Written evidence submitted by the National
Federation of Property Professionals
The National Federation of Property Professionals
(NFOPP) is an umbrella organisation for a number of trade bodies
/self regulatory organisations, which have a combined membership
of just under 14,000 property professionals.
The NFOPP's divisions are:
- National Association of Estate Agents
- Association of Residential Lettings Agents (ARLA)
- Institute of Commercial Business Agents
- National Association of Valuers and Auctioneers.
The NFOPP's over-arching aims are to support its
members by promoting the highest standards of professionalism
and integrity amongst those working within the property industry,
and to encourage members of the public to proactively choose its
members when they are involved in any kind of property transaction.
This response is made on behalf of all members of the NFOPP, including
members of the ARLA.
ARLA members currently are involved in the preparation
of over 500,000 tenancies annually in the Private Rented Sector
many of which could be influenced by the proposed changes to Housing
Benefit. Whilst we fully understand the Government desire to control
spending, we feel that there are consequences of the proposals
that can have major social impacts on the economically poor.
IMPACT OF
HOUSING BENEFIT
CHANGES—EVIDENCE
STATEMENT
Incentives to work and access to low paid work
No comment
Levels of Rent, including Regional Variations
Rents vary greatly across the country, and even from
street to street within some broad market rental areas.
Our reports indicate the lowest rents are generally
in the North East and Scotland, whilst Central London has the
highest rental figures. For this reason the proposed caps on the
Local Housing Allowance (LHA) will have very limited impact in
some areas, but very dramatic effects in places like Camden, Westminster,
Kensington & Chelsea, particularly for the larger families.
Many economically poor will have great difficulty
in accessing affordable housing particularly those with larger
families who will find a weekly cap of £400 plus a requirement
to be within the 30" percentile very challenging. Many have
struggled on the current 50th percentile due to:
- 1) The vast gap
between the current rents and the proposed cap in the most highly
priced areas
- 2) The lack of availability of stock suitable
for larger families.
Shortfalls in rent
A large number of tenants within the Private Rented
Sector (PRS) are unable to pay the current shortfalls. Landlords
will not enter or remain in the PRS unless they can make a profit
on their rental income. Inevitably they will be unwilling to provide
accommodation where they cannot see the possibility of the rent
being paid in full.
Landlords in the PRS fall basically into two groups:
- Larger corporate landlords; and
- Smaller portfolio landlords with typically less
than five properties.
Both categories of landlord tend to have borrowings
secured against the value of their property(s), again our quarterly
survey of landlords and agents (www.aria.co.uk/buytolet/reports)
indicate typical leverage being around the 60% mark at current
house price values. This has obviously risen as house prices have
fallen, although London has suffered less than other parts of
the country. The typical gross rent return on the value of a property
at present is between 4 - 5% before repairs, maintenance and insurance.
With capital uplift uncertain in the foreseeable future asking
landlords to accept a shortfall, and perhaps even take a larger
shortfall because of the proposed capping, is an unrealistic expectation.
Particularly within London there is an alternative market for
the landlord wishing to stay in the sector, some would require
to provide a higher standard of property, or exit the market.
However this should not be seen as a consequence of housing subsidy.
Standards require to be raised by the existing powers available
to local authorities.
Eviction Levels
Eviction occurs in a relatively small percentage
of the tenancies in existence. However it is usually easier for
a landlord just to end the tenancy at the end of a fixed term,
or by providing the appropriate notice period, than to pursue
the rent arrears or evict. The proposed changes will not help
this situation. At present many local authorities are requiring
to use the PRS to deal with homelessness, and it is possible at
the lower benefit level local authorities will be forced to use
a greater proportion of their Discretionary Payment budget to
deal with homelessness in order to pay the market rent.
The real issue is the lack of housing stock and in
particular affordable housing. Our reports indicate that property
available in the PRS is currently well occupied, with more tenants
waiting for housing than stock available to meet the demand. A
significant proportion of this demand is caused by potential first
time buyers being unable to access mortgage finance, changes in
lifestyle with people opting to wait longer to make a purchase,
mobility of labour being even more important in a shrinking employment
market, as well as the desired upward mobility in the workplace.
It is possible that reduced university places may free up some
rental stock. This could be supported by students choosing to
live with their families and not to rent properties, however there
is no strong evidence of such a trend. . Various changes to university
access and funding over the years have not had a major impact.
The conclusion must be therefore that the proposals
will mean that the economically poor or inactive will find the
PRS even more difficult to access than at present.
Landlord Confidence
Landlord confidence in the acceptance of benefit
tenancies has decreased dramatically since the introduction of
LHA because benefits are paid direct to tenants. Some surveys
on rent arrears suggest arrears are still increasing e.g. by the
National Landlords Association, many of whose members will accept
benefit tenants. LHA is a contributing factor as the economically
poor become faced with the dilemma of an increase in Retail Price
Index adding to the cost of food and other necessities, reduced
income and the payment of rent. The end result being, LHA not
being paid over, or partial payments of rents made causing a slow
escalation of arrears. Many of these tenants would be happy to
have the temptation removed and benefit paid direct to the landlord.
Community Cohesion
There is a strong feeling that some families will
be forced to move to more affordable areas to achieve adequate
housing. For example tenants currently living in Camden may be
forced tomove well away from existing schooling and other services,
maybe even leaving London and moving to other regions of the country.
This would have a major social consequence and could created ghettos
of economically poor where employment is already scarce.
Disabled people, carers and specialist housing
No comment
Older people, large families and overcrowding
No further comment
September 2010
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