Communities and Local Government CommitteeWritten evidence submitted by the City of York Council

1. This submission takes account of recent research and consultation carried out as part of the preparation of a report into the introduction of a voluntary private landlord accreditation scheme in York. The City has recognised the vital and growing role the sector plays in the provision of accommodation and through this, contributing to the economic wellbeing of the city, in addition to supporting the community.

2. Excluding vacant homes, the PRS in York was estimated at 12,727 dwellings (17.8% of the City total) in 2008 containing 17,651 households. Many of these households exhibited evidence of socio-economic disadvantage, also a younger more mobile household structure. Multi-occupancy within the PRS was high, dominated by the student market, with single occupancy lets tending to be associated with younger working households or the elderly. There is national evidence that, in the intervening period since this survey was carried out, the PRS has expanded at a greater rate and that a wider variety of people now rent properties. The survey itself concluded that the PRS within the City was significant and growing.

3. This increase has come, to some extent, at the expense of many households on average incomes that, because of high rents, struggle to save a sufficient deposit to get a foot on the property ladder with younger people being particularly affected by the lack of mortgage products available to them, high deposits and high rents.

4. Rent levels have followed a similar increase with average rents in York, and a few other excepted areas in the North of England, being on a par with those in the South east and East of England.

The following table gives an idea of rent levels:

York

Median average
monthly private rent

Affordability: as a
proportion of median
average take home pay

Maximum monthly
rent that local Housing
Allowance will meet

1 Bedroom

£525

33%

£394

2 Bedrooms

£625

39%

£500

3 Bedrooms

£792

50%

£580

4 Bedrooms

£1,186

75%

£845

Source: Shelter Private Rent Watch. Report one: Analysis of local rent levels and affordability. October 2011.

5. The Council’s 2011 Strategic Housing Assessment considers a household is able to afford open market private rented housing in cases where the rent is payable constitutes no more than 25% of their gross household income. The study concludes the following income levels (rounded) are required to access:

A one bed property = £26,000

A two bed property = £39,000

A three bed property = £47,000

6. The median household income in 2011 in York was £22,100 (£19,500 for private renters). Clearly, many households are having to spend more than 25% of their gross income on housing costs.

7. Research indicates that the sector is made up of a series of complex, inter-related sub-markets which impact on each other. This pattern is probably repeated in cities across England, specific to particular areas, and is affected by such issues as the number, type and reputation of educational establishments in the city, levels of deprivation, economic growth and the buoyancy of the PRS within that City. It is obvious that there is no one size fits all system which can be developed to support the PRS, as each area’s market is unique, for example York is home to two large, expanding universities, as well as three higher education colleges, and their property requirements influences a substantial proportion of the private rented sector. Future student numbers, university accommodation building programmes and large scale student accommodation developments will have a serious impact on landlords operating in this sub-market, their properties and future use.

8. These factors can influence the issues that this Committee has expressed an interest in, such as the quality of the housing on offer; the levels of rent requested; the regulation of landlords and of HMOs; tenancy agreements and the length of tenure, and the relationship between local authorities and the sector, in particular how authorities are able to discharge their homelessness duty.

9. Quality of private rented housing and steps taken to ensure all housing is of an acceptable standard. Although, in general, housing stock in York is of an acceptable standard, the CYC’s Private Sector Survey of 2008 found that households within the sector in general exhibited higher levels of economic vulnerability. Rates of fuel poverty were twice the City average. Housing conditions within the sector were also worse than the City average. 37.2% of shared houses were estimated to fail the Decent Homes Standard compared to 19.3% of all occupied dwellings. Category 1 hazard rates within the sector were also significantly higher at 21.1% as were energy efficiency failures at 17.2%. A locally developed Private Landlord Accreditation Scheme is being introduced in York as a means by which baseline standards can be set, with market forces and tenant awareness driving up standards for those landlords and agents outside of the accreditation scheme.

10. The Council also welcomes moves to ensure landlords respond to reasonable requests for energy performance improvements from tenants (or Councils on their behalf) as part of the Energy Act 2011.

11. Levels of rent and the interaction between housing benefit and rents. The buoyant nature of the market in some areas, such as York, means that landlords are able to ignore obtaining market advantage through offering lower rents or higher standards for the most part as “I can put a to-let sign up in my front garden and have tenants moving in 2 days later”. There is also an aversion to taking LHA tenants as, such is the demand for property, higher value, “less problematic” tenancies can easily be achieved. This high demand equates to some of highest rents in the North of England and on a par with South East. The average 2 bedroom property monthly rent is now £662 against average monthly earnings of £1,840. Lower quartile 2-bed rents stand at £595 representing over 32% of median gross household incomes in the City.

12. According to the National Housing Federation the cost of privately renting a home has risen by 37% in the past five years. This is not mirrored by the rise in earnings over the same period. The percentage increase for median rents in York over the past 12 months (October 2011—December 2012) has been, for a room—a 7.2% increase and for a 2 bedroom property—a 4% increase.

13. Access to the PRS for vulnerable households/those on low income (including a growing number of in-work claimant households) is becoming more difficult as the rate of rent rises far outstrips rises in Housing Benefits. This is set to become even more problematic following the announcement in the Chancellor’s Autumn Statement that Local Housing Allowance rates are to rise by CPI (or 30 percentile of actual rents, whichever is the lower) in April of this year and will then be capped at 1% for the two years thereafter.

14. In the start of a vicious circle, high rents and high house prices are inter-related leading to the PRS becoming home to many “frustrated” buyers, including young families. Rents at this proportion of monthly income make it difficult for potential buyers to save to purchase properties of their own.

15. Regulation of landlords and steps to deal with rogue landlords. As it currently stands there is no sure way of even identifying all private landlords letting properties in an area, let alone introducing some form of regulation. As detailed below current licencing options will only apply in areas which meet the necessary criteria. Voluntary accreditation can work in areas where credible market advantage and other benefits can be proven to landlords and agents. Where such schemes exist, they can then release already limited local authority resources to pro-actively seek bad practice and rogue landlords and take action under existing legislation.

16. There is an ongoing difficulty in engaging effectively with the PRS as a lack of registration requirement makes it difficult to know who is a landlord. There are a number of landlord networks/associations, but even the largest in York only represents a quarter of the estimated 2,000 landlords in the City, and the vast majority of these will be the better landlords, not those who need to improve. The majority of York landlords are single property amateur landlords that don’t always understand the roles and responsibilities as clearly they should. The lack of any kind of registration requirement if they don’t own a House in Multiple Occupation allows anyone to enter the market without any form of qualification/training etc.

17. This is one of the reasons behind the proposed introduction of a voluntary landlord accreditation scheme in York, although it remains to be seen how many landlords will sign up amid the current buoyant rental market. It raises such questions as; Will only the conscientious and good quality landlords sign up? What will make the more rogue elements sign up if they can let without problem?

18. As a support to landlords and tenants and to further improve the sector the Council is considering a tenant accreditation scheme to go alongside it, to act as a passport into the PRS for tenants.

19. Regulation of letting agents including fees and charges. In addition to members of industry bodies such as the Association of Residential Letting Agents, a number of bona fide agents appear to favour some form of regulation. Without the introduction of some form of mandatory registration, it is difficult to see how local authorities can be expected to regulate the agents and monitor fees and charges. Anecdotal evidence includes the requirement for administration and deposit fees payable to the agent, sometimes including a charge for landlords and tenants for carrying out an identical task, and, due to the buoyancy of the rental market, the use of holding fees to secure sought after properties. Again it is difficult to encourage tenants to come forward with issues when they are concerned about how this will affect their ability to lease in the future. Registration of agents will provide greater information on the operation of the sector in an area and will ensure a wider proportion of landlords and properties will be subject to some form of official acknowledgement.

20. Regulation of HMOs including the operation of discretionary licencing schemes. Under current regulations areas such as York, with low crime figures and a buoyant rental market, have little hope of introducing additional or selective licencing schemes as there are no areas of low demand and the low levels of anti-social behaviour do not support this. Whilst these are both positives, it does serve to mask issues within the PRS.

21. Article 4 Directive has now been agreed for York, against the wishes of some landlords and organisations, but with the support of elected members and local residents in certain wards affected by an increasing proportion of student homes in their streets/neighbourhoods. This suspends permitted development rights in some areas based on evidence of environmental/social problems. It is an attempt by the Council to take a planned approach to the rise in HMO’s that is being fuelled by rising student numbers and welfare reform measures that restrict under 35 year old claimants to a shared room rate.

22. Tenancy agreements, length and security of tenure. The size, variety and nature of the various sub-markets and the recent broadening of the spectrum of the renting population, would seem to indicate that there is a need for longer, more secure tenures to favour both tenants and landlords. A reduction in tenant churn would benefit landlords by reducing void times and in some instances letting agent fees, which are repeated on a six monthly basis, and would benefit tenants by reducing the fees charged by agents in addition to providing more security of tenure. Longer letting periods would provide more sustainability to communities which again face periods of fluctuation as the size of the proportion of the population renting property grows. There is some concern caused by the insistence of buy to let mortgage lenders to ensure landlords only let properties on Assured Short Term tenancies, meaning some landlords cannot offer more secure tenancies even if they would wish to. Former tenants whose assured short term tenancy has ended are one of the three main reasons for those presenting as homeless to the City of York’s Housing Options Service.

23. With more families entering the PRS, there is a need for it to offer longer term security to raise children, keep them in local schools etc. Restrictions such as no pets or no children can limit those properties available to some families however. Insecurity of the sector is not in line with many European countries where the PRS is often the tenure of choice for many. There is more information to be taken from some of these markets.

24. How local authorities are discharging their homelessness duty by being able to place homeless households in private sector housing. The City of York Council generally welcomes the additional flexibility of this and, where available, it helps divert tenants away from expensive temporary accommodation. However it is increasingly difficult to find landlords willing to let within LHA rates. A snapshot analysis of properties available to rent on “Rightmove” on 7th November, 2011 found only 8% of available properties in the City of York Council area were within LHA rates compared to 57% of properties in the York Broad Rental Market Area rural hinterland. This has the obvious impacts on individuals, communities and service delivery. It impacts on York’s tight urban core, which is surrounded by smaller towns and more rural areas with cheaper rents and draws those having to rent away from service provision and employment opportunities, through its creation of a two-tier rent structure.

25. Research in York shows how important it is that a partnership approach within the PRS be fostered to ensure that quality and standards are maintained. As part of a Housing focussed week of events held by the City of York Council in November 2012, a Private Rented Sector Summit was held, chaired by Dr. Julie Rugg of the Centre for Housing Policy at York University. The purpose of this meeting was to draw together the various stakeholders in the City with an interest in the sector with a hope that it would spark a dialogue and raise awareness of the issues that different stakeholders have to deal with. Even though this was the first of such meetings, it was well attended by 39 invited stakeholders who participated in discussions aiming to identify the current state of the sector in York, its strengths and weaknesses and what was needed to support and develop it in the future.

26. The summit identified the rapid growth in the sector; the importance and interaction of the numerous sub-markets within the sector, particularly the student market and the challenges the sector faces. Amongst the proposals coming out of the event was the need for the development of a specific private rented sector strategy for the City. It was also useful for stakeholders from varied backgrounds and representing a wide spectrum of organisations to listen to each others perspectives on the sector. In addition to the Council and Landlords, Letting Agents and their representative bodies, the higher education institutions and student bodies, the Joseph Rowntree Foundation and other registered providers, the community and voluntary sector and authorities were represented. It is hoped to follow this up on a regular basis.

January 2013

Prepared 16th July 2013