical impact of the recession. For those affected by recession housing benefit is doing what it is supposed to do—keeping people in their homes, and by doing so, providing them with the stability to improve their chances in the job market. There was no evidence of landlords “cashing in”. The cyclical increase in claimants does not generally increase demand, which might drive up rents—claimants are already in the housing market and simply replacing one means of payment from their “own pockets” with partial or full state support. 145 English Housing Survey, 2010–11 cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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A8. The table shows outside some very specific areas there is little evidence of mass withdrawal of landlords from the housing benefit market thus far. Outside these areas the monitoring exercise by DWP suggests that at this stage there is little evidence of the package of reforms leading to landlords cutting rents, or tenants moving to cheaper accommodation. The Government is undoubtedly achieving its objective of cutting benefit expenditure, but thus far the impact is mainly being felt in claimant shortfalls.
HOUSING BENEFIT CLAIMANT NUMBERS IN THE PRIVATE RENTED SECTOR March 2011 December 2011 August 2012 Mar 2011 to May 2012 % change England 1,376,440 1,424,300 1,470,390 6.8% London 267,040 278,460 280,750 5.1% Inner London 102,200 104,980 102,070 -0.1% Kensington & Ch. 4,180 3,930 3,150 -16% Westminster 8,580 8,570 7,430 -13.4%
A9. Particularly in London the impact of the overall cap on benefit is having a severe impact on tenants’ ability to access housing. In boroughs like Brent, for example, the cap is limiting smaller households to approximately the bottom 10% of the market and not paying sufficient benefit to realistically help larger households find accommodation in the PRS.
A10. From April 2013 the uprating of local housing allowance payments will no longer be linked to rents but capped at CPI for 2013–14 and at 1% for the two years after that. As the VOA figures show in some areas that will not create a problem, as rental growth will be subdued. In rental hotspots, however, only allowing growth of CPI, or 1% will leave claimants with significant shortfalls. In its Autumn Statement the Government announced it will use 30% of the savings to cushion the impact in those areas where rent increases are highest. This will be crucial for people being able to afford their homes. As yet there is a lack of detail, however, on how those funds will be allocated.
Written evidence submitted by the Council of Mortgage Lenders
Introduction
1. The CML is the representative trade body for the first charge residential mortgage lending industry, which includes banks, building societies and specialist lenders. Our 108 members currently hold around 95% of the assets of the UK mortgage market.
2. We welcome the opportunity to input into the Communities and Local Government Committee’s inquiry into the private rented sector (PRS). Our members’ mortgage finance activity reflects the evolving tenure mix prevalent in the UK. In addition to lending for home-ownership, our members also lend to support the social housing and private rental markets.
3. Our response is framed by the realities and aspirations for the PRS, and particularly those aspects that are of most significance to our members’ mortgage lending activities.
Executive Summary
4. The PRS is playing an increasingly important role in today’s housing market. It offers flexibility and choice for those households that are either unable to access homeownership or preferring to rent.
5. It is vital that, in an effort to address perceived or actual imbalances in the PRS, any government interventions must: — ensure ongoing stability of this important form of tenure; — focus on the need for increased supply in the PRS and other tenures; — be attractive to both institutional and private investors; and — be reflective of the fact that the PRS is inter-connected, where piecemeal solutions are likely to prove ineffective.
6. Our written evidence touches upon several areas in more detail. — Security of tenure. We are working with members and other bodies to best determine how security of tenure can be improved. More work is being undertaken on establishing landlord (ie lenders’ customers) demand for longer term tenancies to see whether they can be considered a more widespread, viable proposition. The effort to provide tenants with longer term tenancies should not lead to flexibilities and safeguards afforded to all parties under six to 12 month tenancies being eroded. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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— Regulation in respect of leasehold property. Better regulation of managing agents is needed to prevent consumer detriment where ground rents and service charges are excessive, as well as to protect mortgage lenders facing the risk of forfeiture. — Rent controls. We believe that these would be a counter-productive way of seeking to improve rent affordability in an undersupplied housing market.
General Comments and an Overview of the PRS 7. Our members’ buy-to-let (BTL) finance has both underpinned and stimulated much of the growth seen in the private rented sector over the last 10–15 years. At the end of Q3 2012, there were 1.4 million outstanding BTL loans worth £164 billion. 8. The number of households in the PRS has risen steadily since 2000, when 10% rented privately, compared to 17% in 2011. The predominant number of owner-occupiers has fallen slightly since 2007 and, over recent decades, the trend in the social rented sector has been one of slow but steady decline.146 9. The reasons for this changing dynamic are multifarious. Since the financial crisis, access to homeownership has been restricted by macro and micro-economic pressures, as well as funding and regulatory constraints on mortgage lenders. Access to social housing has become more difficult in recent years and it is widely recognised that housing supply has not kept pace with demand across all tenures. 10. Although these circumstances are squeezing more households into the PRS, the quality and flexibility offered by this sector prove attractive even where other housing options are available. Housing “careers” have become complex, with increasing numbers of people moving between tenures during their adult lives. 11. Recent CML research confirmed that UK households’ appetite for homeownership remains unabated. But for a sizeable proportion of private renters, the PRS remains their preferred tenure both in the short term (37% would prefer to remain in the PRS within the next two years) and longer term (12% in the next two years).147 12. With more households entering and remaining in the PRS, we believe there is a strong rationale for government, in conjunction with representative bodies, to build upon the strengths that this form of tenure offers and develop a more holistic PRS strategy.
Investment in the PRS—Quality and Supply 13. We welcome the intentions behind the recent Montague Review, in the hope that concerted action can stimulate institutional investment in the housing market and address the fundamental problem of undersupply. However, institutional investment should not be pursued without due recognition of the role that private landlords have played in increasing both supply and quality in the PRS. Individuals have contributed greatly to the renaissance of the PRS, supported by our members’ BTL financing. 14. There is an increasing need for housing of all tenures, as a result of strong demographic pressures on household formation rates, but low levels of new build are falling well short of requirements. The credit crunch has clearly added to these difficulties, most obviously by shrinking how much mortgage finance is available and triggering the need for fiscal austerity. These pressures look set to only dissipate gradually. 15. Individual landlords are responding by building their portfolios, but they are not in a position to boost supply of rented property to match that demand. We would welcome institutional investment through build-to- let and other means, alongside tax breaks for individual landlords to further drive up quality of existing and evolving portfolios. For example, we believe there is merit in individual landlords’ tax demands, upon sale of the property, being more aligned to what a small business would pay. 16. An area where individual landlords have made a meaningful positive impact is in increasing the quality of housing in the PRS. One initiative that could further assist landlords’ efforts is the Green Deal. This could potentially be used by landlords as a way to improve their portfolio with no upfront cost and without rent increases, which would improve renters’ experiences particularly at the bottom of the market. Much of this is dependant on the Green Deal’s “golden rule” that any bill payer will not be worse off following a Green Deal installation. 17. Any policy objective to increase quality in the PRS must be reflective of the breadth of tenants housed in this sector. There is a risk that, in striving to improve quality, any standard or initiative pushes up rents at the bottom end of the scale with those tenants on lower incomes having to find alternative accommodation or, more likely, an alternative form of tenure where options may be limited.
Tenancy Lengths 18. The private rented sector has become increasingly diverse as it has grown. Although traditionally associated with more mobile sectors of the population, it now caters to a range of households on a longer- term basis. 146 DCLG, English Housing Survey 2010–11 147 CML Housing Finance Issue 02 2012, Maturing attitudes to homeownership cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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19. Given the challenges around access to home-ownership, we have been working with our members and other representative bodies to understand what steps need to be taken to present PRS tenants with greater security, while not eroding the flexibilities that make private renting attractive. We and individual members are in the process of working to understand and overcome the practical barriers that have traditionally prevented longer term tenancies proving viable. 20. Within the past year, we have seen a range of campaigning bodies and political parties question whether the status quo of six to 12 month tenancies affords private tenants the security and stability they may require. We worked with Shelter as it developed its report148 on this topic last year. We are encouraged that Shelter’s recommendations recognise the challenges and focus on the need for better industry incentives, rather than legislative measures, to drive changes in attitudes. 21. For some time now, BTL mortgage terms and conditions have generally restricted landlords to offering assured shorthold tenancies (ASTs) of between six to 12 months. But this in itself does not impose a restriction on how long a private tenant can reside in a property. A National Landlords’ Association (NLA) study conducted in June 2012 showed that over a half (54%) of tenancies now last between two and three years, and that almost a third (32%) last in excess of four years.149 22. Arguably the biggest barrier to longer term tenancies proving viable for lenders is the apparent lack of apparent demand from their existing and potential BTL landlord customers. A recent NLA landlord panel survey (Q3 2011) showed that only 6% of landlords were definitely interested in offering longer tenancies. It is difficult for any commercial operation to build a viable proposition for such a small cohort of customers, particularly as those that have expressed an interest will have only done so in an indicative way and without full knowledge of what might be lost as well gained. 23. Landlord demand for longer term tenancies could be regarded as running counter cyclical to both market conditions and tenant demand. We believe that landlord demand is more likely to materialise at a time of lower demand in the PRS and higher void periods, as opposed to today’s relatively buoyant rental market. 24. But, even in the absence of strongly articulated landlord demand, we have been exploring with our members whether mortgage terms and conditions could be relaxed in order to permit longer term tenancies. 25. A key challenge for lenders, and indeed landlords, to address is the impact of rent arrears where a tenant is on a longer term tenancy. The NLA study in June 2012 showed that 49% of landlords experienced rent arrears within the last year. Higher mortgage arrears could potentially result and a lender’s ability to obtain vacant possession could be impeded. From a mortgage lender’s perspective, a longer term tenancy may only be a suitable option for experienced BTL landlords. And there will always be substantial groups of private tenants for whom shorter, more flexible terms are desirable. 26. Most importantly, there is a risk that a longer term tenancy may not provide landlords or tenants the same level of flexibility offered by the common six to 12 month ASTs. For example, tenants may find themselves less able to move if their personal desires or circumstances changed. Similarly, by agreeing to a longer tenancy, landlords may find it harder to flex their portfolio in response to market conditions or their own business models. The extent to which these flexibilities are retained or eroded under any longer term tenancy model will require careful consideration. Particular break clauses, over and above what is in a standard six to 12 month AST may therefore be required. 27. An effective, transparent and fair way of increasing rents, that is suitably attractive to landlords and tenants, would also need to be established for longer term tenancies to prove viable. This may be some form of index linked increase built into the AST, similar to what Shelter proposes in its Stable Rental Contract. But this would need to strike a balance between satisfying landlords’ expectations over future yields while also appealing to tenants. Without this balance being struck, a less desirable alternative would be for any projected rent increases in future years to be spread out over the life of the tenancy, which would see the tenant paying more in the first year than they might otherwise on a six to 12 month agreement.
Regulation—Leasehold 28. One area that may not be touched upon by other contributors—given how the Committee’s topics focus on agents, landlords and HMOs—is the much needed regulation of managing agents for leasehold properties. This extends beyond the realms of the PRS. 29. Our members and their leasehold customers continue to suffer detriment where a leasehold customer is in dispute with a managing agent over ground rent or service charge and, under threat of forfeiture of the lease, the mortgage lender steps in to pay the sum and protect the security. Given the relative speed and ease with which a freeholder or its appointed agent can terminate a lease, the lender may not have suitable opportunity to challenge the sums payable. 30. This is an area of increasing importance to our members and we have anecdotal evidence to suggest that: some ground rents are far from nominal and escalate in future years; and service charges can be excessive (eg the managing agent recovering legal fees through inflated ground rents and service charges). 148 Shelter, A better deal, September 2012 149 NLA, 3 September 2012 cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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31. In lieu of firmer regulation, there may be a considerable level of uncovered consumer detriment, where a leaseholder is unwittingly paying unjustifiable ground rents and service charges. 32. We would urge that self-regulation of managing agents is either strengthened significantly or replaced by a more independent regime and that the main method of challenging leasehold disputes, through the Leasehold Valuation Tribunal, is simplified to aid both personal and corporate claimants.
Local Authorities’ Homelessness Duty 33. We understand the pressures that led to local authorities being able to discharge their homelessness duty by placing homeless households in private accommodation. However, this solution not only fails to resolve the underlying lack of housing supply, but also has some unintended consequences. 34. Although BTL lending is unregulated, this does not diminish our members’ desire to lend responsibly. When assessing risk at a policy level, individual lenders will need to determine, for example, whether properties tenanted by housing benefit claimants increase the likelihood of the landlord falling into arrears. There are a number of factors that will play into this. 35. There is inherent risk where housing costs will be paid to the tenant, rather than the landlord—increasing the potential for that money to be used for other purposes. Inexperienced or smaller scale landlords may find it particularly difficult to managing the tenant and secure the rental income. 36. The lack of “skin in the game” that benefit-claiming tenants have, particularly regarding negotiating rents, can lead to higher refurbishment costs for the landlord. Those higher overall costs are unlikely to be subsidised by higher rents given recent decisions to cap housing costs under the Universal Credit. Such dilapidations can impact on the lender’s security. 37. It is for these reasons that some lenders take the view that the risks are too high and impose a restriction in the BTL mortgage terms and conditions prohibiting a customer from letting to a housing benefit claimant. Not all lenders impose these restrictions and, even where they do, some are willing to accept benefit tenants through “private lease schemes”, whereby a local authority enters into agreement with a private landlord (usually on a longer term lease of two to five years) with rental payments guaranteed by the local authority. 38. But, looking forward, there is a risk that landlords are less likely to let to benefit-claiming tenants given the proposed welfare reforms being brought about by the Universal Credit. With the Local Housing Allowance being brought within the scope of Universal Credit, landlords may find it more viable in a high-demand rental market to source alternative private tenants. A recent survey undertaken by the NLA revealed that 96% of landlords were concerned about the introduction of the Universal Credit.150 In a similar vein, those lenders that do impose risk-based restrictions on benefit-claiming tenants are likely to need the impacts of Universal Credit to bed-in before considering any change in policy.
Rent Controls 39. The recent pattern of steadily increasing private rents151 is a manifestation of supply not keeping pace with demand. Any solutions designed to suppress rising rents should therefore be aimed at addressing the root cause, rather than introducing artificial and ineffectual strictures such as rent controls. 40. The growth of the PRS was facilitated by the deregulation of the sector in the late 1980s, which led to investment funded in part by BTL finance. Imposing rent controls would dissuade this type of individual, and most likely institutional, investment on which the PRS is built. Both the quantity and quality of housing supply would suffer as a result. 41. Investment and housing quality would also suffer given the likely squeeze on yields. Recent studies by the Greater London Assembly152 and the Joseph Rowntree Foundation153 support that view. It is also important to note that yields in London are below the UK average despite rents being the highest of any UK region.154 As the Mayor of London’s recent consultation on a Housing Covenant for the PRS recognised, rent controls in the capital would not be the answer to rent affordability issues. 42. In addition, comparisons between high rents and average mortgage payments should not be taken at face value. A more detailed analysis that we published in early 2012 (which mapped Valuations Office Agency data on average rents against our own Regulated Mortgage Survey data) showed that there is no evidence to suggest that renting has become universally cheaper than buying.155 Indeed, when deposits and other factors are taken 150 NLA, 20 December 2012 151 LSL Property Services’ buy-to-let index for October 2012 showed that, although it was subject to the slowest month-on-month growth since May, the average UK monthly private rent reached a record high of £744. According to LSL’s index for November 2012, that average rent subsequently fell to £741. 152 GLA, The Mayor’s Housing Covenant, December 2012 153 Joseph Rowntree Foundation, The UK private rented sector as a source of affordable accommodation, November 2010 154 LSL Property Services buy-to-let index, October 2012 155 CML Housing Finance Issue 01 2012, To buy or not to buy cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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into account, renting may prove cheaper. And tenure choices are driven by many factors, including maintenance and repair costs and the risk of negative equity that comes with being an owner-occupier. January 2013
Supplementary written evidence submitted by the Council of Mortgage Lenders A note on the proportion of lenders who prohibit letting to housing benefit claimants: We have sought information from across our membership. For information, a high proportion of outstanding balances in the BTL market are concentrated on a relatively small number of firms. As such, we can report on those lenders that prohibit or allow letting to HB claimants in terms of aggregate market share of outstanding balances. Members representing around 80% of the BTL market by outstanding balance responded and of those: — Lenders representing around 55% of the market allow BTL customers letting to HB claimants. — Lenders representing around 25% of the market restrict BTL customers letting to HB claimants. We have asked members to ensure that BTL mortgage terms and conditions are fit for purpose, although it is for individual lenders to determine this. Some key factors for lenders to consider include: — their particular specialisms and appetites in the BTL market; — likelihood for the mortgage to fall into arrears; and — the difficulty that some inexperienced or smaller scale landlords may face in managing the tenant and guaranteeing the rental stream. Whether there is better evidence on the proportion of buy-to-let landlords who have the wrong kind of mortgage. The CML does not hold any data on residential mortgagors renting out their properties without the lender’s prior consent. Lenders will generally be sympathetic to a residential mortgagor’s request to temporarily let their property. May 2013
Written evidence submitted by the Paragon Group of Companies Executive Summary — Private rental is the only growing tenure type in the UK. It now accounts for 17%, or 3.62 million, of all households and constitutes a similar proportion of homes to the social rented sector. — It is already the dominant housing choice with transient sectors including students, economic migrants and those who relocate for employment purposes and is becoming increasingly popular for families and older age groups. — Significant improvements have occurred in the private rented sector (PRS) in recent years, many of which have been driven by buy-to-let landlords who take a professional approach to managing their properties, and this is reflected in tenants’ favourable opinions of the PRS. — Private landlords are already heavily regulated and sufficient powers already exist to take action against rogue landlords. At present, there are over 50 Acts of Parliament and 70 sets of regulations governing the PRS. — The critical problem that underlies concerns about the sector is a lack of supply rather than adequate regulation. The PRS is operating at capacity resulting in limited availability and competition in the sector. — Overly burdensome, top-down regulation such as rent controls would only serve to deter investment by private landlords, thus exacerbating the problem of supply. — It is debatable whether longer tenancies are desirable or necessary. Flexibility is one of the main appeals of the sector while many tenants can already obtain longer agreements from their landlords.
1. About the Paragon Group of Companies 1.1 Paragon is the leading independent provider of mortgages to residential property investors in the UK private rented sector through our specialist brands, Paragon Mortgages and Mortgage Trust. We are proud to hold a leadership position in the Council of Mortgage Lenders, and we are active members of the Intermediary Mortgage Lenders Association, the Association of Residential Letting Agents’ lenders panel, the National Landlords Association and the Finance & Leasing Association. We are also members of the Treasury’s Home Finance Forum. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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1.2 We launched our first buy-to-let mortgages in 1995 and have increasingly focused our business on professional landlords who have proven experience in purchasing and letting residential rental property. This focus is reflected in the excellent performance of the Group’s buy-to-let mortgage assets and our reputation as a leading voice in the sector. We currently have approximately 40,000 landlord customers and manage over £8.2 billion of buy-to-let loan assets. 1.3 In addition, we operate a specialist loan servicing business for third parties through our Moorgate Loan Servicing brand. The division offers a professional, flexible, efficient and cost effective proposition to lender clients to help them manage their loan assets effectively. Clients include building societies, investment banks, specialist lenders, commercial banks and other financial services companies.
2. Overview: The Private Rented Sector 2.1 Private rental is the only growing tenure type in the UK. It now accounts for 17%, or 3.62 million, of all households and over the last 30 years the difference between the number of private renters and social renters has narrowed from over three million to now be roughly equal (3.62 million and 3.83 million households respectively). 2.2 The PRS is already the dominant housing choice for transient sectors including students, economic migrants and those who relocate for employment purposes. Long-term demand in the PRS is forecast to rise, fuelled by major socio-economic factors and a contraction in the owner-occupier and social housing tenures. Consequently, there has been a rise in the number of non-traditional private renters including families and older age groups; a survey of landlords shows that 51% of tenants are categorised as families with children. 2.3 Despite the growth of the sector, it still only accounts for a relatively small proportion of the total housing market when compared to other European countries such as Germany where 47% of homes are located within the PRS. 2.4 Private landlords are the backbone of the PRS with 71% of properties in the PRS owned by individual landlords. The remaining 29% is comprised of institutions and alternative providers, for example employers that offer accommodation to staff. 2.5 Individual landlords dominate in almost all countries. In France, an overwhelming 95.5% of landlords are individuals or couples. In Ireland, small investors who own one or two properties make up 90% of private landlords. Even in Switzerland, private individual landlords are in the majority. 2.6 While there is no such thing as a typical landlord, the average UK landlord is just over 50 years old, is financially astute, has been letting property for 12 years and holds an average of eight properties. The idea that the PRS is dominated by novice landlords is a myth; most individual landlords consider themselves to be professional investors and nine out of ten have more than six years’ experience in renting out property.
3. Standards in the PRS 3.1 Standards in the sector are perhaps best judged by tenants’ experiences. The latest statistics from the Department of Communities and Local Government show that 84% of private renters are satisfied with their accommodation, compared to 80% in the social sector. 3.2 The PRS has also seen rapid improvements in energy efficiency and the number of properties meeting the decent homes standard even as the size of the sector continues to expand (according to the latest English Housing Survey). This suggests that the vast majority of private landlords are committed to improving their property portfolios and investing in high quality housing stock. 3.3 The main factors that determine overall standards in the PRS are supply and demand. Currently, the PRS’ capacity is being stretched to the limit and housing supply is failing to meet demand. The UK population is expected to grow to 71.6 million by 2033 with an estimated 290,000 new homes required each year to satisfy that demand. Only 114,160 homes were built in England in 2011. Such pressures on available housing inevitably lead to higher prices and a lack of choice which in turn means that there is demand for some properties that there would otherwise not be. 3.4 The most effective method of improving standards in the PRS, or indeed in any housing sector, is to increase the supply of stock and to get the whole housing market working well again. This means enabling the expansion of the PRS rather than limiting investment with substantial regulatory hurdles.
4. Rents and Rent Controls 4.1 Rents are perceived to be escalating rapidly, especially in South East England because of strong tenant demand and constraints on housing capacity. However, our regular survey of landlords showed that only a fifth reported an increase in rent income in the third quarter of 2012. The vast majority (68%) reported the same income. 4.2 Consideration also needs to be given to the yield that landlords obtain from their property as this gives a more accurate view of how the market is performing for both landlords and tenants. Our survey findings show that the average nationwide yield—the property portfolio’s annual rental income as a percentage of its cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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total value—has remained approximately 6% since Q1 2011. There are a number of possible causes but the overall picture is clearly not one where landlords are “profiteering” especially when interest on the mortgage finance is taken into account. 4.3 Survey data also shows that yields in central London (7.1%) over the last quarter were only the third highest in the country after the East of England (7.5%) and the North East (7.2%). 4.4 Rent controls have been suggested by some as a means of curbing high rents but there is clear evidence from the UK and abroad to support the consensus among economists that a ceiling on rents reduces the quality and quantity of housing. To quote the eminent economist Paul Krugmann (NY Times, 2000): “the analysis of rent control is among the best-understood issues in all of economics, and—among economists, anyway—one of the least controversial”; it could be very damaging for tenants, landlords and the UK’s housing market and associated sectors if this consensus is ignored at a time when access to mortgage finance is constrained and the social housing sector is in decline.
5. Regulation of Landlords, Lettings Agents and Managing Agents 5.1 It would be inaccurate to portray the PRS as an unregulated sector as there are 50 Acts of Parliament and 70 sets of regulations that apply to it, a fact noted by the Government’s Red Tape Challenge. Local authorities already have sufficient powers to tackle rogue landlords, although evidence suggests that the powers are not currently utilised to their fullest. 5.2 The critical issue for decisions on regulation is how they might affect the supply and demand dynamic in the market. Top-down regulation, including mandatory registration or licensing, will only serve to deter investors at a time when more and not less investment is needed. Government should focus on ensuring that the current legislative framework is delivered effectively. 5.3 The use and promotion of accreditation schemes can help to improve standards without imposing unnecessary burdens on private landlords. There are a number of schemes already available: many of our customers are already accredited members of bodies such as the National Landlord Association and in December 2012 the Mayor of London launched a London Rental Standard that is aimed at driving higher standards. 5.4 While private landlords are well regulated there is a regulatory gap with lettings and management agencies. At present lettings agents are not required to abide by a government, ombudsman or regulatory body code of practice. Tightening up this area may help to restrict the number of tenants renting from rogue landlords but it will also address the fact that many tenants’ problems come from sub-par management of problems once they are in the property.
6. Tenancy Agreements 6.1 There have been calls for longer tenancies to be rolled out across the PRS to supersede the existing assured short-hold tenancy agreements. It is difficult to see how this can be done without overly bureaucratic top-down directives but we should also consider whether it is desirable or necessary in the first place. 6.2 Longer tenancies may suit some tenants and landlords. However, one of the main reasons that people choose the PRS is for the flexibility that it offers. Caution must be taken before encouraging tenants and landlords to accept longer tenancies where they are not specifically desired. Locking in a set rent might be attractive initially but parallels such as saving or loan products show that there would have to be penalties if either party wished to break the terms of the agreement and in the vast majority of cases it is the tenant that wishes to move on from the property. 6.3 There is also the question of whether it is necessary. Our research shows that on average tenants stay in a property for 2.5 years and one in ten stay longer than five years. This suggests that the market is perfectly capable of providing longer term arrangements where they are wanted without any government intervention.
7. Local Authority Housing Duty and the PRS 7.1 Local authorities’ ability to discharge their housing duty to the private rented sector, and the general decline in size of the social sector, will place additional pressures on the PRS. As noted above, supply in the sector is already being squeezed and the PRS must continue to expand if it is to keep pace with demand. Investment in the sector should be encouraged and interventions that cause that investment to slow or disappear should be resisted. 7.2 There are also concerns among the landlord community over the impact of the DWP’s decision to end direct payments. We note the findings of the DWP’s recent pilot project where levels of payments by tenants on the projects varied from 88% to 97% and 316 tenants were switched back to payments to their landlords, and we urge the Government to keep this issue under close scrutiny. January 2013 cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Written evidence submitted by the City of York Council 1. This submission takes account of recent research and consultation carried out as part of the preparation of a report into the introduction of a voluntary private landlord accreditation scheme in York. The City has recognised the vital and growing role the sector plays in the provision of accommodation and through this, contributing to the economic wellbeing of the city, in addition to supporting the community. 2. Excluding vacant homes, the PRS in York was estimated at 12,727 dwellings (17.8% of the City total) in 2008 containing 17,651 households. Many of these households exhibited evidence of socio-economic disadvantage, also a younger more mobile household structure. Multi-occupancy within the PRS was high, dominated by the student market, with single occupancy lets tending to be associated with younger working households or the elderly. There is national evidence that, in the intervening period since this survey was carried out, the PRS has expanded at a greater rate and that a wider variety of people now rent properties. The survey itself concluded that the PRS within the City was significant and growing. 3. This increase has come, to some extent, at the expense of many households on average incomes that, because of high rents, struggle to save a sufficient deposit to get a foot on the property ladder with younger people being particularly affected by the lack of mortgage products available to them, high deposits and high rents. 4. Rent levels have followed a similar increase with average rents in York, and a few other excepted areas in the North of England, being on a par with those in the South east and East of England. The following table gives an idea of rent levels: Affordability: as a proportion of median Maximum monthly Median average average take home rent that local Housing York monthly private rent pay Allowance will meet 1 Bedroom £525 33% £394 2 Bedrooms £625 39% £500 3 Bedrooms £792 50% £580 4 Bedrooms £1,186 75% £845
Source: Shelter Private Rent Watch. Report one: Analysis of local rent levels and affordability. October 2011. 5. The Council’s 2011 Strategic Housing Assessment considers a household is able to afford open market private rented housing in cases where the rent is payable constitutes no more than 25% of their gross household income. The study concludes the following income levels (rounded) are required to access: A one bed property = £26,000 A two bed property = £39,000 A three bed property = £47,000 6. The median household income in 2011 in York was £22,100 (£19,500 for private renters). Clearly, many households are having to spend more than 25% of their gross income on housing costs. 7. Research indicates that the sector is made up of a series of complex, inter-related sub-markets which impact on each other. This pattern is probably repeated in cities across England, specific to particular areas, and is affected by such issues as the number, type and reputation of educational establishments in the city, levels of deprivation, economic growth and the buoyancy of the PRS within that City. It is obvious that there is no one size fits all system which can be developed to support the PRS, as each area’s market is unique, for example York is home to two large, expanding universities, as well as three higher education colleges, and their property requirements influences a substantial proportion of the private rented sector. Future student numbers, university accommodation building programmes and large scale student accommodation developments will have a serious impact on landlords operating in this sub-market, their properties and future use. 8. These factors can influence the issues that this Committee has expressed an interest in, such as the quality of the housing on offer; the levels of rent requested; the regulation of landlords and of HMOs; tenancy agreements and the length of tenure, and the relationship between local authorities and the sector, in particular how authorities are able to discharge their homelessness duty. 9. Quality of private rented housing and steps taken to ensure all housing is of an acceptable standard. Although, in general, housing stock in York is of an acceptable standard, the CYC’s Private Sector Survey of 2008 found that households within the sector in general exhibited higher levels of economic vulnerability. Rates of fuel poverty were twice the City average. Housing conditions within the sector were also worse than the City average. 37.2% of shared houses were estimated to fail the Decent Homes Standard compared to 19.3% of all occupied dwellings. Category 1 hazard rates within the sector were also significantly higher at 21.1% as were energy efficiency failures at 17.2%. A locally developed Private Landlord Accreditation Scheme cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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is being introduced in York as a means by which baseline standards can be set, with market forces and tenant awareness driving up standards for those landlords and agents outside of the accreditation scheme. 10. The Council also welcomes moves to ensure landlords respond to reasonable requests for energy performance improvements from tenants (or Councils on their behalf) as part of the Energy Act 2011. 11. Levels of rent and the interaction between housing benefit and rents. The buoyant nature of the market in some areas, such as York, means that landlords are able to ignore obtaining market advantage through offering lower rents or higher standards for the most part as “I can put a to-let sign up in my front garden and have tenants moving in 2 days later”. There is also an aversion to taking LHA tenants as, such is the demand for property, higher value, “less problematic” tenancies can easily be achieved. This high demand equates to some of highest rents in the North of England and on a par with South East. The average 2 bedroom property monthly rent is now £662 against average monthly earnings of £1,840. Lower quartile 2-bed rents stand at £595 representing over 32% of median gross household incomes in the City. 12. According to the National Housing Federation the cost of privately renting a home has risen by 37% in the past five years. This is not mirrored by the rise in earnings over the same period. The percentage increase for median rents in York over the past 12 months (October 2011—December 2012) has been, for a room—a 7.2% increase and for a 2 bedroom property—a 4% increase. 13. Access to the PRS for vulnerable households/those on low income (including a growing number of in- work claimant households) is becoming more difficult as the rate of rent rises far outstrips rises in Housing Benefits. This is set to become even more problematic following the announcement in the Chancellor’s Autumn Statement that Local Housing Allowance rates are to rise by CPI (or 30 percentile of actual rents, whichever is the lower) in April of this year and will then be capped at 1% for the two years thereafter. 14. In the start of a vicious circle, high rents and high house prices are inter-related leading to the PRS becoming home to many “frustrated” buyers, including young families. Rents at this proportion of monthly income make it difficult for potential buyers to save to purchase properties of their own. 15. Regulation of landlords and steps to deal with rogue landlords. As it currently stands there is no sure way of even identifying all private landlords letting properties in an area, let alone introducing some form of regulation. As detailed below current licencing options will only apply in areas which meet the necessary criteria. Voluntary accreditation can work in areas where credible market advantage and other benefits can be proven to landlords and agents. Where such schemes exist, they can then release already limited local authority resources to pro-actively seek bad practice and rogue landlords and take action under existing legislation. 16. There is an ongoing difficulty in engaging effectively with the PRS as a lack of registration requirement makes it difficult to know who is a landlord. There are a number of landlord networks/associations, but even the largest in York only represents a quarter of the estimated 2,000 landlords in the City, and the vast majority of these will be the better landlords, not those who need to improve. The majority of York landlords are single property amateur landlords that don’t always understand the roles and responsibilities as clearly they should. The lack of any kind of registration requirement if they don’t own a House in Multiple Occupation allows anyone to enter the market without any form of qualification/training etc. 17. This is one of the reasons behind the proposed introduction of a voluntary landlord accreditation scheme in York, although it remains to be seen how many landlords will sign up amid the current buoyant rental market. It raises such questions as; Will only the conscientious and good quality landlords sign up? What will make the more rogue elements sign up if they can let without problem? 18. As a support to landlords and tenants and to further improve the sector the Council is considering a tenant accreditation scheme to go alongside it, to act as a passport into the PRS for tenants. 19. Regulation of letting agents including fees and charges. In addition to members of industry bodies such as the Association of Residential Letting Agents, a number of bona fide agents appear to favour some form of regulation. Without the introduction of some form of mandatory registration, it is difficult to see how local authorities can be expected to regulate the agents and monitor fees and charges. Anecdotal evidence includes the requirement for administration and deposit fees payable to the agent, sometimes including a charge for landlords and tenants for carrying out an identical task, and, due to the buoyancy of the rental market, the use of holding fees to secure sought after properties. Again it is difficult to encourage tenants to come forward with issues when they are concerned about how this will affect their ability to lease in the future. Registration of agents will provide greater information on the operation of the sector in an area and will ensure a wider proportion of landlords and properties will be subject to some form of official acknowledgement. 20. Regulation of HMOs including the operation of discretionary licencing schemes. Under current regulations areas such as York, with low crime figures and a buoyant rental market, have little hope of introducing additional or selective licencing schemes as there are no areas of low demand and the low levels of anti-social behaviour do not support this. Whilst these are both positives, it does serve to mask issues within the PRS. 21. Article 4 Directive has now been agreed for York, against the wishes of some landlords and organisations, but with the support of elected members and local residents in certain wards affected by an increasing proportion of student homes in their streets/neighbourhoods. 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some areas based on evidence of environmental/social problems. It is an attempt by the Council to take a planned approach to the rise in HMO’s that is being fuelled by rising student numbers and welfare reform measures that restrict under 35 year old claimants to a shared room rate. 22. Tenancy agreements, length and security of tenure. The size, variety and nature of the various sub- markets and the recent broadening of the spectrum of the renting population, would seem to indicate that there is a need for longer, more secure tenures to favour both tenants and landlords. A reduction in tenant churn would benefit landlords by reducing void times and in some instances letting agent fees, which are repeated on a six monthly basis, and would benefit tenants by reducing the fees charged by agents in addition to providing more security of tenure. Longer letting periods would provide more sustainability to communities which again face periods of fluctuation as the size of the proportion of the population renting property grows. There is some concern caused by the insistence of buy to let mortgage lenders to ensure landlords only let properties on Assured Short Term tenancies, meaning some landlords cannot offer more secure tenancies even if they would wish to. Former tenants whose assured short term tenancy has ended are one of the three main reasons for those presenting as homeless to the City of York’s Housing Options Service. 23. With more families entering the PRS, there is a need for it to offer longer term security to raise children, keep them in local schools etc. Restrictions such as no pets or no children can limit those properties available to some families however. Insecurity of the sector is not in line with many European countries where the PRS is often the tenure of choice for many. There is more information to be taken from some of these markets. 24. How local authorities are discharging their homelessness duty by being able to place homeless households in private sector housing. The City of York Council generally welcomes the additional flexibility of this and, where available, it helps divert tenants away from expensive temporary accommodation. However it is increasingly difficult to find landlords willing to let within LHA rates. A snapshot analysis of properties available to rent on “Rightmove” on 7th November, 2011 found only 8% of available properties in the City of York Council area were within LHA rates compared to 57% of properties in the York Broad Rental Market Area rural hinterland. This has the obvious impacts on individuals, communities and service delivery. It impacts on York’s tight urban core, which is surrounded by smaller towns and more rural areas with cheaper rents and draws those having to rent away from service provision and employment opportunities, through its creation of a two-tier rent structure.
25. Research in York shows how important it is that a partnership approach within the PRS be fostered to ensure that quality and standards are maintained. As part of a Housing focussed week of events held by the City of York Council in November 2012, a Private Rented Sector Summit was held, chaired by Dr. Julie Rugg of the Centre for Housing Policy at York University. The purpose of this meeting was to draw together the various stakeholders in the City with an interest in the sector with a hope that it would spark a dialogue and raise awareness of the issues that different stakeholders have to deal with. Even though this was the first of such meetings, it was well attended by 39 invited stakeholders who participated in discussions aiming to identify the current state of the sector in York, its strengths and weaknesses and what was needed to support and develop it in the future.
26. The summit identified the rapid growth in the sector; the importance and interaction of the numerous sub-markets within the sector, particularly the student market and the challenges the sector faces. Amongst the proposals coming out of the event was the need for the development of a specific private rented sector strategy for the City. It was also useful for stakeholders from varied backgrounds and representing a wide spectrum of organisations to listen to each others perspectives on the sector. In addition to the Council and Landlords, Letting Agents and their representative bodies, the higher education institutions and student bodies, the Joseph Rowntree Foundation and other registered providers, the community and voluntary sector and authorities were represented. It is hoped to follow this up on a regular basis. January 2013
Written evidence submitted by City of Bradford Metropolitan Borough Council
1. Executive Summary of Key Points 1.1 We have considerable concerns that despite a long history of working hard to raise quality standards in the private rented sector, much more needs to be done to make a significant difference to improve standards in this increasingly important sector. 1.2 We have had considerable success in recent years when undertaking proactive enforcement campaigns, targeting particular geographical “hotspots”. However, these campaigns are resource and labour-intensive. 1.3 Recent research suggested that areas like Bradford, where there is high housing benefit dependency and a concentration of poor stock conditions, should be considered a special case for policy intervention. A partnership between the HCA, local authorities, the private rented sector and the banking sector should develop policy to offer a financial package (a “decent deal”) to improve stock conditions in the private rented sector, which could be incorporated into a landlord accreditation scheme. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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1.4 Improvements could be made to legislative and enforcement regimes that would assist local authorities in meeting their duties in relation to private rented housing. These include simplification, the removal of overlaps and the creation of consistency across different pieces of legislation and guidance. 1.5 The lack of long-term security of tenure for private rented tenants continues to be an issue of concern. The sector is never going to be attractive to families who wish to settle and lay down long-term roots in a local community, unless greater security of tenure can be provided.
2. Introduction 2.1 The Climate, Housing, Employment and Skills (CHES) Service of Bradford Council is responsible for the development of the Housing Strategy for the district, and for the delivery of key elements of that strategy. In particular, we are responsible for responding to complaints about the standard of housing in the private sector, and for licensing houses in multiple occupation (HMOs). We are also responsible for discharging the Council’s statutory responsibility for homelessness and for managing partnership arrangements with other housing providers, including private landlords, for housing vulnerable people and people in housing need. Our work involves close liaison with both landlords and tenants in the private sector on a day to day basis. We therefore have a very broad interest and stake in issues relating to the private rented housing sector. 2.2 Bradford’s housing landscape is a legacy of its industrial past. The district is highly polarised in terms of concentrations of high and low income households, and this has a direct impact on the way that the local housing market operates. A comprehensive background report, which focuses on the effects of changes in tenure patterns—including the growth of the private rented sector—is attached as an appendix to this submission or can be accessed at http://www.ippr.org/publications/55/9070/alike-in-dignity-housing-in-bradford
3. Comments on Specific Issues 3.1 Quality of private rented housing 3.1.1 Bradford has a high concentration of poor quality private rented stock—the 2008 Stock Condition Survey showed that 58.8% of privately rented properties failed to meet the Decent Homes Standard—far higher than the national figure of 40.6%. This is due in part to our legacy of older terraced housing. There has been considerable growth in the size of the private rented sector in Bradford—from 12% to 18% of households over the 10 years 2001–11. Many new landlords to the sector are “reluctant landlords” as a result of adverse economic conditions. These factors give rise to our considerable concerns that despite a long history of working hard to improve standards in the private sector, a more proactive approach to attract investment into the sector to achieve quality standards is needed. 3.1.2 We have had most success in recent years when undertaking proactive enforcement campaigns, targeting particular geographical “hotspots” where we know there have been high concentrations of poor quality private rented housing. To date we have completed 3 proactive projects where we have worked with local regeneration partners including social enterprises to promote a proactive enforcement/accreditation approach to all privately rented accommodation. This has resulted in over 1,000 privately rented properties being brought to standard through both cooperation and enforcement. In this approach we have found that landlords and tenants are generally supportive as it removes any adversarial relationship between the two parties, places the enforcement officers in a more advisory role and does not financially penalise the better landlords. However, these campaigns are very resource and labour-intensive, and local authorities will not always be able to find sufficient funding to implement them. 3.1.3 We would argue strongly that areas such as Bradford, where there is high housing benefit dependency and a concentration of poor stock conditions, should be considered a special case for policy intervention. A partnership between the HCA, local authorities, the private rented sector and the banking sector should develop policy to offer a financial package (a “decent deal”) to improve stock condition in the private rented sector, access to which could be incorporated into a landlord accreditation scheme. 3.1.4 We have had considerable successes in offering loan finance to owner-occupiers for home improvements, and this approach could be extended to private landlords based on proof of inability to access conventional bank finance or other sources of funding if a government sponsored source of funding could be made available. 3.1.5 The role of local authorities in taking steps to ensure that private rented housing is of an acceptable standard continues to be of fundamental importance, notwithstanding the difficulties in resourcing such work against a backdrop of adverse economic conditions for some private landlords. There are improvements that could be made to the enforcement regime that would assist local authorities in meeting their duties. These centre around removal of overlaps and duplications which are currently built into related legislation. 3.1.6 The overlap and duplication of powers created by the Regulatory Reform Order and the Housing Act 2004 relating to fire safety do cause some problems between enforcement authorities. This has led to local authorities and fire authorities having to meet and agree separate enforcement protocols in order to agree a way forward in terms of who enforces what and where. A review could be undertaken to eliminate this duplication in order to reduce bureaucracy. There is also a need to bring Planning and Building Regulations in cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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line with the Housing Health and Safety Rating system (HHSRS). It is possible for a housing development to pass through the planning process and comply with Building Regulations and yet contain hazards relating to lighting, crowding and space, noise and falls on stairs. Examples include rooms without windows and the use of “pigeon” staircases in loft conversions. 3.1.7 The Decent Home Standard, which was initially related to social housing stock, has subsequently become applicable to the private rented sector. However, local authorities can only enforce the first part of the decency standard relating to Category 1 hazards, and yet we have to report on the number of houses that we have made decent. The Decent Home Standard may now have less importance within the private rented sector, but it has been confusing and unhelpful to have this standard run alongside the HHSRS. 3.1.8 In more general terms, the HHSRS is a proven and useful tool for measuring and enforcing quality standards in the private rented sector. However it is an evidence based tool developed using statistical evidence which has not been updated since its introduction in 2006... Local authority enforcement experts should be involved in feeding into such a review. We have identified anomolies with the HHSRS such as not being able to take more than one course of action for the same hazard for example. 3.1.9 The Select Committee may wish to consider the advantages and disadvantages of using legal means or the welfare system to supplement work to enforce better standards in the PRS. Specifically, we would be interested in exploring whether Housing Benefit could be legitimately with-held for substandard properties, or whether possession orders could be declined when tenants legitimately with-hold rent due to the poor quality of their accommodation.
3.2 Levels of rent within the private rented sector 3.2.1 It is important that the Select Committee fully understands that rent levels and trends in the private sector are not uniform across the whole of the country. In some parts of the country, particularly the north of England, private rents are close to or on a par with social rents. Controls on rents, particularly in areas like Bradford, might further inhibit landlords in investing in the private rented market or in their existing portfolios, given that many are already struggling to meet mortgage costs. We would therefore urge the Committee to take on board regional and local variations in the private rented market when considering issues relating to private sector rent levels. A broad brush national approach to reducing LHA expenditure is also putting further pressure on landlords ability to invest in their portfolios, especially at the lower quality bottom end of the market. Setting LHA at 30% of the broad local market rate is restricting the availability of affordable housing for those reliant on Housing Benefit in an area where 54% of households in the private rented sector receive Housing Benefit.
3.3 Regulation of landlords, and steps that can be taken to deal with rogue landlords 3.3.1 Accreditation for private landlords needs to be carefully considered by the Select Committee, as there are advantages and disadvantages to implementing such a system. Most landlords are good, and do not need the burden of accreditation in order to continue maintaining acceptable standards in their properties. Accreditation is therefore a tool primarily for poorer quality housing and to secure better conditions for the most vulnerable tenants. 3.3.2 There are limitations to accreditation, particularly where it is adopted without considerable resources or incentives—our experience is that landlords need to see an incentive in order to get on board with accreditation schemes. One incentive could be the power to pay Housing Benefit direct to the landlord if the tenant agrees, which is not currently possible. The adoption of a mandatory accreditation or licensing system would be extremely resource-intensive, and if it was not adopted on a widespread basis, it could cause loss of investment in the PRS in areas where mandatory accreditation operated (as investors choose to focus on areas where accreditation doesn’t apply). One way to maintain a “level playing-field” across different local authority areas would be to develop a sub-regional landlord accreditation scheme to increase visibility and transparency in the sector, however the appetite and funding for this is currently uncertain within the West Yorkshire sub-region and previous models developed in this way have not proven successful or sustainable beyond a pilot period.
3.4 Regulation of letting agents, including agents’ fees and charges 3.4.1 We are aware that some tenants in Bradford have had issues with letting/management agents, and we would therefore support further work into the feasibility of greater regulation of this sector, given the growth and proliferation of businesses operating as agents.
3.5 Regulation of houses in multiple occupation 3.5.1 We would be in favour of simplifying the HMO definition and the removal of the specific requirement for five or more occupiers in the licensing requirement. We feel that it is the number of storeys that poses the greater risk than the number of occupiers, so would support a definition along the lines of three or more storeys and two more families to constitute a HMO requiring a licence. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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3.5.2 The HMO licencing procedure should be simplified by removing the requirement to issue a proposal, prior to the actual licence. The proposal stage can be confusing for owners and is arguably unnecessary, and its removal would reduce bureaucracy and ultimately the fee.
3.5.3 The legislation around Management Orders (MOs) for HMOs requires review and simplification. The relevant part of the legislation seems to make an assumption that local authorities have their own social housing stock and property management functions readily available. However, in places like Bradford where council housing has been subject to stock transfer, putting in place an MO has been an extremely difficult and time- consuming process, and therefore very costly and resource-intensive. Key constraints have been the difficulties in attracting a partner to manage the HMO and the timing in complying with procurement rules.
3.5.4 The inclusion of the Residential Property Tribunal in the appeal process for enforcement notices also adds another level of bureaucracy to enforcement in the private rented sector. One example relates to the service of S239 “notices of intended entry”. An enforcement officer visited a HMO in relation to suspect wiring. Once in the property, other defects were noted and the officer carried out an inspection of all the lets. The subsequent notice was appealed and the appeal upheld, as it was determined that the officer should have left the premises once the wiring had been checked, then served S239 notices, and then returned to carry out further inspection on other defects. We would argue that there should be scope to operate more efficiently, using common sense, in relation to identifying hazards in HMOs.
3.5.5 In Bradford we have not pursued the option to operate discretionary licensing schemes for HMOs due to the difficulties in defining a specific area to focus on. Whilst this is an option which hasn’t been ruled out for the future, we are conscious that we would not wish to penalise good landlords, and our experience in proactive enforcement campaigns has shown that a lot can be achieved on a proactive basis.
3.6 Tenancy agreements and length/security of tenure
3.6.1 The lack of long-term security of tenure for private rented tenants continues to be an issue of concern. The sector is never going to be attractive to families who wish to settle and lay down long-term roots in a local community. There is an argument therefore to develop a tenure option which affords greater security of tenure for private tenants, but which doesn’t lock landlords and tenants in indefinitely.
3.6.2 One of the consequences of the relative lack of security of tenure in the PRS, is the incidence of retaliatory evictions. We have concerns that when some landlords become aware that their tenants have contacted the local authority for assistance with the poor standard of their accommodation, that they then serve notice on their tenants, who are then required to move out. This can occur either due to malice on the part of the landlord, or simply because the landlord lacks the funds to address the disrepair or hazards which the tenant has complained about. The Select Committee could meaningfully look into whether legislative changes to tenure security could help to resolve this problem.
3.7 Discharging homelessness duty into private sector housing
3.7.1 We will be considering this issue during the course of reviewing Bradford’s Allocations Policy over the next few months, and a decision will be taken on the extent to which (if at all) the local authority discharges its homelessness duty by placing homeless families in the private rented sector. The recent guidance which has been issued in relation to the standards expected, should local authorities discharge their duty in this way, has caused considerable concern for us, as it does not appear to be fully streamlined with the HHSRS. Given that local authorities would be potentially liable for the safety of homeless households placed in the PRS, alongside fulfilling their role as enforcing authority, it is of critical importance that standards expected should be entirely consistent with the HHSRS.
3.8 General points
3.8.1 Any new legislation or guidance developed by the Government in relation to PRS and regulation of landlords, letting agents or HMOs must be simple and streamlined, and must not serve to duplicate or conflict with other pre-existing legislation. Much of the legislation in this area is already complex and difficult to interpret and therefore implement, which restricts its potential to assist local authorities in achieving the best possible outcomes for tenants, landlords and local communities. January 2013 cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Supplementary written evidence submitted by the City of Bradford Metropolitan Council Issues Relating to Developments Containing Rooms with Inadequate Natural Lighting Planning consents have been given and works approved by independent building inspectors to convert large buildings into apartments. Concerns relate to the lack of direct natural lighting into some rooms being used as bedrooms. In line with the Housing Act 2004, Housing Professionals use an assessment tool called the Housing Health and Safety Rating System (HHSRS) to identify hazards and categorise risks and it is on this basis appropriate enforcement action is taken. Guidance on the use of the HHSRS in provided by Housing Health and Safety Rating System, Operating Guidance (Housing Act 2004 Guidance about inspections and assessment of hazards given under section 9) 2006. With regards lighting this category and associated hazard covers the threats to physical and mental health associated with inadequate natural and/or artificial light. It includes the psychological effect associated with the view from the dwelling through glazing. The Housing Standards Team in Bradford has found flats containing rooms without windows being used as bedrooms, although in one case they were described on plans as “study rooms”. In another case the internal layout differed from the original plans and again an internal room was created without a window. The health conditions which can be caused by inadequate light include: Depression and psychological effects caused by a lack of natural light or the lack of a window with a view. Eye strain from glare and a lack of adequate light (natural or artificial). Flicker caused by certain types of artificial light causes discomfort and may cause photo convulsive reactions to those susceptible. Therefore a lack of natural lighting to the main living areas of a dwelling/flat could present category 1 hazards and the Council would have a duty to take appropriate action even though the planning and building regulations requirements have been met and this hazard increases risks to the health and wellbeing of the occupants. Although not a requirement, the absence of a window would normally not be acceptable under the terms of planning control. However it remains a local administrative choice to have such a policy, whereas it is a legal requirement for all Housing Professionals to use the HHSRS assessment tool and address the hazards associated with inadequate light. The lack of a specific requirement for a window in habitable room within the Planning Legislation or the Buildings Regulations (which only requires a purged and background ventilation system for bedrooms) introduces immediate conflict when properties are inspected under Housing legislation post development.
Case study This is a large office block that has been converted into apartments with planning consent. An Independent Building Inspector has signed off works. Plans show that there are internal bedrooms without natural lighting. The development was completed and as there is no requirement for bedrooms to have natural lighting but must have some form of ventilation, which they did. Assessment under the HHSRS is likely to establish a Category 2 rather than a category 1 hazard due to the availability of natural lighting to the living room but the lack of lighting to the bedroom still presents increased risks.
Issues Regarding Inadequate Kitchen Provisions in Shared Houses and Houses in Multiple Occupation (HMOs) There have been three recent cases which concern inadequate kitchen provisions in large developments principally designed for letting to students. In all three cases relating, parts of the building (cluster flats) are classified as HMOs and the developers have sought Planning and Building Regulations approval. Neither of these regulatory services is concerned with the issues of poor layout or inadequate food preparation facilities as it is not within their control. However, the Council’s Housing Standard Team is tasked with regulating Houses in Multiple Occupation for which it has adopted its own standards (that are consistent with neighbouring Local Authorities) and also has duties/ powers under the Housing Act 2004. The kitchen facilities provided in each of the developments failed to conform to the Council’s standards and improvements were necessary following assessment under the Housing Health and Safety Rating System. The Council’s adopted standard requires one set of kitchen facilities for every five residents.
Case Study A recently constructed purpose-built development, built to a high standard, which included Town Houses specifically designed to house a group of up to 12 students. The three relevant hazards identified under the HHSRS related to “Food Safety” and “Flames, Hot Surfaces etc” and “Crowding and Space”. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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The deficiencies related to insufficient kitchen facilities within the dwellings for the intended number of occupants. To each house there were two sets of kitchen facilities provided in a single area designated for cooking, storage and preparation of food. The layout comprised two cookers sited adjacent to each other with very little space between each appliance and there was a similar arrangement with the two sinks. This in effect was a doubling up of facilities rather than two separate functional kitchen areas. These provisions have been made to facilitate sharing by up to 12 persons. The arrangement and layout effectively limited the number of persons being able to safely use the kitchen facilities at any particular time and there was an increased likelihood of injury etc associated with the above hazards. The service has addressed the deficiencies by serving hazard awareness notices under the Housing Act 2004 in respect of the inadequate facilities and the poor layout. This did however cause significant consternation to the developers as they had taken advice from their own architects. The Council’s Planning and Building Control sections did not legislate for these requirements during the development. The Housing Standards Team were not however consulted by the developer on their specific requirements for shared facilities which resulted in retrospective enforcement which is never satisfactory.
Overlap of Enforcement Powers Relating to Fire Safety A grey area of enforcement exists between the Fire & Rescue Service (West Yorkshire Fire and Rescue Service—WYF&RS) who enforce through the Regulatory Reform (Fire Safety) Order “RRO” and the Council under the Housing Act 2004. For the purposes of HMOs and flats (both purpose built and conversions) the RRO places a duty on the Fire Service to take action in relation to means of escape in case of fire and deficiencies to the common parts of HMOs. The Local Authority is responsible for licensing of larger higher risk HMOs and also for assessing HMOs using the HHSRS and taking appropriate action under the Housing Act 2004 to address more serious hazards, including that of fire.
Case study The Housing Standards Team and the fire service were engaged in dealing with matters concerning a large purpose built block split into apartments. Each apartment is privately owned and there is a management company assigned to deal with the common parts. All relevant approvals were obtained at the time of completion of the development. However, the owners of the apartments have since changed the previous fire rated doors to non-fire resisting doors to the main flat door, thereby compromising the escape route. WYFRA do not have powers to gain entry to the flats under the RRO and there was quite a protracted debate about whether the deficient doors should be treated as part of the common parts or part of the flat and therefore who should lead on enforcement. This was further complicated by the fact that the doors are treated as part of the flat under the terms of the lease. The Fire Service eventually did take the lead on dealing with the deficient doors, but on the basis that the council would assist on matters of gaining entry. In order to deal with the grey areas of responsibility, the West Yorkshire Local Authorities and the WYFRA have developed and signed up to a protocol which establishes joint working relationships. The legislative overlap has been recognised and acknowledged by the Chief Fire Officers Association and a circular (2007/1009) was issued to Regional Fire Services and a protocol accompanied the circular. The template Protocol had been jointly endorsed by the Housing Minister and Fire and Rescue Service Minister at CLG and is recommended for adoption by all enforcing authorities. The Lakanal House tragedy clearly demonstrates that breaches in the compartmentation of individual flats can lead to fire spreading very easily. In order to carry out a thorough inspection of very large developments, the responsibility for inspection and enforcement with regards to fire safety deficiencies should rest with one Authority—and should rest with the authority or body which possesses the relevant expertise/knowledge in this area. The situation at the moment is that the Council would have to inspect the internal structure and layout of the flats and the Fire Service the common areas. As it stands the responsible person must carry out a thorough risk assessment and act upon the findings—it is often found that risk assessments do not cover internal structures of flats and are usually concentrated on the common escape route only. These and similar concerns have also been highlighted in a Report to the Secretary of State by the Chief Fire and Rescue Adviser on the emerging issues arising from the fatal fire at Lakanal House, Camberwell on 3 July 2009 by Sir Ken Knight and the LABC Lakanal House CPD Briefing note May 2013.
Provision of Access to Loft Conversions and the Hazard of “Falls on Stairs” It is a commonly-held assumption that if an element complies with the Building Regulations then it is satisfactory. However the Building Regulations are only technical guidance and our experience is that compliance with Building Regulations does not mean compliance with the requirements of the HHSRS. As well as the example of rooms without windows discussed above there are also potential issues with certain types of staircases. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Alternating tread stairs, also referred to as space saver stairs could be passed in certain circumstances for use in residential properties by Building Control particularly for use with loft conversions. Whilst the use of such staircases are allowed in limited circumstances it is possible that they become the subject of an assessment under the HHSRS and therefore could present Category 1 hazards due to the increased risk of a fall they create. Should action be necessary under the Housing Act 2004 it would again cause the owner consternation as they would argue that approval has been given under the Building Regulations.
Case Study The authority had one such case where a single room was accessed off such a staircase. The staircase was only short of handrails in meeting the requirements of Building Regulations. The Authority considered serving a prohibition order to address the hazard of falling on stairs but this was not necessary due to the cooperation demonstrated by the owner who duly removed the staircase.
Conclusion The enforcement Authorities who work within the private rented sector are faced with various pieces of legislation, supported by technical guidance which is not always complementary, consistent and in some cases conflicts. June 2013
Written evidence submitted by Leeds City Council 1. Background 2. The private rented sector (PRS) is an important sector in providing homes for individuals and families. It allows flexibility and economic migration, offers life long homes, and provides people with a good quality home in which they can lead their life. Unfortunately it is still saddled with a relatively poor image with some landlords being seen as greedy, charging high rents for poor housing and throwing vulnerable occupiers out on to the street at the first opportunity. Nothing could be further from the truth. Whilst there are poor landlords and criminal landlords the majority of the sector is of a good standard and well managed. 3. It is important to reiterate that there is no single private sector housing market as it made up of different sectors catering to different housing needs. In this respect it is not dissimilar to the owner occupied market. Sub markets dictate the quality and condition of the offer and the level of management provided by owners or agents.
4. Quality of PRS Housing 5. A significant part of the PRS is self regulating based on these markets. The top end of the market in Leeds where rents can run into thousands of pounds a month does not require regulation by the Council as quality and standards must be maintained to maintain market position. The position is not dissimilar in a lot of the outer higher rental markets within the city. Clients expect higher than basic legal minimum standards and the market has to provide these. The clients are also more likely to take up any dispute with owners or agents directly rather than complain to the local authority. Here reputations are important to owners and agents so good management of quality homes is essential for business. 6. The poorer quality PRS stock tends to be concentrated in the inner city in the older housing stock. Stock condition surveys confirm this to be the case for all private sector housing, but as 55% of the PRS is located in the pre 1919 stock this issue is exacerbated. However, even within the pre 1919 PRS sector, markets dictate quality of the stock. Within the traditional student market quality is dictated by the market. Standards have been increased due to the client group demanding higher standards and having a sufficient supply of properties to enable them to make a choice, resulting in the poorer standard housing in this market not being let, adversely affecting landlords income. 7. With the loss of the PRSG there has been a reduction in any financial assistance that could be made available to the sector. Using intelligence on stock condition, health indexices etc there may be the potential to look at the savings between housing investment and improvements in health and well being as an invest to save model. A report by Sheffield Hallam University showed that for every £1 invested into energy efficiency or falls prevention in the Leeds Housing Stock resulted in a £2 saving to city.
8. Rent Levels in PRS 9. Rental levels vary greatly within Leeds from a few hounded pounds at the lower end of the market to thousands of pounds a month at the top end. Market sectors and locations tend to dictate rents. 10. There is an increasing issue of affordability across all sectors of the private rental market. Even within traditional affordable rental markets for the average household private rents are taking an increasing amount of incomes. In some areas, based on 25% of spending being on housing cost, household incomes would need cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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to be £30,000 per annum compared to actual average incomes in these areas of £24,000. These areas were traditionally markets for the average household, so rents are now taking a greater proportion of their income. This is on top of fuel and food costs. This will be exacerbated by overall reductions in benefits as a result of welfare reform. 11. The interaction between housing benefit and rents has mainly been at the lower end of the rental market. However this is not the case for everyone with increasing issues of affordability for those who have made their home and life in the more suburban markets of the city but who require housing benefit to help with costs. With the impending introduction of welfare reform and proposals to reduce the welfare bill it is likely that rental levels in these markets will become unaffordable to those who rely on housing benefits to help pay for their home. This has the potential to cause migration of households into new areas and potentially new markets. It also has the potential to see increased investment by the PRS into areas of the city which have been predominately owner/occupied increasing the transient nature of areas and their sustainability. 12. The main interaction between rents and housing benefit has been at the lower end of the market especially as the way in which housing benefit is calculated has changed in terms of reduction of the rent percentile level at which it is awarded. It is difficult to regulate the rental market without some sort of Government interventions. However the current model is resulting in an increase in a lack of affordable rented accommodation as rents increase and amount of a persons income require to meet that rent increases. This situation is likely to increase with the introduction of the proposed welfare changes.
13. Regulation of Landlords 14. Firstly what is a rogue landlord? How does someone become defined as a rogue landlord.? 15. There has recently been as increase in reluctant landlords due to the current economic conditions and the lack of movement in the selling of properties. Owners who have to move for employment or who inherit properties are increasingly turning to the PRS as they are increasingly unable to sell their houses due to market conditions or negative equity. 16. Part of the issue with the PRS is due to a lack of knowledge and understanding of the business. Individuals enter the sector with little knowledge of their responsibility or of business planning as to the cost of renting a property. The perception is that it is easy money that can be made with very little effort. Education is a tool by which landlords should be helped to understand the rental business. The Council has its own web site which it uses to provide guidance to owners and tenants around this type of information. There is a place in this for CLG and the landlord organisations to provide more help and assistance. LCC already works closely with NLA and RLA on their landlord foundation courses, helping promote these and linking them to licensing scheme conditions. This could be web based information or courses which would offer help and advice. Ideally these would be free but used as a marketing tool to encourage landlords to join organisations to improve their business skills and knowledge of the market. 17. Strategically working with landlord associations at a local level can help with regulation of the sector. By engaging and forming partnerships with PRS representative clear policies and strategies can be developed for the sector and gain the support of the landlords themselves. Standards and policies can be agreed and when implemented they have the backing of the landlords themselves as the minimum requirements for the sector. 18. Accreditation schemes can also help to regulate the sector. To be successful there needs to be a market advantage to be a member , this also needs to include incentives such as parking and refuse concessions to encourage membership. Therefore accreditation does not work in all sub markets. For the Leeds Landlords Accreditation scheme the main area of success has been in the student market. If an owner is not a member then letting of their property will be difficult. However this is not the same in other sub markets were there is no perceived advantage to being accredited. The scheme needs to gain significant market advantage city wide by obtaining membership across all markets. This needs to be done in partnership with Landlords organisations, promotion of the scheme to the sector, especially the tenants so that they are asking for their landlords to be members. Accreditation schemes allow owners to learn about the sector, future developments and to become better landlords. Leeds has its own Landlords accreditation scheme which has been recognised nationally. Currently there are 337 members and the number is increasing. This covers over 14,000 bed spaces in the city. 19. A robust enforcement policy allows the targeting of resources to deal with those landlords who despite having the defects to their properties pointed out by the local authority do not resolve the issues without more formal enforcement. Having a triage system allows enforcement to be targeted to landlords who refuse to undertake the works required via informal means. This allows enforcement to be targeted and resources deployed where required. All staff involved in enforcement are highly professional and competent in taking action. The teams involved last year took 97 prosecutions against owners for non compliance with legal notices, failure to obtain a licence or breaching their licence conditions. In addition, the service responded to 3,303 requests for service, carried out over 2,000 property inspections and served 1,360 separate enforcement notices, including 22 prohibition orders. However this approach relies on tenants to complain about their housing conditions. Unfortunately, those who are in worst need generally don’t complain due to fear of losing their home, lack of knowledge about their rights or a lack of options in relation to their income. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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20. As part of the enforcement process we would welcome or up to date date on the enforcement of the HSHRS as the current guidance is now considered out of date. 21. Consideration should be given to revising the existing powers of entry process. To have to serve and re- inspection a property when invited in by a tenant is laborious and a waste of resources. Any enforcement concordat show offer any landlord the right to put any defects right initially, unless there is serious risk. The need to serve a section 239 Housing Act 2004 notice should be removed. 22. Intelligence allows the authority to identify where the poorest quality housing stock and levels of associated PRS are located. By dedicating resources to address these areas, tenants who would not usually make contact with the authority are proactively protected. To achieve the best outcomes such proactive targeting of locations should be as part of a wider intervention involving the Planning, crime and grime teams, Anti- social behaviour, Police etc. The intervention should not just be about enforcement but should also include education and improving management standards so that once the actions are complete the improvements remain sustainable. 23. Mandatory licensing of HMO’s has shown that this can improve the conditions within this property type. The issue in terms of poor standards is with those HMO’s which do not require a licence. These and those properties owned in the areas described above are the main causes for concern. The Rugg Review considered registration of the PRS as a whole. This would allow better regulation, improved standards and would bring an element of professionalism to the sector. A consequence may be that it reduces the supply of homes as single or small portfolio holders do not see the business case or it puts off those who are currently renting out of necessity due to the current economic climate. 24. There has also never been any link between property standard and housing benefit. There are arguments for and against this in terms of affect on supply for vulnerable individuals, rent levels etc. that can be made especially with the introduction of universal credit.
25. Regulation of letting agents 26. As with the sector as a whole this varies from market to market. At present anyone can set up as a managing agent without any experience or training. This leads to a spectrum of quality in the sector, with the best being very good at their business and the worst causing considerable hardship and difficulties to customers of the sector. 27. The average management fee for the city is 10% of rent. This is for basic management and precludes a finders fee which is paid on top of this amount. Discussions with landlords indicate that management costs with agents tend to be closer to the 20% level due to the add-ons charged. 28. Tenants with choice and their own financial means to make that choice will shop around to get best value. This is especially the case in the professional and student market where there are considerable options to allow choice. There is also a tendency for agents in this type of market to be a member of a professional organisation and to have the appropriate training and professional qualifications. 29. Leeds has seen an increase in the number of managing agents who deal with the lower rental end of the market. Here the offer is generally cheaper than the city normal which brings with it associated problems in terms of poor management and getting repairs done. There have been a number of cases where agencies have set up, quickly changed names or ownership or closed down only to re-open a few weeks later under a different name but with the same owner. This practise tends to be within the lower rental areas where the most vulnerable and socially excluded client groups reside though necessity rather than choice. 30. Leeds has considered an accredited Managing Agents scheme. Unfortunately, there was little appetite from the managing agents themselves and resources did not allow the scheme to be progressed. The scheme as with landlords would have been voluntary and would not have fully addressed the issue of the poor managing agents in the sector. This is perhaps an area that should have an increased priority and would benefit from Government led policies.. 31. Again the option of proper regulation of the managing agents sector could be considered with legal minimums for entry into the market. Even this will not help some tenants whose properties are self managed by landlords who do not give agreements and whose only contact with the tenant is via a mobile phone with rents collected on a Monday night in cash.
32. Regulation of HMO’s, including discretionary licensing 33. Leeds has the largest number of mandatory licensable HMO’s in the country, around 3000 properties at any one time. This has created resource issues around the five year re-licensing process due to the volume of applications. It was not helped this year due to the potential changes in the process which came in but during the period of re-licensing rather than at the start and this in effect was too late for over 90% of landlords in Leeds. 34. The standard of accommodation in mandatory HMO’s has been found to be better than in other types of HMO’s. Landlords expect to have a compliance check and to comply with the licence conditions. It is in the cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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non licensable HMO’s where standards are the worst due to poor conversions, a lack of planning enforcement, tenants not bringing problems to the Council’s attention, etc. Leeds has considered additional licensing as an option but decided against it based upon an option appraisal which showed the preferred option to be proactive work in targeted areas with a dedicated resource. Having introduced selective licensing it was determined that the lessons from this scheme would be learnt before any additional licensing schemes would be introduced. Article 4 Direction has been adopted by the City in 2012 which will help to manage future development of the sector under certain circumstances. 35. Leeds received Secretary of State approval to introduce a selective licensing scheme in the city. The designation commenced in October 2009. It is perceived to have been a success by all parties, however we are just in the process of conducting a review to determine what has worked over the initial 3 years, what do we need to do over the next two and how do we ensure continued improvements in the area. The business case for selective licensing cost the Council at least £80,000 to produce. A consequence of this is that any further additional licensing scheme would require up front funding by the Council, which is difficult to justify in the current financial climate. 36. As a result of the cost of additional licensing the Council is looking to use an alternative approach of proactive locality working targeting the poorer areas as described above.
37. Tenancy agreements and security of tenure 38. The landlords use assured shorthold tenancy agreements (ASH) as part of their letting. These are generally six or 12 month agreements depend upon the market. It is very rare that anything longer than a 12 month agreement will be in place. This gives limited security to tenants to allow longer term planning for their home and life. 39. Again this is market dependant and will depend upon the relationship between the individual landlord and tenant. Whilst there may be a 12 month agreement in place this can be rolled on year after year where both the tenant and owner agree. This minimises costs to the owner and provides an element of stability to the tenant. This type of relationship can be seen to occur across all markets’ 40. There is always a risk of retaliatory evictions when enforcement action occurs. One option may be reduce the right of repossession/eviction were the LA has served notice due to the presence of a category 1 hazard. 41. The way managing agents charge their fees can affect security of tenure. Managing agents charge a finders fee for new tenants, usually a months rent, so it is in their interests to increase turn over of tenancies. In the more unscrupulous agencies this could be a way of operating. It would be down to the owner to do their homework on agencies before engaging them to manage their property as it will affect their income streams as well tenants lives. 42. Longer tenancies is an issue that the PRS have considered. However there are concerns about repossessing their properties if a tenant fails to pay or causes damage. The current ASH allows them not to renew in these cases and is quicker and cheaper than court action. Longer tenancies may also restrict those who use the market to be mobile.
43. Homelessness duty and the PRS 44. Leeds engages with the PRS to assist homeless individuals/families to find suitable homes. Through its Housing Options Service the Council has a Private Sector Letting Scheme. The scheme encourages the PRS to offer up properties to those on the Local Housing Register by offering incentives. Landlords offer accommodation to an agreed standard and the Council following a homelessness assessment, places a suitable individual/family into the accommodation. The scheme offers the landlord damage liability for the first tenancy period, direct housing benefit payments and support of the tenant by the Council. After the initial tenancy period it is up to both parties to agree to continue the arrangement. The scheme offers the landlord a “probationary” period to consider a vulnerable tenant whilst offering the tenant a home. The scheme does not discharge all of the Council’s homelessness duty but is successful in finding homes for those in need. 45. The Council is currently considering it’s option to discharge its homelessness duty to the PRS under the Localism Act. This is at an initial stage and the option will be explored fully prior to any decision being made in respect of the tenancy policy by the Council. However are considers regarding the standard of accommodation. Any accommodation should be free from a any category 1 hazard and fit for purpose in terms of size standards etc. Currently Leeds has an inspection regime for its private sector letting scheme to ensure properties met the require standard prior to occupation. Prior to any discharge of duty to the private sector such an inspection regimen would be essential to ensure standards of accommodation for tenants. 46. To increase the supply of property available to the Council a private sector leasing scheme is being explored in partnership with the PRS. This work is on going with a view to determining a suitable scheme, subject to the financial model being workable, in the new year. January 2013 cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Supplementary written evidence submitted by Leeds City Council Leeds Neighbourhood Approach As part of the review into services the LCC decided against further discretionary licensing in favour of a more flexible approach to area based improvements. Whilst seen as a success, Selective Licensing has had a number of limitations in terms of improving the private rented sector. It is specific to management issues and does not cover standards, and there are significant costs to the creation of the initial business case. The one area in Leeds took two years to develop and get approved at a cost of around £100k to the authority. Using the lessons learnt the Council has developed and has recently implemented its Neighbourhood Approach. This will target neighbourhoods on a street by street basis addressing the area as whole and dealing with standards in the private rented sector as well as empty homes. Partners who are working with the Council in this approach include the Police, Fire, third sector organisations, Care and Repair and employment services. The model involved identifying areas of high numbers of rented properties and empty homes, poor environmental standards, high crime levels etc. The aim is to improve the area overall not just the housing stock. Other agencies will be involved in improving the area. Everyone in the area will be offered help and advice around energy efficiency, benefit checks, employment opportunities, fire safety checks and crime prevention visits regardless of tenure. In terms of the private sector, all landlords, including managing agents and tenants have been written to offering any help and advice we can to improve their property and business. Other landlords are being asked to mentor those who need help with issues around their business or tenancy issues. These landlords will be from our accreditation scheme or national associations and have considerable experience and knowledge of this business. The aim is to help landlords with their business and for them to improve their management standards. The details of how the mentoring will work are being finalised. Landlords have been given a 6/8 week period to come forward to work with the Council and others before we adopt a more formal approach. This will involve the full use of all legal powers to address issues in standards. The aim is to inspect 100% of all privately rented properties in an area and to ensure that they meet the legal minimum requirements. However it also looks to educate and improve the knowledge and management skills of landlords to try and improve the area longer term and make the area more sustainable. This approach is seen as more flexible than licensing; can target a single street or 4/5 streets over a 6/9 month period rather than have a scheme for up to five years. The team which has been set up can work on areas throughout the city using this approach as they are identified or they become an issue. Once it is up and running it is hoped that there could be up to three of these areas in operation in various parts of the city at any one time.
Selective Licensing The area was designated as an Discretionary Licensing Area in October 2009. Currently there have been 576 licences issued. As a result of the work done by the team 47 prosecutions have been taken against landlords operating within the area; 42 of these have been for operating without a licence. Currently there is a programme of inspections to ensure all licensable properties fully comply with scheme conditions and legal minimum standards. These are programmed to be completed by October of this year. Throughout the life of the scheme regular meetings are held with partners to consider progress and to encourage better joined up working. These partners include Planning, the Police, Fire Service, the ASB team and the local environmental team. Whilst it is difficult to separate the results of selective licensing on the area from the overall regeneration of the area, comparison with the control area has shown: — A reduction in crime—criminal damage, theft, vehicle crime, domestic burglary have all shown a greater reduction than in the control area. — Rent levels have remained the same as in the comparison area. — There has been a fluctuation in empty home levels but this can be attributed to one landlord with a large portfolio within the licensing area but with no presence in the control area going into administration. Overall the selective licensing area has seen a decline in the number of empty homes since its introduction. — Property prices have remained similar in relation to the comparison area, with no decline in prices which was a concern of landlords who opposed its introduction. A perception survey amongst partners showed they thought it had been a success. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Fees Structures in Leeds—Licensing/Accreditation Selective Licensing For the full five years the licence was agreed at £525. This was the average fee level for a mandatory HMO licence at this time. If you were a member of an accreditation scheme—Leeds City Council’s or Unipol—you attracted a £75 discount per licence. For every year the scheme has been in operation new owners would be offered a continual 20% reduction year on year until year five when a new owner would be paying only 20% of the original £525, namely £105. Where owners have tried to claim a reduced fee after the first year, but had owned and let the property, since the scheme’s introduction they would be charged the full £525 fee.
HMO Licence Fees HMO LICENCE FEES (WEF AUTUMN 2011) HMO Licence Fee HMO Licence Fee Property Type (Accredited Landlord) (Non-accredited Landlord) 5–6 Occupants £583.45 £700.14 7–8 Occupants £749.27 £908.96 9–14 Occupants £1,105.49 £1,332.73 15–19 Occupants £1,228.32 £1,455.56 20 or more occupants £1,351.15 £1,578.39
Licence Discounts A discount has been applied to the invoice for a HMO licence if, at the time of issuing the invoice, the applicant for the HMO licence owns the property and is a confirmed member of the Leeds Landlords’ Accreditation Scheme (as administered by RLAAS Ltd) and/or a full, not just advertising member of the UNIPOL Code of Standards. The accreditation discount to the HMO licence fee will NOT be applied if we issue a invoice and your application to either of the above accreditation schemes is pending. You should note that once you have submitted your HMO licence application in most cases, an invoice is issued immediately. We will not retrospectively apply the accreditation discount to an existing invoice and there is no “proxy” entitlement to the accreditation discount by virtue of an “association” between a none accredited and an accredited member. Accreditation discounts will not be available to landlords where it appears that a timely application has not been made to the council. There is also a discount if you are a member of the UNIPOL Code of Standards. If you only use UNIPOL to advertise your property you will have to pay the full amount. If we receive a request to alter a licence there will be a charge of £100 per licence. Multiple variations may be eligible for a discount depending on the nature and complexity of the request. We will charge £150 for any application we receive from a landlord who wants to “buy” the unexpired term of an existing licence. This can arise for instance, if you have bought a licensed property from an existing licence holder, and you want to apply for a new HMO licence in your own name. Application, renewal and request for variation forms can be found in downloads on this page.
Leeds Landlords Accreditation Scheme Fees COSTS TO LANDLORDS—ANNUAL MEMBERSHIP FEES Membership of LLAS costs from only £45 per year depending upon the number of rented properties you own: Number of Properties Fee Up to 5 £45 6–10 £90 11–20 £135 21–30 £180 More than 30 £225
Discount for Unipol Code Landlords We do not make any charge for properties that are fully occupied by students and which are declared to Unipol if you are a Unipol Code Landlord. In addition you also receive a further discount of £20 on the normal LLAS membership fee. June 2013 cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Written evidence submitted by the East Midlands Property Owners Ltd Introduction 1.1 Thank you for this opportunity to contribute to this inquiry. 1.2 EMPO is a not for profit residential landlord association whose primary function is to support and represent the interests of residential landlords, letting agents and property investors across the East Midlands. EMPO is based at 78 Lenton Boulevard, Nottingham NG7 2EN. EMPO currently has 350 members who own or manage in excess of 10,000 residential properties. 1.3 The private rented sector (PRS) has played a critical role over the past 20 years in terms of supporting the following: — The significant growth in the student population would not have been possible without the expansion of the PRS. — Labour mobility would have been significantly constrained without the growth in the PRS. — Without the PRS fewer people would have been housed at a time of shrinking social housing stock and the requirement for high mortgage deposits from first time buyers. — The PRS prevented an acute shortage of affordable family homes due to years of insufficient investment and failed polices in addressing the shortage of social housing due to large amounts of social housing stock sold off under the Right to Buy and not replaced. 1.4 EMPO has been encouraged by Housing Minister Mark Prisk recent announcement of a new £200 million fund for the construction of new homes specifically for private rent. However we are dismayed with the relentless level of locally implemented regulations impacting upon landlords; for example licensing schemes and other measures which are adding unnecessary cost resulting in higher rents and slower investment activity in the PRS.
The quality of private rented housing along with the steps that can be taken to ensure all housing in the sector is of an acceptable standard? 2.1 We accept the sector does have its problems with rogue landlords and they should be tackled robustly at a local level whilst avoiding intervention measures that impact adversely on the majority of good landlords following good standards and practices. These landlords deserve to be treated well as they conduct themselves in a business like fashion and pre-dominantly supply accommodation above the standards required by law and in many instances offer housing of a better standard than owner occupiers in the same location. 2.2 There are a large number of tools within the various Housing Acts to deal with the property and the skills of those who manage them. We believe local authorities need to make better use of and utilize these provisions in pursing enforcement activities to ensure compliance by the small number of rogue landlords. 2.3 We support and recognise professionally operated landlord accreditation schemes as being an excellent and invaluable tool for landlords in ensuring they are kept up to date with their responsibilities in terms of landlord management and housing standards. We believe these voluntary schemes can play a significant role in improving standards, providing local authorities are more focused in ensuring adequate marketing spend being made available to promote them. 2.4 We support a landlord register (or fit and proper license) where the landlord registration number is recorded on the tenancy agreement along with the registration number for the accreditation scheme. Landlord charges for such a register would be on a sliding scale depending on membership subscriptions to accreditation schemes and landlord associations. 2.5 We support and salute Government policies such as Green Deal and the Energy Companies Obligation to Affordable Warmth as workable and cost effective schemes for landlords to effectively improve the energy efficiency of their rented properties.
Levels of rent within the PRS-including the possibility of rent controls and the interaction between housing benefits and rents. 3.1 At present rents are below CPI in the majority of local authorities across England & Wales. — Average rents from the 12 months to June 2012 grew by 1.76% in England. — In 160 out of the 325 authorities, rental growth was below 2%. — In 80 out of the 325 authorities, rental growth was negative. Data released by Valuation Office Agency (VOA) 3.2 “Rent Affordability” over recent years has been being impacted by a combination of factors including slow wage growth, the cost of local authority discretionary licensing, an acute shortage of affordable homes and high mortgage deposits for first time buyers. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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3.3 Experience shows Landlords will tend not to invoke rent rises every six or 12 months for tenants in situ, but rebase their rent to market when a tenant moves on, which on average is every 24 months. 3.4 The open market is the best determinant of rent levels. Rent controls would distort the market by deterring new institutional investment in the rental property whilst leading to an exodus of current investors. This would have the affect of leaving social housing providers with the responsibility of meeting the subsequent housing demand from these market changes. House prices would fall and any talk about institutional investors “beefing up” the residential market would vanish. 3.5 Rent inflation across the UK as a whole tends to correlate very strongly with average earnings and therefore linking rents to average earnings might be a good way of setting rents and would mean that rents would have the same affordability in the future as they do. 3.6 The interaction of housing benefits and rents. With the recent announcement by the Chancellor that benefits will be capped at 1% from 2014 and therefore no longer linked to inflation will undoubtedly mean some claimants will experience a rent shortfall, which will have to be met out of their own pocket. As we have shown in our earlier analysis of rents by the VOA, some areas will experience little rental growth and therefore claimants will not need to make up the shortfall. However there will be instances where claimants will need to seek alternative cheaper accommodation or take advantage of the fund being made available by Government to cushion the impact of these changes where claimants live in areas where rent increases are highest.
Regulation of landlords and steps that can be taken to deal with rogue landlords; regulation of letting agent’s fees and charges. 4.1 Effective regulation requires all PRS stakeholders to be part of the process from a very early stage. Regrettably our experience with local authorities demonstrates this early engagement is not present. 4.2 Existing regulation imposed by local authorities is not properly or actively enforced or marketed/ promoted to the wider landlord community. This allows rogue landlords to operate under the radar and amateur landlords to operate while being unaware of their responsibilities. 4.3 We would like to see all agents offering client money protection services and being part of a self regulating body such as RICS or ARLA. 4.4 We do not believe in caps on fees, but are very supportive of full and transparent disclosure of all fees and charges at the commencement of the client relationship.
The Regulation of houses of multiple occupation (HMOs), including the operation of discretionary licensing schemes imposed by local authorities. 5.1 With Government benefit changes now only offering 25–34 year olds support for shared accommodation, the need and requirement for this type of accommodation in the community is essential. In Nottingham 32% of the population is aged between 18–30 years and the local authority policy is to restrict the use and growth of HMOs in the city. At a time where shared accommodation is the only option available to many young people and where forthcoming changes in welfare reform will make this type of accommodation even more critical within housing provision. . 5.2 Our concerns are compounded by the fact that often decisions to constrain the growth of HMOs are taken without any early consultation with the PRS or evaluation of the need for HMO’s in a local area. The sole decision process is based around reducing student housing densities. Shared housing does not form a part of local authorities strategic housing plans, although for many young people this type of housing is the only accessible housing option open to them. 5.3 We believe discretionary licensing schemes do little to improve communities and standards. In fact we suggest they only really impact upon the good landlords as effective enforcement procedures to deal with rogue landlords are lacking under such schemes. Furthermore landlord costs associated with complying with such schemes are passed onto tenants in the form of higher rents. There is also evidence these schemes create homelessness as landlords opt out of licensing by serving possession notices to tenants so properties can be re- marketed with fewer tenants at higher rents.
Tenancy agreements and length and security of tenure 6.1 Most tenants in the PRS are on Assured Shorthold Tenancy Agreements (AST). 6.2 Tenancies fail for specific reasons such as changes in circumstances by the tenant. For example when a tenant loses their job or experiences a relationship breakdown. Other reasons include rent arrears and anti social behaviour. It is perhaps more appropriate to focus policy intervention on these reasons for tenancy failure, rather than on a tenancy framework that appears for the most part fit for purpose. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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6.3 There are several reasons why longer tenancies are not used more extensively by the PRS. — Valuation- Most PRS Landlords view property as an investment and as with all types of investment opportunities there is a requirement for flexibility in terms of having the ability to sell investments relatively quickly. A property with a sitting tenant will negatively affect its selling price. — As part of the terms and conditions for a buy-to-let mortgage, restrictions are placed on the type and length of tenancy agreements permitted in order to protect the value of the mortgage company’s asset in the event of repossession. — There is a huge fear amongst landlords that the continued roll out of regulation into the PRS will make the PRS sector less attractive as an investment option. Landlords want the flexibility to sell their investments quickly which would not be possible with long term tenancy agreements in place. — The best outcome for occupiers and investors is a policy environment that delivers choice and where the well proven AST co-exists with longer-term tenancies. — Forcing long tenancy across the whole market would be a high risk strategy for the Government. The PRS needs to grow and attract new investment in order to meet the future demands for housing. Increased regulation and interference such as index linked rents tied to longer tenancies will reduce the investment levels in the sector. — There are a number of simple ways where longer term tenancies would become attractive to investors. These include measures introduced by local authorities to help landlords deal effectively with anti social behaviour (ASB). Giving landlord the ability to terminate tenancies swiftly, without having to go to court where the reason is landlord sale, rent arrears or ASB. Gaining the support from mortgage lenders for longer term tenancies.
How local authorities are discharging their homelessness duty by being able to place homeless households in the PRS. 71. There is strong demand for accommodation from tenants not on benefits and combined with future welfare reform changes we expect to see significant increases in demand for accommodation in the PRS. Regulation such as Article 4, discretionary licensing and Government interference in the sector is inhibiting future investment in the PRS. In Nottingham there is local authority resistance to PRS investment in providing housing other than family housing under the City’s Article 4.direction. This approach will create a problem for Nottingham City and other local authorities in discharging their homelessness duty into the PRS.
Conclusions Recent studies show that since 2001 the number of private rented households has grown by 75%. By 2025 it is predicted 22% of all households will be living in the PRS. Therefore the importance of the PRS in providing affordable, safe and decent homes is crucial if the housing needs for England and Wales are to be achieved. Overall we believe the PRS functions well in providing the homes people want to live in at rents they can afford. Future investment necessary to meet demand will only happen in the sector if investors are confident government will treat them in a business like fashion and not over burden them will regulation. Our recommendations include the following: — To include a simple compulsory registration scheme for landlords. — To recognise that a significant concentration of HMOs is limited to a few wards in the Country and extended planning powers on HMOs will constrain a desperately needed type of accommodation in many of our communities — Local authorities need to provide robust evidence that mandatory licensing is under full control and properly managed prior to looking at discretionary licensing schemes. — Local authorities need to introduce robust measures to tackle the problem of rogue landlords and agents. — Local authorities need to properly consult on policy matters with all PRS stakeholders from an early stage therefore ensuring respect and buy in from the PRS. — Local authorities need to ensure they have adequate resources to advertise new regulation prior to it being rolled out. — Policy such as rent controls will damage investor confidence, the sector and ultimately housing provision. January 2013 cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Further written evidence submitted by the East Midlands Property Owners A Small Addendum My comments are not intended against the safety aspects of HMO’s, rather some of the provisions, such as room sizes and number of people permitted (which do not apply to owner occupied property for example), and where a newborn child can tip a property into HMO status, with a newborn considered to be a person on the premises, under the 2004 Act. My personal opinion is that the 2004 Act is very poorly written, and does not take account of the real world situation and the increasing demand for multiple occupation. The matter is further aggravated by the insurance position, and insurance companies either refusing to insure DSS occupied properties, or putting on heavy increased premiums, at a time when income from such persons via benefits is falling and is becoming less and less certain. There is an urgent need for a Government funded insurance scheme to cover some properties, something on the lines of pooling together of premiums on a non profit basis. The increasing imposition of discretionary HMO licensing as things stand, with insurance and other problems, seems to me to be a recipe for disaster, which will not improve matters and if anything create more homelessness. January 2013
Supplementary written evidence submitted by the East Midlands Property Owners EMPO is convinced the open market is the best determinant of rent levels. However if government was seeking to re-introduce rent controls as a way to control rent inflation. We would suggest as an alternative option the linking of rents to average earnings. As we believe this option would not lead to a mass exodus of current investors and deter new investment into the PRS which would be the case under rent controls. May 2013
Written evidence submitted by the National Union of Students NUS (National Union of Students) is a voluntary membership organisation which makes a real difference to the lives of students and its member students’ unions. We are a confederation of 600 students’ unions, amounting to more than 95% of all higher and further education unions in the UK. Through our member students’ unions, we represent the interests of more than seven million students. Our mission is to promote, defend and extend the rights of students and to develop and champion strong students’ unions. We welcome this opportunity to take stock of the major issues within the private rented sector and contribute to this inquiry. With students remaining a core demographic within this tenure, and many likely to stay in the sector for prolonged or indefinite periods, this is a key area of interest for the organisation and our membership. We feel that this consultation is timely, given the recent figures provided by the 2011 census which show how the sector has largely grown by default in response to the decline in owner occupation and availability of social housing. In the long term, NUS would like to see the government addressing the issues surrounding this which leave many unable to access options other than private renting which can prove costly and unstable. However, it is important to acknowledge that for many including many students, the private rented sector is and will remain the only option available or the one best suited to their needs. It is therefore vital that proper attention is paid to the sector and the rights of those operating within it. As it stands, tenants are often disenfranchised, vulnerable, and disempowered in the context of their relationship with their landlord or letting agent.
Response Quality of private rented housing 1. Property standards in the private rented sector continue to be an issue for many students, particularly in areas with inadequate supply of housing and high housing costs. Many struggle with getting their landlords or letting agents to respond to requests for repairs in a timely fashion. 2. Poor standards of insulation, particularly when combined with fuel poverty can lead to significant health impacts and students often report their landlord or letting agent has failed to respond to the structural issues which have led to these problems. 3. Recent research on young sharers in the private rented sector (predominantly students) found that over 50% of households reported having mould and condensation.156 156 Bouzarovski et al, 2012, Fuel poverty among young adults in multiple occupancy housing. Available at: http://espru.files.wordpress.com/2012/06/enyafinalreport.pdf cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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4. Localised research undertaken by students’ unions indicates a similar picture, with 41.5% of students at Sussex and Brighton universities reporting “extensive mould” was present in their homes. 49% of those who reported the problem to their landlord or letting agent felt that “nothing” was done to resolve the issue.157 5. NUS believe that some increases in regulation on a national level, including landlord registration could result in improved property standards by increasing landlord accountability. 6. NUS believes that well supported local accreditation schemes are the best way to ensure incremental improvements in standards across the private rented sector and that these can complement programmes of enforcement and regulation to deal with genuinely substandard properties and poor landlord practice. 7. The government should play a role in financing and supporting local accreditation schemes to ensure that they are sufficiently resourced to have a meaningful impact on local housing standards. Entirely self-financing schemes are likely to either be under-resourced and inadequate or to push significant cost onto the tenant. Excessive cost is also likely to make them less attractive to landlords. 8. Local authorities need to be sufficiently funded to be able to enforce property standards and take action against rogue landlords. Proactive work also needs to take place to ensure that tenants are aware of their options to hold their landlords to account. 9. Local regulatory initiatives such as additional licensing schemes should offer tangible benefits to tenants which justify the cost they incur to finance their administration, rather than being used to subsidise core council costs. 10. Support should be given to those seeking to establish letting agents as social enterprises which promote improved standards and tenant experiences. Many students’ unions are now pursuing this with significant success.
Rent levels 11. The affordability of housing in the private rented sector remains hugely problematic for many students, with housing costs increasing much more rapidly than student income. 12. According to recent NUS research, over 50% of students agree or strongly agree with the statement “I regularly worry about not having enough money to meet my basic living expenses such as rent and utility bills.”158 13. We would be keen to see the government considering how it might impose some form of rent control in the private rented sector, as we believe that with inadequate supply and current market conditions, rents will continue to spiral beyond the reach of many without such proactive intervention. Building in a link to inflation may provide a means of ensuring that this is not prohibitive to the continued growth of the sector, while ensuring that this is not to the detriment of those who live within it. 14. However, in the long term, it is felt that the only genuine solution to issues around affordability is to increase supply dramatically as this is undoubtedly the critical issues as far as rent levels are concerned. We have yet to see evidence that the government takes this issue as seriously as it should. 15. Rents in private developments of purpose-built students accommodation are of particular concern as, according to the recently released NUS/Unipol Accommodation Costs Survey, a privately provided room of this sort will now cost a student on average £6,309.69 over the course of an academic year—a figure which far exceeds the student loan most will receive.159 In London, the average weekly cost of a room in a private development is a staggering £220.97 or over £10,000 per year which cannot be considered affordable for the vast majority of students. 16. There is concern that local authorities are granting permission to this type of development without concern for the affordability of accommodation provided, due to their desperation to relieve pressure on local housing stock. This is likely to be counterproductive and unsustainable as many of these developments are now operating with voids due to the combined impacts of exorbitant pricing structures and decreasing student numbers. 17. We would like to see a requirement for all private providers of student accommodation to be permitted to develop only when they have entered into a nomination agreement with an institution. This would ensure that provision is more affordable and better aligned with student need. 18. We would also like to see the possibility of introducing affordable room quotas in purpose-built student developments investigated to ensure rent levels do not present an obstacle to access to higher education. 157 University of Sussex Students’ Union, 2012, Rate Your Landlord. Available at: www.sussexstudent.com/files/ministies/40123/ ry12012.pdf 158 National Union of Students, 2012, The Pound in Your Pocket Summary Report. Available at: www.poundinyourpocket.org.uk/ downloads/PIYP_Summary_Report.pdf 159 NUS/Unipol, 2012, Accommodation Costs Survey. Available: www.nus.org.uk/Global/Campaigns/Accommodation%20Costs%20Survey%0V6%20WEB.pdf cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Regulation of landlords 19. NUS believe that some increases in regulation on a national level, including landlord registration could result in improved property standards by increasing landlord accountability and providing recourse for tenants experiencing difficulties with their landlord. 20. Any additional regulation should be targeted at the poorest landlords and try to avoid penalising good landlords or subjecting them to excessive bureaucracy. 21. While we believe that national funding and support for regulation would be the most cost-effective way of ensuring a robust system, we also believe that no system of regulation will be effective without sufficient funding for proactive and stringent enforcement on a local level. 22. In order to ensure that tenants are empowered to expect decent management standards, any regulation should also be accompanied by work to improve tenant knowledge of the rights and responsibilities of both themselves and their landlords as set out by legislation.
Regulation of letting agents 23. We believe that regulation of letting agents should be a priority for the government, given the evidence of widespread malpractice in the sector. The discrepancy between the regulation of letting agents and estate agents is unjustifiable and leaves tenants vulnerable to exploitation, as well as being damaging to the reputation of those letting agents who voluntarily adhere to prescribed standards through affiliation to a sector body. 24. Regulation should be comprehensive and meaningful to ensure consumer confidence and improved tenant satisfaction, as well as improving the perception of the sector in wider society. 25. We would like to see a model similar to that recently introduced in Scotland, whereby letting agents are only permitted to charge deposits, with all other fees banned. 26. Without regulation, some letting agents are able to exploit prospective tenants’ desperation in an overcrowded marketplace to charge a complex array of fees, many of which are not anticipated by the tenant and these can therefore lead to significant hardship. In addition to this, these fees are rarely transparent and are often significantly inflated in relation to the costs they claim to cover (eg booking fees which stretch to several hundred pounds). Some may also be non-refundable even if property is not secured (even where this is not the fault of the tenant). This can be a huge setback for those looking to find accommodation. 27. Regulation of letting agents should also include a requirement for a minimum standard of training to ensure a sufficient level of competency and again promote consumer confidence. 28. There should be an independent and impartial complaints resolution service for tenants and landlords who are not satisfied that their issues have been resolved adequately by their letting agent.
Regulation of houses in multiple occupation 29. We understand the role that regulation of houses in multiple occupation has to play where this addresses the standards of accommodation and the health and safety issues which can be specific to this type of property. It is, however, important that local authorities are equipped to be properly enforce these standards in order for this regulation to be meaningful. 30. We are concerned by the impact of planning restrictions aiming to control the growth of HMOs, particularly in towns with large student populations. Article 4 Directions have been implemented by a large number of local authorities and we believe that these serve to restrict supply of shared housing in these areas. Shared housing of this sort represents the most affordable option for many, beyond just students, who live in the private rented sector, often due to lack of alternative. 31. This is particularly of concern given the recent restriction of housing benefit to the shared room rate for those up to the age of 35 which is likely to increase demand for this type of accommodation. 32. Often the implementation of Article 4 Directions is driven by the political agenda of small, but vocal segments of communities, rather than being part of a joined-up and coherent approach to local housing need. This is illustrated by the fact that documentation relating to Article 4 Directions often directly contradicts what is stated in local Strategic Housing Needs Assessments; these often state that demand for HMOs is likely to grow and recognise the role this housing plays in supporting young people and a mobile workforce. 33. We would like to see the government review the impact Article 4 Directions have had on affordability, supply and community cohesion as we believe that not only have these measures failed to address the problems they set out to, but they have exacerbated and created other issues. For further details on this, see our contribution to the recent Housing Voice report on the affordable housing crisis.160 34. Additional licensing schemes relating to HMOs should offer tangible benefits to tenants that justify the cost that is inevitably passed on to them from the landlord. 160 Independent Inquiry into the Affordable Homes Crisis: Volume II Volume of Evidence, 2012, Housing Voice: The Affordable Homes Alliance. Available at: http://www.housingvoice.co.uk/downloads/Volume_2.pdf cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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35. Additional licensing schemes should not cover issues which can be addressed through other means. Such issues commonly included in licensing schemes include anti-social behaviour and waste disposal. Often the content of such schemes penalise and typecast those living in HMOs rather than proactively addressing these issues where it actually occurs. 36. It is understood that this may be due to lack of funding available for local authorities from other sources to address such issues, but it is not fair to effectively place this cost on those least able to pay it based in a perception that they are responsible for the issues at hand. 37. Overemphasis on issues such as these within local licensing schemes can also result in a failure to address genuine issues relating to property standards and landlord behaviours.
Tenancy agreement and security of tenure 38. NUS believe that a requirement for all tenancies to be in written form would ensure greater transparency and understanding between landlords and tenants by ensuring that there is a clear record of the legal agreement between these parties. 39. We acknowledge that security of tenure is a major issue for many in the private rented sector, including many students, and agree that improving this should be addressed by the government. 40. We also believe that any policy change to initiate an improvement in this area would need to build in adequate flexibility for those who need to be more mobile, such as many students and migrant workers.
Conclusion NUS believe that some increases in regulation may improve standards in the private rented sector, but that this can only work if local authorities are properly equipped to actively improve standards locally. This should be both through enforcement activities against non-compliant landlords and through local accreditation schemes. These require governmental investment to ensure that they are robust, sustainable and worthy of consumer trust. It is felt that regulation of letting agents must be prioritised to ensure that there are minimum standards that tenants can expect, as well as transparency on the fees charged and tenants’ rights in relation to these. Rental costs in the private sector, particularly in London, are of genuine concern and are likely to have an impact on prospective students’ ability to access higher education at the institution of their choice. The government needs to establish a coherent plan for increasing supply (including bringing empty homes back into use) in order to meaningfully address this. January 2013
Supplementary written evidence submitted by the National Union of Students NUS BRIEFING: PRIVATE RENTED SECTOR, MAY 2013 1. Introduction To follow on from Liam Burns’ appearance at the Select Committee’s evidence session in Leeds, NUS would like to elaborate on some particular points addressed and provide further detail on relevant NUS research, as requested by the Chair.
2. Summary This briefing will cover the topics of letting agent regulation, letting agent fees, accommodation costs in the purpose-built sector, Article 4 Directions and property standards and enforcement.
3. Letting Agent Regulation The issues for students Current letting agent practices cause a range of issues for students and NUS is therefore supportive of moves to regulate the industry. As students are often pitted against each other, and others, in an over-crowded marketplace, they will generally look for the property rather than the agent, as has been reinforced by Which?’s recent research on the sector. This means that they have little choice as to which letting agent they rent with once they have succeeded in finding a suitable property which they can afford. As a result, tenant choice has little impact in terms of motivating quality-based competition amongst letting agents and there is therefore little incentive to improve standards of service. This also explains why 40% of the sector currently sits outside of any kind of voluntary standards or redress scheme: the market advantage these offer at present is slim. Research conducted by Sussex and Brighton Students’ Unions demonstrate that there are significant differences in experience between students whose properties are managed by a landlord and those whose properties are managed by a letting agent. On a range of satisfaction indicators, it was found that landlords cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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were consistently between 2.5 times and four times more likely to be rated “very good” by their tenants than letting agents. The most significant disparity was in the areas of “value for money”, “clarity of contract” and “delivery of promises”.
NUS recommended policy solution
For letting agents to be brought onto the same regulatory footing as estate agents, with this including access to client money protection, the OFT having the right to close down poor performing agents and further clarity on who the primary customer is.
Support could also be given to letting agents functioning as social enterprises, as is now the case in many students’ unions. This is a potential avenue to explore to drive up standards through quality-based competition in the sector.
4. Letting Agent Fees and Front-Loading of Costs
The issues for students: excessive fees and up front costs
Current letting agent fee-charging practices result in a significant front-loading of living costs for tenants and this can cause significant problems for students in relation to their studies and financial wellbeing: — Students report being charged many hundreds of pounds in fees, in addition to a sizable deposit and this can mean that their start-up costs in initiating a tenancy are well over £1,000. This may be a contributory factor to why students responding to the Brighton and Sussex survey were almost four times more likely to rate their landlord “very good” in terms of value for money than those whose properties were managed by a letting agent. — The level of up-front costs is of significant concern, particularly given that in many instances these will be charged prior to receipt of their student loan or any other maintenance package a student may receive, or will need to be found from the previous year’s budget. — The recent NUS Pound in Your Pocket research project, which included a survey of over 14,000 students in further and higher education found that over half of students regularly worry about meeting basic living costs such as rent. — It is therefore no surprise that the same research reveals that 5% of students paying high levels of up-front housing costs (£500–749.99 in terms of deposit) are taking on high risk debt such as payday loans compared to just 2% of students paying £249.99 and under. This is illustrated by the graph below. Although fees were not looked at specifically, it is likely that high levels of additional fees will further exacerbate any financial problems.
NUS Pound in Your Pocket, 2012
Non-transparent fees and difficulty in managing budgets
In addition, because of the current lack of transparency in fees charged, with fee structures often configured in complex ways so as to prevent full understanding of what will be due (so called “drip pricing”), students face serious difficulty in being able to plan and manage their budgets. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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— The recent ruling by the Advertising Standards Agency is certainly a step in the right direction, but there is still concern that with tenants so disempowered in the housing market, there will still be many who are not able to make their decision on the basis of fee level. Letting agents may still publish fees in hidden corners of websites or using complex formulae.
Non-transparent fees—not proportional
The final issue with fees is that often it is unclear what payment of a fee entitles the tenant to, or in fact what they are paying for: — For example, an administration fee, which appears to cover a service which merely entails putting a tenant’s name on a standardised contract can run to hundreds of pounds—clearly not proportionate in terms of the service provided. — Often, these fees are charged both to the landlord and the tenant without either party necessarily being aware of this. — The most problematic fee type is the “holding deposit”—this is often required before a tenant is even able to make an offer to rent a property, and commonly well before they have seen a copy of the proposed tenancy agreement, or found out about the letting agent’s fee structure. — If the tenant then either withdraws due to finding that the terms are not suitable, or potentially unfair, or if they fail a reference or credit check, they are liable to lose the entire amount. Meanwhile, the landlord is able to terminate the arrangement at any point without incurring any financial loss.
NUS recommended policy solution
For all of the reasons above, NUS advocates for, as a minimum, the need for fees to be proportionate, transparent and fair to be legislated for. — Ideally, we would like to see the model recently introduced in Scotland to be adopted throughout the UK. — This requires that no fees beyond the deposit are charged to the tenant so that they are able to plan their finances according to more even payments made throughout the year and prohibitive front loading of costs is avoided. — Meanwhile, the letting agent is able to charge any necessary fees to the landlord who is more likely to be able to shop around between agents (and therefore encourage competition on fee levels), and the landlord is able to set their rent according to the costs they have incurred.
5. Accommodation Costs in the Purpose-built Student Sector
The issues for students
During the evidence session, the Chair expressed significant surprise at Liam’s assertion that rents in the purpose-built student accommodation sector had doubled in the past 10 years. This shocking finding was uncovered through this year’s NUS/Unipol Accommodation Costs Survey. It is clear that with many institutions unable to invest in their own accommodation and students pushed out of housing in the community by Article 4 Directions in many places, the private sector has seen room for significant profit. Private sector bed spaces have increased exponentially from representing 4% of the sector 10 years ago in 2003 to 39% today. 79% of the bed spaces planned for development next year will come from the private sector.
It is therefore clear that the presence of a sizable and growing private element of the sector is having an inflationary influence on pricing across the sector. Presently the average weekly rents across the UK for each sector are as follows: £118.49 for institution owned and managed accommodation, £119.83 for those under nomination agreement (between institution and private provider) and £140.07 for private, direct-let buildings. Average annual rent across all provider types is now therefore £5,244.04, which is likely to be much of or all of a student’s maintenance loan payments. In London, a room in a private development will set a student back almost £10,000 per year on average.
The difficulties these overinflated rents are causing for students is reflected by NUS’ recent Pound in Your Pocket research into student financial wellbeing which found that over half of students regularly worry about regularly worry about meeting basic living costs including rent and that in many cases, this leads to them considering dropping out. Those students paying between £500 and £600 per month were around four times more likely to take on high risk debt than those paying £400 a month or under, as is shown by the graph below. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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NUS Pound in Your Pocket, 2012 In many cases, as with housing benefit and private rents elsewhere, the state is effectively subsidising the functioning of these private companies while they are given free rein to make a huge amount of profit from students. It is clear from the rate of growth of these developments (despite a reduction in student numbers and large numbers of voids this year) that investors see significant gains to be made in this market, at the expense of students and the state.
NUS recommended policy solution NUS would therefore like to see the government take action on this issue, as it represents a significant causal factor in student poverty and a barrier to access to education. Potentially avenues could be explored around requiring affordable room quotas in private developments, or requiring developments to be in nomination agreement with an institution would help to keep costs to students at a more reasonable level.
6. Article 4 Directions and Limited Supply of HMOs NUS is concerned about the impact of Article 4 Directions on students and others seeking affordable housing in the private rented sector. 88,000 people aged between 25 and 35 are now only going to be in receipt of the shared accommodation rate of Local Housing Allowance and this will result in an increase in demand for HMO accommodation. Many local authorities recognise that there will be increased demand for this type of housing in their Strategic Housing Market Assessment (SHMA), but meanwhile also implement Article 4 Directions without any credible plans to enable HMOs to come into existence in other areas of the city. To give an example, Leeds’ SHMA expects that young households in the city will increase by 33,000 over the next 14 years. Meanwhile, in the first eight months in which the Article 4 Direction was applied (February to October 2012), just six planning applications were granted to convert properties to C4 status. If HMO development continued at this rate, just 168 new shared households will be created in the next 14 years. The actions of local authorities implementing Article 4 Directions seem to be purely politically motivated and ignore much of the evidence of the detrimental impact this planning control can have. Research undertaken in Leeds demonstrates that there are significant problems, including empty homes which are unsuitable and unaffordable for families. Additionally, the DWP interim report on the impact of changes to Local Housing Allowance suggests that some housing officers are noticing decreased supply available for benefit recipients as a result of Article 4 Directions in some cities. Given the fact that we are in the midst of a housing crisis, it seems ludicrous that local authorities have the right to impose limitations on the supply of affordable, high density housing, when it is often for political gain rather than being rooted on a sound evidence base.
NUS recommended policy solution NUS would like to see a full and wide-ranging review of the usage and impacts of Article 4 Directions, specifically with reference to the availability of affordable shared housing, not only to students, but to young professionals and benefit recipients.
7. Housing Standards and Enforcement The issues for students Often students are dissatisfied with the upkeep of the property they are renting, but there is a lack of clarity as to how they are able to hold their landlord or letting agent to account. Since often students move on from cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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housing after the period of their initial tenancy and there is often high demand in cities with large student populations, there is generally very little incentive for landlords or letting agents to keep their property up to standards, particularly during the tenancy. There are generally hugely differential levels of ability or willingness on the part of the local authorities to act on enforcement issues and often there is very little support available at all. In many cities, with local authorities’ budgets being squeezed, there is little incentive to prioritise this area of work and many are reducing capacity in this area, effectively giving landlords and letting agents free reign. Additionally, where something becomes potentially a criminal matter, police forces are often found to disregard it and view it as a civil matter. This can become hugely problematic, and there have been instances of letting agents renting out properties in the process of being repossessed or fraudulently advertising properties that don’t exist and taking large sums of money from students, particularly those from outside the UK who may be forced to book accommodation from abroad. Additionally, we are now seeing a proliferation of additional and selective licensing schemes implemented, which often increase the rent levels of student houses, while giving demonstrably little indication of improved standards, or even of any kind of inspection. This suggests that in many cases, this is being used as little more than a fundraiser for the local authority and potentially, as a way of creating an additional hoop for landlords to jump through if they wish to bring “undesirable” HMOs to the market.
NUS recommended policy solution For this reason, NUS believes that the focus should be on enforcing existing legislation and on creating a national register of landlords to ensure that landlord accountability is improved at the bottom, often-illegal end of the sector. To drive up standards elsewhere, NUS is also supportive of robust accreditation schemes, including the national Unipol/Accommodation for Students Code which ensures standards that tenants can be sure of, through a systematic process of verification and accountability to tenants (via clear and transparent complaints mechanisms). May 2013
Written evidence submitted by the National HMO Lobby Executive Summary 1. The Memorandum is submitted by the National HMO Lobby and concerns the houses in multiple occupation (HMOs) segment of the Private Rented Sector (PRS). It identifies the distinctive characteristics of HMOs, their incoherent composition and their main markets, and the detrimental impact they have on the society, environment and economy, and hence cohesion, of local communities. It surveys campaigns, legislation and literatures on HMOs, and attends to the Committee’s enquiries about quality, rents, regulation and homelessness. The Memorandum concludes with seven Recommendations to control the development, to discourage the abuse and to encourage alternative forms of accommodation to HMOs. The Memorandum is supplemented by References and by a Review of recent PRS literature.
Introduction 2. The Memorandum is submitted by the National HMO Lobby, founded in 2000, a voluntary association of local community associations concerned about the impacts of HMOs on their communities. It comprises some fifty members in 35 towns throughout the UK, whose campaign was instrumental in amending planning legislation on HMOs. Its website is at http://hmolobby.org.uk/index.htm.
Information 3. The Memorandum is concerned solely with one segment of the Private Rented Sector, namely HMOs. The reason is the distinctive nature of HMOs, which is indeed recognised as an issue by the Committee in its briefing: “Those making submissions may wish to consider … the regulation of houses in multiple occupation (HMOs) …” The Memorandum refers to England especially (the problems are general, but legislation on HMOs differs elsewhere in the UK). 4. What are now recognised as HMOs have always existed, although not distinguished as a housing type until the Housing Act 1985. They were formally defined in the Housing Act 2004, when the concept of “household” was clarified (as essentially a family), and a HMO was identified as a dwelling shared by three or more households. Defined as such, a HMO exhibits a number of distinctive characteristics. 4.1 Occupancy: the occupation of HMOs is intensive, higher than an ordinary dwelling house, and equal to a high-season hotel. 4.2 Occupants: typically, consequent upon their markets (see 5 below), the occupants of a HMO are mostly from one narrow age range (young adults), unlike the wider mix in most other residential uses, and as such, they are novice householders. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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4.3 Occupiers: by the very fact of multiple occupation, HMOs lack the internal structure of a single household (or the management of a residential institution). 4.4 Occupation: typically, tenancies in HMOs are short-term, due to the markets they serve (see 5 below). 5. There are a number of distinct markets for HMOs. 5.1 Young professionals: young single working adults, who as yet are unable to rent a self-contained property (let alone buy one); this market is ubiquitous. 5.2 Student second homes: for students in higher education, away from home, and wanting term- time accommodation; this market of course appears in university towns, and due to current developments in higher education (tuition fees, graduate employment, purpose-built accommodation) is becoming increasingly volatile. This is by far the largest market for HMOs: over a million students are using houses as second homes (ONS 2012). Studying away from home is assumed to be the norm in this country; but everywhere else in the world, only a minority of students go away to study. (See references in 12 below.) 5.3 Benefit claimants: young single adults, claiming housing benefit, who qualify only for the shared housing rate (currently those aged under 25); this market has emerged especially (but by no means only) in seaside towns, and due to changes in housing benefit (raising the age threshold to 35), is likely to increase. (See BURA 2009, CLG 2007, 2010, Smith 2012.) 5.4 Migrant or seasonal workers: workers employed seasonally, in agriculture or in resorts, who want temporary accommodation; this market affects both seaside and market towns. (See CLG 2008, Rugg 2008.) 6. Given the distinctive characteristics noted in 4 above, many HMOs (not all) have a tendency towards a range of internal and external problems. All are endemic, arising from the fact of multiple households, and hence a lack of cohesion, internal and external Internally, the absence of anyone willing and able to exercise any co-ordination, can readily give rise to health and safety problems, with the result that HMOs can become dangerous to their occupants. These are especially the concern of the National HMO Network. 7. Externally, the lack of cohesion endemic to HMOs extends to the neighbourhood, and this is the particular concern of the National HMO Lobby. Even individually, HMOs can impact detrimentally on the neighbourhood. This fact contributes to the tendency for high concentrations of HMOs to develop. Even a single HMO can frighten neighbours into moving away. At the same time, given the distinctive markets for HMOs, these markets prefer to congregate together, especially in the case of student second homes. It is not uncommon, not only for whole streets, but also for whole areas, to become dominated by student HMOs: in Headingley in Leeds, for instance, there are a hundred streets where the student population outnumbers residents. This process has become known as “studentification” (Smith 2002). 8. When high concentrations of HMOs develop, the impacts are compounded. 8.1 Social impacts include antisocial behaviour, comprising not only serious incidents, but also endemic low-level antisocial behaviour, such as noise nuisance (in houses, gardens, the street), public drunkenness, evacuation (vomiting, urinating, defecating), vandalism. And student HMOs especially are a magnet for burglary (soft targets, rich pickings). 8.2 Environmental problems include parking problems, and litter, student rubbish and landlord flytipping, which in turn lead to rodent infestation. Streets are blighted by letting boards, flyposting, security grilles. Gardens go wild, or are concreted over. The built environment is exploited for profit, at the cost of residential amenity and the area’s character. 8.3 The local economy becomes a “resort economy”, the market fluctuating wildly between term and vacation, retail distorted towards a very narrow demographic, and work becomes casualised. 8.4 There is intense pressure on over-used community facilities, that is, local public services, like waste disposal, policing, and local authority enforcement generally. 8.5 More fundamentally, other services are under-used, leading to the closure of community facilities., especially schools, which are so crucial to sustaining a community—not simply educating the next generation of residents, but providing a vital social nexus. As the demographic balance shifts, both young and old become isolated. Rising house prices and loss of amenity lead to an exodus of families. There is reduced opportunity for low cost home ownership. Those who are left struggle to maintain the neighbourhood, surrounded by a disengaged population. Cohesion and sustainability are lost, and anomie erodes the community. A key factor in reducing the sense of belonging in a community is having a large student population (Sheffield 2008). 9. As a result of the problems they generate, HMOs have been the subject of considerable attention in the last decade or so, in campaigns, in legislation and in different literatures. Two national organisations have been established. The National HMO Network comprises professionals (particularly environmental health officers) and others concerned with the welfare of HMO occupants. On the other hand, the National HMO Lobby, comprises local community associations, and is concerned with the impact of concentrations of HMOs on the wellbeing of local communities. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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10. HMOs have been subject to legislation. First identified in the Housing Act 1985, the term “household” was not defined (which left the meaning of “multiple households” ambiguous). The Housing Act 1996 provided for discretionary licensing of HMOs (“household” still remained undefined). But the Housing Act 2004 finally provided a definition of “household” (effectively a “family” or equivalent), and hence of multiple occupancy, and it provided for the licensing of HMOs, both mandatory and discretionary. (The scope of mandatory licensing was defined in Statutory Instrument (SI) 2006 371, restricted to HMOs with five or more occupants and three or more storeys.) 11. In planning terms, HMOs were recognised in the Use Classes Order of 1987 (SI 1987 764), but again “household” was not defined, and planning appeals and court cases (especially Barnes v Sheffield 1995) established the precedent that (incongruously) HMOs could be considered to be “single households”. However, lobbying by residents, councillors and MPs succeeded in persuading the government to consider the issue in 2008 (CLG 2008), to consult on legislation in 2009, and to amend the Use Classes Order in 2010 (SI 2010 653). The amendment adopted the definition of HMO from the Housing Act 2004, and established a new Class C4 for smaller HMOs (larger HMOs were already classed sui generis). This meant that the conversion of a family home from Class C3 to Class C4 became a change of use, and hence required planning permission. The new Coalition Government of 2010 in fact made such change of use “permitted development”, removing the need for planning permission (SI 2010 2134). But many LPAs have introduced Article 4 Directions, which remove the permitted development right, and restore the need for planning permission (for details, see the “Local HMO Plans” page on the Lobby’s website). 12. There is a growing literature on HMO concerns, in the media, in commissioned reports and in academia. 12.1 The media, printed and broadcast, have relished the town-gown conflicts generated by student HMOs. Early reports included Chrisafis 2000, Harris & McVeigh 2002, Tysome 2003 and Purves 2005. In 2006, the Universities UK report and HMO licensing provoked Clark 2006, Vine 2006, Allen 2006 and Simpson 2006. The proposals for new legislation in 2009 prompted Channel Four 2009, Wintour 2009, Doward 2009, Robinson 2009 and Buonadonna 2009. Dixon 2011 reported on more recent developments. 12.2 A number of reports on the PRS in general have appeared in the last decade, including Shelter 2002, Rhodes 2006 and Rugg & Rhodes 2008 (see Supplement 2). The PRS in seaside towns was the subject of CLG Committee 2007 and CLG 2010. HMOs specifically were studied by CLG 2006 and by CLG 2008. Studentification was considered by Rugg 2000, and then by Universities UK 2006, NUS 2007 and National HMO Lobby 2008. 12.3 Academic studies of HMOs have been carried out by Professor Darren Smith especially, including Smith 2002, 2008, 2009, 2012, and also Hubbard 2009 and Sage 2012. 13. PRS quality: The quality of HMOs is very varied. Those marketed to benefit claimants or seasonal workers can be very poor indeed, and it was these which prompted HMO licensing. This was also often the case with student second homes. But many in this market are now of very good quality, for a number of reasons. On the supply side, in many university towns, the student market is very competitive. Student HMOs are a lucrative investment, and many investors seek to take advantage—which raises the standard of the HMOs on offer. On the demand side, students are often supported by their unions and their parents, in their search for quality accommodation. In response, therefore, many landlords subscribe to accreditation schemes, like those run by Unipol Student Homes in Leeds, Bradford and Nottingham. 14. PRS rents: Again, rents can be very varied among HMOs. But a defining feature of HMOs is that most rooms in the house are let singly, rather than renting out the house as a whole, and this of course increases the landlord’s return on the investment. In particular, student second homes are widely seen as cash cows. According to Accommodation for Students website, rents nationally have gone up from £67.11 to £68.70 per person per week in the last year. 15. PRS regulation: The National HMO Lobby supports the Rugg & Rhodes recommendation that “it should not be possible for landlords to let without a licence” (p113) (hence, Recommendation 4). 16. HMO regulation: In the interests directly of HMO occupants , and indirectly of HMO neighbours, the Lobby supports HMO licensing schemes. The Lobby welcomed the introduction of mandatory HMO licensing in 2006, though it considered that the licensing net should be cast wider (hence, Recommendation 1 below). The Lobby also welcomed the introduction of discretionary additional HMO licensing at the same time, and in particular, the decision in 2010 to delegate that discretion to local housing authorities (LHAs). The Lobby also welcomed legislation on HMOs in planning law in 2010—and regretted the subsequent weakening of this legislation, noted in 11 above (hence, Recommendation 2). 17. PRS tenancies: There is probably a strong case for greater security of tenure in the PRS, as increasing numbers of individuals and families come to rely on renting, rather than home-ownership. However, given the inherently temporary nature of HMO occupancy (see 4.4 above), assured shorthold tenancies are probably adequate for this element of the PRS. 18. Homelessness: It is certainly the case that LHAs have become dependent on the PRS for accommodating homeless households. But this says more about the inadequacy of housing policy generally than it does about the value of the PRS in particular. Indeed, the PRS (especially the HMO segment) bears considerable cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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responsibility for the shift from ownership to renting in general, and for the housing shortage in particular. It is clearly the case that PRS investment has contributed to the inflation of house prices, at a time of shortage of stock, to the disadvantage of aspiring home-owners—who are thereby obliged to rent instead (to the advantage of the PRS!). Investment in HMOs in particular, for the sake of their lucrative returns (as noted at 14 above), exacerbates housing problems. The majority of HMOs, as noted at 5.2 above, are in fact student second homes. This means that thousands of family homes are taken out of the general housing market, in order to feed a demand for second homes—first homes are lost in favour of second homes. “There is no greater inequality in this country than that some people should have two homes while others have none” (George Monbiot, quoted in NHPAU 2008, para 178). Student HMOs thus indirectly contribute to the problem of homelessness in the UK, hence Recommendations 5 and 6.
Recommendations 19. In the light of the problems posed by HMOs, the National HMO Lobby recommends to the Committee a number of courses of action, intended to impose controls on their development, to discourage their abuse and to encourage alternative forms of accommodation. 20. As noted at 10 above, licensing of HMOs was implemented in 2006. As noted at 13, it was done in response to the poor quality of many HMOs, and also to the often poor quality of their management (15 above). SI 2006 371 designated HMOs comprising both three or more storeys and five or more occupants as subject to mandatory licensing. At the time, many (including the National HMO Lobby) argued that this scope was too narrow. Therefore, following 16 above, the Lobby recommends (1) that HMOs comprising either three or more storeys or five or more occupants should be subject to mandatory licensing.
21. As noted at 11 above, smaller HMOs were made subject to development control in 2010. But this control was removed when change of use from Class C3 to Class C4 was made permitted development by SI 2010 2134. This has obliged many LPAs to introduce Article 4 Directions, to remove that permitted development right in designated areas. But most neighbourhoods are not covered by such Directions (often due to costs), and residents there are vulnerable to uncontrolled development of HMOs, individually or cumulatively. In view of the problems posed to neighbours, as described at 8 above, and following 16 above, the Lobby recommends (2) that the amendment to the General Permitted Development Order SI 2010 2134 be repealed, removing permitted development rights for change of use from Class C3 to Class C4. [Incidentally, the Lobby also recommends (2a) that the original GPDO (SI 1995 418) be amended to make clear that “dwellinghouses” in Part 1 of Schedule 2 refers only to properties in Class C3, as originally intended, and not to HMOs in Class C4.] 22. As noted at 7 above, the markets for HMOs tend to cultivate areas where the market has already made an inroad. The upshot is high concentrations of HMOs in very specific areas. Many LPAs have responded by introducing policies on HMO development intended to resist the emergence of such concentrations. Manchester and Portsmouth are among several examples, which have set thresholds, above which permission for HMOs will not normally be granted. These LPAs have set the threshold at 10% of residential properties within a defined area: given the above-average occupancy of HMOs (4.1 above), this equates to 20% of the local population—which can be accommodated by the local community. A higher proportion begins to undermine that community (as noted at 8.5 above). The Lobby therefore recommends (3) that local planning authorities be advised to adopt policies limiting HMO development to not more that 10% of a neighbourhood.
23. Even with controls on HMOs, as noted at 15 above, landlords may still avoid their responsibilities. At section 4.5 of their report, Rugg & Rhodes propose “light-touch licensing” of landlords, to address this issue: “it should not be possible for landlords to let without a licence” (p113). The National HMO Lobby endorses Rugg & Rhodes’ “policy direction of travel”, and recommends (4) that a simple national registration scheme for landlords be established.
24. As noted at 5.2 and 18 above, many HMOs, specifically those let to students, are de facto second homes. This country cannot afford to tolerate use of its limited housing stock for the benefit of the privileged few. The National HMO Lobby therefore recommends (5) that measures be explored for discouraging or preventing the use of any domestic property as a second home (for work or study or holiday), unless expressly built for that purpose.
25. In her study of The nature & impact of student demand on housing markets, Rugg (2000) recommended that “a housing strategy should be integral to the expansion plans of every HEI” (p34). Such impacts are noted in 8 above and also in 18. The continued expansion of higher education in the ensuing decade has seen the impacts Rugg studied increase. Given the scale of the on-going student demand for accommodation, the National HMO Lobby endorses Rugg’s proposal, and recommends (6) that every HEI should adopt a housing strategy designed to minimise its students’ impact on local housing supply.
26. ODPM 2004 asserts “HMOs ... provide affordable housing options for some of the most vulnerable and disadvantaged groups in society, including benefit claimants or those on low incomes …” (p18). However, it is debatable whether HMOs are the best response to these demands. Should vulnerable people, who would otherwise be homeless, be dependant on the private sector (rather than on social housing)? For this reason, the cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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National HMO Lobby recommends (7) that public sector housing provision should be made available to young single people in receipt of housing benefit (as an alternative to HMOs). January 2013
Supplement 1 References Allen, Kate, “Excessive concentration” Inside Housing 7 July 2006 Buonadonna, Paola, “HMO Legislation” The Politics Show, BBC1, 25 October 2009 BURA Seaside Network Turning the tide of HMOs in coastal towns Reception, Westminster, 27 January 2009 Channel Four, “Student HMOs”, News at Noon, 10 August 2009 Chrisafis, Angelique, “Two square miles of housing hell” The Guardian, 24 October 2000 Clark, Laura, “The student ghettos” Daily Mail, 24 January 2006 CLG (Communities & Local Government) Housing Research Summary 228 Dealing with “Problem” Private Rented Housing 2006 CLG, Evidence Gathering—Housing in Multiple Occupation and possible planning responses 2008 CLG, Strategy for seaside success: Securing the future of seaside economies, 2010 CLG Committee Coastal Towns 2007 Dixon, Sara, “University ghost towns fear as tuition fees rise” Express, 18 April 2011 Doward, Jamie, “Student ghetto areas ‘blight lives of locals’” The Observer, 13 September 2009 Harris, Paul, & Tracy McVeigh “Student takeover alarms cities” The Observer 21 July 2002 Housing Act 1985 Housing Act 1996 Housing Act 2004 Hubbard, P, “Geographies of studentification and purpose-built student accommodation: leading separate lives?” Environment and Planning A 41 (8), 2009 National HMO Lobby 2008 NHPAU (National Housing & Planning Advice Unit), Rapid Evidence Assessment of the Research Literature on the Purchase and Use of Second Homes, 2008 NUS (National Union of Students), Students in the Community: Working together to achieve harmony, 2007 ODPM (Office of the Deputy Prime Minister) Licensing in the Private Rented Sector: Consultation on the Implementation of HMO Licensing 2004 ONS (Office of National Statistics) “Number of people with second addresses in England and Wales, March 2011”, Statistical Bulletin, 22 October 2012 Purves, Libby, “Student Lodgings” The Learning Curve BBC Radio 4, 15 March 2005 Rhodes, David, , Chartered Institute of Housing, October 2006 Robinson, Winifred, “Shared Houses” You and Yours, BBC Radio 4, 8 October 2009 Rugg, Julie, et al, The nature & impact of student demand on housing markets YPS, 2000 Rugg, Julie, & David Rhodes, The Private Rented Sector: its contribution and potential, University of York, 2008 Sage, Joanna, et al, “The rapidity of studentification and population change: there goes the (student)hood”, Population, Space and Place, 18(5) 2012 Sheffield University, Changing UK: the way we live now, 2008 Shelter, Private Renting: a new settlement 2002 SI (Statutory Instrument) 1987 764 Town & Country Planning (Use Classes) Order SI 1995 418 Town & Country (General Permitted Development) Order SI 2006 371 The Licensing & Management of Houses in Multiple Occupation & Other Houses (Prescribed Descriptions) (England) Regulations cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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SI 2010 653 The Town and Country Planning (Use Classes) (Amendment) (England) Order SI 2010 2134 The Town and Country Planning (General Permitted Development) (Amendment) (no 2) (England) Order Simpson, Mark, “Student Housing” One O’Clock News BBC1, 8 August 2006 Smith, Darren, “Patterns and processes of ‘studentification’ in Leeds”, The Regional Review, 12 (1) 2002 Smith, Darren, “The politics of studentification and ‘(un)balanced’ urban populations: lessons for gentrification and sustainable communities?” Urban Studies, 45(12), 2008 Smith, Darren, “The real geographies of studentification”, RTPI workshop, 22 June 2009 Smith, Darren, Ed, “Student Geographies”, Environment & Planning A, 41 (8), August 2009 Smith, Darren, & Richard Tyler “Studentification: success & failure of the PRS” Northern Housing Consortium The future contribution & potential of Private Sector Housing conference, Harrogate, 2009 Smith, Darren, “The social and economic consequences of Housing in Multiple Occupation (HMO) in UK coastal towns: geographies of segregation”, Transactions of the Institute of British Geographers, 37(3), 461–476, 2012 Tysome, Tony, et al, “Town & Gown” [series] Times Higher Education Supplement August 2003 Universities UK, 2006 Vine, Jeremy, “Estate bans students”, Jeremy Vine, BBC Radio 2, 31 January 2006 Wintour, Patrick, “Minister to act against student enclaves” The Guardian, 12 September 2009
Supplement 2 Rugg Reviewed In the last decade, three reports on the Private Rented Sector in general have appeared, including Shelter 2002, Rhodes 2006 and Rugg & Rhodes 2008. The last gave specific attention to HMOs. But the validity of its conclusions has been questioned, both by the National HMO Lobby, and by Professor Darren Smith of Loughborough University, who has studied HMOs for over a decade. The Lobby (National HMO Lobby, “PRS Review 2008: Response” 2008, online at http://hmolobby.org.uk/ prsreview08.htm#response) is concerned that Rugg & Rhodes fail to take an objective approach. They state, “At the heart of the Review is the general desire to see the PRS as a less marginal tenure” (p6); but they admit that this can be done only at the expense of owner-occupation or social renting (p47). Rugg & Rhodes also neglect HMOs other than student HMOs, and they underestimate their impacts on local communities. Most seriously, their quantification of the issue is highly suspect. The following are extracts from Darren Smith, “The real geographies of studentification”, a paper presented to a RTPI workshop at Brighton on 22 June 2009, which challenges Rugg’s & Rhodes’ narrow representation of studentification.
1. Introduction Despite the consensus of opinion, a recent government-commissioned report (Rugg and Rhodes, 2008) asserts: “the limited nature of the problem [studentification]” (p.100) has been exaggerated by well-organised lobbying groups. Contrary to the majority of current political (DCLG, 2008), policy (eg Durham City Council, 2007), academic (eg Hubbard, 2008) and media discourses (The Guardian, 2008a) on student housing, and town/gown relations (eg UniversitiesUK, 2005), Rugg and Rhodes analysis of studentification reveals a piecemeal process of change, arguing that “intensive student habitation is not common” (p. xxi). In this paper, I challenge this narrow representation of studentification, asserting that Rugg and Rhodes’ analysis of the scale of studentification (they use the term “intensive student habitation”) is methodologically flawed; based on out- dated data, and a limited methodology.
2. The Rugg and Rhodes Review of the Private Rented Sector The geographies of private rented student housing affect the wider operation of the private rented sector. Indeed, as Rugg et al. (2002: 289) note in previous research: “student demand affects all aspects of the local housing market”. This is particularly important given the deeper penetration of students into the private rented sector. King Sturge (2008) reveal that 730,000 students (51% of total student population) are accommodated within shared housing in the private rented housing sector in 2008 (Rugg and Rhodes (2008) show the total 2,611,000 private rented dwellings in 2006). Given the high proportion of students residing in the private rented sector, it is therefore imperative that any problematic issues of private rented student housing are fully acknowledged and cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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addressed, and that the residential geographies of students are represented in accurate and meaningful ways; which the Rugg and Rhodes report unfortunately fails to deliver.
3. A Narrow Representation of Studentification? First, by basing their analyses on the incidence of households with a student Household Reference Person (HRP), Rugg and Rhodes construct a partial representation of the scale of high-density, student populations in local neighbourhoods. This will mask the vast majority of students living in high concentrations, such as students co-residing with a student HRP, or students co-residing with a non-student HRP. Second, the methodology employed by Rugg and Rhodes’ is further limited by the use of census wards as the geographical unit of analysis. This geographic resolution tends to “hide” localised concentrations of students; despite Rugg and Rhodes acknowledging that: “this kind of problem can evidently be felt very acutely at street by street or neighbourhood level, but is clearly not a widespread issue” (p.99). With this in mind, a micro-geographic perspective of studentification is essential, and the use of census data at Lower Super Output Areas (LSOA) is imperative, since this provides information, on average, for spatial areas with 1,500 residents (Office for National Statistics, 2008a), compared to electoral wards which include 5,500 individuals on average, and range from 100 to 30,000 individuals (Office for National Statistics, 2008b).
4. The “Real” Geographies of Studentification in 2001 Table 1 shows that there are LSOAs from 15 university towns and cities within the top 20 highest concentrations of student populations in England and Wales at LSOA. Further analyses of 2001 census data reveal 687 LSOAs with a student population of 20% or more in England and Wales. This cut-off point was the measure identified by Berube (2005:11), to define “student- heavy wards ... due to studentification”. It is also noteworthy that there were a further 1,287 LSOAs with a student population of between 10–19% in 2001. It is a plausible hypothesis that the concentration of students in many of these latter LSOAs will have increased since 2001, as student populations have expanded (see next section). Further analyses show that there were a total of 47 towns and cities with one or more LSOAs with a student population of 50% or more. To further demonstrate the wide-scale of studentification, Table 2 provides a breakdown of the total number of LSOAs in university towns and cities with a student population of between 25–49% and 50–100%. It can be seen that there are 28 English university towns and cities with four or more LSOAs with student populations of 25% or more.
5. Exploring the Post-2001 Geographies of Studentification As Savills (2008) note, the total student population has expanded by 31% over the last decade, and currently totals 2.34 million. Crucially, Rugg and Rhodes (2008) interpretation of intensive student habitation does not take into account these changing factors, which will have transformed the residential geographies of students in profound ways. Overall, the total student population in the core cities of England increased by 52,400 students (+17.3%) from 250,145 to 302,545 students between 2000–01 and 2006–07. Although increases are common across all eight core cities, there is some variance, with rises being most pronounced in Nottingham (+22.7%), Newcastle (+22.5%), Birmingham (+21.5%), Leeds (21.3%), and, to a lesser extent, in Liverpool (+14.9%), Manchester (+13.7%), Bristol (+12.8%), and Sheffield (+9.9%). Student populations have increased in the most dramatic ways in many of the smaller English university towns and cities since 2001. Figure 2 demonstrates how the total full-time undergraduate student populations increased in between 2000–01 and 2006–07, in a number of case studies. … Strikingly, increases were most marked in Bournemouth (+47.1%), Norwich (+36.8%), Bath (+30.0%), Plymouth (+29.2%), Canterbury (+25.3%), York (+23.9%), Reading (+22.6%), Durham (+21.4%), Loughborough (+16.1%), Brighton and Hove (+12.7%) and Southampton (+8.2%). Indeed, when couched within broader societal changes, the general shortcomings of using the 2001 census data are emphasised. For example, Dorling et al’s (2008) recent study of the changing geographies of the UK reveals that “demographic segregation” is unfolding in the UK, with “areas becoming more segregated, most quickly from 2001 to 2006” (p.2). Such analyses clearly emphasise the pitfalls of using 2001 GB census to understand the current scale of studentification in 2008, or similar processes of change which are giving rise to a more segregated society. Arguably, pinning down the geographies of studentification in accurate ways is important for formulating effective public policies to mitigate detrimental societal conditions, such as the breakdown of community cohesion, the fragmentation and disintegration of local neighbourhoods, and social exclusion. As Dorling et al. note: “today communities tend to be more geographically polarised: we tend to now more live alongside people with similar age, economic and lifestyle status” (p. 16). Processes of studentification are inherently inter-woven cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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here into these pressing, broader societal patterns of change. The dismissal of studentification as a widespread process of change may have serious consequences for the general future health and well-being of many local communities and neighbourhoods. It may also lead to the disempowerment of local residents from articulating their views on the locally important issues of studentification, which are clearly voiced to local and national political actors in many university towns and cities. [from Darren Smith, “The real geographies of studentification”, RTPI workshop, Brighton, 22 June 2009]
Written evidence submitted by the District Councils’ Network The District Councils’ Network welcomes the opportunity to respond to the Select Committee Inquiry into private rented housing. Whilst the private rented offer varies from district to district, the principles of providing good quality and well managed accommodation are the same across all areas. District councils consider private rented sector housing to be a key contributor to a balanced housing market, and can support economic growth. The headlines from the 2011 Census, shows that the number of private renters in England and Wales has increased by 88% from 1.9 million in 2001 to 3.6 million in 2011. A recent study by the districts in Cumbria identifies that the size of the private rented sector is 13% of all residential dwellings. Although below the national average, it has increased from just over 11% at the time of the 2001 Census. Even more striking is the increase in the size of this sector for Carlisle (15%) and Copeland (16%) compared to more than ten years ago (11% and 9% consecutively). The reasons for this growth are lack of ability for first time buyers to secure a deposit, and limited number of affordable housing through new supply. Districts would like to see more initiatives to support the development of high quality private rented accommodation on longer tenancies or leases, but also to tackle the problematic properties, the novice landlords encouraged by the buy-to-let boom and the rogue landlords who provide poor quality properties for vulnerable people. Many areas are considering the links between housing and health through the Health and Wellbeing strategies, as tenants of private rented accommodation are more likely to be at risk from mental health issues associated with overcrowding, harassment by landlords and disrepair issues. There are identified inequalities for many living in the private rented sector such as children living in poverty.
1. The quality of private rented housing, and steps that can be taken to ensure that all housing in the sector is of an acceptable standard 1.1 The issues of poor quality private rented sector housing are well documented and summarised in the Houses of Parliament document “Housing and Health”, January 2011. This report highlights that whilst the Decent Homes Standard was extended to the private rented sector in 2002 and made optional in 2007, slow progress was made by authorities in improving the private rented stock. 1.2 Examples in this section refer to recent evidence gathered by the six districts in Cumbria through a recent stock condition survey. Cumbria is an area which represents a wide range of housing issues, from extreme pressures of affordability in the Lake District National Park, to the low demand and poor quality areas of the west coast. It is considered that this provides a snapshot of the issues facing districts in dealing with both landlords and tenants. 1.3 In Cumbria, non decency in the private rented sector is 41.2% a rate that is just above the overall average of 40.8%. Data from the Eden District Council Stock Condition Survey shows that 47% of private rented stock does not meet the decent homes criteria and 30% has Category 1 Hazards. 1.4 The highest rates of non-decency were found in converted flats and low rise purpose built flats. Converted flats tend to be associated with the oldest stock and privately rented dwellings, both factors associated with non-decency. 1.5 Non decency rates are higher in the privately rented sector for all household types. The biggest disparity between the privately rented and owner occupied sector is for multi person households where 62% are non decent followed by one person households where 48% are non decent. 1.6 The main hazard is excess cold in Cumbria due to the high proportion of hard-to-treat older dwellings which are 64% of all Category 1 Hazard failures. 1.7 It was estimated that to remediate the cost of Category 1 Hazards in Cumbria would cost approximately £18 million. 1.8 The demographic data shows that people living with Category 1 Hazards are most likely to be those under 25 and with a household income of less than £10 000. 1.9 Whilst the majority of landlords are responsive to requests for repairs, local authorities may look to enforcement as a last resort. The reduction in capacity in private sector housing teams, and the costs of taking forward legal action often prohibits a council from dealing with disrepair in this way. If Eden District Council dealt with all Category 1 Hazards through enforcement then this would amount to 1240 legal cases. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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1.10 The recently announced guarantees for private investors to deliver private rented properties are welcomed. A new high quality offer would support economic mobility and regeneration, however the scale of the development required to attract private investment is not always deliverable in a district areas. The involvement of LEP’s in co-ordinating investment could support schemes over a wider area and could work within the HCA Local Investment Areas. 1.11 Empty property initiatives could bring about a significant number of new affordable properties and deliver economic regeneration. The district councils are encouraged by the latest bidding round for empty property funding through the HCA, which allows the improvement of commercial and residential properties. These could be managed by Registered Providers and may help the recovery of many declining town centres.
2. Levels of rent within the private rented sector—including the possibility of rent control and the interaction between housing benefit and rents 2.1 Rents are set by local supply and demand and create the opportunity of landlords to be selective in choosing tenants in areas of high demand. This has caused a gap in the market for those claiming benefit but not eligible for social housing and has led to evidence of hidden homelessness. 2.2 There has been an increase in homelessness of 26% in the past three years and a large increase in those placed in bed and breakfast and other temporary accommodation. 2.3 Local housing allowance for private tenants could lead to an increase in overcrowding and moves to cheaper poorer quality rented accommodation. 2.4 Registered Providers have kept their tenants informed of changes to the welfare reforms and the implications for them, however, very little information has been provided to private rented tenants and a coordinated campaign could help support private tenants. 2.5 Population movements are expected when the changes are introduced to cheaper and more accessible areas, but many council areas do not have the flexibility of the stock to allow these movements to take place. Areas of high demand will not be able to accommodate those wishing to downsize and there is an added pressure of rising fuel costs which is forcing households to move from rural areas to more urban areas.
3. Regulation of landlords, and steps that can be taken to deal with rogue landlords 3.1 The DCN welcomes the Government guidance on “Dealing with Rogue landlords” August 2012. In district councils there is evidence to identify rogue landlords through complaints directly to the council or through multi-agency working with the police, fire authorities etc. These landlords often hold large portfolios of property and target the most vulnerable tenants. Again, capacity of the district council to take legal action is often limited and may result in the tenants moving to other unsuitable accommodation or presenting as homeless. 3.2 Tenants may be reluctant to complain to the council about conditions as they are afraid that they may be evicted. There is also evidence that if the landlord is required to carry out repairs, they recoup the costs by increasing the rent and there is currently no protection for the tenants.
4. Regulation of letting agents, including agents’ fees and charges 4.1 The district councils would welcome the regulation of letting agents. This could be achieved through accreditation schemes by local authorities and would ensure that they have sufficient information to advise on tenancy issues, illegal evictions, disrepair issues etc.
5. 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
5.1 The number of districts are introducing selective licensing is increasing, however there is less emphasis on the value of voluntary accreditation schemes as they tend to attract landlords who are already maintaining a good standard of accommodation and management. 5.2 In many areas districts have worked together to ensure consistency in HMO licensing charges and conditions, however, many local authorities have not been proactive in identifying all HMO’s which require licensing due to capacity issues. 5.3 The shift towards a growth in the private rented sector needs to be tracked. This could be done in a similar way to the registration of food businesses that councils administer and manage. This would lead to better knowledge about the balance of housing tenures and identify potential hotspots. It would also allow for an improvement in communication with landlords and to encourage them to work alongside Choice Based Lettings, housing options teams etc. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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6. Tenancy agreements and length and security of tenure 6.1 The DCN would encourage the opportunity for longer and therefore more secure tenancies. Families with children at local schools or people with local support networks are reluctant to move into private sector accommodation due to the possibility of the tenancy ending after 6 months. Private sector leasing arrangements on new build properties could offer a more sustainable solution particularly where the area wishes to encourage a more flexible workforce and attract younger people to an area. 6.2 Ending of private sector tenancies is one of the main reasons for households making a homelessness application. 6.3 In many circumstances the introduction of longer term tenancies would be beneficial to district councils which are facing increasing budgetary pressures from the cost of disabled facilities and adaptations. Those living in the private rented sector have the same access to this funding but do not have the repayment obligation through the land charge mechanism which is imposed for owner occupiers. There is no guarantee that the disabled tenant can remain in the property beyond their short tenancy agreement. There are examples where disabled tenants have moved 3 times and have required each property to be adapted. District councils would like to see an extended tenancy agreement before approving the adaptations.
7. How local authorities are discharging their homelessness duty by being able to place homeless households in private sector housing 7.1 The DCN supports the safeguards which have been put in place to ensure that private rented accommodation is suitable for homeless households, however it is felt that this should be extended to the properties of all housing benefit claimants. This would ensure that public money is not being spent on poor accommodation and unscrupulous landlords. This would raise the standard of accommodation but also the onus would be on the landlord to produce safety records, tenancy agreements and good management practice rather than the local authority having to proactively inspect properties and would take some of the pressure off the under resourced private sector teams. 7.2 Information sharing between housing benefit databases and housing is not permitted however, it would be extremely valuable if this was available. January 2013
Written evidence submitted by the Country Land and Business Association 0.0 Introduction 0.1 The Country Land & Business Association (CLA) represents over 34,000 members in England and Wales. Our members both live and work within rural areas; they operate a wide range of businesses including residential, agricultural, tourism and commercial ventures—at the last count the CLA represents some 250 different types of rural businesses. 0.2 We have been looking after the interests of our members, as well as promoting the positive aspects of land ownership, land management and rural business activities for the past 100 years. CLA members own or manage approximately half the rural land in England and Wales including edge of settlement locations and some urban portfolios. According to the Joseph Rowntree Foundation in 2004 38% of all rural let housing is owned by CLA members. 0.3 A new Housing Policy has been initiated to “frame” CLA membership capabilities to provide private rented sector housing. In response to the consultation undertaken with members to date, the primary barrier limiting delivery of greater housing supply on CLA land, particularly sub-market rented units, is the taxation regime. 0.4 The role of rural landowners in providing private rented housing both in existing stock and new stock should not be overlooked. Providing units at sub-market rents or letting on long-term tenancies is common practice amongst the membership, meaning that a fundamental role is played by CLA members in terms of community sustainability.
1.0 Quality of private rented housing and steps that can be taken to ensure that all housing in the sector is of an acceptable standard 1.1 Local Authority Environmental Health Officers already have the Housing Health and Safety Rating System (HHSRS) with which to assess and control housing condition within their Local Authority boundaries. 1.2 In the case of ward or neighbourhood level housing that falls below an acceptable standard, Local Authorities are already able to declare Neighbourhood Renewal Areas or establish Selective Licensing Schemes. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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1.3 In terms of established neighbourhood renewal areas or locations where selective licensing has already been used, the profile of those areas tend to share common features namely: — Urban inner city locations of low value housing. — Often pre1919 terraces without cavity walls and low thermal efficiency. — Areas affected by post-industrial decline with higher than national average proportions of vulnerable households. — Very high proportions of private rented stock compared to national averages. 1.4 Where Local Authorities containing such stock (eg: Newham) seek to introduce Mandatory Landlord Registration at a borough-wide level or the Welsh Assembly at a national level, they run the risk of imposing unreasonable burdens on private sector landlords. — In the case of Newham Council, it would have been more proportionate to expect the Local Authority to have imposed Mandatory Licensing in the ward/wards where the quality of housing stock and management had already been established as problematic through the number of enforcement notices issued. Creating a blanket policy for the entire borough is excessive, expensive, unnecessary and penalises good landlords. — In the case of the proposed by the Wales Agent and Landlord Scheme (WALLS); the Welsh Assembly run the risk of unintended consequences in rural areas—particularly in national parks—where wages and rents are low but capital values are high and a market for second homes exists. It is likely that there will be a reduction in rural properties available to rent in these areas—a situation that would be mirrored in England if Mandatory Landlord Registration was introduced.
Recommendation DCLG should look at the national English House Condition Survey and LA Private House Condition surveys to establish what proportion of private sector housing stock is non-decent. The data should then be cross referenced with spend per LA on private sector enforcement and an appropriate budget set from within formula grant allocations to enable implementation of existing powers. Beyond the HHSRS, these powers include: — The Housing Act 1988 (as amended). — Housing Standards under the Housing Act 2004. — Landlord and Tenant Act 1985 requirements (basic repairing obligations where the tenancy agreement is silent). — Gas Safety Regulations. — Fire Regulations. — Tenancy Deposit Scheme rules. There is no need for compulsory Landlord Registration or new enforcement powers.
2.0 Levels of rent within the private rented sector—including the possibility of rent control and the interaction between housing benefit and rents 2.1 CLA members experienced rent control during the 1950s and 1960s. It led to units being withdrawn from the rental market and compromised the maintenance of housing types that owing to their traditional construction are expensive to maintain. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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2.2 The graph below (DCLG data) confirms that only in 2011, did the private rented sector in England begin to “catch up” with other tenures in terms of numbers of housing units provided. Government policy, encouraged by the February 4th “Build to Rent” funding competition, is seeking to enhance new private rented housing delivery. The required institutional and private investment will not be forthcoming if rent control becomes a reality. Trends in Tenure (England) Total in tenure 16 14 12 10 8 Million 6 4 2 0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2008-09 2009-10 2010-11
Owner occupiers Social renters Private renters
2.3 CLA members letting housing stock under Rent Act 1977 or Rent (Agriculture) Act 1976 tenancies already suffer substantial reductions in rental income, in some cases by half, owing to the protected nature of these tenancies. Such reductions make succession rights extremely valuable.
2.4 There is significant feedback from CLA members citing inconsistent decisions and a lack of transparency from Rent Officers in the context of rent act tenancy rent setting. The CLA suggests the Government legislates so that the limit of 80% of market rents that is chargeable in the social housing sector should also apply as the appropriate level of rents for regulated Rent Act tenancy stock.
2.5 Where this change results in an increase in the level of regulated “fair rents”, landlords in that sector will be better able to maintain the quality of the existing housing stock and to comply with their statutory repairing and safety obligations. The increased enforcement of the Housing Health and Safety Rating System imposes disproportionate burdens on Rent Act “regulated” landlords whose rental income falls far short of the costs of meeting their repairing and other obligations in many cases. The injustice of this burden is felt more keenly where the tenants’ situations have changed so that they are, in fact, well able to pay rents at a much higher level than is set by the rent officer.
2.6 The ability for the social housing sector to increase rents was brought forward by the 2011 Localism Act and followed austerity programme reductions in National Affordable Housing Programme (NAHP) grant availability. The rationale for allowing rents to rise was to give Housing Associations enhanced revenue streams against which to borrow and deliver new stock. The same rationale applies to CLA members some of whom, with the benefit of reasonable revenue streams and recognition of sub-market rent through the taxation regime, wish to deliver new build market rented and affordable units.
2.7 In summer 2012, the government received the findings of the Montague Review. This review identified the need for a large increase in the stock of open market private rented sector housing owing to the shortfall in mortgage supply. The final report contains the following assessment:
The Review Group reflects on the issue of “yield” and the fact that evidence heard had confirmed an average return of 5.9% delivered as capital growth on residential rented portfolios over the last ten years as opposed to 3.5% in income return (net rent after management costs). They state that a change to a long-term residential investment market dependant only on income returns will require higher rents, lower construction and management costs.
Recommendations — Rent controls risk the future supply of rented housing and are in direct conflict with the findings of the Montague Review reference “yield” and new Localism Act freedoms re: rent setting. The Autumn statement approach of capping Local Housing Allowance payments, with flexibility where hotspots exist, is a more credible approach. — Basic supply and demand issues are at the centre of rent rises (lack of over 100,000 new units per annum as building completions continue to slump—CLG data). Therefore securing a continuous supply of private rented housing is vital to keeping rents low. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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— It is equally important to recognize that in some housing locations eg: parts of Sheffield, private sector rents are actually falling as repossessions and “accidental landlordism” arising from a lack of mortgage finance, mean that the increase in the private rented sector is outpacing latent housing demand where household formation rates are starting to decline. — There is therefore a strategic issue at the heart of housing undersupply and the rate of rent rises (falls) in different parts of the country. Rather than entering the territory of rent controls that would only add to the difficulties afflicting national housing supply: — Mortgage undersupply. — Lack of newbuild activity/National Housing stock undersupply. — Affordable Housing grant cuts. — Regeneration budget cuts meaning that brown field clean-up funding is no longer available. — Low yields. The government should seek to “balance” the findings of the Montague Review alongside institutional investment in market rented housing, allow non-institutional landlords to invest in new build supply whilst gaining appropriate taxation advantages. — The CLA has already submitted possible changes to the current taxation regime, which we believe would encourage and increase the supply of affordable housing by the private sector, to the Chief Secretary to the Treasury and he has indicated that these proposals are already being considered. 161 — We think it unreasonable that private sector landlords should be put in a worse position than their social housing equivalents. We therefore suggest that the Government should allow Protected Tenancy rents to rise to the 80% of open market rents that can be charged on Housing Association and Council House stock.
3.0 Regulation of landlords and steps that can be taken to deal with rogue landlords See 1 above.
4.0 Regulation of letting agents, including agents fees and charges 4.1 It is recognised that some letting agents advertising their services to third parties, may be taking advantage of the “accidental landlord” status of some property owners who have become landlords unintentionally. 4.2 The CLA is confident of the self-regulatory capabilities of RICS, CAAV and ARLA membership. 4.3 The CLA is opposed to mandatory regulation of letting agents, fees and charges.
Recommendation Where letting agents publicly advertise their services to third parties, there should be a requirement for RICS, ARLA or CAAV membership.
5.0 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 5.1 HMO licensing already exists for certain categories of HMO under the Housing Act 2004 and all HMO’s are regulated by HMO Management Regulations. 5.2 The CLA recognizes that Houses in Multiple Occupation can pose particular management problems in that transient and vulnerable individuals are often housed in close proximity to one another in this housing type.
Recommendation. The CLA accepts the need for discretionary licensing schemes for HMO’s in some Local Authority areas. Please see 1.3 above.
6.0 Tenancy agreements and the length and security of tenure 6.1 We would emphasis the beneficial effect that the introduction of shorthold tenancies under the Housing Act 1980, reformed by the Housing Act 1988 and then the Housing Act 1996, had on the private rented sector. It gave greater freedom of contract between the parties, moreover the de-regulation of rents linked to the introduction of the assured tenancy in The Housing Act 1988 enabled landlords to better invest in maintaining their property. The introduction of the Asured Shorthold Tenancy and the ability to regain possession under the s.21 notice only ground increased the willingness of landlords to let property confident that they would be able to regain vacant possession in the event that they needed to do so. The result of this all these reforms was 161 In a letter to Andrew Bradford of the Housing and Communities Policy Group of the Scottish Rural Property and Business Association dated 4th December 2012. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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that property owners were far more willing to make their properties available to rent than had previously been the case. 6.2 CLA members are satisfied with the Assured Shorthold tenancy model but regret the loss of void rates periods. Charging Council Tax when a landlord is trying to make a property “decent” is unreasonable— particularly when public services are not being used.
Recommendations — Reinstate Council Tax void rate periods of 6 months on letting accommodation. Where major refurbishment is required following long term tenancies, 12 months void rate periods should be awarded. — Many CLA members choose to let property at either sub-market rents or on longer term tenancies, or a combination of both, in order to secure long term rental revenues and ensure community sustainability. Carefully crafted tax reliefs could significantly encourage and expand the provision of affordable housing conditional upon set objectives. We have already submitted proposals as mentioned under Item 2 above.
7.0 How local authorities are discharging their homelessness duty by being able to place homeless households in private sector housing The CLA responded to the Homelessness (Suitability of Accommodation) (England) Order 2012 consultation as follows: “The CLA agrees that the four bullet points listed are the criteria that local authorities should take into account when considering location but would add a fifth bullet point regarding “lack of employment opportunities.” The NPPF recognises and assists in the ability for rural communities to contribute towards the national growth agenda however, at the time of writing (23.7.12) there is little knowledge as to how this will be implemented or how the interface between Localism and the NPPF will work.”
Recommendation Until the NPPF is demonstrated to have delivered heightened employment in the countryside, it is inappropriate to discharge the homelessness duty into rural accommodation.”
8.0 Conclusion The government has recognised the importance of the private rented sector in a range of strategies, Ministerial Statements and reviews 2011–12. The Government wishes to increase the supply of private rented housing stock, and this would be compromised by rent controls. The capping of Local Housing Allowance is a more credible approach, with the caveat that flexibility for hot spot areas should be incorporated. This submission also demonstrates the wealth of powers already available to Local Authorities in terms of housing enforcement and proposes use of English House Condition and Private House Condition survey data to indicate the size of enforcement team budget required at the Local Authority level. Finally, CLA members have a large part to play in the private rented sector both in terms of existing stock and with regard to the ability to deliver new stock. Providing units at sub-market rents or letting on long-term tenancies is common practice amongst the membership, meaning that a fundamental role is played by CLA members in terms of community sustainability. The point is that this should be a decision for the landlord, not the state. In addition, carefully crafted tax reliefs could significantly encourage and expand the provision of affordable housing conditional upon set objectives. The CLA believes that new capital gains tax roll-over relief (based upon that already provided by TCGA 1992 s 247—roll-over relief for acquisition by authorities with compulsory purchase powers) for reinvestment into let housing would encourage the provision of new rented housing. The intention behind the new relief would be to encourage not just the supply of housing but the supply, in particular, of rented housing. The framework of the relief under s. 247 can easily be adapted to ensure that the housing, which has attracted the relief, will indeed be rented and not, eg, sold or used for owner-occupation. The relief, being a form of roll-over relief, would automatically result in the relieved gain becoming taxable if the property is sold because the then CGT is calculated by reference to cost reduced by the previously rolled-over gain. The legislation also contains a mechanism for recovering the relieved gain even when reinvestment property is not disposed of. TCGA 1992 s 248(2) claws back the relief where a usage condition is broken: when the reinvested land becomes eligible for the private residence exemption within the following 6 years. There could be similar clawback if the house acquired with the aid of the relief failed to satisfy conditions as to being let. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Conditions as to the lettings would need to be defined. There would be limitations on the term (though not renewals of periodic tenancies), and perhaps letting to connected persons such as the owner’s family and employees. January 2013
Written evidence submitted by the London Borough of Camden We welcome the opportunity to submit evidence on the private rented sector. Camden is an inner London borough, where a third of households now live in the private rented sector and we have the third highest private rents in the country. In Camden we are examining the role this sector plays in the make-up of our housing stock. It has become clear, as detailed below, that home ownership has decreased in the borough as the numbers of people living in the private rented sector has increased. This is a fast becoming a mature sector with residents seeing the private rented sector as a (sometimes only) long term solution. What has also become clear is that many people are becoming landlords without the proper knowledge or ability to maintain the properties they rent out. Property conditions are also a concern in Camden, in 2004, a third of homes in Camden’s private rented sector did not meet the decent homes standard. Much of our stock is energy inefficient, and there are limited opportunities to build purpose built private rented housing with limited land for new building sites Property prices and rents in Camden continue to rise, and there are limited opportunities for new social housing developments. High rents are impacting on Camden families and our mixed communities. There is a growing risk of child poverty. Welfare reform will have a particular impact on inner London including our ability to find suitable homes for homeless families in the private rented sector. We would like to discuss the possibility of benefits that are paid to cover part or all of rent only being paid to Landlords whose properties meet the decent homes standard. Also, given the very high level of rents in Camden it would be helpful if the committee could do further exploration of the impacts of rent capping and whether this would make housing more affordable and accessible. It is important for Camden as a council not to presume that the private rented sector in the borough is dominated by rogue landlords. We have led the way in delivering the UK Landlord Accreditation Scheme, incorporating the London Landlord Accreditation Scheme, where we train and accredit agents. In October 2012, 786 agents were registered as accredited through our scheme in London and it has become a useful tool in helping to deliver quality housing. I trust that the Committee will find the evidence submitted from Camden’s example to be of interest in their consideration of improving the private rented sector. We look forward to working with you and the Committee on this important issue.
Executive Summary (i) Camden is an inner London borough, where, according to the 2011 census, a third of households now live in the private rented sector, which is a 10% increase in the last 10 years. The private rented sector is changing, it needs to be modernised to meet the needs of many households who live in the sector as their permanent home (ii) Property prices and rents in Camden continue to rise, and there are limited opportunities for new social housing developments. High rents are impacting on Camden families and our mixed communities. There is a growing risk of child poverty. Welfare reform will have a particular impact on inner London including our ability to find suitable homes for homeless families in the private rented sector. (iii) Security of tenure is a key concern and impacts on outcomes for children living in the sector. Families living in the private rented sector should have the same opportunities to a stable home, to raise complaints against their landlord and to be able to form tenant organisations and as social housing tenants do. There should be greater regulation of the buy-to-let mortgage market, and landlords should be enabled to offer longer tenancy lengths to good tenants where both parties wish to enter into a long term agreement. (iv) While there are “rogue landlords” who must be tackled, there are many good landlords, and there are many small landlords who have little experience in managing rented accommodation and do not appreciate the standards that should apply to rented housing. Camden has developed and now hosts the UK Landlord Accreditation Scheme, incorporating the London Landlord Accreditation Scheme to offer landlords training and advice and set standards for membership to improve professional standards in the sector. There should be further legislation to regulate letting agents both on fees that they can charge, and to encourage longer tenancy terms. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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(v) Property conditions are a concern in Camden. While we are aware that many homes contain poor property conditions, tenants who lack security of tenure are wary of reporting these problems. We also find we have difficulty contacting overseas landlords and making them accountable for management of their properties. (vi) Licensing is one way to ensure property standards, however the current licensing regime is limited in the evidence required to implement a scheme. Sometimes landlords evict tenants when work is required and charge higher rents once the work is completed. (vii) Our work indicates that more grants and financial incentives should be made available to help landlords improve their stock. This has proved to be an effective method of achieving property improvements without the loss of a home to the tenant.
1. Recommendations for Action My recommendations are as follows: 1. The sector needs to be modernised to meet the needs of households living in the private rented sector as a long term home. Security of tenure is a key concern and impacts on outcomes for children. Families living in the private rented sector should have the same opportunities to a stable home, to raise complaints against their landlord and to be able to form tenant organisations as social housing tenants do. 2. Increasing the supply of affordable rentals, including in the private rented sector, is key to ensuring mixed communities and reducing child poverty in high demand areas such as Camden. 3. Security of tenure is critical to provide long term homes to families. There should be greater regulation of the buy-to-let mortgage market, and landlords should be enabled to offer longer tenancy lengths to good tenants where both parties wish to enter into a long term agreement. 4. Accreditation of landlords and managing agents should be promoted. There should be further legislation to regulate letting agents both on fees that they can charge, and to encourage longer tenancy terms. 5. The government should take further action to ensure that overseas landlords are properly accountable for management of their PRS investment properties. 6. The current licensing regime is limited in the evidence required to implement a scheme, and should be extended. 7. Our work indicates that more grants and financial incentives should be made available to help landlords improve their stock. This has proved to be an effective method of achieving property improvements without the loss of a home to the tenant. 8. Government needs to explore capping rents in order to make rented properties more affordable and accessible. 9. Benefits paid to cover rent costs should be linked to property conditions but in such a way as to avoid penalising the tenant.
2. Factual information to be submitted 2.1 Thank you for this opportunity to present evidence to the Committee. I would like to share facts and information about the Camden private rented sector, as an example of an inner London borough, and how current housing conditions impact on our local residents. I have structured my evidence using the subheadings that the Committee have helpfully provided.
3. The quality of private rented housing, and steps that can be taken to ensure that all housing in the sector is of an acceptable standard 3.1 In 2004, a third of Camden homes did not meet the decent homes standard. Many homes in our stock were built pre 1945, and therefore have poor insulation. Fuel poverty is a concern for our residents, especially where other expenses continue to rise. 3.2 We have found grants and financial incentives are an effective mechanism to improve homes. Where there are no financial incentives, landlords sometimes evict the tenant while they carry out work on a property, or because they intend to charge a higher rent once the property condition has been improved. Tenants are therefore reluctant to inform environmental health officers of the problems they experience in their property as they risk losing their home. 3.3 Licensing is one way to ensure property standards, however the current licensing regime is limited in the burden of evidence required to implement a scheme. Selective licensing is not a possibility for Camden as it only applies to areas of low demand and high anti-social behaviour. Therefore we can only consider licensing HMO’s. 3.4 We would also like to raise our concerns about accountability of overseas landlords. We have found it difficult to enforce property standards, serve management orders, bring empty properties back into use, or to resolve antisocial behaviour from tenants in leasehold properties on our council estates where the landlord lives cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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overseas. The Government should do more to make overseas landlords accountable to ensure that their properties are managed to a good standard.
4. Levels of rent within the private rented sector—including the possibility of rent control and the interaction between housing benefit and rents 4.1 Camden is an area of high demand, and housing benefit has no impact on market rents. Median private sector rents in the borough stood at an average of £445 a week for a two bedroom property during the twelve months up to and including March 2012. 4.2 In May 2012, there were just under 5,000 private renters in Camden claiming Housing Benefit. In November 2012, 1074 private renters will be affected by local housing allowance caps. 320 renters are expected to be above the total benefit cap. 4.3 Affordability of the private rented sector is a key concern in Camden, as costs of rent become prohibitive to those claiming benefits and to middle income families. Access to affordable housing is a critical element in reducing child poverty. The sector needs modernising to meet the needs of the many households who are living in this sector as their permanent home. 4.4 I welcome recommendations from the Committee that would enable more affordable long term private rented homes to maintain a mixed community in Camden.
5. Regulation of landlords, and steps that can be taken to deal with rogue landlords 5.1 While there are “rogue landlords” who must be tackled, there are many good landlords, and there are many small landlords who have little experience in managing rented accommodation and do not appreciate the standards that should apply to rented housing. The Council uses a range of interventions to improve standards, characterised as a “carrot and stick” approach. Assistance offered to landlords includes: — Camden has developed and hosts the UK Landlord Accreditation Scheme that provides training for landlords, encourages good practice, and avoids costly enforcement activity. The scheme is very successful and so far 11,129 London landlords have been accredited including 646 with properties in Camden. — We offer landlords grants to improve conditions and bring empty homes back onto the rental market. — We offer casework advice and support to owners of empty properties to carry out repairs, and let or sell the property. — We issue schedules of works required by landlords prior to taking enforcement action. 5.2 However we are not afraid to take decisive action. In the last year our Environmental Health Officers have: — issued 72 statutory notices requiring works on 48 dwellings; — issued 23 statutory notices related to 13 properties for public health type issues like Rodents, Power Cut Offs and Filthy Homes; — taken seven prosecutions to a hearing, through which the courts awarded £23,641 in fines and £25,255 costs. There were also a number of cases where the Council undertook works in default where the landlord or owner failed to do them, and claimed back costs and expenses as an alternative to prosecution; and — we were the first local authority to take direct control of three poorly managed rented houses since 2006 using strong new powers and are preparing for more action where “rogue landlords” fail. 5.3 We are preparing a new private rented strategy that is due to be launched in March that will introduce further initiatives to assist Landlords to improve the standards of accommodation in this critical sector of Camden’s housing Market.
6. Regulation of letting agents, including agents’ fees and charges 6.1 Lettings agents, like landlords can currently be established and run by individuals with little training or experience. We also train and accredit agents on our Landlord Accreditation Scheme. In October 2012, 786 agents were registered as accredited through our scheme in London. 6.2 The following conditions apply to agents seeking accreditation: — The Agency must show that two thirds of the directors and staff have attended training. — If the Agency has several offices, only the office attending the training will be accredited. — To become accredited the directors and staff must attend a one-day development course run by UKLAP, the staff within the agency must be “fit and proper” persons and comply with the UKLAP code of conduct. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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— For an agency to be accredited, the Agency must be a member of any of the following organizations: NALS (National Approved Letting Scheme), ARLA (Association of Residential Letting Agents), ARMA (Association of Residential Managing Agents), NAEA (National Association of Estate Agents), RICS (Royal Institution of Chartered Surveyors) or a professional body that is governed by a code of conduct, enforced by the professional body. Agents who are not a member of a recognized organization, can provide other evidence of competency. — The Agency must agree to recommend the UKLAP to all their landlords. — Agents would be subject to similar disciplinary action as landlords. 7. However, we remain unable to regulate the fees that agents charge. A high number of complaints received by UKLAP relate to agents fees and charges. Further regulation of agents would need to be legislated for.
8. 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 8.1 Camden operates mandatory licensing of HMO’s, and will be considering an additional licencing scheme to incorporate additional types of HMO. 8.2 We think there is a need to have a borough wide licencing scheme to capture poor management in many HMOs, rather than a bias towards landlords owning bedsit type HMOs. It is unfair to focus on one type of HMO. However, the burden of proof required to operate additional or selective licencing is a limiting factor in our enforcement activity. 8.3 There have been some implications of adherence to a mandatory only scheme. Complaints about conditions in rented housing are now more likely to feature HMO’s that are not required to be licensed because of the scrutiny applied to licensed HMO’s. There is a pressure on landlords to avoid licensing; through legal and illegal conversion, the reduction of occupying tenants to four and therefore potential under occupation, and the creation of cramped and small studio type flats which are difficult to remedy.
9. Tenancy agreements and length and security of tenure 9.1 Security of tenure is a key concern. With a growing number of families living in the private rented sector as a permanent home, we know that outcomes for children are better where families can remain in one home without disrupting their schooling. We have not implemented flexible tenancies in our own Council stock as we recognise the benefit to families of long term stability. 9.2 Families living in the private rented sector should have the same opportunities to have greater certainty and a stable home, to raise complaints against their landlord and to form tenant organisations as social housing tenants do. The Assured Shorthold Tenancy regime makes it possible for Landlords to offer longer tenancy terms, but risk adverse banks and lettings agents may encourage landlords to offer shorter terms so that they can charge administration fees, or to raise the rent on a property. 9.3 We know from working closely with landlords for our homeless households that many landlords prefer long lets with a good tenant as this provides a secure rental income stream. We continue to provide tenancy training to all our homeless households so that landlords have greater assurances that the tenant will also meet their responsibilities.
10 How local authorities are discharging their homelessness duty by being able to place homeless households in private sector housing 10.1 For many years now, Camden has operated a very successful approach to homelessness prevention that has significantly reduced the number of households that have required Temporary Accommodation. In 2003–4 Camden accepted a duty for 1,648 households a year. By 2011–12 this had reduced to 153 in the year. The private rented sector has been a good source of permanent housing to prevent homelessness in Camden. Between 2008–12 677 households moved into private rented housing to prevent their homelessness, and we additionally used the private rented sector to provide homes for people where we had a duty to provide temporary accommodation. 10.2 The popularity of Camden as a place to live means that private rented sector rents are high. Median private sector rents in the borough stood at an average of £445 a week for a two bedroom property during the twelve months up to and including March 2012. The LHA cap for a two bedroom property in Camden is £290 and some households needing a two bedroom home will be further disadvantaged by the total household benefit cap. The combination of high rents and less benefit available to households to cover housing costs will make temporary accommodation placements in Camden and in many other parts of London unaffordable and, therefore, unsuitable. The Secretary of State has strengthened provisions on suitability of accommodation in relation to location. Taken together, providing accommodation which is both affordable and in a suitable location will be challenging. January 2013 cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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Supplementary written evidence submitted by London Borough of Camden Thank you for the opportunity to give evidence before the Committee on 15 May 2013. I am writing in reply to the Committee’s request for further information on the issues below. 1. On the percentage of landlords within Camden who have not joined the accreditation scheme As I said to the Committee, we are immensely proud to host the London Landlords Accreditation Scheme with 11,000 members, 647 of whom have properties in Camden. The scheme provides training for landlords, encourages good practice and avoids costly enforcement activity. The scheme is voluntary and, in the absence of compulsory registration of sector-wide licensing, it is impossible to say with accuracy the percentage of landlords within Camden who have not joined the accreditation scheme. However, with the number of private rented dwellings in Camden now totalling more than 32,000, it is likely that a very large percentage of landlords in the borough are not accredited. We have recently held a successful conference for Landlords at Camden Town Hall and would expect to see an increase in registration rates. 2. Evidence of changes of address amongst primary school children, and how this links to churn in the PRS We have data on turnover in schools based on a termly school census, but this evidence is not linked to tenure. We believe, however, change of address amongst primary school children linked to churn in the private rented sector can have a serious impact on childhood development. Research carried out by Shelter published in May 2013 revealed that, nationally, one in 10 renting families have had to change their children’s school in the past five years. In Camden, we plan to get a better understanding of the number children impacted locally as we gather evidence over the next year to inform our future plans for the private rented sector. I trust that the Committee will find this information useful and that you will not hesitate to contact me for anything further. June 2013
Written evidence submitted by the Department for Communities and Local Government Introduction Demand for rented housing is growing. The private rented sector has responded to this demand and now houses 3.7 million households in England (equivalent to 17% of the overall housing stock), compared to two million in the early 1980s. 1.5 million homes were added in just eight years between 2003 and 2010—a 55% increase. Much of this growth has been driven by individual landlords with small portfolios, and the lack of large scale investment has constrained further market expansion. Furthermore, growth in the rented sectors has not contributed significantly to the supply of new housing. Government recognises the importance of the private rented sector and is keen to encourage further growth through the supply of new high quality large scale development for private rent. Encouraging supply will not only provide homes for additional families in the sector but also, by promoting competition, improve standards and affordability compared to the levels that would otherwise prevail if supply were static. This Government has made a number of changes designed to encourage supply and make it easier for institutional investors to become involved in the sector. We have made changes to stamp duty levied on bulk purchases, and revised the regime for Real Estate Investment Trusts to widen access and reduce the cost of compliance. We have also taken up key recommendations of Sir Adrian Montague’s report on the barriers to institutional investment, announcing: — A new £200 million fund providing equity finance to house builders and developers. It will support the building of large demonstration projects of purpose-built private rented housing, showing the viability of the build-to-rent market and increasing investor confidence. — A £10 billion debt guarantee scheme to support the delivery of i) new homes purpose built for private rent and ii) up to 15,000 additional affordable homes. The scheme will use the Government’s fiscal credibility to reduce the cost of borrowing for housing providers, while attracting investment from fixed income investors seeking a stable, long term return on their investment without exposure to residential rental property risk. We are currently seeking input from organisations suitably qualified and experienced to help set up and deliver the scheme. — A new, expert PRS investment taskforce to facilitate deals and support the delivery of rented homes through bringing together developers, management bodies and institutional investors. This taskforce will address barriers around the relative unfamiliarity of large scale private rented schemes. Overall, the sector is performing well. Not only has the number of privately rented homes increased in response to demand but the overall standard of accommodation in the sector has improved significantly over the past decade. However, the Government recognises that these trends are not universal and that there is still a minority of privately rented homes that are not in an acceptable condition and a minority of landlords and cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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agents who are not meeting the standards that should be expected of them. This submission sets out Government’s response to those challenges, and in particular responds to the seven issues set out by the Committee.
The quality of private rented housing, and steps that can be taken to ensure that all housing in the sector is of an acceptable standard 1. The quality of privately rented housing has improved rapidly over the past decade, and levels of satisfaction compare well to other tenures (see box). But it is clear that a minority of landlords do not maintain properties to a decent standard. Government is supporting local authorities to take tough action against those landlords. Condition of/Satisfaction with Privately Rented Housing The English Housing Survey: Homes Report 2010162 reports the underlying condition of housing using a range of characteristics. One indicator is the cost of bringing homes up to a given level of repair. The survey shows that the basic standardised cost of repair163 for the private rented sector is higher than for other sectors, at £17.57 per square metre (£17.57/m2), compared to £11.61/m2 for the overall housing stock. However, this is a significant improvement, in absolute and relative terms, compared to 2001, when the costs were £40.33/m2 for the private rented sector and £19.06/m2 for the overall stock. In part these differences are explained by the relative age of homes in different tenures. While the private rented sector contains a slightly higher proportion of new (post-1990) homes than the overall housing stock (15% compared to 12.9%), it also contains almost double the number of pre-1919 homes (40.0% compared to 21.7% of the overall housing stock). According to the English Housing Survey: 2010–11 Household Report,164 83.6% of private tenants are very or fairly satisfied with their accommodation. Whilst that figure is lower than for the owner occupied sector (95.4%), it compares favourably with local authority tenants (76.7%) and housing association tenants (83.2%). Similarly, 71.6% of private tenants are satisfied with the way their landlord carries out repairs and maintenance, compared to 65.8% of local authority tenants and 73.1% of housing association tenants. 2. Whilst average conditions have improved significantly, a minority of privately rented homes are not in an acceptable condition. Local authorities can use the Housing Health and Safety Rating System (HHSRS) to assess properties against 29 different hazards such as damp and mould growth, excess cold, electrical and fire hazards, etc. If a property is found to contain serious, “category 1”, hazards, the authority has a statutory duty to take action. It may compel private landlords to make necessary improvements through the issuing of improvement notices and, in the most severe cases, prohibition notices. 3. Government has been supporting nine local authorities to use these powers in areas where some of the very worst conditions of “Beds in Sheds” occur and has recently published guidance.165 4. We will be working with a wider range of local authorities, over the coming months, to encourage action to be taken against a broader range of rented properties that are not in an acceptable condition 5. Besides regulatory approaches targeted at the worst properties, both landlords and tenants also have an incentive to improve the energy efficiency of rented properties through the Green Deal from February 2013.
Levels of rent within the private rented sector—including the possibility of rent control and the interaction between housing benefit and rents Rents Levels and Control 6. Across England as a whole, increases in private sector rents in recent years have been modest and remained below inflation. In December the Valuation Office Agency published an indicative median rent of £575 a month in the 12 months to September 2012. The equivalent for the year to September 2011 was the same, £575 per month. More broadly, Rightmove have forecast that two-thirds of landlords are planning to freeze rents next year.166 7. There are currently several sources of data on rental levels in the private rented sector, all of which are indicative but none definitive. The sources include:— — Office of National Statistics (ONS) “private rental’ component of Consumer Price Inflation (CPI). — Valuation Office Agency (VOA)_data. 162 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/6748/2173483.pdf 163 This is expressed in a basic standardised cost per square metre converted to 2001 prices using the Building Cost Information Service (BCIS) National Index. 164 https://www.gov.uk/government/publications/english-housing-survey-household-report-2010-to-2011 165 Dealing with rogue landlords: a guide for local authorities August 2012:, https://www.gov.uk/government/publications/dealing- with-rogue-landlords-a-guide-for-local-authorities 166 Rightmove, Consumer Rental Forecast, 3 December 2012 cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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— Surveys by private companies such as LSL Property Services. — English Housing Survey. 8. These data produce a range of values for rent increases between 0.9%167 and 3.3%168 per year. These values do not point to disproportionate overall increases. 9. Most recently, the LSL index for November 2012 showed that rents in England & Wales fell for the first time since March 2011, with average rents at £741 per month. However, the LSL index only looks at new Buy to Let lettings and has a small sample size; and rents will generally increase when a landlord has a new tenant. 10. Looking forward, ONS is improving coverage in the Consumer Price Index of private rents by using Valuation Office Agency data, with the enhanced measure included from March. The Valuation Office Agency data represent the best potential source on private rents and we are working closely with them to improve information on how rent levels vary geographically and over time.
Rent Controls 11. In specific high demand areas, rents have risen more quickly because supply of rented homes has not kept up with demand. Government is clear that encouraging supply of new homes, rather than the imposition of rent controls, is the right policy response. 12. Prior to the Housing Act 1988, the private rental market was in long-term decline, having dropped to just 9% of the housing market in 1988. Regulated rents and lifetime tenancies had meant that being a landlord was simply not commercially viable for many property owners and investors. Controlled rents had meant landlords had very limited funds to maintain properties leading to poor stock condition. And low rents, combined with lifetime tenancies had driven investors away, leading to less supply The resulting shortage of rented accommodation helped neither tenants nor landlords. 13. By enabling landlords to charge market rents and introducing assured shorthold tenancies, the 1988 Act arrested this decline. The sector now accounts for 17% of housing. Consequently, rent control has been ruled out by successive administrations. Instead, we must encourage the supply of new homes for rent.
Interaction between Housing Benefit and Rents 14. Housing Benefit is the third largest area of welfare expenditure. It has gone up from £11 billion in 1997 to £20 billion in 2009 and, if unreformed, will reach £25 billion by 2016. It is right that Government should take steps to manage the cost of housing benefit, and the overall level of benefits that households can claim, as part of tackling the deficit. 15. From April 2011, the rates of Local Housing Allowance were reduced and capped to reduce pressure on the Housing Benefit Bill and help restore fairness to the system. The changes to Local Housing Allowance make it simpler for claimants to understand and easier for people to plan for the future when they know the maximum amount of Housing Benefit that will be available for a whole year ahead. 16. In addition the Chancellor announced in the 2012 Autumn statement that:— — LHA rates will be up-rated by Consumer Price Inflation, as planned, in 2013–14. — For the following two years (2014–15 and 2015–16) increases will be capped at 1%, in line with other benefits; and. 17. We estimate that by 2015–16 rates will be on average just under £4/week lower than they would be otherwise, leading to forecast net savings of £105 million in 2014–15 and £225 million in 2015–16. 18. Government accepts that these changes will have a greater impact on people in areas such as London where demand is high. Government has set aside £140 million over two years to help people affected by these new limits. 19. This ring-fenced funding will be targeted at people in areas where rent increases are causing a shortage of affordable accommodation. This is on top of existing Discretionary Housing Payments. 20. The cap will have a phased roll out, starting in four London boroughs in April 2013. This will allow Government to test its systems and will help all local authorities prepare for full implementation in October 2013.
Regulation of landlords, and steps that can be taken to deal with rogue landlords 21. The majority (83.6%169) of private tenants are very or fairly satisfied with their accommodation and 71.6% are satisfied with the way their landlord carries out repairs and maintenance. This suggests that, overall, landlords provide a reasonable level of service. Of course, not all landlords meet all of their obligations all of 167 VOA data 168 ONS data used for CPI 169 English Housing Survey: 2010–11 Household Report cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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the time. The Government wants to drive up standards across the board by ensuring that tenants are well- informed, empowered consumers. Tenants should be clear what they should expect from a decent landlord or letting agent, and what to do if things go wrong. Government will work with the sector and relevant organisations to ensure that both tenants and landlords know and understand their rights and responsibilities. 22. There is, however, a minority of landlords who fail to even meet their basic responsibilities and, in some cases act in a way which is outright criminal. These rogue landlords exploit some of the most vulnerable groups in society and also jeopardise the reputation of the sector. Their behaviours can include placing tenants in overcrowded or poor accommodation (including illegal outhouses), benefits fraud, tax evasion, employment of illegal migrants and other criminal behaviours. This is unacceptable in modern Britain and Government supports local authorities using the full range of their powers against rogue landlords. 23. An extensive range of powers is available to local authorities to take action against rogue landlords. These include powers under the Housing Act 2004, to require improvements where properties present hazards, and to licence certain landlords. Local authorities have the discretion to introduce local licensing schemes to tackle particular local problems. Where landlords do not comply with enforcement action, or licensing provisions, they can be prosecuted through the courts. Local authorities can also join up with other enforcement agencies, such as Her Majesty’s Revenue and Customs, UK Border Agency and the police to gather intelligence and take action across a broad range of illegal activities. 24. It is clear from our work so far that sufficient powers are available to local authorities and other enforcement agencies to tackle the full range of rogue landlord behaviours. But this is nonetheless difficult and complex work. To help authorities use these powers more effectively, Government has: — Published a guide for local authorities on dealing with rogue landlords;170 and — Provided £1.8 million of funding to the nine local authorities where the practice of accommodating tenants in illegal “sheds with beds” is most prevalent. 25. Over the coming months, we will be working with a number of local authorities to broaden the scope of this work beyond the current focus on illegally occupied outhouses, ie “Beds in Sheds”.
Regulation of letting agents, including agents’ fees and charges 26. The Government recognises the importance of tackling bad practice among letting agents. One in five tenants and 17% of landlords are dissatisfied with their letting agent, according to a recent Which? Report.171 According to a recent survey an estimated 85%172 of agents belong to a professional body or organisation. However, previous surveys have shown a much lower figure, around 50%. The Government is keen to raise consumer awareness of the benefits of using an agent which is a member of one of the schemes. There is potential to raise standards across the board, not least by ensuring that consumers are well-informed and empowered to exercise their rights. 27. The Government does not, however, believe that significant burdensome regulation is needed. New regulation could increase costs for both landlords and so far tenants. 28. Letting agents are already subject to consumer protection legislation, which covers issues such as giving false or misleading information to consumers, not acting with the standard of care and skill that is in accordance with honest market practice and claiming falsely to be a member of a professional body or an approved redress scheme. 29. This legislation also includes protections against disproportionate or hidden fees and unfair terms and conditions. Where a consumer (who might be a tenant or a landlord) believes that an agent is in breach of this legislation, they can go to their local trading standards officer or the Office of Fair Trading. The Office of Fair Trading has done a lot of work to clearly set out what is required under this legislation.173 30. In addition to the protection offered by the consumer protection legislation, up to a half of agents are also members of voluntary schemes which ensure that members have the right protections for consumers in place. There are three organisations which run self-regulatory schemes: the Royal Institution of Chartered Surveyors, the Association of Residential Letting Agents and the National Approved Lettings Scheme. 31. All three organisations offer client money protection and professional indemnity insurance to their members alongside requirements as to standards of service and a complaints procedure for consumers. Also In addition the Property Ombudsman scheme requires its members to abide by a code of standards that it is in the process of getting approved by the Office of Fair Trading. 32. Over the last two years the Government has encouraged an increase in self regulation and has endorsed the industry-led SAFEAgent scheme, which is designed to help consumers understand the benefits of using agents with client money protection, by developing an easy to recognise logo. Two thousand agents now belong to SAFEAgent. 170 https://www.gov.uk/government/publications/dealing-with-rogue-landlords-a-guide-for-local-authorities 171 ‘Renting roulette consumer experience of the lettings market’ Which Report November 2012 172 Private Landlords Survey 2010, DCLG, October 2011 173 OFT guidance on unfair terms in tenancy agreements http://www.oft.gov.uk/shared_oft/reports/unfair_contract_terms/oft356.pdf cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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33. The Government believes the clear priority is to ensure existing laws are enforced and established protections are extended to cover more transactions. This work includes ensuring that both agents and tenants know their rights and responsibilities.
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 34. Houses in Multiple Occupation (HMOs) play an important role in housing people who may not be able— or wish—to live as a single household. At the same time, they can present higher risks than other properties (particularly fire risks), as well as more challenging management issues. It is appropriate, therefore, that more stringent regulation is targeted on these properties. Local authorities have a role both in determining whether development of HMOs is appropriate in an area, and in licensing HMOs to ensure good management. 35. The planning development management regime allows local authorities to consider whether developing an HMO, or converting an existing family house to an HMO, is appropriate in the local context. The HMO licensing system, under the Housing Act 2004, ensures that the licence holder is fit and proper to hold a licence, that the management arrangements are appropriate and that the house is suitable for the proposed number of occupiers. 36. The impacts of large HMOs tend to be greater than for small HMOs. So, where a property is to be occupied by more than six unrelated people who share basic amenities, a material change of use from any use always requires an application for planning permission. Similarly, larger HMOs (of three or more storeys and housing five or more people) always require a licence. 37. Because of their lower impacts, it would be over-reaching, as a matter of national law, for smaller HMOs always to require planning permission and/or a license. However, this may be appropriate in some areas, where there are particular problems. So, for smaller HMOs, local authorities have the discretion to:— — Consult on and introduce “article 4 directions” requiring planning permission to be sought where it is proposed to convert a dwelling house to a small HMO. — Consult on and introduce an “additional licensing” scheme to improve the management of HMOs. 38. The Government considers that these arrangements strike the right balance between protecting the occupiers of HMOs and their local communities and minimising regulatory burdens on landlords and tenants.
Tenancy Agreements and Length and Security of Tenure 39. Assured shorthold tenancies were introduced over 20 years ago and have been the standard form of tenancy for over 15 years. This stability, and the balance provided between the needs of landlords and of tenants have underpinned the rapid growth in the sector. There are no plans to change this system. 40. The Housing Act 1988 introduced the current regulatory framework based around the assured shorthold tenancy. The main characteristics of this new regime were the ability to limit the length of a tenancy, a “no fault” possession procedure and allowing landlords to set market rents. The Housing Act 1996 made assured shorthold tenancies the default tenancy for private renting. 41. Under this framework, the number of households renting privately has risen from two million in the early 1980s to 3.7 million in 2010, representing 17% of all households in England.174 In particular, the sector responded flexibly to the needs of households caught up in the recent economic turmoil. 42. A stable legal framework is vital to the continued growth of the sector. This is borne out by Sir Adrian Montague’s Review of the private rented sector,175 which said: “Investors were attracted by the stability of the regulatory framework. Alongside stable returns, respondents also drew our attention to the importance of the stability of the regulatory framework for renting over the last 20 years. Equally, they warned of the dangers to the attractiveness of the sector were that stability to be undermined. In the 1970s rent controls and restrictions on regaining vacant possession caused institutional interest in the sector to evaporate, and strong Government endorsement of the current status quo in these areas would help to bolster the market.” 43. Whilst assured shorthold tenancies allow the landlord to end the tenancy after the initial fixed term of six months, the English Housing Survey 2010 showed that most tenants in the sector stay for at least a year. It also found that in 2010–11 more than 40% of private tenants had been in their home for more than two years.176 44. More importantly, in the majority of cases it is the tenant who ends the tenancy rather than the landlord. Statistics show that in only 9% of cases are tenancies ended at the instigation of the landlord. 45. The Government acknowledges that there is some demand for longer tenancies, within the existing legal framework. We welcome work that has been done to promote this. Promoting investment in build-to-rent will 174 English Housing Survey, Homes 2010, published July 2012. 175 Review of the barriers to institutional investment in private rented homes, 2012 176 English Housing Survey 2010–11 (published July 2012) cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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support growth in longer tenancies, which can meet the investment profile sought by institutional investors as well as demand from tenants.
Homelessness and the private rented sector 46. The Government has empowered local authorities to fulfil their duties to homeless households through the offer of suitable accommodation in the private rented sector. The standard of accommodation in the sector and the stability it offers to tenants are high in the majority of cases and, with suitable safeguards, there is no reason why the private sector should not be used to meet the housing needs of homeless people. 47. The Localism Act 2011 gave local authorities a power enabling them to end the main homelessness duty with a private rented sector offer, without the applicant’s consent. It also allows them the freedom to make better use of good-quality private sector accommodation that can provide suitable accommodation for households accepted as homeless. This power was commenced on 9 November 2012. 48. During the passage of the Localism Act members in both Houses of Parliament and homelessness organisations raised concerns about the quality of private rented sector accommodation. Particular issues of damp, cold, mould and rogue landlords were raised. In response to those concerns, the Government decided that additional regulatory safeguards were necessary, particularly given that these households may be vulnerable and may have fewer choices available to them than other households. 49. It is estimated that 18,000 new private lets will be made each year through this route. This will be monitored via statistical returns from local authorities on how they carry out their homelessness duties. This return, called the P1E, will record how often authorities make use of this power. 50. The Homelessness (Suitability of Accommodation) (England) Order 2012 sets out the circumstances in which accommodation used for the purposes of a private rented sector offer to end the main homelessness duty is not to be regarded as suitable. These circumstances cover five broad areas: — the physical condition of the property; — health and safety; — licensing for Houses in Multiple Occupation; — landlord behaviour; and — elements of good management; 51. The Order provides appropriate protection for homeless households while minimising the requirements on local authorities or landlords which could reduce the number of suitable properties. January 2013
Notes of the informal meetings with tenants and landlords from Greater London: 8 May 2013 MEETING WITH TENANTS Members present: Clive Betts MP (for part of the meeting) Simon Danczuk MP Mark Pawsey MP
Tenants present: Ann Ginige Josie Greener Hugh MacPherson Peter Murray Rosie Walker Mr Betts welcomed the tenants and explained the purpose of the inquiry. The tenants present explained their circumstances and summarised their experiences of being tenants in the private rented sector. These ranged from one who had been a tenant for over 40 years to one who had recently been evicted and was sofa-surfing at friends’ houses while seeking new accommodation. Similarly they had experience of a wide range of properties from the former Crown Estates property and ex-Right-to-Buy housing through conversions to reasonable quality and poor quality housing. The tenants were asked whether they preferred the private rented sector. One said that it was very suitable for students. Another said that it was suitable but that increasing rents in London might put it beyond those on fixed incomes such as pensioners. Others indicated a preference for social housing, which gave greater security of tenure and owner-occupation. On length of tenure, there was mixed experiences of assured shorthold tenancies. One tenant commented that they had been entering assured shorthold tenancies for five years and had always moved at the end of the tenancy. On the one hand, it gave tenants flexibility to move at relatively short notice. On the other, a landlord cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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could use the six-month break point to terminate the tenancy if the tenant pressed the landlord to fulfil obligations or as an opportunity to increase the rent. One tenant had experience of an 18 month assured shorthold tenancy but this was the exception and it had a six-month break provision. Another participant had been in the private rented sector for 17 years and had moved 17 times and had never been offered more than a year. All agreed that tenants who were unaware of their rights, which was the majority, were often taken advantage of by landlords. All agreed that tenants would benefit from concise and easily digestible information on their rights and obligations. Little was available now. The tenant who had been on the same property for over 40 years had a regulated tenancy. The situation had changed dramatically over the decades. The original owner had lived in the building but on her death it has passed to a charity which has sold it. Subsequently it had been bought unseen and there had been problems establishing the identity of the owner. This was important as those residing in the building needed to know that the owner met their obligations—for example, to ensure that the building was insured. Concerns were expressed about the sources of advice and remedial action available to tenants. Most local authorities were willing to take housing problems up with landlords. However, in those cases where the authority did little more than write a letter the tenant could be at risk of retaliatory action, including eviction, by the landlord. In other cases where authorities were prepared to follow-up by using, for example, their environmental health powers significant improvements for tenants could be achieved. In some cases local authorities could force a sale to the occupants. Concern was expressed about the closure of legal centres which were a key source of advice for tenants. Criticism of letting agents was voiced. They had a vested interest in keeping shorthold tenancies to the minimum term as they could collect frequent renewal fees. Many were helpful until tenants handed over fees, at which point assistance stopped. Their fees were not transparent and often the full range of changes was not mentioned at the outset. One participant said that they had seen fees charged by agents that varied from £75 to £250 for the same flats, where the agents were competing for business in a property. The worst could be characterised as operating little more than a protection racket. England should follow Scotland and outlaw fees paid by tenants to lettings agents. Letting agents also encouraged arrangements to avoid the spirit of the law. The example cited was the case where five people wished to enter a tenancy, they would be advised to put only four names on the tenancy agreement. This had the effect of avoiding registration as an HMO. Letting agents preyed on people’s vulnerability and tenants’ ignorance of their rights. Letting agents’ operations were riddled with conflicts of interest. It was anomalous that business which encompassed both estate agents and letting agents had employees sitting beside each other some of who were subject to regulation—the estate agents—and others who were not—letting agents. The meeting considered rent levels. It was pointed out that rents in property subject to the pre-1988 [Housing Act] regulatory regime were generally below market levels, though the trade off was that the landlords frequently ignored maintenance of the property. One tenant considered that there should be a happy medium with moderate rent increases in rents matched with a regular programme of work. There was a strong case for having no rent increases if there were works outstanding. One tenant said that when property moved out of the social sector and rent protection ended, rents were often put up above the rate of inflation, though even these increased rents could be below market rents. Those present were each asked to identify one improvement they would make. The following were suggested. — Repeal section 21 of the Housing Act 1988 which allows a landlord to gain possession without the need to give a reason. — Regulation of letting agents. — All landlords should be required to meet basic, minimum standards.
MEETING WITH LANDLORDS Members present: Clive Betts MP (for part of the meeting) James Morris MP John Pugh MP Heather Wheeler MP
Landlords present: Richard Best Erik Alexander Graham Howell Iain Beaton David Evans Heather Wheeler welcomed the landlords and explained the purpose of the inquiry. The meeting considered licensing of landlords. The point was made that it would be onerous and it was impossible to apply standards across the board. It was suggested that a process of levelling-up should take place: increasing standards and regulation for rogue landlords while decreasing them for reputable and compliant ones. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
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On the question of whether regulation was a nuisance or a barrier to investment, one participant gave the example of Thanet where HMOs were not viable due to the council’s licensing requirements. The HMO sector was subject to onerous rules and the interpretation of them varied from council to council. Another participant gave the example of putting three separate front doors on an HMO. This meant being charged three different sets of council tax. The local authority subsequently sought to charge for 20 sets of council tax based on the number of flats in the building. Given that the landlord’s rent included council tax the landlord said this would have put him out of business. His tenants would have sought cheaper accommodation. Participants suggested that capping rents would create more HMOs and lower property values. Regulation controlling the length of tenure would also prompt many landlords to get out of the market.
One participant described a particular problem with “rogue” landlords who operated outside the already heavily regulated system-often preying on the vulnerable tenants who were unable to find accommodation through legitimate means (for instance, because they had poor references or no work history). These rogues would always be outside the system, however it was regulated. Legitimate and good landlords could therefore be exposed to more regulation for no real benefit while those targeted remained outside the net.
One participant explained how in his area he got 20% off his £5,000 HMO licensing fee by being be accredited through a three-day course every three years. Another participant commented that further regulation was a solution looking for a problem. Energy Performance Certificates were considered nonsensical by one participant who called for deregulation before any further regulation. It was agreed that increased fines for rogue landlords would work, but an accreditation scheme would not.
One participant, commenting on the measure in the May 2013 Queen’s speech requiring landlords to ascertain whether their prospective tenant was a legal immigrant, said it was ridiculous to ask landlords to police migration status. One solution suggested was a register of tenants, with legitimate tenants having a certificate. This, it was argued, would get decent landlords off the hook and uncover rogue landlords with uncertificated tenants. A new set of rules was also needed which applied nationally and across housing sectors.
A further suggestion was the state should act as guarantor of rents. One participant said that would be a start and encourage landlords to take on local authority tenants. Another said, however, that any such scheme would be intrinsically impossible as, when a tenant’s circumstances changed, it would be unreasonable to ask a local authority to guarantee their rent.
It was noted that people typically rented for about two years. In flats in south London people were staying more than two years—the problem being there was nowhere else for them to go. People on the coast tended to stay longer. In London people were more mobile, switched jobs regularly, were younger and often moved when they got married.
One landlord cited a tenant who “preferred vodka to rent” and the difficulty of evicting him. Only when the locks were changed and the tenant tried to kick in the door were the police able to take him away.
The majority of participants agreed that paying housing benefit directly to tenants (direct payments) was causing problems. It was noted that paying rent directly to the landlords of vulnerable tenants was not mandatory. The system was opaque and many landlords did not know how direct payments would work. Some were having to help their vulnerable tenants fill in applications to opt out of direct payments otherwise they said they would never see the money.
There were now many obligations on landlords. Arguments over damage to properties were very difficult to resolve, as they involved calculating the current value of damaged goods. That was one good reason for keeping up rents and writing off damage.
Landlords were generally happy to use letting agents. The main problem was agents not telling tenants about changes to terms and conditions of their tenancies.
One participant said he was happy to take tenants from the council housing waiting list as they were worth a lot in the long term. Most boroughs ran landlord forums. He said that he was working hand in glove with local authorities. They found him properties to acquire among other things and, he said, created his business from start to finish. The authority was commercially minded as it knew he would come back for more prospective tenants. He said that tenants placed by local authorities did not mess about as they did not want to become intentionally homeless. His view was not shared as others present were reluctant to engage with those on the housing register. The issue came back to direct payments and the problem of receiving rent. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
Ev 306 Communities and Local Government Committee: Evidence
Supplementary written evidence submitted by the Department for Communities and Local Government
Thank you for your letter of 12 June requesting clarification about the Housing Guarantees Schemes. On 31 January we launched an open and competitive process to procure a delivery partner or partners for the schemes. Government issued an invitation to tender inviting bids from organisations with the qualifications and experience to help deliver the schemes. Those tendering needed to demonstrate their ability to raise the necessary capital and lend it on to borrowers at the lowest possible cost, while controlling the risk to DCLG as guarantor of the debt.
As you know, we are running two separate guarantees schemes. This decision was taken for a number of reasons, including state aid regulations, the need to include different security requirements, and other practicalities associated with lending into two slightly different sectors. Our extensive market engagement confirmed that those involved in both the private rented and affordable housing sectors understood and accepted this approach. The Government has always reserved the right to provide direct guarantees to investors under both the affordable and PRS schemes.
The tendering period closed on 11 March, and we are currently at a commercially sensitive stage in our evaluation of the market response. It would be wrong to pre-empt the outcome of our evaluation and I cannot therefore comment on the response we have received or on our current timetable. However, I can confirm that we expect to make an announcement on delivery arrangements for both schemes very shortly.
I look forward to receiving the report on your inquiry in due course. I will of course let you know when we announce the outcome of the procurement process. June 2013
Supplementary written evidence from the UK Association of Letting Agents
Thank you for your letter of 17 April 2013, asking for UKALA’s views on the Government’s amendments to the Enterprise and Regulatory Reform Act.
UKALA has welcomed the Government’s amendments to the Bill in broad terms. We believe that they represent a considered first step to providing greater consumer assurance in the sector without succumbing to the temptation to simply extend the Estate Agents Act 1979 provisions to letting agents. While the willingness of the House of Lords to accept the earlier amendments proposed by Baroness Hayter represented a very positive step, we had significant doubts about the suitability of simply extending the scope of existing regulation.
There are considerable differences between the relationship between estate agencies and their clients and that between letting agents and theirs, whether landlord or tenant. While it is true that access to impartial redress would prove beneficial, we believe that the protection should go further, and take into account all aspects of the lettings business.
Specifically, UKALA believes that the legal requirements should mirror the model successfully operated by the letting agents’ trade bodies. This would ensure that every agent offering letting or management services provides: (i) Access to impartial redress. (ii) A comprehensive suite of financial protections, including client money protection insurance, professional indemnity insurance and deposit protection compliance. (iii) Assurance that an industry agreed code of practice is followed at all times, backed by appropriate enforcement in the event of a breach.
These assurances are already available to any letting or management agency wishing to build them into their business cost effectively through membership of a professional body such as UKALA or ARLA.
Failure to provide these service elements would result in exclusion from membership of the relevant trade body. Similarly, if a letting agent were found not to have one or more of these in place, the business should be barred from future activity in the lettings markets.
I trust this provides you with the additional evidence you need. I am happy to elaborate further if that would help the Committee. May 2013 cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
Communities and Local Government Committee: Evidence Ev 307
Inquiry into the Private Rented Sector NOTES OF THE INFORMAL MEETINGS WITH TENANTS AND LANDLORDS IN LEEDS: 13 MAY 2013 Members present: Clive Betts MP Simon Danczuk MP Mark Pawsey MP John Pugh MP
1. Meeting with Tenants Tenants present: Sarah Goldthorpe Huw Jones, Leeds Tenants Federation Mohammed Rastampoor Lee Richards Reena Vaht Mr Betts welcomed the tenants and explained the purpose of the Committee’s inquiry. The tenants explained why there were in the private rented sector. The main reason was lack of social housing. One of the pressures on social housing was that many people were occupying property larger than they needed but either could not or would not move to smaller properties. Those present considered that a local authority was a better landlord than many private landlords. In the social housing sector, there was common set of standards and therefore greater consistency. Council tenancies were currently, however, very difficult to obtain, and often available only to those with specific local connections. For those on benefits the only option was the bottom end of the private rented sector. They said that prospective tenants found it difficult to shop around or to move because they were in urgent and acute need of accommodation, that it was very difficult to put up a bond for accommodation and that accepting bad accommodation in a good location was sometimes a way into work—for example, it could reduce or obviate travel costs. One tenant, however, offered more positive reasons for his living in the private rented sector. Rented privately suited his particular circumstances: it was a more flexible tenure and avoid the labyrinthine process involved in buying and selling property. The meeting then considered problems in the private rented sector housing. Those present said that some landlords took tenants’ money and provided nothing in return, that information and requests to agents were not passed to landlords, landlords (and their agents) were slow to carry out repairs and in one case, even when the council had successfully taken their landlord to court, no remedial action had been carried out. The point was also made that, in contrast to social landlords who were known to tenants and who knew how to deal with problems, private landlords were often unknown to tenants and their varied widely. The tenants present doubted that bad landlords would join an accreditation scheme. Similarly, bad landlords were always going to exist even with increased regulation. The Committee pointed out that in oral evidence sessions some had said that poor quality accommodation and inadequate responses to tenants’ concerns could be attributed to landlords seeking to squeeze as much money from their assets, while others had said that it was lack of landlords’ resources. In response it was pointed out that recent improvements in the quality of student accommodation had been driven by competition on quality. Some landlords, especially the so-called accidental landlords—ie owners unable to sell a dwelling— lacked the resources, time and skills to be good landlords. There was general agreement that local authorities had a vital job in ensuring the private rented sector operated efficiently and equitably. But local authorities often had insufficient resources to support the private sector, in particular, to take enforcement action against bad landlords. In addition, councils were concerned that, if they pressed too hard, landlords would pull out of the market. There was general agreement that local authorities should have greater powers to make landlords maintain properties and treat tenants fairly. It would be helpful to have a clear checklist of expected standards. The housing market in Leeds was examined. The number of private tenants was growing and recently had been included in the Leeds Housing Federation, which had previously focussed on those in the local authority or social sectors. Leeds Council’s attention was similarly shifting as for the first time there were more private rented sector tenants then social tenants. The private rented sector was diverse: 10% was top end—for professionals with a principal home outside the area—paying around £700 per month; 30–35% was in the middle—for example, new build in the suburbs build that could not be sold—and catered to the upwardly mobile; 30% was for students paying about £120 per week; and 10–15% was at the bottom end with rents around £75 per week. In some cases, the Local Housing Allowance was insufficient to meet the costs of the rent. On letting agents, the tenants present had paid charges levied by agents. They said that agents charged for putting prospective tenants on their lists, that charges were not made clear at the outset and that, once a tenant entered a tenancy, extra, unexpected charges appeared. Agents would also charge to renew a tenancy. Typically agents took tenants’ money for very poor or no services. They did not offer value for money for tenants. cobber Pack: U PL: COE1 [E] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
Ev 308 Communities and Local Government Committee: Evidence
The meeting considered arrangements for renewing tenancies. One tenant had refused to sign a new tenancy agreement until repairs were carried out but nothing had been done. Many continued to occupy homes after the expiry of a tenancy without signing a renewal. The benefit to the tenant was that the rent remained unchanged. All agreed that tenants needed to be better informed of their rights. Many tenants did not read their contracts or realise that contracts were often weighted in favour of landlords with the imposition of obligations on tenants. In addition, changes were made to tenancy agreements without notification to tenants in breach of the law. Finally, on deposits, one tenant had mistakenly paid the deposit to the landlord and he had ignored requests to return it.
2. Meeting with Landlords Landlords present: Andy Francis Tim Hunter Andrew Stone Jonathan Morgan Michael Troke Steve Rowley Clive Betts welcomed the landlords to the meeting and explained the purpose of the inquiry. The landlords were asked why they had entered the private rented sector. Most had done so as an investment, looking for a balance between rental income and capital growth. One landlord had wanted to give something back to society, having been brought up in a council house. Another had used the sector as a safety net, keeping hold of the properties he had lived in as he moved from place to place. Some participants saw being a landlord as a profession, rather than an investment. Indeed, one had become a landlord because he was looking for employment. The landlords considered that renting property was no longer lucrative, either in terms of rental returns or capital growth. Nevertheless, all but one of the landlords had added to their portfolio in recent years. 5% was a typical rate of return, but returns could be slightly higher when the landlord had held the property for a long time. Lenders were not supportive, and insisted on loan-to-value rates of 60% or under. Valuers were instructed to be cautious about the figures they put on landlords’ existing property. One landlord said that banks’ requirements were so stringent that any additions to his stock had to be cash purchases. Banks were looking for opportunities to revalue property so that they could foreclose if mortgage to value rate was breached. It was also suggested that some people were using buy-to-let mortgages to fund homes for owner occupation. One landlord suggested that selective licensing, which had been introduced in part of Leeds, made banks nervous. The potential for the council to close down a property caused lenders concern. Lenders’ caution was spurred by unfamiliarity rather than any inherent risks in licensing areas. The landlords had different experiences on the length of tenancies. Some said that the average tenancy lasted between six and 12 months; another said that in his experience an assured shorthold tenancy would be renewed at least once. One landlord said that he would like to put tenants in for five years, but that the bank would not allow it. Landlords were sometimes prepared to take a hit on rents in order to keep tenants for longer. The participants pointed out that not all tenants wanted longer tenancies: most students only wanted their house for 12 months and some people lived in the private rented sector because of the flexibility it provided. In North Leeds, where there was more choice for tenants, people would move house for a saving of £10 a month or for a better view. Within the city centre, there were 10,500 apartments and the occupancy rate was very high, with the average tenancy lasting nine months. In the higher end of the sector, it was common for tenancies to be renewed and rents increased, but when tenants were on housing benefit there was no point in trying to increase the rent because they would not be able to pay. Within houses of multiple occupation, the turnover was very high because of tenants’ changing circumstances. There were substantial void periods and losses for landlords. One landlord had 35 properties for tenants on housing benefit but over the last 12 months had only been paid for 28. Another said that he had lost over 7% of his annualised income either because housing benefit had been held back or the tenant had received it and moved on without paying the rent. This figure had increased from 4–4.5%. One landlord commented that people were living more chaotic lives. The landlords were concerned about direct payments to tenants. Rent was often the last expense tenants would pay, and tenants would abscond if they thought they owed the landlord money. When establishing a tenancy, landlords reducing rent to bring it in line with local housing allowance could currently opt to have the housing benefit paid to them. This would not be the case in future and would affect landlords’ willingness to offer lower rents. In cases where tenants did not pay the rent, the attitude of tenant would determine whether court action was necessary. Some landlords said that it could take around 12 weeks to remove a tenant; others said the process could take up to six months. Landlords had requested that the council establish a tenant referencing scheme, but the council had been concerned about data protection. cobber Pack: U PL: COE1 [O] Processed: [16-07-2013 11:52] Job: 027272 Unit: PG10 Source: /MILES/PKU/INPUT/027272/027272_w064_michelle_note of meeting with tenants in Leeds v1-0.xml
Communities and Local Government Committee: Evidence Ev 309
The meeting considered Leeds Council’s use of Article 4 Directions. Landlords expressed concern that the Directions did not permit change of use from family house back to house of multiple occupation. Landlords currently letting to sharers were therefore put off letting to families. All landlords were members of the Leeds accreditation scheme, which they said had helped to raise standards and drive out bad landlords. Through the scheme, the council educated landlords on their roles and responsibilities. The scheme cost £100–140 a year on average. The landlords considered that such schemes should be compulsory for all landlords. One landlord taking tenants from the council had been assigned a housing manager through the scheme, who visited the property every six weeks. There was no need for a letting agent, as the council would find tenants for the landlord. There was support for local authorities to run tenant referring schemes. There were differing views about the respective merits of local and national accreditation schemes. Landlords operating across a number of local authorities would tend to prefer a standardised national scheme, such as those operated by the National Landlords Association and Residential Landlords Association. One landlord, however, favoured accreditation schemes operated by local authorities, as they were more likely to be based on an understanding of local housing needs. A compromise might be a scheme with national minimum requirements, upon which local adjustments could be built. The meeting discussed landlords operating in the black economy, who gave the sector as a whole a bad reputation. Participants considered it important that local authorities target these bad landlords, but acknowledged that this was not always easy. One way of raising standards would be not to pay housing benefit where landlords were unaccredited. Local authorities lacked powers to deal with empty homes. It was suggested that the authorities’ hands were tied by legislation. Within the selective licensing area, empty properties were dealt with more effectively. Overall, the landlords thought that selective licensing had been effective at tackling problems. The initial form had been quite long and cumbersome, but after that the process had been straightforward. One landlord drew the Committee’s attention to the “Let’s Help You” scheme, a free website to help people in need of “affordable” housing connect with landlords prepared to house them. This was operating initially in West Yorkshire and was gradually being rolled out nationally. In addition, Leeds Council held bi-monthly meetings to provide information and training for landlords, which was especially useful for accidental landlords. Participants were concerned about the proposal in the Queen’s Speech to require landlords to check tenants’ immigration status. They were unclear how they would go about conducting checks. One landlord said that the Green Deal could be seen as a success story. It was a good example of self- regulation, and the take-up had been very high. The process was seen as simple and straightforward.
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