Communities and Local Government CommitteeWritten evidence submitted by the Local Government Association

The Local Government Association (LGA) is the national voice of local government. We work with councils to support, promote and improve local government.

We are a politically-led, cross party organisation which works on behalf of councils to ensure local government has a strong, credible voice with national government. We aim to influence and set the political agenda on the issues that matter to councils so they are able to deliver local solutions to national problems.

1. Key Points

In this response we have set out some examples of the role local authorities play to raise standards and facilitate investment to meet demand. We have identified a number of ways that the Government could support local authorities’ work with the private rented sector which are summarised below:

Reduce the amount of bureaucracy involved in working with the private rented sector to raise standards and free up frontline services.

Be realistic about the scale of the challenge. Any new requirements for local authorities on the private rented sector must be properly resourced and funded, without creating additional burdens.

Streamline and improve enforcement tools so that local authorities can tackle criminal landlords, for example the rise of illegally rented outbuildings, or “beds in sheds”.

The Local Authority Role

Understanding housing needs and aspirations within an area and identifying future pressures is crucial to ensure that housing investment underpins and supports locally led growth. Councils play a central role and work in partnership with investors and landlords of all tenures to raise standards and facilitate investment to meet demand.

Councils do this through effective use of their planning powers, coordinating action and investment using tools such as housing and tenancy strategies and by working across geographical boundaries to join up and take a strategic approach. Councils also invest directly in new and existing housing and work closely with landlords in both the social and private sectors, using their enforcement powers as a last resort to tackle unacceptable standards and criminal landlords.

The amount, cost, quality and location of private sector housing is an important issue for councils when considering overall housing need and priorities. The private rented sector is growing, and in some parts of the country is larger than the social housing sector. Approximately 3.4 million households (16% of all households) in England are now living in the private rented sector, a 30% increase since 2005. This growth can be compared with the challenges faced by those wishing to become owner occupiers; gross mortgage lending has fallen by 50% between 2007–111 and an average deposit for first time buyers stands at over £26,0002 ^. House building remains stubbornly low and recent government data demonstrates that starts (new construction) up to September 2012 are 85,000 units short of the 2006 peak3 ^. In this context the private rented sector becomes an increasingly important tenure.

Councils are responding with vigour and imagination, finding new ways to fund work in the private sector. They are also drawing on their broader assets, knowledge and powers, and those of their partners in order to do new things in new ways. Our response includes several examples of local authorities taking a proactive role with the private rented sector and supporting innovation in the development of the market. This is in a context of reduced funding, which has had an impact on all front line services including private sector housing teams. Local authorities have responded by developing innovative ways of funding their role, for example:

South Tyneside Council reinvests commuted sums acquired through planning gain into its private rented sector budget.

London Borough of Wandsworth has a joined up approach to preventing and treating falls in older people. The council received funding from public health budgets to cover their contribution which included undertaking a risk assessment and identifying 198 residents previously not known to the Health Service and that will receive additional support as a result.

Oxford City Council’s HMO licensing fees are set at levels that enable it to cover the costs of running a sizeable enforcement team.

2. Councils are Working to make sure that People have a Home

New models for investing in the private rented sector

Local authorities are taking a proactive role with the private rented sector and supporting innovation in the development of the market. This role was highlighted in the Montague Review of Institutional Investment in the private rented sector. For example:

Islington Council has announced plans to invest £20 million of its £800 million pension fund with residential property investment manager Hearthstone Investments.

Manchester City Council’s partnership with the Greater Manchester Pension Fund and the Homes and Communities Agency (HCA) will see more than 240 new homes built for sale or rent.

The London Borough of Newham is working with a Housing Association to raise additional housing equity, and is building on this approach to buy property and enter the market as a private landlord.

The interaction between housing benefit and rents

It is too early to reach conclusions about the impact of the Government’s housing benefit changes which for the most part have yet to take effect. Nor is it possible to disentangle, at least on the evidence currently available, the effect of welfare changes from those caused by the state of the wider economy. Local authorities, and the LGA, will be monitoring the impact of benefit changes on the private rented sector and rent levels.

In high demand areas there will be competition for rental accommodation which may make it difficult for those in receipt of benefits to access affordable and appropriate accommodation in the sector.

Local authorities are working with private landlords to explain the changes and work with them in placing those on the waiting list and in the discharge of their homelessness duty. For example, the London Borough of Croydon has established, through tender, a panel of eight private sector landlords that will act as managing agents for HMOs,4 for placement of homeless families. They will spread the word about the scheme—the guarantee of income and expected standards—and bring forward suitable properties.

How local authorities are discharging their homelessness duty by being able to place homeless households in private sector housing

The flexibility for local authorities to discharge their homelessness duty in the Private Rented Sector (PRS) is welcome. However, the scale of the challenge for local authorities should not be underestimated. Some parts of the country, particularly in London, are experiencing high rent levels and competition for affordable properties.

The legislative framework requires that councils should have regard to the location of the accommodation when placing homeless households in the Private Rented Sector (PRS). Where suitable accommodation is outside the district of the housing authority they must have regard to a range of factors when taking decisions about placements.5

Local authorities will place people within their own area where this is possible. Placing out of area is always a last resort for councils. In high demand areas it will not always be possible to place within area. Where placements out of area are necessary, councils will take a responsible approach. For example councils in London share information and monitor movement across the capital using an Inter-borough Temporary Accommodation Agreement. This ensures that authorities that may receive households receive information in advance of the placement and contains important conditions relating to rental prices. The LGA is working with London Councils to explore appetite across England for a similar set of management principles that underpin information sharing arrangements.

Letting agents, including agents’ fees and charges

The impact of fees and charges on local communities is an area of concern and high fees could act as a barrier to the private rented sector, particularly for people on low incomes. Households who could potentially find suitable accommodation in the private sector will be blocked by the need to pay agents fees and charge. This will add to the pressure on waiting lists for social and intermediate housing.

Local authorities are also being proactive in this area and some are choosing to act as local lettings agents themselves, for example Decent and Safe Homes (DASH) is now well advanced in developing a local lettings agency for Derbyshire. Help2let was the first social letting agency in London, set up by Harrow Council to match households on the waiting list with private landlords.

3. Councils are Making Sure that People are Safe, Secure and Healthy in their Homes

The quality of private rented housing, and steps that can be taken to ensure that all housing in the sector is of an acceptable standard

Where quality standards reach unacceptable levels local authorities have regulatory and enforcement tools available. Using these tools is often a last resort with a focus on engagement with good quality landlords through forums, accreditation schemes and training. Councils will seek a dual approach, where good behaviour is encouraged through licensing and support to follow enforcement processes. The other side of this is action against poor behaviour, for example by using powers under the Proceeds of Crime Act.

Licensing the private rented sector can also be a tool for tacking specific issues with poor quality accommodation. The following case studies illustrate the value of licensing in meeting local needs and supporting targeted action.

Hastings Borough Council is targeting one of its struggling neighbourhoods with tough enforcement and a property purchase programme in collaboration with a specialised housing association.

London Borough of Newham and Oxford City Council are in the process of rolling out area-based licensing schemes across their whole area. Newham is introducing a borough wide scheme covering all private rented housing. Oxford is coverings all HMOs. Both are structuring their licensing fees to incentivise and reward cooperation from landlords.

Regulation of landlords, and steps that can be taken to deal with rogue landlords

Enforcement action is always a last resort however a number of the powers available to councils are limited in their use due to a lack of clarity and disproportionate bureaucracy. These could be streamlined to reduce bureaucracy and act as a more effective deterrent to non-compliant landlords.

The LGA would like to see the following amendments to existing legislation:

Ambiguity within the wording of the Housing Act 2004 can lead to Residential Property Tribunal panels making different interpretations of owners, responsibility and which properties are defined as HMOs.

Legislation should be updated and rationalised to make it accessible and understandable to local authority officers and landlords.

The Housing Health and Safety Rating System (HHSRS) is a risk assessment system for housing and forms the basis of property inspection in the private rented sector. It is recognised as an improved tool for housing standards enforcement through which local authorities can take action, but the evidence base is dated and the whole process is time consuming. We would therefore recommend that the system is reviewed to ensure that it is fit for purpose.

Court action may be the ultimate course of action with the worst landlords. Prosecution should act as the ultimate deterrent, but the fines imposed by magistrates courts are often much lower than the maximum fine. Local authorities are working at a local level to build relationships with magistrates but there is more that can be done nationally to raise awareness of the harm that can be caused to tenants from unlicensed HMOs and ensure that penalties properly reflect this.

Some of the worst examples of exploitation by landlords have been seen in the rise of illegally rented outbuildings or “beds in sheds”. Pilot funding from DCLG has been useful in determining the scale of the problem in a select group of areas, mainly to the East and West of London. Local authorities have been taking action to address this issue. For example:

staff training to promote joint action across the council;

providing support through the housing options services to help people find more suitable accommodation;

more effective mapping and analysis to find problem hot spots; and

joint action with UK Borders Agency and HMRC.

Outside London, Blackpool Council has closed several of the most dangerous HMOs following the introduction of selective licensing.

The regulation of houses in multiple occupation (HMOs), including the operation of discretionary licensing schemes imposed by a local authority for a category of HMO in its area

Licensing schemes can play an important role in aiding the management of HMOs and the sector overall in an area. As noted in the introduction, the more time that private housing officers spend on forms and processing information, the less time they are able to spend on proactive enforcement and support for landlords.

The LGA is therefore keen to see a focus on streamlining red tape. Clarifications and minor changes set out below to the systems and powers on HMOs would make them easier and less costly to use. For example:

A clearer definition of “HMO”, “definition of dwelling”, the “person managing” and the “person having control”. Minor changes here could end confusion and uncertainty.

The amount of information that is required upfront from landlords could be reduced without detriment to quality.

The discretionary licensing schemes are useful tools but the legislation could be improved. The confusion over definitions in the legislation means that some authorities have had to issue two designations for an area in order to cover all areas. This could be remedied through giving local authorities more discretion in using selective and additional licensing powers.

Article 4 directions can be used to limit the number of HMOs in an area. The use of this power is constrained by the lack of flexibility for local authorities around the notice period and compensation provisions currently required for the use of Article 4 directions. These issues, coupled with the loss of planning fee income often act as a disincentive to the use of the directions.

We would like to see local authorities provided with greater flexibility and discretion on discretionary licensing schemes, and see disincentives to the use of Article 4 directions removed.

January 2013