The private rented sector is ready to help fix the ‘broken housing market’

by Dr Rosalind Beck

14:40 PM, 15th November 2017
About A year ago

The private rented sector is ready to help fix the ‘broken housing market’

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The private rented sector is ready to help fix the ‘broken housing market’

Housing will take centre stage in the forthcoming Budget, with the emphasis on building more homes and on increasing the number of owner-occupiers.

If, however, the Government wants a country which works for everyone, it also needs to address the needs of those who will never be able to buy. With 16 million British people having less than £100 in savings, any chance of being in a position to buy is remote.

As someone who was brought up by a single parent on benefits I know that for millions of families, every penny is spent by the end of the week.  Whereas my family was lucky enough to rent a council house, because of Government policy this is no longer viable for most.

It is therefore fortunate that the private rented sector (PRS) stepped in as social housing was sold off and not replaced, and now houses an estimated 4.8 million households. This includes many who would have qualified for social housing in the past. Click Here

This critical role of the PRS has been recognised by several Conservatives, including Iain Duncan Smith. Click Here On the other hand, the new Conservative MP, Neil O’Brien, has called on the Chancellor to extend the fiscal attack launched by George Osborne, when he introduced the bizarre policy requiring landlords to pay tax on finance costs as though they were profit, which is going to bankrupt many. Click Here Mr O’Brien would be pleased about this as he also suggested the PRS should be halted in its tracks.

In fact, the forecasts are that more, not less, rental housing is needed, especially at the ‘lower end,’ and attacking the PRS in ways which increase costs disproportionately affects the poorest in society. Indeed it is estimated that 4.6 million tenants are facing higher rents and eviction because of Osborne’s ‘tenant tax.’ Click Here  This consequence was predicted by economists such as Professor David Miles, formerly of the Monetary Policy Committee, who called Osborne’s war on landlords ‘profoundly wrong-headed.’ Click Here

At the same time, tenancies in both the private and social sectors are also being jeopardised by Universal Credit and other benefit changes. Average arrears in the PRS now stand at £1,600 Click Here and have also been increasing in the social sector, often as a result of paying tenants directly and, contrary to popular view, not only because of delays in processing applications. There are tenants, for example, who when they receive a large cheque with which they are supposed to pay the rent, spend it on Christmas presents or a holiday instead.  They then face eviction by both social and private housing providers and they may join the ranks of the homeless.

A report out this week shows that homelessness levels have risen by 20% in the last year in the South-east alone. Click Here The National Audit Office found a similar increase in London, and criticised the Government for not getting a handle on how its ‘reforms’ are impacting on this. Click Here

Councils are bearing the brunt, but the costs of homelessness go beyond the rising costs of Bed and Breakfasts; as families take whatever roof over their heads they can get, families and social relationships are splintered.  Mental health, crime levels, education and life chances are all affected by homelessness and the instability it brings.

Much of the burden is therefore being transferred from central to local government; and their policies contradict each other.  For example, in Warboys, Huntingdonshire, the council bought up all the housing intended for first time buyers from a development of 120 houses, in order to rent it out. They, contrary to Westminster, prioritised homeless families over people who already had somewhere to live.

A further approach by numerous councils such as Monmouthshire, Click Here Croydon, Click Here and Maidstone Click Here is to offer financial incentives to private landlords willing to house their homeless clients.

However, when tenants don’t pay or when they damage the properties, councils often advise them to ignore legal notices. One council allegedly told a tenant to break back into the home she had vacated, forcing the landlord to take her to court. Click Here The more landlords become aware of this ‘treachery’ the less willing they will be to house riskier clients.  Private landlords already lose around £9 billion a year in damage and arrears.

Many councils have also brought in measures which hammer landlords’ finances. Gavin Barwell, when he was Housing Minister, spoke out against the practice in many areas of charging hundreds of pounds per rental property for a licence. So-called ‘rogue’ landlords, whom the schemes are supposed to target, are unlikely to register so only decent landlords pay. Many councils are also re-banding Houses of Multiple Occupation in order to multiply the amount of council tax they can charge by the number of rooms in each house. As landlords often have small margins, these can put them out of business.

Central Government, local government and so-called homelessness charities all fail to recognise that attacking landlords hurts tenants too and that recent measures are pushing up costs for the poorest in society.  The Institute of Fiscal Studies, which also opposed the tax levy on landlords, calling it ‘plain wrong,’ has now predicted that the next recession will hit those at the bottom far worse than the recent one did, because of Government policies. Click Here The Government needs to urgently overhaul its housing strategy.

Some suggestions to prevent levels of homelessness from spiraling out of control:

  • The PRS must be recognised as the largest rental tenure and as part of the solution. It is often said that it is the simplest ideas which are the best. Well, what about, in the face of a housing shortage, encouraging the people who have successfully housed nearly 5 million households, to do more of the same?
  • This would be done by incentivising landlords who commission and pay for new builds, who convert commercial premises, restore decrepit housing and so on, thereby increasing the supply of habitable property. The Residential Landlords Association has given a blueprint of how this could work. Before designing incentives, the recently-imposed disincentives need to be reversed. In fact, that might be enough to get landlords once more increasing supply.
  • More protection must be given for landlords who house lower-income tenants. Crisis, the charity,  has made some suggestions in this respect, but they do not go far enough. If landlords are to take on the risks of high arrears and damage done by tenants, they need state indemnification, not just help with a deposit. Without such protection, landlords will continue their exit from this sector.
  • One-sided legislation which allows rogue tenants to stay in properties for months on end whilst paying no rent must be revised, as must the huge fines of up to £30,000 imposed on landlords for administrative or minor errors. Such legislation is ill-conceived.
  • Universal Credit must be changed so that rents go directly to both social and private landlords. It is wrong of Government to introduce a system of encouraging tenants to be more responsible, whilst insisting a third party bear all the associated risks.

In sum, the private rented sector is now, numerically, the most important rental tenure and a critical part of the UK’s social and economic infrastructure and could take on an even greater role. It’s about time the Government recognised this and reversed policies which stop the creation of new housing and which cause more people to be made homeless.



Comments

David Price

16:08 PM, 15th November 2017
About A year ago

Dr Beck, I will pick on one small point in your article which has been of concern to me for sometime.
"It is wrong of Government to introduce a system of encouraging tenants to be more responsible, whilst insisting a third party bear all the associated risks."
Many of the antisocial problems would be solved if tenants were compelled to be responsible and for all aspects of their lives. At present as the law stands there is no compulsion to pay rent and no penalty for using money supplied by government to pay for the roof over your head. The result is arrogant behaviour on the part of the tenant with the landlord taking all the risk. Associated with this is the wanton damage done by tenants for which they are legally responsible (criminal damage act) but for which the police will take no action using the spurious argument that there is a contract in place so the matter is civil (https://www.property118.com/judge-to-look-into-why-tenants-are-not-prosecuted-for-criminal-damage/). Once again this leads to an arrogant attitude.
Cure these two problems and many of the social ills of our society would go away.

Robert Mellors

10:11 AM, 16th November 2017
About A year ago

This is an excellent set of ideas/suggestions, that could make a very real positive difference to the housing shortage problems.

In relation to the statement "If landlords are to take on the risks of high arrears and damage done by tenants, they need state indemnification, not just help with a deposit." while this would be great, I don't believe that any government is going to indemnify landlords against the potential costs arising from a bad tenant, as that would be discouraging tenant responsibility. However, a very simple and zero cost solution to this issue, that the Government could do very quickly and easily, is put in place legislation that enables direct deduction from benefits (third party payments) for debts owed by former tenants (rent arrears and damages etc). There is already the primary legislation allowing this for current tenants, so it would be a simple amendment to enable deduction for debts owed by former tenants. This would make the tenants responsible for their debts, as a portion of their income would be taken to pay off the debt to their former landlord. This would not only make the tenant more financially responsible, but it would also gradually encourage better behaviour (less anti-social behaviour and criminal damage) so that would have knock on savings for the police as well.

Mick Roberts

14:27 PM, 16th November 2017
About A year ago

Very good reading that gets some good points across.
In Nottingham, the homeless are now being shipped to Sheffield 40 miles away, as the Travelodges are full round here with Homeless & homeless benefit tenants. This would have only been London a few years ago.
Why isn't some big news programme picking up on this?

Monty Bodkin

14:46 PM, 16th November 2017
About A year ago

Reply to the comment left by Mick Roberts at 16/11/2017 - 14:27
In Nottingham, the homeless are now being shipped to Sheffield 40 miles away, as the Travelodges are full round here with Homeless & homeless benefit tenants.

Blanket landlord licensing will sort that right out Mick.
Good landlords will be queuing up to invest their hard earned in Nottingham.

Mick Roberts

17:45 PM, 16th November 2017
About A year ago

Reply to the comment left by Monty Bodkin at 16/11/2017 - 14:46
Yes, there will be even less won't there at £600 per property.
And the council say tenants won't have to pay for their licensing. Aah right won't they. Licensing is what did the final trigger for me to start giving rent increases to most of my tenants, some of 'em I haven't gave a rent increase to for 10 years, but I ain't paying for it, when all my houses have new combi's, kitchens, UPVC etc.

Gary Nock

10:02 AM, 17th November 2017
About A year ago

A very good article Ros. We are part of the solution not the problem. But as both political parties are coveting the youth vote / Generation Rent then landlord and letting agent bashing is seen as a vote winner. Until they realise that it is a vote loser depending on how well we get our message across. When I send my tenants a rent increase I tell them all the reasons why. May not change the way the tenant votes or feels about landlords but it's a start.

Richard U

10:07 AM, 17th November 2017
About A year ago

A nicely written article, with some good points and a good amount of evidence. In particular it is crystal clear that not everyone can be a homeowner without creating a new sub-prime mortgage issue, where lenders are taking more risk than is useful for society.

I also support the incentivisation of property building and major renovation - a major challenge here is banks allowing the value being created to be made liquid on completion of works.

The withdrawal of section 24 and improvements to the turnaround in Universal Credit are no-brainers.

Regarding a proposal that really supports people on the fringes - if landlords choose to deal with the risks inherent in renting to tenants that may not be able to pay if they get into arrears, I would suggest they do this at their own risk - the idea of a government indemnity is interesting, but actually is likely to be an administrative challenge. I think a better option would be for the government to build more council housing for the most vulnerable and the tax payer to share the burden of supporting our least able/most at risk -
we may not like it, but we will always have people that need more support than others, whilst giving people opportunities to improve their situation is of course the right thing to do - I'd prefer to have a simple system where a minimum standard of living that we can be proud of is guaranteed for all uk residents.

Finally, I would definitely support better redress for landlords left out of pocket - by both larger deposits and faster redress through legislation. It is not a landlord's job to provide a service that has not been paid for.

Ian Narbeth

10:34 AM, 17th November 2017
About A year ago

What is frustrating for me is how few Tory MPs seem to understand what is going on. All they do is refer matters to the minister and don't seem to protest that their own Party's policies are causing problems. Do they lobby the minister? They certainly don't make in public the points that Dr Beck makes.

Labour MPs dare not be seen as other than anti-landlord for fear they might lose leftist vote of people who are inspired by Corbyn and increasingly the politics of envy. How can we persuade our elected representatives that if they constantly attack the people they rely on to help solve the housing problem they won't get our full co-operation and if they tax us unfairly we won't have money to invest to improve the housing stock? If there are any MPs reading this, would they care to comment?

terry sullivan

9:14 AM, 18th November 2017
About A year ago

i will never take hb tenants


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