The private rented sector is ready to help fix the ‘broken housing market’Make Text Bigger
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.
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