15:47 PM, 10th February 2012, About 10 years ago 4
We have witnessed a variety of different challenges which have impacted upon the housing market at different times and in different ways. In the early 80s the problem was one of excessively high interest rates; there have been times when rampant inflation has caused house prices to escalate by thousands a week in certain areas of the country (only to crash in subsequent years) – and the impact of growing unemployment has been all too familiar.
Each of these problems individually has caused different pressures upon the housing sector, sometimes leading to a rush of mortgage applications bolstering the sales market, and on other occasions leading to additional pressure on the rental sector.
Running alongside all of this has been the good old reliable social sector, always there to pick up those who would otherwise have fallen through the cracks, when other parts of society have been unable – or unwilling – to provide.
Whilst the market might have been able to cope with the individual challenges imposed on a one by one basis, it is now faced with a kaleidoscope of chaos as a result of the collision of a whole series of issues coinciding. This has led to the present impasse where at the top of the food chain we are told the bankers have no more money to lend whilst at the other end, society is having to learn to accept the hard truth that everything is cash limited – and that includes benefits.
So what does this mean? It means there is greater pressure than ever on the currently available housing stock, particularly in the rental sector. At the very time the number of households is growing (coupled with fewer being able to afford to buy their own property) there is also a slow down in the amount of available stock due to a loss of confidence in the market. So not only are fewer households able to provide private housing for their own occupation, fewer landlords are able to provide private housing for the rental sector. As a result there is increased pressure on the social sector to provide housing at the very time a cap on benefits is being introduced.
In a nutshell – the bankers aren’t lending through fear borrowers will default, developers aren’t developing because they are unable to turn a profit, private sector landlords aren’t investing as they are concerned about their returns, existing renters aren’t buying because there are fewer mortgages – and social sector landlords are being squeezed through the combination of a reduction in rental returns coupled with a reduction in state funding which is forcing them towards the wider commercial marketplace, the combination of which means fewer available units at an affordable price.
How can we break down the barriers which have allowed this vicious circle to form?
The simple answer is to re-introduce confidence into the market place, which in turn will lead to a flow of funding. This will encourage investment and development and result in freeing up more housing stock, both existing and new. Whilst the bankers may say they don’t have any money, there doesn’t seem to be a shortage of private equity, including overseas investors – but what they all need is reassurance that their investment has a good chance of paying back.
Lynne Abbess, a practicing Solicitor and established portfolio landlord has launched of a novel tenant accreditation service called LandlordAssurance.com.
The web-based system provides each registered tenant with a Tenant Passport which they can carry with them from one property to another, containing data about their rental history over a rolling 6 year period. Tenants are incentivised to ensure they comply with the terms of their tenancy – early evidence demonstrates that registered tenants are even electing to pay their rent early! – and this will in turn place them in a strong position to acquire their next tenancy (or even a mortgage).
The system is based on a series of checks and balances to ensure fairness to all parties, including the fact consent is required at all levels. And registration for both landlords and tenants is free.
Once registered, there is no need for a landlord to take any further action unless their tenant defaults, resulting in an entry being filed on their Passport. However, as the Tenant has the protection of receiving a monthly email alert to advise them of their Passport status, there is never a point at which they need feel out of control. If they are concerned by an entry made, they can register either a Comment or Challenge, which will be revealed on a subsequent Passport Search. Landlords will have the benefit of witnessing a real life picture of their prospective tenant’s history and likely future performance – and tenants will be reassured that their landlords can’t say anything adverse behind their backs.
This service could be of particular benefit in offering private landlords the confidence to accept social tenants, facilitating the government objective of enabling their move into the private sector. The same is true of students, who would no doubt benefit by leaving University with a 3 year Passport history under their belt as they emerge into the real world.
The benefits of the scheme have already been widely recognised across the property sector as a whole.
Jane Bayer, Rent Deposit Scheme Administrator at Centrepoint, has commented that “This service could have a real impact. Many landlords are reluctant to accept young people on benefits, meaning they’re often over-looked as prospective tenants – so the ability to prove they’ve managed their rent and can be depended on, could be invaluable. Any scheme which gives more landlords the confidence to offer more vulnerable young people a chance to put homelessness behind them, is a step in the right direction.”
Ian Fletcher, Head of Policy at the British Property Federation says: “The market is absolutely ripe for this kind of service. Landlords, lenders and investors need clear information on tenants’ past and likely future reliability, which is exactly what this service is able to provide”
So is this new service the magic bullet which will enable the barriers to come down and the houses to go up?
To find out more see www.LandlordAssurance.com
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