Reforming private renting and getting it right

Over on Landlord Law Blog, Tessa Shepperson has offered three warnings to politicians who are trying to tackle housing policy on their election campaigns.

In a nutshell, she notes the importance of housing to people’s health, wellbeing and life chances, highlights the lack of real information about the private rented sector and the actors within it, and the need to ensure it is not a bad investment.

The blog is really raising concerns about Labour’s proposals for the private rented sector: essentially rent stabilisation and longer term tenancies. These are both policies that Generation Rent is calling for – though we think Labour should go further. Tessa makes valid points about them and they merit a response.

How big a problem are rogue landlords nationally?

It would be nice to know the full extent of criminal and unethical behaviour by landlords. The trouble is we don’t even know the full extent of the industry. The private rented sector operates in a grey area between the serious business of providing homes for a range of customers, and a lucrative hobby, and as such it has avoided the level of regulation that the food industry is used to.

The lack of resources local authorities have to tackle criminal landlords, the fear tenants have about reporting criminality to the authorities, and the legality of unethical practices like hiking the rent or revenge evictions all hinder the truth coming out.

Ultimately it shouldn’t matter what the extent of the problem is. The very fact that it exists, that vulnerable people are being mistreated, should be sufficient to take action to stop it. As Tessa says, national register of landlords is an essential starting point; licensing and better enforcement will flow from that.

Do tenants really want longer tenancies?

For a start, growing numbers do. It should come as no surprise to landlords that people are renting for longer – we’re not all young professionals trying out different flatshares in different parts of town. More of us want to settle down – and the evidence of that is the growing number of children living in private renting. If the private rented sector is going to keep growing, one year contracts aren’t going to cut it any more. Families can’t live like that. And if tenants don’t want to stay somewhere for three years, they won’t need to.

Children_in_renting.png 

Source: English Housing Survey

What happens if someone gets locked into a tenancy they then find is wrong for them?

As we understand it – and we hope this is the case – Labour are planning a right to a three-year tenancy. The landlord is locked in but the tenant isn’t. That means that if a tenant needs to move for work, or wants to move in with someone, they can give notice to move out at any time. Landlords are grown-up business people, they understand that the customer is king. As long as the tenant pays their rent then they should be able to leave on their terms – not those of their service provider.

The big caveat to this of course is that under the current Labour proposals, landlords will have a six-month break clause, which opens the door to even shorter tenancies than most renters are currently used to. This makes us very worried and we are calling for this to be taken out.

What can landlords do if they are stuck with a nightmare tenant and no easy way to get them out?

We recognise that there are awful tenants out there (but how big a problem is it really?) and landlords should be able to get rid of them. There is a process for dealing with tenants who break the terms of their agreement – and that won’t go anywhere under a system of longer tenancies.

If investing in the private sector becomes a bad investment, who will buy the properties that landlords no longer want to keep?

There is a chance that a handful of hobbyist landlords will take a look at the new professional rental market and decide they can’t hack it. That’s fair enough, and it’s true that their tenants might not be able to get a mortgage on the same property that they’re already paying a mortgage on. So someone will have to take those tenants on.

But there are many landlords who aren’t in the rental game for the rising house prices, who want, like us, a sustainable private rental market: councils, housing associations and institutional investors like pension funds. Amateur landlords exiting the market in droves will dampen prices to levels that will start to look attractive to businesses that only care about long term rents and are very comfortable with giving tenants a lot of security.

You’re not creating a “bad investment” by professionalising the industry, you’re creating a different investment – one that is not dependent on inflation that would look dangerously Venezuelan in any other context, and the resulting pool of customers who have nowhere else to turn.

 

Edit: extra line added to highlight the proposed break clause. Thanks to @RentRebel for pointing out.

Showing 3 reactions

Please check your e-mail for a link to activate your account.
  • commented 2015-04-22 21:14:31 +0100
    Poor landlords freaking out about their precious section 21 possibly being taken away and them having to face justifying why they are making someone homeless. Poor dears. Awwwww.
  • commented 2015-04-17 18:27:39 +0100
    A good post and its nice to see that people read my blog! However, I would prefer to see a landlords register and proper records kept for a few years before big changes come on.

    The big problem for landlords about longer tenancies is that they cannot use section 21 to evict tenants. Not all landlords are using it to evict tenants who dare to complain!

    Often they are used for other reasons, such as getting the property back to sell, evicting tenants who are anti social or who are not respecting the property, or to evict tenants who have a poor payment record.

    Section 21 and the buy to let mortgage are the two big reasons why the private rented sector developed after the 1990’s (prior to which the PRS was moribund). We need to think very carefully indeed before removing section 21 therefore. Or the PRS could change as dramatically again.
  • commented 2015-04-17 18:24:00 +0100
    I am a landlord, and I think a national register (at a fairly low price) is probably a sensible way to get a better picture of who landlords are. That would then mean there is an avenue to educate them (especially the accidental ones), inspect/enforce, and ensure taxes are being paid.

    If a tenancy agreement were three years, but the tenant can give notice at any time that sounds like a very lopsided and biased agreement favouring the tenant which makes it much harder for the landlord to plan. How can they make decisions re investment in a new kitchen if the “three year” tenancy could end after eight weeks?

    It’s surprising Generation Rent does not support improvements to the possession process, which would directly benefit the majority of good tenants. If a landlord finds it difficult and slow (ie expensive) to end a tenancy, they will be much, much more careful about who they let to. The end result? The majority of good tenants have to jump through extensive, intrusive hoops to rent through no fault of their own.

    The way things are now, if a landlord wants to end a tenancy then from issuing the possession notices (s8 or s21) to the property being empty takes up to six months (I say this based on experience). The process is very slow and if the landlord is reliant on a s8 (not a s21 which could not be used during the three years) then it’s a little too easy for a malicious tenant to make spurious defences (eg I know of a case where a tenant damaged electrical fittings deliberately and then reported the landlord to the council, to delay an eviction due to substantial arrears).