So simple, so obvious, so why is it not this way?

by Mark Alexander

10:48 AM, 10th September 2012
About 9 years ago

So simple, so obvious, so why is it not this way?

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So simple, so obvious, so why is it not this way?

Open letter to Housing Minister Mark Prisk MP – “Solving the Housing Crisis“An open letter to Housing Minister Mark Prisk MP – “Solving the Housing Crisis

Dear Sir

The combined housing provision of Local Authorities and Registered Social Landlords (e.g. Housing Associations) now provides no more UK homes than the Private Rented Sector.

Given that the UK Private Rented sector has matured significantly since the Housing Act was implemented in 1988 many landlord and tenant groups feel that a review is necessary.

On behalf of over 1 million Private Rented Sector landlords and over 4 million tenants living in their properties I ask you to set up a working committee to look into issues affecting this huge sector of the UK economy and to consider the amazing legacy you are in a position to leave with a reform of the Landlord and Tenant Act.

At the macro level the issues are:-

  1. Increasing supply of safe accommodation whilst containing costs and the balance of supply and demand
  2. Dealing with criminal operators and providers of substandard accommodation

Increasing supply of safe accommodation whilst containing costs and the balance of supply and demand

The Private Rented Sector has proven that with the right level of incentive it can provide significant help in solving the housing crisis. However, reform is necessary to deal with the three fundamental requirements for Private Rented Sector landlords:-

  1. For rent to be paid on time
  2. For properties they provide to be respected
  3. For neighbours to be respected

Many private landlords feel they are discriminated against.

An example of this discrimination is that Local Authorities and Registered Social Landlords are paid rents directly for benefits claimants. In the Private Rented Sector, benefits are paid to tenants and it is then up to the landlord to collect the rent. For a person whose business is not in the provision of housing the differences may not appear significant. However, given that most landlords operate on a profit margin of circa 20% of rent a none payer of just two rent can easily result in over one full year of lost profits. Recovery of this money from benefits claimants is rarely a commercially viable option. Small landlords are small businesses and very few are able to withstand losses of this nature.

Once simple yet fundamental issues such as this are addressed more private sector investment will pour into the PRS.

The cost of renting safe residential accommodation is rising due to scarcity, i.e. supply and demand. Correct this and strip out unnecessary levels of bureaucracy and provision of supply will grow.

Law abiding citizens are being discriminated by the PRS

Landlords who have lost faith in providing accommodation to benefits claimants are now turning to group operators such as Group 4 Security which are offering guaranteed rent and to return properties to landlords in good condition after a period of 5 years. However, these terms are only offered to landlords who are prepared for their properties to be let to asylum seekers and ex-offenders. The law abiding population are therefore disadvantaged. This is creating bad feeling and criminal ghettoisation and it could be argued that such conditions actually incentivise crime such as the 2011 riots!

Over 170,000 landlords and associated professionals subscribe to this Forum and its newsletter, many of the higher level discussions occur offline. For example, I am in regular contact with a number of European Park Home operators, each of which will be far more interested in pouring substantial investment into the PRS and joint ventures with local authorities if simple issues such as the above can be addressed. They don’t want to manage crime ghetto’s and nobody wants them to exist in their area. However, a model exists whereby in areas with the highest demand for low cost accommodation (e.g. London and the South East), detached modern prefabricated units can be provided for rent at less than the the cost of single persons LHA allowance and local authorities could be cut into a profit share even at this level if they were to provide land on peppercorn terms. The calculations to arrive at these claims include the cost of taking a brown or greenfield site and putting in all mains services as well as the costs of the pre-fabricated units. Clearly the investor operators of such developments will have similar concerns as local populations. They would much prefer to provide this affordable accommodation to low paid working tenants than creating ghetto’s of asylum seekers and ex-offenders. Why therefore, does the structure incentivise the opposite?

The solution?

Treat Private Rented Sector Landlords as equals to Local Authorities and Registered Social Landlords.

Landlords provide a service and good landlords deserve respect and equality. Where a tenant is not paying or behaving anti-socially landlords need similar rights to that of an Innkeeper, Hotelier, Hostel or Guest House Owner, i.e. the ability to have a person removed and, where necessary, arrested if services are not paid for or when a guest in their property is causing damage or behaving anti socially. In the same way that squatting is no longer a civil offence and is now a criminal offence, similar protection needs to be given to the basic needs of small businesses operating as landlords.

Dealing with criminal operators and providers of sub-standard accommodation

A small minority of people providing residential accommodation are criminals. Good landlords would like to see these people put of out of business as it tars their reputations. A simple law making it a criminal offence for a person to to provide residential rental accommodation without a licence (which is no more costly or difficult to obtain that a Consumer Credit Licence) is all that is required. A framework could be created similar to the points system for motoring offences to deal with criminal and fringe offences. If the licence cost no more than a TV licence and every landlord needed just one, regardless of the number of properties owned, this would generate over £145 million to police the sector (£145 per licence X an estimated 1 million landlords). Simplification of the laws to deal with enforcement could allow for an established body such as Trading Standards and, where necessary the Police, to take action as opposed to clogging up the Court systems.

Summary

The issues I have outlined above are obviously not a detailed solution. However, I believe the points raised are representative of a significant amount of the frustration that both landlord and tenant groups are having with the PRS and the way it currently operates.

Yours faithfully

Mark Alexander
Founder of Property118.com

UPDATE

A copy of this Open Letter to Mark Prisk MP can now be downloaded by clicking  >>>   HERE     <<<  

Please email or post this document to your local MP, media and press contacts, landlords association, tenants association and all other landlords, lettings agents and anybody else you know with an interest in the welfare of the UK Private Rented Sector.

UPDATE TWO

Further to comments left below the requested e-petition has now been published, please see >>> http://epetitions.direct.gov.uk/petitions/38471

Comments

Mark Alexander

7:05 AM, 11th September 2012
About 9 years ago

Note to all readers - How can I get more exposure for this open letter?

I will include it in the Property118 Newsletter, I have tweeted it, Facebook shared it, Google +'d it and added it to LinkedIn but I am only one person.

For the Housing Minister to take note I need to spread the word.

Do you have any media contacts you could introduce to this open letter?

How can YOU spread the word?

If you are a member of a landlord or tenant group please share this with them and ask them to comment.

Do you have a blog, a website or a social media account where you can mention this?

9:08 AM, 11th September 2012
About 9 years ago

Send to the Conservative home website.
They will be looking for things to go into their next manifesto.
Your letter could provide a foundation for some proposals.
As you suggest a few tweaks to housing law could rejuvenate the rental market.
As it stands presently there is no confidence that an investor may totally .
control his investment
Consequently it is difficult to say the least to convince someone to invest.
After all when you think about it, if you had a business proposition which stated invest a lot of money in an investment vehicle which should generate good ROI providing that the income is received; but that there is a hazard in law which might prevent income being received for say 10 months and would possibly result in the investement vehicle being damaged and having items stolen from it; would many investors laugh you out of the room!?
I think they would.
And yet this is the business model that the PRS labours under presently.
It cannot be any good for the economy for this state of affairs to exist, especially as household growth has more direct impact on an economy than most other forms of investment.
Growth is what the govt is after.
For the PRS the answers are as plain as the nose on one's face.
You would have thought that govt would realise that a small amount of adjustment would feed into the economy almost instantly.
Most investment projects take years to generate perceived benefit.
Your suggestions which have been gleaned from lots of posts and your own thinking I would suggest form a template of simple ideas, which if adopted could have a massive and immediate impact on the economy.
Perhaps time to negotiate with the supposed enemy, namely Shelter to make them realise that there is something in this letter for all parties.
They always seem to get PR, so why not include them in the proposals as there is something for everyone in your suggestions.
They cannot in any way be considered LLcentric..
Time to include all sides of the argument and come out with one voice.
The present adversarial way the PRS is dealt with does none of it's constituent parties any favours.

Mark Alexander

10:09 AM, 11th September 2012
About 9 years ago

How would I send this to the Conservative Home Website?

I was hoping to Tweet the article to Mark Prisk but he's not on Twitter,

As for Shelter, can you really see them accepting a weakening of tenants rights, even if it is a logical solution, or do you think they would be more likely to oppose any such moves on the basis of that's what they exist for?

11:10 AM, 11th September 2012
About 9 years ago

Your suggestions also include issues abour sub-standard property and licencing LL.
These are issues Shelter is interested in.
Persuading that tenants should not rob LL of rent surely is something they would wish to support on the basis that non-payment of rent has an impact on the service a LL may provide for the immediate tenant and others that come after.
Surely Shelter would not wish to support a regime which effectively could deprive a LL of a property and any future tenants and cause the LL to be made bankrupt and possibly homeless.
As for the site I think you just send to thie email addres.
You often see the founder of the site on newsnight.
There may be a link on there.

Mark Alexander

12:12 PM, 11th September 2012
About 9 years ago

We shall see, I did Tweet the article to Shelter. I'm hopeful they will respond but I'will be very pleasantly surprised if they do. They make a lot of noise about building bridges with the PRS but I've not seen any signs of action.

13:51 PM, 11th September 2012
About 9 years ago

We would be happy for you to post this letter in our community forum Mark, to generate as much exposure as possible.

The main problem for our community of landlords and agents at the moment is with the impending Welfare Reform via Universal Credit.
Landlord Referencing Services has been trying to address this issue for over a year now, warning that the abolition of direct payment of LHA to landlords is going to have a detrimental effect via rising rent arrears (which is already a major problem for landlords right across the UK) - as well as many other factors... > http://www.landlordreferencing.co.uk/discuss/community-forum/almost-eight-million-adults-in-the-uk-do-not-have-internet-access-how-will-universal-credit-work-for-them/

Annette Stone

15:59 PM, 11th September 2012
About 9 years ago

Tim Montgomerie of Conservative Home writes regularly in THE TIMES. Maybe sending it to him there with a copy to the Editor might have some effect
Also what about sending to the Mayor - old Boris might just be interested.
Brilliant if I may say.

Mark Alexander

17:17 PM, 11th September 2012
About 9 years ago

Thank you Annette. Would you mind sending this to these people as it may look a lot better coming from a third party.

Annette Stone

18:17 PM, 11th September 2012
About 9 years ago

Absolutely. Will go off tomorrow Would you also send it to the PM with a note saying I have sent it to the Mayor. Boris has a deputy Mayor in charge of housing and will try and find out who that is.
One other suggestion. If Property118 has 170,000 subscribers who presumably are all professional property people then why do not we do one of these open letters to the letters page calling upon the new Minister to act on our letter and say it is signed by you, any of your correspondents prepared to stand up and be counted and sent on behalf of 170,000 property professionals.

Tom Doolin

19:18 PM, 11th September 2012
About 9 years ago

Mark. You may wish to revise your comparison with the cost of a Consumer Credit Licence. I've just applied for mine to be renewed and the cost has gone up to £575.00

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