View all articles
On 13th April the Public Accounts Committee published its 49th report of 21-22 Session – Regulation of private renting. It’s important to keep an eye on these reports because they often lead to more legislation and it’s good to have an early warning. This report is very upfront, as can be seen from the title, and therefore we must try to anticipate the outcome.
The full report and related documents are here:
Public Accounts Committee – Publications – Committees – UK Parliament
“The Committee of Public Accounts is appointed by the House of Commons to examine “the accounts showing the appropriation of the sums granted by Parliament to meet the public expenditure, and of such other accounts laid before Parliament as the committee may think fit” (Standing Order No.148)”
Right from the summary, you will be aware that this is the forerunner of major changes for private landlords:
“Summary: The private rented sector in England has doubled in size in the last 20 years and now houses 11 million people. However, the sector is failing far too often to provide safe and secure homes for renters, with 13% (589,000) of privately rented properties currently posing a serious threat to the health and safety of renters, costing the NHS an estimated £340 million each year. Tenants are unable to realise their right to a safe and secure home due to an inaccessible and complex regulatory framework and the threat of retaliatory eviction. Regulation by local authorities is under capacity and not providing appropriate and consistent protection for tenants. The sector is a postcode lottery of local authority enforcement, with 21% of all privately rented homes in one region estimated to be severely unsafe. The Department for Levelling Up, Housing and Communities (the Department) does not know what base level of resource local authorities need to ensure landlords comply with legal minimum standards, and it is not proactive enough in supporting them to regulate effectively. Despite these systemic issues, the Department has only made piecemeal legislative changes in recent years, and in doing so has made the regulatory system even more overly complex and difficult to navigate for tenants, landlords and local authorities. It intends to address problems within the sector with a planned White Paper later in the year. However, to do so it will need better data to understand issues within the sector and to evaluate the impact of legislative changes on landlords, tenants, the housing market as a whole and the effectiveness of regulation.”
It goes on to explain how the Department for Levelling Up, Housing and Communities (DLUHC) will introduce more legislation and regulation to help renters because:
“Unsafe conditions, overcrowding, harassment, discrimination and dodgy evictions are still a huge issue in the private rented sector”.
I will cover the ones which have the potential to have the biggest impact on our business, but it’s probably worth reading the full report in order to understand the legislative burden which is likely to hit the private rented sector in the coming months and years.
The report is in two parts:
1. Regulation by local authorities
The committee plans to publish a White Paper later this year with plans for reforms that will address the “challenges” faced by local authorities when enforcing regulation of the private rented sector because –
“Compliance with legal minimum standards is inconsistent across England, and the proportion of privately rented properties with category 1 hazards ranges from 9% in London to 21% in Yorkshire and the Humber, resulting in a ‘postcode lottery’ of tenant safety”.
The report includes other examples of inconsistencies and talks about the fact that local authorities vary in the use of Licensing and in the number of properties they inspect each year. The point is also made that “only 10” landlords have received Banning orders to prevent them from being landlords since the legislation was introduced in 2016. Of course, Shelter was always going to get a mention:
“Shelter reports that 80% of local authority officials said they did not have sufficient numbers of staff working on licensing and enforcement to ensure that the landlords in that area were compliant with their legal responsibilities”.
In my opinion, qualified and experienced officers should not be doing the admin function of dealing with licensing applications when a good administrator could be trained to check and raise queries if necessary. This wouldn’t happen in the private sector because a business wouldn’t survive paying an expensive member of staff to carry out functions that a less expensive member of staff could do. In fact, qualified and experienced people probably would not stick around if they were expected to carry out menial tasks. I have also attended many meetings where there are multiple council officers where one would have been enough, this is the problem where there is no accountability for the public money that is wasted, but hey let’s charge private landlords more licence fees and recruit more officers!! There is one very big local authority that takes up to 18 months to process an application and this causes many issues for legally compliant landlords who need a new licence to sell or refinance.
The conclusion is:
“The Department does not know what basic level of resource is needed for local authorities to regulate their rental markets against legal standards…. It does not collect data, for example, on the number of complaints, the number of inspections, or the number of staff who carry out tenancy relations duties that tackle harassment and illegal eviction”.
Imagine a company telling their shareholders that!
It goes on:
“The Department has introduced various pieces of legislation which give local authorities a range of tools and powers to enforce compliance in the private rented sector, such as civil penalties and banning orders”.
The civil penalties, in particular, gave local authorities the means to reduce time spent preparing and appearing in court and enabled them to keep the penalty revenue to use for further enforcement work rather than have it paid to the Government as happens when they do take a case to court and a fine is imposed. In my opinion, this was a fair way to ensure that criminal landlords paid for local enforcement rather than licensing which usually costs good landlords thousands while enabling criminal landlords to avoid licensing and enforcement – evidenced by the low number of landlords who have been banned from the business. What DLUHC need to find out is WHY this considerable power has not been used as it was intended before they consider more legislation and regulation which also will only impact the legally compliant good landlords this country depends on to house “11m people” (according to the report).
When I read the next section, it confirmed that landlord licensing will be seen as the answer to all the problems of the private rented sector. I have said in the past that every landlord in the country should need a licence before offering a home to another person, this should have been introduced in the 2004 Act as a nationally run scheme that would resolve the issues of patchy enforcement and even out the cost of the licence – dare I say ‘economy of scale’ should have reduced costs:
“The Department told us that local authorities find selective licensing to be a useful tool for targeting enforcement action and intelligence gathering.
In 2015, the Department added a requirement that selective licensing schemes covering over 20% of a council’s local area or rented housing stock must be approved by the Secretary of State. It told us it introduced this requirement to ensure robustness and consistency in the way licensing schemes are used. However, given regulation is managed and delivered locally, it is not clear why the Department restricts the use of larger schemes or on what basis it rejects them”.
Again, who would run a business like this? Much less, what is arguably one of the most important businesses in the country, putting rooves over peoples’ heads. Guesswork and local authorities being the only source of important information is just bad governance.
2. Improving the sector for renters
“Renters’ right to a safe and secure home.
Tenants have a legal right to a safe and secure home that is free from serious health hazards. However, they face significant barriers to realising this right, and many experience significant issues which can result, for example, in serious illness, harassment or homelessness. Some 13% of privately rented homes in England have at least one category 1 hazard—a serious threat to health and safety.
There is also evidence of discrimination with 25% of landlords unwilling to let to non-British passport holders and 52% unwilling to let to tenants who receive Housing Benefit.
Through a Section 21 notice, landlords can evict tenants without reason. Half of renters surveyed by the tenant union ACORN, said they had chosen not to raise complaints due to fear of retaliatory eviction. A London based homeless charity also told us that tenants give up on their rights and tolerate poor conditions due to fear of landlord’s threats and intimidation.”
Let’s just look at these statements in relation to information from credible sources:
“525,000 social homes currently do not meet the national….. In total, it means more than a million people are likely to be living in social homes that fail the Government’s own minimum benchmark for human habitation…..”
“HRPs in the private rented sector appear to be the most diverse in terms of ethnicity and nationality, compared with HRPs living in other tenures. In FYE 2017, the majority are white, at 82%, the same as social renters and lower than owner occupiers (92%). The next single grouping is black HRPs, who make up 5% of the private sector, compared with 8% of social renters and 1% of owner occupiers. Around three-quarters (74%) of private renters are UK or Irish nationals, the lowest of any sector; these being 91% of social renters and 97% of owner occupiers. Around 17% of private renting HRPs were EU citizens, compared with 4% and 2% of social renters and owner occupiers. The remaining 9% of the private rented sector’s HRPs have a nationality from outside the UK or EU (5% for social renters and 2% for owner occupiers)”.
Source: English Housing Survey, Ministry of Housing Communities, and Local Government. Oh yes, the same source as the report, and I am not sure why they bother to collect this data only to ignore it when it doesn’t fit the current narrative?
I am not going to go into the Section 21 argument that landlords do not evict good tenants, because for years we have shot ourselves in the foot by not using the section 8 route where we had grounds and now we know that section 21 is coming to the end of its life, which in the scheme of things is a very short period in the history of private renting in the UK – less than 35 years.
In the planned white paper, we can expect to see proposed legislation and regulation of the following issues, which are addressed in the report:
It is too difficult for renters to realise their legal right to a safe and secure home.
Recommendation: Alongside its Treasury Minute response the Department should write to the Committee to set out how it will use its planned reform programme to:
• Better support renters to understand what their rights are; and
• Improve renters’ ability to exercise their rights by learning from complaints and redress mechanisms used in other consumer markets.
Local authorities do not have the capacity and capability to ensure an appropriate level of protection for private renters.
Recommendation: The Department should conduct a realistic assessment of the resources needed for local authorities to regulate effectively, with consideration given to the size, types and quality of private rented properties and the demographics of renters. The Department should write to us within the next six months with an update on the outcome of this assessment.
The Department is not doing enough to support local authorities to regulate effectively
Recommendation: The Department should take a more proactive approach to supporting local regulators and sharing good practice. To do so, it should learn from other consumer protection systems that provide central intelligence and support to local regulators.
Local Authorities are constrained by the Department’s approach to licensing landlords.
Recommendation: As part of its planned reforms, the Department should assess whether current arrangements for licensing schemes are working, and whether alternative arrangements may be more efficient and effective.
The Department lacks good enough data to understand the nature and extent of problems renters face.
Recommendation: The Department should develop a coherent data strategy to identify and collect the data it needs to:
• understand the problems renters are facing; and
• evaluate the impact of legislative changes. Once complete, this strategy should be shared with this Committee and the Levelling up, Housing and Communities Committee.
The Department’s forthcoming White Paper offers an opportunity for significant improvement to the private rented sector
Recommendation: As part of its planned reforms, the Department should ensure it has a full understanding of the cumulative impact of proposed changes on tenants, landlords and the housing market as a whole. In doing this, it should work closely with other departments, including formally where appropriate, to understand how the reforms may affect or be affected by other policy areas such as benefits and tax.”
We can all get behind this one because we are only too aware of the impact of changes to taxation and capping of benefits. The domino effect takes a while, but I am certainly seeing far, far more application tenants who landlords are selling this year than I can ever remember. By 2024 we will see a lot more private sector tenants struggling to find a nice home and that will be the result of reduced supply and once the Genie is out of the bottle it may be very difficult to return to previous supply levels even if Government wind back.
But there is hope that the penny may drop before too long:
“Many issues facing both landlords and tenants relate to other policy areas, such as housing benefits, tax laws and courts systems. There is therefore a need for cross-government working and data-sharing to understand the wider impacts of planned legislative changes on landlords and tenants”.
