Communities and Local Government CommitteeWritten evidence submitted by the Residential Landlords Association
1.0 About the Residential Landlords Association
1.1 The Residential Landlords Association (RLA) represents 16,000 small and medium-sized landlords in the private rented sector (PRS) managing over 150,000 properties in England and Wales. It promotes and maintains high standards in the sector, provides training for its members, runs local landlord accreditation schemes and seeks to drive out criminal landlords.
2.0 Summary of Points and Recommendations
2.1 English Housing Survey statistics have shown that at 17% the private and social rented sectors now comprise an equal proportion of the overall housing market. In a recent report, Savills and Rightmove estimated that by 2016 one in five households will be renting in the private sector.
2.2 The most recent English Housing Survey figures show that 85% of private tenants are very or fairly satisfied with their landlord, compared with an 81% satisfaction rate for social housing tenants.
2.3 A new banning or disqualification order should be established to prevent criminal landlords being involved in the management or letting of privately rented properties.
2.4 Local authorities should no longer be the sole sector regulator. There resources should be freed up to target non-compliant landlords through the introduction of self-regulation via accreditation for compliant landlords, run by approved independent accreditation bodies. A similar model exists under Building Control.
2.5 Ministers should work with local authorities to review the skill set of Environmental Health Officers to ensure they have the training needed to bring swifter prosecution against criminal landlords.
2.6 Underpinning all such changes is the need for measures, to boost supply since it is only through boosting the number of properties available to rent that tenants can better exercise choice.
2.7 Article 4 Directions, legal tools that local authorities can use to restrict the growth of Houses of Multiple Occupation, are being misused and should be repealed to alleviate the restriction on supply, protect the asset values of residents’ homes and allow people to choose where they want to live.
2.8 Ministers should bring together representatives from across the sector to establish a single, authoritative, common rent level survey.
2.9 Agreeing with the Business Secretary’s, assertion that rent controls “reduce supply” the RLA would strongly argue against any adoption of rent controls.
2.10 One of the most effective measures in professionalising the rental market would be to introduce greater controls on letting and managing agents. This part of the sector has remained unregulated far too long and is on occasion unprofessional.
2.11 Letting agent’s terms and conditions should be clearer along with what is chargeable and what is not, both to the landlords and tenants. Details of fees should be available to either party before signing any terms either on a web-site or by request on business premises.
2.12 Imposing statutory security of tenure is not the answer. A contractual based longer term tenancy model should be encouraged for those who need it. Many tenants, however, prefer the flexibility that the sector currently offers. Written tenancy agreements are to be encouraged but failure to use them should not be penalised; rather there could be a statutory basic fall back agreement.
3.0 Regulation of the Private Rented Sector
3.1 One of the RLA’s core objectives is to promote and maintain high standards within the sector. The provision of sub-standard accommodation that can often be dangerous is not acceptable. It should be noted however that the most recent figures available from the English Housing Survey show that 85% of private tenants are very or fairly satisfied with their landlord, compared with an 81% satisfaction rate for social housing tenant.
3.2 Key to tackling problem properties is to radically change the regulatory system and root out criminal landlords who fail to provide the service or the standard of accommodation that is legally expected of them. There needs to be a smarter system of regulation that better pinpoints those operating under the radar and who are difficult for local authorities to find, rooting out for good those who reap misery on tenants.
3.3 According to figures from Shelter, just 487 landlords in England were prosecuted last year; a figure that is remarkably low out of an estimated 1.2 million landlords in total. This is despite our analysis showing over 100 individual pieces of legislation and regulations containing around 400 individual measures affecting the sector. The problem is not a lack of powers, but the willingness and ability of local authorities to enforce their existing powers.
3.4 In his report for the RLA on investment in the sector, Professor Michael Ball of Reading University noted that landlord-tenant relations are subject to a wide-variety of housing, health and safety, planning, social policy, and environmental legislation. This, he concludes “has all developed in a haphazard, uncoordinated manner over many decades”. This, he notes, inevitably raises landlord costs; increases landlord administrative time; heightens risks because of the liabilities associated with regulations and elevates the “hassle-factor” of being a landlord.
3.5 Professor Ball concludes that “there is a wide variety of regulatory bodies, often with overlapping responsibilities. Many have risk-minimising, rather than optimal risk strategies, and do not bear the costs of their own actions. Responsibilities are spread between quangos, central, national and local government with limited or no coordination and potential negative overlap.”
3.6 As with building control local authorities should cease to be the only regulator. There should be a specific housing “code” which alone sets out the requirements applicable to the sector. Whoever is the regulator should take sole responsibility for their enforcement. The same minimum standards would apply under all regulators.
3.7 A new banning or disqualification order should be established to prevent criminal landlords being involved in either the management or letting of privately rented properties.
3.8 Local authority resources should be freed up to target non-compliant landlords. by the introduction of self-regulation via accreditation for compliant landlords by approved independent bodies. Given the funding difficulties they face, it is much easier for councils to target compliant landlords who can easily be found than spend the time and energy needed to pursue those operating under the radar. Robust accreditation, would act as a kite mark giving accredited landlords a marketing advantage. Scheme members should be expected to provide tenants at an early opportunity with a guide to both their rights and responsibilities with details of what to look out for and questions to ask before and after signing a contract. The RLA has developed such material.
3.9 Under the model in operation in Leeds, Fylde and East Lancashire, landlords are accredited, with an emphasis placed on Continual Professional Development (CPD) and the improvement of management standards. The property standards are essentially compliance with existing legal standards.
3.10 The RLA scheme has been developed to comply with the requirements set by the Accreditation Network United Kingdom (ANUK), which are:
Declaration—applicants must declare that their properties comply with the scheme requirements.
Verification—by a system of auditing the declaration and evidence of CPD.
Continual Improvement—the RLA is committed to ensuring that:
Standards are being constantly raised.
Benefits of membership are developed.
Scheme operations are improved and made more efficient.
Complaint Procedure—to enable a good system of redress to tenants and to assist in maintaining standards. Disputes are considered by a thorough procedure with sanctions in the worst cases of non-compliance.
3.11 Ministers should work with local authorities to review the skill set of Environmental Health Officers to ensure they have the training needed to bring swifter prosecution against criminal landlords.
3.12 Underpinning all such changes is the need for measures to boost supply since it is only through boosting the number of available properties to rent that tenants can be truly discerning in their housing options.
4.0 Regulation and Availability of Houses of Multiple Occupation
4.1 Councils now have the power to restrict the creation of new Houses of Multiple Occupation (HMOs) by making Article 4 Directions.
4.2 Previously, planning permission was not required to convert a property from use as a single family dwelling to become a small HMO lived in by up to six unrelated residents as a single household. Under regulations introduced in 2010, councils have the power to require planning permission before this change of use can be made for properties in selected districts. This procedure is regularly being misused.
4.3 A new use class has been created for planning purposes, Class C4, for small shared houses and flats in multiple occupation lived in by between three and six unrelated individuals.
4.4 Over 35 local authorities either have made or are considering making Article 4 directions to enable them to prevent family houses and flats being used as small HMOs without planning permission in designated areas. Usually these areas are where there are significant populations of students, but they also affect young professionals, such as nurses, or migrant workers. The reality is that permission will frequently be refused.
4.5 Whilst much of the case for restricting the growth of HMOs relates to the desire of a number of Councils to address the phenomenon known as “studentification”, the reality is that HMOs play a vital role to the regeneration and supply of housing in many communities. As demographics shift, landlords make better use of existing stock which would otherwise be under-utilised and poorly maintained. Article 4 Directions are motivated by sentiment against young people.
4.6 HMOs help provide a mobile workforce with necessary accommodation, vital for many local economies. HMOs are not just occupied by students but, with record social housing waiting lists and first time buyers facing increasing difficulties, are increasingly required by young professionals and workers. Due to the increase to 35 as the age for the (housing benefit) shared accommodation rate, more housing of this kind will be needed.
4.7 Areas with concentrations of HMOs are renowned for their vibrant nature with local, independent retailers and a café culture which helps promote a diverse and strong local economy.
4.8 The Rugg Review (2008), commissioned by DCLG, into the PRS argued against the use of planning powers to limit HMO numbers with research showing problems to be confined to less than 1% of council wards.
4.9 Where Article 4 Directions have been applied, a significant decrease in property prices has been seen. In Nottingham and Leeds, up to one third has been shaved off the value of properties in areas where the council has a direction. Therefore, local owner/occupiers feel the impact.
4.10 The use of the regulations to restrict the availability of HMOs has a direct impact on the supply of new homes. Consequently rent levels increase in popular areas.
4.11 Local authorities have a duty to ensure that sufficient HMO accommodation is provided in their area but are disregarding this. If an Article 4 direction is put in place, the result is that HMOs may be established in areas where they may not be welcome, such as where there is a dominance of family units. This is likely to create community disharmony.
4.12 The imposition of the regulation takes away the freedom of people to choose where they want to live. It allows local authorities to engage in social engineering, restricting who can live where.
4.13 Instead of local authorities adopting Article 4 Directions, it would be better to address problems that may occur where there are high concentrations of HMOs using the existing powers at local authorities’ disposal including those used for tackling anti-social behaviour.
4.14 Article 4 Directions do nothing to alter the make-up of existing communities but by making them, local authorities are denying tenants the choice of where they can live, drying up supply, increasing rents and significantly reducing the value of houses owned by local residents.
4.15 These powers should be repealed to alleviate the restriction on supply, protect the asset values of residents homes and allow people to choose where they want to live. This would also force councils to be more creative and work with landlords to address any problems caused by large HMO populations.
5.0 Levels of Rent
5.1 The RLA recognises that for many tenants’ rents are simply too high for them to manage, particularly in London. Whilst there are a plethora of organisations producing data on average rent levels, each has its own methodology enabling organisations to simply cherry pick those figures that best suit their case. It is important, however, to identify real increases in rents, stripping out the inflation element.
5.2 Given the widespread public and political interest in rental levels in the private rented sector we call on Ministers to bring together representatives from across the sector in conjunction with the Valuation Office Agency to establish a single, authoritative, common rent level survey. Such discussions should establish a robust methodology which gives the most accurate and comprehensive data that can properly inform policy making in relation to the sector.
5.3 Methodologies aside, the RLA does recognise the concerns of many over the amount that tenants can find themselves paying for their properties. Ultimately though, the answer lies in boosting the supply of properties.
5.4 Any suggestion of rent controls would be a regressive step at just the moment that more needs to be done to encourage investment in new properties. As the previous Housing Minister, Grant Shapps observed, as a result of previous rent controls, the private rented sector shrank from 55% of households in 1939 to just 8% in the late 1980s. If replicated now, rent controls would cause untold damage to the sector.
5.5 Rent controls would further dissuade lenders from advancing money to purchase properties to rent and would damage the finances of many buy to let investors. Experience from the past shows that property quality suffers markedly if rent controls are imposed.
5.6 In agreeing with the Business Secretary, Vince Cable’s assertion recently that rent controls “reduces supply” the RLA would strongly argue against any adoption of rent controls.
6.0 Regulation of Lettings Agents
6.1 The dubbing by the Royal Institution of Chartered Surveyor’s recently of lettings agents as being akin to the “Wild West” highlights a major area of concerns in the sector. Around two-thirds of landlords use agents in some way.
6.2 One of the most effective measures in professionalising the rental market would be to introduce greater controls on letting and managing agents. The sector has remained unregulated far too long and as such is on occasion unprofessional. With the greater focus on increased responsibility and higher standards in the PRS, it should be led by the industry that serves it. Landlords should be receiving advice from their agents and as such these companies and their employees should not be operating until that competence is proven.
6.3 The key reason for licensing is to protect monies held by agents. There is a need for proper bonding and audit of client accounts. This should be via participating agent organisations.
6.4 It is important that agents are brought into line to give a fair option to landlords who may consider the increased burden of management too much to operate themselves and opt instead to pass the responsibility to an agent. As it stands, there are not enough competent, qualified agents available to do this leading to landlords giving a property over to companies that may not effectively manage the property. There will be a period of time required to improve the standards of agents, especially as some of these may be using their client account to trade. Although clamping down on such agents quickly may seem a tempting option, it would be better to see these agents manage either their exit or recovery from this situation rather than disappear entirely.
6.5 Although landlords can learn by compliance with various forms of licensing, subject to proper enforcement, it is unacceptable for agents to learn at landlords’ expense. There should be a minimum qualification level for a principal and an appropriate qualification level for a percentage of the staff to licence the company.
6.6 Due to the size and unregulated nature of the market, the fee structure is not particularly homogenised or transparent. Terms and conditions of agents should be clearer along with what is chargeable and what is not, both to the landlords and tenants. The level of all fees should be available to both parties before signing any terms either on a web-site or at request on a property. We do not believe that fees should be set or influenced by government.
7.0 Tenancy Agreements and Security of Tenure
7.1 The introduction of the shorthold tenancy has been key to reviving the sector, along with market rents. At the moment we are concerned that Article 8 of the European Convention on Human Rights (Respect for the Home) may be held to apply to the private rented sector. As the Montague Report pointed out a stable regulatory regime is vital. Imposition of security of tenure or rent controls (including restrictions on rent during a tenancy) will undoubtedly lead to disinvestment from the sector.
7.2 The Association supports long tenancies to those who need them such as families and the elderly. However, the sector caters for many tenants who appreciate the flexibility of the sector and do not want long term tenancies. We have now developed a model for long term tenancies based on an option to renew for tenants. However, certain barriers need to be removed particularly requirements by mortgage lenders to limit tenancies to 12 months and the ability to evict non compliant tenants through the Court system must more quickly.
7.3 We support the use of written tenancy agreements. The RLA is the only organisation which publishes Crystal Mark Plain English compliant tenancy agreements. Making them compulsory though raises difficulties in practice and this could adversely affect tenants more than landlords. One answer could be a statutory fall back agreement setting out minimum terms rather than imposing tenancy contracts or penalties for failure to provide them.
January 2013