5 Tenancies and rents |
87. In this chapter, we will first consider the
tenancies on offer and any changes that could be made to tenancy
structure, before turning to rents and affordability. We will
then consider a number of related matters, including the placement
of homeless households in the private rented sector, the calculation
of local housing allowance, the quality of data about the sector,
and steps that can be taken to tackle tax evasion.
88. The Housing Act 1988 introduced two forms
of tenancy: assured and assured shorthold tenancies. The Housing
Act 1996 made the assured shorthold tenancy the default,
and today it accounts for the vast majority of tenancies.
It has become the norm, and it gives landlords an automatic
right of possession without having to give any grounds once the
fixed term has expired. In this case, a landlord must give two
months notice in writing (a "section 21 notice").
Under assured tenancies, which are now far less common, the landlord
does not have an automatic right to repossess the property when
the tenancy comes to an end.
89. The routine use of the assured shorthold
tenancy has been thrown into relief by the increasing number of
families with children living in the sector. We heard that there
was a case for longer tenancies in some circumstances and some
calls for greater security of tenure. The housing charity, Shelter,
Renters in England typically have short contracts
of only 6 or 12 months, resulting in uncertainty for renters and
high levels of churn in the sector. [...]
This is a particular problem for families with children.
Renters are eleven times more likely to have moved house in the
last year than people with a mortgage. Moving house this frequently
is not only extremely expensive, it can have a negative impact
on children's education and well-being. Government research found
that frequent movers are significantly less likely to obtain 5
A* to C GCSEs, or to be registered with a GP.
We heard from some of those looking for more security
of tenure, including one renter, Carl Thomas, whose ten year old
daughter had "already moved 7 times in her life".
In contrast in Germany, we found that there was much greater security
of tenure, with tenancies generally being indefinite and tenants
having strong protection against eviction.
90. As well as providing longer-term housing
for families, the sector still has to retain its traditional function
as a provider of housing for those in need of flexibility. Richard
Blakeway, Deputy Mayor of London for Housing, Land and Property,
saw a challenge in trying to
balance the flexibility that the PRS offers, which
is critically important, particularly for labour mobility and
for our economic competitiveness, with greater security, particularly
for families, who are forming a larger proportion of private tenants,
certainly in London.
Dr Julie Rugg found the market "immature in
getting a good link between what people want and what the market
She said that "we could maybe start encouraging landlords
who want long-term tenants to gather together, and let them badge
themselves slightly differently from landlords who really only
want short-term tenants".
91. A number of those representing landlords
and agents pointed out that the assured shorthold tenancy already
offered flexibility. The National Landlords Association (NLA)
said that the "existing tenancy structure is more flexible
than many realise" and suggested that there was "a lack
of understanding in all quarters about what can be achieved with
the Assured and Assured Shorthold Tenancy".
The UK Association of Letting
Agents agreed that the current structure was flexible but said
that "the full extent of this flexibility has yet to be fully
explored by the market, given a number of limitations and the
relative youth of the PRS in its current form".
It was also suggested that, while initial tenancies might only
be for six months or a year, in practice tenants would often stay
in a property for much longer. Mark Prisk, the Minister, told
us that half of tenants were "over two years in tenancy,
and in fact about 19% are over five years".
Richard Lambert, Chief Executive Officer of the NLA, suggested
that we draw "a distinction between the term of a tenancy
and the duration of a tenancy". He said that
if you are dealing with somebody for the first time,
you want to get to know them; you want to understand them; you
want to see if it works for you and it works for them. In the
same way that you do not get married on a first date, you are
not going to offer somebody a longer tenancy straight off.
92. We heard about proposals and work underway
to promote longer tenancies. Shelter set out details of its proposed
Stable Rental Contract which it described as a "mutually
beneficial rental product".
It said that a "more stable and balanced private renting
offer can be developed from the existing legal framework".
Under its model, tenants would be given "five years in their
home, during which landlords could not end their tenancy without
a good reason". At the same time, renters would be allowed
two months' notice to end their tenancy.
The Residential Landlords Association was consulting on a different
model for longer term tenancies,
and the Mayor of London would be "inviting major landlords
to participate in a pilot to test out how they can offer tenants
longer contracts and greater certainty over rent increases".
The Mayor's Deputy, Richard Blakeway, said that they were keen
to explore whether longer tenancies could be achieved within the
assured shorthold tenancy framework rather than having additional
93. We noted that where institutional investors
and housing associations were moving into market renting, there
seemed to be greater scope
for longer tenancies. The website of Genesis Housing Association
states that "on most of our properties we offer rental tenancies
for 1, 2, 3, 4 or even 5 years".
Neil Hadden, Chief Executive of Genesis, confirmed that these
tenancies would give a tenant, after six months,
the opportunity to bring the tenancy agreement to an end with
two months' notice, and that this provision would be built into
the tenancy agreement.
Qatari Diar Delancey, a joint venture between the Qatari Sovereign
Wealth Fund and the principal client fund of Delancey Real Estate
Management Ltd, was offering tenancies in the former Olympic village
for up to three years (with tenants able to give two months' notice
after the first six months).
94. The demographics within
the private rented sector are changing. No longer can it be seen
as a tenure mainly for those looking for short-term, flexible
forms of housing. While some renters still require flexibility,
there is also an increasing number, including families with children,
looking for longer-term security. The market, therefore, needs
to be flexible, and to offer people the type of housing they need.
The flexibility of assured shorthold tenancies should be better
exploited, and the option of using assured tenancies should also
be considered where these meet the needs of landlords and tenants.
That we are beginning to see some institutions and housing associations
offering longer tenancies under the current law suggests that
we do not need legislative changes to achieve them. Rather, we
need to change the culture, and to find ways to overcome the barriers
to longer tenancies being offered. We
shall consider three of the principal barriers.
Barriers to longer tenancies
95. It was suggested that landlords preferred
shorter tenancies because they wished to retain the ability to
gain possession without going through lengthy eviction procedures.
The British Property Federation said:
'Bad-tenants' exist and long-term fixed contracts
create another hurdle that a landlord must overcome to get an
investment generating a viable return. Landlords often defer action
and rely on the tenancy coming to an end to save costs associated
with potentially more complicated litigation.
One landlord, Oliver Cornes, said that it took between
four and six months to evict a tenant.
Shelter said that, alongside the introduction of its Stable Rental
Contract, the Government should investigate "ways of increasing
confidence in court processes and landlords' ability to use possession
grounds to end the tenancies of tenants who breach their contract".
Tessa Shepperson, a solicitor specialising in landlord and tenant
law, suggested that
landlords be entitled to prompt possession orders
against non paying tenants as of right, and that if tenants seek
to defend and counterclaim, for example because of the property's
poor condition, they be required to pay their rent into court
(or an authorised organisation) to abide the event.
96. Landlords also need confidence that they
will be able to gain possession promptly should they wish to sell
the property. East Midlands Property Owners noted that "a
property with a sitting tenant will negatively affect its selling
said that one of the conditions of its Stable Rental Contract
would be that landlords would "still be able to end the tenancy
if they sell the property".
97. If landlords are to offer longer tenancies,
they will need confidence that they can gain possession quickly
if they wish to evict tenants who do not pay the rent or if they
wish to sell the property. Because it can take months to evict
a problem tenant, some landlords will offer shorter agreements
in the confidence that, if necessary, they will be able gain possession
at the end of the fixed term. Equally, they might wish to keep
open the option of selling the property. We
recommend that the Government convene a working party from all
parts of the industry, to examine proposals to speed up the process
of evicting during a tenancy tenants who do not pay rent promptly
or fail to meet other contractual obligations. The ability to
secure eviction more quickly for non payment of rent will encourage
landlords to make properties available on longer tenancies. The
Government should also set out a quicker means for landlords to
gain possession if they can provide proof that they intend to
sell the property.
98. Another barrier was the insistence of some
mortgage lenders on tenancy agreements of one year or less. The
NLA stated that
many buy-to-let lenders prohibit the establishment
of tenancies longer than 12 months in their lending conditions.
This has the obvious effect of restricting the number of landlords
who are able to offer longer tenancies.
Where landlords do not have a mortgage, there seems
to be more scope for offering longer or more secure tenancies.
Sue Thompson, a landlady, told us that she used "Assured
Tenancies not Assured Shorthold [...] because I do not have any
99. Paul Smee, Director General of the Council
of Mortgage Lenders told us that lenders were concerned about
"the ability to get vacant possession if a landlord gets
into trouble" but were "looking very seriously at how
they can remove that condition from mortgage offers, and the circumstances
in which they can do so". He added, however, that "the
lender has not felt a great surge in demand for these mortgages
In June 2013, the Nationwide Building Society Group announced
that The Mortgage Works, part of the group, was to become the
first mainstream buy to let lender to enable its borrowers to
offer their tenants the option of contracts with terms up to three
100. Some landlords are not
able to offer longer tenancies because they are prevented from
doing so by conditions in their mortgage. We are pleased that
lenders are considering how such conditions can be removed, and
that Nationwide Building Society is to begin allowing its borrowers
to offer longer term contracts. We urge the Council of Mortgage
Lenders to work with other lenders to ensure that they quickly
follow suit. Lenders should only include restrictions on tenancy
length in mortgage conditions if there is a clear and transparent
101. In some cases, letting agents might also
be a barrier to longer tenancies. The NLA was concerned that "letting
agents very rarely discuss the possibility of longer fixed-terms
with their landlord clients or applicants".
Tessa Shepperson stated that it was "very much in the interests
of letting agents to retain the current [tenancy] system, as their
income is largely derived from finding new tenants and charging
Agents' groups denied this. Caroline Kenny, Executive at the UK
Association of Letting Agents, said that
when property becomes available there are marketing
costs and staff have to go out, physically, to show the property
and call at the property. That outweighs the other costs involved.
She also said that "a trained letting agent
should know they have to listen to the requirements of the tenants"
and that when a tenant requested a longer tenancy, "the agent
should be the facilitator and try to achieve the tenant's request,
if it is suitable for the landlord to release the property for
a longer duration".
102. Letting agents have an important role to
play in making sure tenants are fully aware of the tenancy options
available and in facilitating longer tenancies where they are
desired. We recommend that
the Government include in the code of conduct for letting agents
a requirement both to make tenants aware of the full range of
tenancy options available, and, where appropriate, to broker discussions
about tenancy length between landlords and tenants.
103. A number of witnesses raised concerns about
'retaliatory eviction', whereby landlords would serve notice on
a tenant if they complained or asked for repairs to be carried
out. Bradford Metropolitan District Council stated that
one of the consequences of the relative lack of security
of tenure in the PRS, is the incidence of retaliatory evictions.
We have concerns that when some landlords become aware that their
tenants have contacted the local authority for assistance with
the poor standard of their accommodation, that they then serve
notice on their tenants, who are then required to move out. This
can occur either due to malice on the part of the landlord, or
simply because the landlord lacks the funds to address the disrepair
or hazards which the tenant has complained about.
Geoff Fimister from Citizens Advice observed that
"for assured shorthold tenancies you do not have to give
a reason as to why you are bringing the tenancy to an end".
He said that in these cases the tenant was "particularly
The Building and Social Housing Foundation said that the risk
of retaliatory eviction made it difficult for local authorities
to carry out reactive enforcement.
It suggested that councils could take a more proactive approach,
rather than rely on tenants reporting problems.
We discuss proactive enforcement in chapter 3.
104. Some witnesses suggested that legislation
was needed to prevent retaliatory eviction. The National Private
Tenants Organisation stated:
New legislation should be introduced to deal with
the problem of tenants being evicted in response to legitimate
complaints about housing conditions [...] Several countries such
as New Zealand and states in Australia and the U.S.A. have introduced
legislation to deal with this problem.
Friends of the Earth and the Association for Conservation
of Energy were concerned that tenants would be unlikely to request
energy efficiency measures from landlords for fear of eviction
and proposed that legal protection be given to tenants requesting
energy efficiency improvements.
They said that a "simple solution would be to limit the use
of section 21 by landlords when an energy efficiency request had
been made by a tenant under the regulations".
105. There is a perception amongst
some tenants that if they speak out it could result in their losing
their home. Tenants should be able to make requests or complain
without fear that doing so will lead the landlord to seek possession.
We are not convinced, however, that a legislative approach is
the best or even an effective solution. Changing the law to limit
the issuing of section 21 notices might be counter-productive
and stunt the market. Rather, if we move towards a culture where
longer tenancies become the norm, tenants will have greater security
and also more confidence to ask for improvements and maintenance
and, when necessary, to complain about their landlord. Moreover,
if local authorities take a more proactive approach to enforcement,
they will be able to address problems as they occur rather than
waiting for tenants to report them.
106. Some witnesses were particularly concerned
about the affordability of rents within the sector. Dr Julie Rugg
of York University said that
the combined influence of a strong PRS and limited
alternative options for households seeking accommodation means
that rental affordability is compromised. According to the most
recent English Housing Survey (2010/11) housing costs for private
renters absorbed 43 per cent of their gross weekly income; amongst
owner occupiers the figure was 19 per cent, and social renters
29 per cent.
Digs, a grassroots organisation of renters in Hackney,
London, said that nearly all its members had faced large rent
increases, in some cases as high as 40%, over the last three years,
and that many of the members facing an increase had been forced
107. While concerns were raised about rising
rents, we also heard that rent increases in many parts of the
country were below inflation, and that the yields landlords received
were stable. The buy-to-let lender, Paragon Group, referred to
survey findings which showed
that the average nationwide yieldthe property
portfolio's annual rental income as a percentage of its total
valuehas remained approximately 6% since Q1 2011. There
are a number of possible causes but the overall picture is clearly
not one where landlords are 'profiteering' especially when interest
on the mortgage finance is taken into account.
The British Property Federation stressed that not
all tenants had a rent rise every year and that it was "very
common practice in the market for private landlords only to rebase
their rent when a tenant moves out".
The Government said that "across England as a whole, increases
in private sector rents in recent years have been modest and remained
108. We heard some calls for rent control or
capping below market levels.
The University of Sussex Students Union said that
consideration should be given to the idea of rent
control as this may provide protection to students and other tenants
in the private rented sector against inflated rents for poor quality
properties and over inflationary rent increases.
The Housing Law Practitioners' Association (HLPA)
said that rent control already existed "for three classes
of residential occupier", including benefits recipients who
it said were subject to "de facto rent control" because
of restrictions on housing benefit.
The HLPA said that there was "a pressing case, both for the
protection of individuals and in order to make wider savings,
for rent control to be extended to bring down the rental levels
in the private sector".
109. For the most part, however, our evidence
was against measures to control rents. It was suggested that rent
control would adversely affect investment in the sector and consequently
lead to a reduction in supply.
Richard Blakeway, Deputy Mayor of London for Housing, Land and
Property, said that
rent controls are not the answer. One of the most
striking things about London's rental market is that yields are
the lowest in the UK. If you introduce rent controls, you will
drive away investment, limit mobility and drive away people improving
their properties. You will see a deterioration in the quality
of rented accommodation as well as a reduction in quantity.
110. Problems with the affordability
of rents are particularly acute in London and the South East.
Although in other parts of the country average rents and yields
are relatively stable, we are still concerned that some families
are struggling to meet the costs of their rent. We do not, however,
support rent control which would serve only to reduce investment
in the sector at a time when it is most needed. We agree that
the most effective way to make rents more affordable would be
to increase supply, particularly in those areas where demand is
highest. We consider
supply in chapter 6.
Setting rents for longer tenancies
111. One of the features of Shelter's Stable
Rental Contract was that landlords would only be able to increase
rents at the rate of inflation.
It referred to modelling by Jones Lang Le Salle which showed that
indexing rents would increase landlords' returns
by making increases more steady and predictable. This is because
many landlords do not increase rents for a number of years, and
then when faced with a significant rent increase, renters may
leave and create the risk of a void period for landlords.
Shelter also said that, while the maximum annual
rent increase would be in line with the consumer price index,
landlords "would not be obliged to charge it if they felt
it was above rent increases in their local market".
112. The British Property Federation, however,
expressed concern about index-linking:
Recent history [...] shows that index linking is
neither stable or predictable, flitting between -1.6% and 5.6%
over the past three years, and with what might appear to be quite
small annual increments compounding into a far larger increase
than people might anticipate.
It offered other suggestions for how rents could
be set, but warned that there was "no 'perfect way'"
to do it:
A very stable and predictable way of setting rents
is simply to set a fixed uplift in an occupiers' tenancy or lease
agreement, for example the rent will increase by 2% per annum.
This is sometimes used in both sectors but represents a gamble
for landlords or tenants about what is going to happen in the
Rent inflation tends to correlate very strongly with
average earnings (with some lag), and therefore linking rents
to average earnings might be a good way of setting rents and would
mean that rents would have the same 'affordability' at some date
in the future as they do now, but only for the 'average' person.
113. There is no perfect
way to set rent, but, where longer tenancies are being established,
linking increases to inflation or average earnings, or voluntarily
agreeing a fixed uplift each year merit consideration and could
provide tenants and landlords with a degree of stability, though
over time mechanisms may emerge as, for example, in the commercial
property sector. Tenants', landlords' and agents' groups should
encourage their members to discuss these options at the outset
of a tenancy. Existing arrangements for setting and increasing
rent are often arbitrary and uneven, and reflect the immaturity
of the market.
Placement of homeless households
in the private rented sector
114. The private rented sector is playing an
increasing role in the provision of housing for homeless people.
Provisions in the Localism Act 2011 allow local authorities to
discharge their homelessness duty with an offer of accommodation
in the private rented sector without the applicant's consent.
We heard several times that it was too early to consider the impact
of this legislation.
Nevertheless, the NLA considered it to be a "positive step"
because it showed "that the Government sees the PRS as part
of the housing solution rather than part of the problem and that
the PRS is no longer a short-term stop-gap but a source of long-term
Others were less supportive of the measure. The homelessness charity,
Crisis, said that it had opposed the measure throughout the passage
of the 2011 Act because it was concerned that it would lead to
115. The Government said that, in response to
concerns about the quality of private rented accommodation, it
had "decided that additional regulatory safeguards were necessary".
It had therefore issued the Homelessness (Suitability of Accommodation)
(England) Order 2012
which "sets out the circumstances in which accommodation
used for the purposes of a private rented sector offer to end
the main homelessness duty is not to be regarded as suitable".
The criteria covered five broad areas: the physical condition
of the property; health and safety; licensing for houses in multiple
occupation; landlord behaviour; and elements of good management.
116. The charity, Herts Young Homeless, referred
to the earlier consultation on this order and said that it was
'a good start' but that it had to be "enforced by local authorities
and any concerns regarding rogue landlords must be followed up
and resolved using this and other relevant guidance".
The Chartered Institute of Environmental Health was concerned
about the wording of the order. It said that it should "be
amended to make clear that local authorities MUST arrange an inspection
of a property to ensure no Category 1 hazards exist before it
117. We welcome the Government's
use of secondary legislation to clarify when accommodation is
unsuitable for homeless households. We expect councils to pay
full regard to this order and to ensure that homeless households
are only placed in suitable accommodation. Given that many of
these households will be vulnerable, councils have a particular
responsibility to ensure that the properties they are placed in
are free from serious health and safety hazards. We recommend
that, as a matter of good practice, local authorities should inspect
properties before using them for the placement of homeless households.
OUT OF AREA PLACEMENTS
118. The Homelessness (Suitability of Accommodation)
(England) Order 2012 also provides that local authorities "must
take into account the location of the accommodation", including
"where the accommodation is situated outside the district
of the local housing authority, the distance of the accommodation
from the district of the authority".
In its response to a consultation about the Order, the Government
This Order does not prevent or prohibit out of borough
placements where they are unavoidable nor where they are the choice
of the applicant. Some households will wish to leave their current
district as such a move can have a positive effect for those escaping
violence or those seeking to move to take advantage of employment
119. Crisis, however, was concerned that the
order would not
be strong enough to prevent local authorities discharging
their homelessness duty using out of borough placements, which
can uproot households and force them to move miles away from their
Cllr Jonathan Glanz, Cabinet Member for Housing and
Property at Westminster City Council, considered it "inevitable
that central London boroughs will have to look at ways in which
the requirements of people presenting as homeless within those
boroughs are accommodated slightly outside their boroughs, or
even outside London, depending on where we end up with the market"..
He said that people from Westminster had been placed in Bognor
Regis and on the north coast of Kent, but that it had been "in
discussion and by agreement with people who have either got family
connections there, or who have said that they would be quite happy
to do so".
London Borough of Newham said that there were "simply not
enough properties in our borough that fall within the new [local
housing allowance] rates, much less the overall benefit cap or
private rented sector landlords who will consider benefit claimants
It added that it was "hugely unhelpful for Government to
put restrictions on what local authorities can do when our work
in this area is simply concerned with mitigating against the consequences
of Government policy".
120. Hastings Borough Council, as one of the
areas in which homeless households were likely to be placed, had
concerns about "risks associated with an influx of vulnerable
households from outside of the area in terms of increased demand
for local services and the negative impact on the overall local
It said that there should be
a requirement for Local Authorities to inform a receiving
Authority of any household relocated to another area with details
of how ongoing support needs will be addressed. The receiving
Local Authorities should be able to stipulate which areas should
not be used to relocate homeless households e.g. areas with significant
levels of deprivation and large concentrations of private rented
stock where extensive work is ongoing to regenerate the area through
tenure diversification and enforcement.
121. All agree that, wherever
possible, councils should be placing homeless households within
their local area (unless there are particular circumstances that
mean it is not in the households' interests). It nevertheless
appears inevitable that councils in areas with high rents, London
in particular, will place homeless households outside the area,
including in coastal towns. Before any placement, there should
be a full discussion with the receiving authority and the prospective
tenant and information about the household and its ongoing needs
should be shared. The Government should consider making this a
122. We heard some examples of positive work
to ensure homeless households were placed in suitable private
rented accommodation and to provide them with ongoing support.
Broadway Homelessness and Support, a charity based in London,
described how it had "set up set up Real Lettingsa
social enterprise providing stable private rented accommodation
for people who have been, or are at risk of becoming, homeless".
A number of local authorities were also running or setting up
local letting agencies.
The charity Centrepoint called for social letting agencies to
be expanded. The
NLA referred to the Private Rented Sector Access Development Programme
being funded by DCLG through Crisis.
The NLA was one of the organisations on the panel selecting access
schemes to receive funding.
It said that these schemes had
been successful in working with some of the more
challenging people to house, for example, seeing great results
in supporting rough sleepers into private rented accommodation
and in housing former offenders. Schemes have also seen some results
in housing under-35s in shared accommodation, although there is
recognition that this takes considerably more time and resources
both to set up and sustain.
We were pleased to hear of positive
examples of work to support homeless households in the private
rented sector, including the establishment of social letting agencies
and the development of private rented sector access schemes. We
encourage the Government to work with local government, the charity
sector and industry bodies to ensure best practice is shared and
LOCAL HOUSING ALLOWANCE
123. We heard some concerns about the way local
housing allowance (LHA) was calculated. Blackpool Borough Council
explained that the town faced problems because of "artificially
The dominance of Housing Benefit within the large
private rented sector in Blackpool means that it is difficult
to establish a market rent when calculating the Local Housing
Allowance (LHA), simply because so few properties are let to people
paying their own rent without assistance through LHA. Also, the
LHA is calculated across a Broad Rental Market Area that covers
a wider suburban and rural area of the Fylde Coast that has much
lower rates of benefit claimants and higher market values than
Blackpool. So the LHA rate applied to Blackpool tends to be higher
than might be expected from just looking at the quality of accommodation
on offer to benefits claimants in Blackpool itself because it
is based on the few best properties that aren't let to benefits
claimants, and market rents in better areas.
It was therefore "very profitable for landlords
to buy and let out accommodation to benefits claimants in Blackpool,
demonstrated by the doubling in HB claimants in the private rented
sector seen in the last 10 years".
This had a destabilising effect on neighbourhoods and created
"a vicious circle where economically in-active residents
in poor privately rented accommodation make neighbourhoods less
attractive to people looking to buy a home".
The council had discussed with the Department for Work and Pensions
(DWP) a change to the way LHA was calculated, but its request
for a "refined approach to reflect particular local housing
markets" had been refused.
124. In other places, the boundaries of broad
rental market areas were giving rise to the opposite problem.
Ruth Abbott, Housing Standards and Adaptations Manager for the
City of York Council, said that the establishment of LHA in Yorkshire
had created a big issue because
it took into account the rural area just outside
of York. When they set the local housing allowance in York, it
was a significant impact in the fact that 57% of the properties
outside of York were okay with the local housing allowance, but
only 8% of properties in York were able still to attract housing
benefit tenants. [...] We would want York to be looked at in isolation,
rather than being looked at across such a broad assessment, including
the rural areas. It has caused us a major problem.
125. Mark Prisk acknowledged that there were
"some local anomalies" with LHA. He added that it was
"something that both DWP and ourselves have an interest in,
we need to keep an eye on".
In our view, it is not enough just to monitor the situation. In
Blackpool, landlords are profiting from artificially high levels
of local housing allowance while neighbourhoods are being destabilised
by increasing numbers of benefit claimants. It is perverse that
large sums of public money are being spent in a way that serves
only to drive up rents and damage the fabric of the town. We
recommend that the Government take immediate steps to allow councils
to apply for a variation of broad rental market area boundaries
where anomalies occur. This
issue raises wider concerns about the interaction between housing
benefit and rents, whereby housing benefit can drive rents up
across the area, which in turn leads to upward pressures on the
local housing allowance, creating a vicious circle and increasing
costs for the taxpayer. We
recommend that the Government conduct a wide-ranging review of
local housing allowance (LHA). This review should assess whether
there is greater scope for local flexibility over the setting
of LHA rates and the boundaries of broad rental market areas.
Local authorities could be incentivised to reduce the housing
benefit bill by being allowed to retain any savings for investment
in affordable housing.
126. A concern throughout the inquiry was the
adequacy of data about the private rented sector. Digs stated
the private, unregulated nature of the PRS makes
valid statistical research into the sector difficult. The DCLG's
own annual survey of private landlords has only been running since
2009, is based on no more than 650 landlords and fails to take
into account that most landlordsparticularly those at the
least scrupulous end of the spectrumwill not participate
in government surveys. While there is not even a register of private
landlords (as discussed in the methodology section of the DCLG's
Private Landlords Survey), it remains impossible to record accurate
levels of tenancy 'churn' or to survey landlord behaviour.
Concerns about the quality of data were brought home
to us when we asked the Mayor of Newham, Sir Robin Wales, about
the percentage of accredited landlords in Newham. He suggested
that it was only following the introduction of the licensing scheme
that the council had begun to establish how many landlords there
were in total:
We thought it was 10% [accredited], but it is 600
out of a known 15,000 now, and we are fairly confident that will
go up to 20,000 to 25,000, although these things are difficult
127. Given there is so much doubt over the number
of landlords, it must, by implication, be difficult to get an
accurate picture of rent levels. The Government, however, said
that rent data was improving:
[The Office for National Statistics] is improving
coverage in the Consumer Price Index of private rents by using
Valuation Office Agency data, with the enhanced measure included
from March. The Valuation Office Agency data represent the best
potential source on private rents and we are working closely with
them to improve information on how rent levels vary geographically
and over time.
128. It is important that policy on the private
rented sector is informed by an accurate evidence base. While
the quality of data on rents may be improving, there is more work
to be done, especially to get an accurate picture of the number
of landlords in the sector. We
recommend that the Government establish a small task group of
key organisations and academics to consider how data relating
to the private rented sector can be improved and made more readily
available. In addition, we encourage the National Audit Office
to contribute to an effective evidence base about the sector and
to draw upon our recommendations when developing studies on housing
129. Haringey Council expressed concern about
tax evasion in the private rented sector:
The admission in late 2012 by HMRC that the private
rented sector is a key area where the government is losing tax
revenue demonstrates that many landlords, if they feel that they
can, will attempt to dodge their responsibilities. We welcome
the creation of an HMRC taskforce to investigate this issue and
advocate closer working with local authorities to crack down on
rogue landlords cheating the tax system.
In our view, close working of this kind would be
particularly beneficial where the local authority has introduced
a landlord licensing or accreditation scheme.
Such an approach would also be helped if there were a simple means
of verifying that a landlord was registered for tax.
130. Written evidence from Robert May, who has
developed software for the property industry, suggested that unique
tax reference numbers could be included on tenancy agreements:
Each tax paying landlord [...] should have a Unique
Tax reference. If through a minor legislation change the Landlord's
UTR or UTR linked reference number is required for all Assured
Tenancy Agreements new and existing, it would become immediately
apparent which landlords do not have a UTR and therefore will
not be declaring or paying tax on their Rental income.
131. We do not endorse any particular scheme,
but more co-ordinated approaches and closer working between HMRC,
local authorities and letting agents could help to address issues
of evasion of both income and capital gains tax in the private
We recommend that the Government, in reviewing the regulation
covering the private rented sector, set out proposals for greater
co-ordination between the tax authorities and those regulating
the private rented sector.
173 Ev 302, para 40 Back
"Assured Shorthold Tenancy Agreement", National Landlords
Association website, www.landlords.org.uk Back
"Gaining possession of a privately rented property let on
an assured shorthold tenancy", www.gov.uk Back
Department for Communities and Local Government, Assured and
Assured Shorthold Tenancies: A Guide for Tenants, p 6 Back
Ev 134 Back
Ev w321 Back
Q 432 Back
Q 44 Back
As above Back
Ev 227, para 38 Back
Ev 161-162 Back
Q 692 Back
Q 361 Back
Ev 134, para 4 Back
Ev 134, para 6 Back
Ev 134 Back
Residential Landlords Association, Longer term tenancies:
a consultation, May 2013 Back
Ev 239 Back
Q 421 Back
Qq 411-16 Back
Ev 242 Back
Ev 246, para 6.5 Back
Ev w51 Back
Ev 134-135, para 7 Back
Ev w61 Back
Ev 272, para 6.3 Back
Ev 134, para 5 Back
Ev 228, para 43 Back
Ev w32 Back
Q 521 Back
"Nationwide gives landlords the option to offer longer term
tenancies", Nationwide press release, 26 June 2013 Back
Ev 227, para 41 Back
Ev w60; see also Ev 304 [Note of meeting with tenants from Greater
Q 192; see also Q 243 [Peter Bolton-King]. Back
Q 177 Back
Ev 261, para 3.6.2 Back
Q 180 Back
Ev w253, para 2.2 Back
Ev w253, para 2.3 Back
See para 55. Back
Ev 147, para 22.214.171.124; see also Ev w164-w165 [Digs], Q 180 [Geoff
Ev w327, para 28 Back
Ev w327, para 34 Back
Ev 132; see also Department for Communities and Local Government,
English Housing Survey Households Report 2010/11, para
2.21. The survey includes the note: "The percentages of income
spent on housing costs in this section are the average, across
all cases in the sector, of individual percentages of income spent
on rent/mortgage payments. It is not the same as the percentage
of the average income spent on the average rent/mortgage in a
particular sector". Back
Ev w165 Back
Ev 254-255, para 4.2 Back
Ev 248, para A6 Back
Ev 299; see also Ev 248 [British Property Federation] and Office
For National Statistics (ONS), Index of Private Housing Rental
Prices, June 2013. This document stated that between May
2012 and May 2013, rental prices grew by 1.3% in England (p 7).
The ONS said that these were experimental statistics and recommended
that caution be exercised when drawing conclusions from the final
data (p 2). Back
See, for example, Ev w7 [Melissa Robinson], Ev w168, para 10
[Alice Ashworth], Ev w248, Ev w122-w123, paras 7ff [Barristers
of Arden Chambers], Ev w144 [Thanet District Council]; Ev w190,
para 15 [Housing for the 99%], Ev w204, para 15 [Hastings Borough
Ev w138, para 10 Back
Ev w248, para 6. The other two classes of tenant were those occupying
property pursuant to the Rent Act 1977 and those who occupied
assured tenancies governed by the Housing Act 1988. Back
Ev w248, para 8 Back
See, for example, Ev 305 [note of meeting with landlords from
Greater London], Ev w37 [Sir Henry Elwes], Ev w53 [Home Counties
Property], Ev w54 [Graham Heather], Ev w56 [NetRent], Ev w62 [Mark
Walton], Ev w78 [Tom Glancz], Ev w109 [Andrew Wernick], Ev 219
[Westminster City Council], Ev w158-w159 [Investment Property
Forum], Ev 249-250, para 6 [Council of Mortgage Lenders], Ev 290,
para 2.1 [Country Land and Business Association], Ev w257-w258
[Judy Bowie-Britton], Ev w278 [Young Group]. Back
Q 440 Back
Ev 134 Back
Ev 141 Back
As above Back
Ev 248, para A3 Back
As above Back
Ev 248, paras A4 and A5 Back
Department for Communities and Local Government, Supplementary
Guidance on the homelessness changes in the Localism Act 2011
and on the Homelessness (Suitability of Accommodation) (England)
Order 2012, November 2012, para 7 Back
See, for example, Ev w96, para 27 [Housing Law Practitioners
Association], Ev w124, para 27 [Barristers of Arden Chambers],
Ev 247, para 7.1 [British Property Federation], Ev w318, para
16 [Law Society of England and Wales]. Back
Ev 228, para 50 Back
Ev 276, para 6.1 Back
Ev 303, para 48 Back
Homelessness (Suitability of Accommodation) (England) Order 2012
(SI 2012/2601) Back
Ev 303, para 50 Back
As above Back
Ev w149 Back
Ev w131 Back
Homeless (Security of Accommodation) (England) Order 2012, Article
DCLG, Homelessness(Security of Accommodation) (England) Order
2012: Government's Response to Consultation, November 2012,
p 11 Back
Ev w276, paras 6.2-3 Back
Q 302 Back
Q 307 Back
Ev 234, para 3.6 Back
As above Back
Ev w206, para 32 Back
Ev w206, para 34 Back
Ev w153 Back
See, for example, Ev w109 [Northampton Borough Council], Ev w198,
para 3 [DASH], Ev 144 [Local Government Association]. Back
Ev w228, para 2 Back
Ev 229-230, paras 5ff Back
Ev 229, para 8 Back
Ev w206, para 9 Back
Ev 212, para 4.3 Back
Ev 212, para 4.1 Back
Ev 212, para 4.2 Back
Ev 212, para 4.4 Back
Ev 212, para 4.5 Back
Q 568 Back
Q 742 Back
Ev w164 Back
Q 331 Back
Ev 300; see also Q 501 [Ian Fletcher] and fn 222 on the Office
For National Statistics (ONS), Index of Private Housing Rental
Prices, June 2013 Back
Ev w225, para 3.11; in November 2012, HMRC announced that it
would launch a task force in the South East of England targeting
those in the rental sector who did not pay the right amount of
tax, "More Tax Cheats to Feel the Force", HMRC press
release, 19 November 2012. Back
See chapter 3. Back
Ev w330; see also Ev w163 [Digs]. Back