Communities and Local Government CommitteeWritten evidence submitted by Westminster City Council

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

Westminster has one of the largest private rented sectors in the UK at an estimated 40% of the stock according to recent census results. It is made of a range of sub markets including a luxury sub-market at one end of the market, comprising less than 10% of the sector, and at the other end houses in multiple occupation including hostels. It is therefore a very diverse market but the largest component is what may be described as the “middle-market”. A survey of 330 private tenants in 2010 found that 90% of tenants overall were satisfied with the quality of their property and 82% with the general condition and repair of the property.

Our 2010 Stock Condition Survey found more decent homes failures in the private rented sector (39.1%) than the owner occupied (31.9%), but that private rented sector rates were below the national average of 45.4%.1

The City Council inspected 1,712 private rented properties in 201112, served 206 legal notices, removed 771 category 1 hazards, made 461 homes decent and did seven prosecutions. Additionally, 111 HMOs were improved and 35 new HMO licences were issued.

The residential environmental health service is well known across the city with referrals for inspections coming from a range of sources including tenants themselves. It also has a neighbourhood engagement role and local partnerships are developed (particularly with health professionals). This helps to raise awareness of the service and to make links between a poor quality home and poor health. Additionally proactive partnership work is carried out with the Portman and Spirit Group to improve properties HMO above restaurants and pubs.

The Council’s view is that existing legislation (principally the Housing Act 2004) is adequate to ensure the private rented sector is of an acceptable standard where it is adequately enforced through a good balance and combination of local authority pro-active and reactive work to address poor conditions.

Levels of rent within the private rented sector—including the possibility of rent control and the interaction between housing benefit and rents

Westminster has some of the highest private rents in London which are reflective of the high cost of market housing generally in the City (property prices are the second highest in London).

Rent control is not supported as this could restrict the essential supply of private rented housing which is particularly important when mortgage finance is restricted. Private landlords need to get a return on their investment which can compare favourably with other investments. It is worth noting that research carried out by Savills and Rightmove2 has shown that investment yields (excluding capital appreciation) tend to be lower in high value areas. The London Mayor’s findings in the recent Housing Covenant relating to the private rented sector highlights that rent controls are not the answer to affordability issues in the private rented sector.

We however support the London Mayor’s proposals to work with landlords to pilot more flexibility and choice in tenancy agreements which could include tenants having greater certainty over rent increases.

Also innovative partnerships between investors in private rented housing and social landlords may help to reduce some of the high costs associated with private renting, for example high management costs. Social landlords could offer significant management efficiencies such as reducing costs for void periods and lower cost repairs and maintenance. These reduced costs would in turn increase yields and these types of partnerships may also help to cushion rent increases and to raise quality and standards, as properties would be required to meet social sector standards.

The implementation of the LHA caps on existing Housing Benefit claimants in April 2011 impacted over 5,200 households in Westminster. The strength of the private rented sector market in Westminster means that the overwhelming majority of private rented sector accommodation is let at rents above the LHA caps and thus is unaffordable for households on benefits. Whilst there will always be some properties let to households on benefits, the majority of these will be studios and one bedroom properties and there is little family sized private rented sector accommodation affordable to households on benefits. This situation will be worsened as the Household Benefit cap is introduced in April 2013.

One effect of this is that at a time of increasing homelessness authorities are expected to lease Temporary Accommodation from the private rented sector to meet their statutory obligations to provide Temporary Accommodation for households for whom they have a statutory duty to provide housing. This housing must be suitable and affordable and the lack of supply of such accommodation in high value areas means that authorities will have to look increasingly to cheaper areas in and outside London, or subsidise accommodation through their own resources, for those households who have to be housed within the local area. This is exacerbated by the lack of certainty over the Temporary Accommodation Subsidy Regime, its likely reduction in future years in high value areas, and the fact that it has not allowed the procurement of sufficient volumes of self-contained accommodation to meet the increased demand, has led to increased use of bed and breakfast emergency accommodation

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

Existing legislation is in our view adequate to deal with criminal landlords. Local authorities have the power to prosecute landlords for unlawful eviction/harassment (1977 Protection from Eviction Act) and also the power to prosecute landlords for failing in their responsibilities (1985 Landlord and Tenant Act). The City Council carries out prosecutions but they are rare (around one each year) and normally the issue can be addressed through negotiation with the landlord.

Local authorities already have an existing power to inspect properties, carry out assessments, issue statutory notices and prosecute landlords in relation to the quality of the property (principally Housing Act 2004). There is also a statutory duty for local authorities to intervene and take action if category 1 hazards are identified in a property.

Mandatory landlord registration is also not supported as it is likely to become burdensome and costly to administer and there is a danger it would become a tick box exercise without bringing any real benefits. While there can be lower membership of voluntary accreditation schemes in high demand areas as there are fewer business reasons for joining schemes, the Mayor’s voluntary accreditation scheme (the London Rent Standard) and self regulation is supported as an alternative to mandatory accreditation. The scheme will have the advantage of being strongly promoted and branded for London as a whole, which will help to address different local authorities having different approaches towards promoting accreditation schemes and as many landlords work across borough boundaries. We support the London Rent Standard clearly highlighting the business reasons for accreditation such as access to advice, information and training at a relatively low cost.

Regulation of letting agents, including agents’ fees and charges

As with private landlords, the City Council does not support the mandatory regulation of letting agents and instead supports the type of voluntary accreditation and self regulation proposed by the Mayor (highlighted above). Tenants will also have the option to avoid non accredited agencies.

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

The current regulatory framework is considered adequate.

Tenancy agreements and length and security of tenure

The private rented sector caters for a range of sub markets—for some tenants it is their long term home while others are attracted to its flexibility. Equally for some landlords it is a long term investment while others only want to rent out a property for a short period. The current legislative framework is adequate as it provides for both scenarios as an assured shorthold tenancy can be periodic and run indefinitely with the consent of both parties or be for a fixed term.

Many tenancies last much longer than the statutory minimum. A survey of 330 private tenants in Westminster found that while 32% of tenancies had lasted less than one year, for the over 65 age group over half had been living in their homes for at least ten years. The survey also found 95% to be satisfied with their security of tenure.

While many tenants may prefer greater security, requiring landlords by law to offer longer tenancies may restrict the supply of private rented homes, if landlords aren’t able to exit the market when they want to. In Westminster there are high numbers of landlords owning only one or two properties and a survey of 72 landlords found 47% owned one property and another 21%, one or two properties. The survey also found the tenancy term preferred by the majority of landlords was 12 months. Bringing more institutional investment into the private rented sector and subsequently a more mixed landlord structure will help to improve security of tenure.

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

The City Council’s first aim is to prevent homelessness by offering a range of options, including discretionary housing payments to secure the customer’s current private rented tenancy. Where prevention fails and a full homeless duty is owed, applicants will be assessed for discharge of duty via one suitable offer of private rented sector housing. This must be affordable so it may be some distance from Westminster depending on the number of bedrooms required. There will be some applicants however for whom the sector will not be suitable, for example those with disabilities requiring adaptations to the home, or those with chaotic mental illness and they will not be offered accommodation in the private rented sector.

January 2013