Communities and Local Government CommitteeInquiry into the Private Rented Sector


Members present:

Clive Betts MP

Simon Danczuk MP

Mark Pawsey MP

John Pugh MP

1. Meeting with Tenants

Tenants present:

Sarah Goldthorpe

Huw Jones, Leeds Tenants Federation

Mohammed Rastampoor

Lee Richards

Reena Vaht

Mr Betts welcomed the tenants and explained the purpose of the Committee’s inquiry.

The tenants explained why there were in the private rented sector. The main reason was lack of social housing. One of the pressures on social housing was that many people were occupying property larger than they needed but either could not or would not move to smaller properties. Those present considered that a local authority was a better landlord than many private landlords. In the social housing sector, there was common set of standards and therefore greater consistency. Council tenancies were currently, however, very difficult to obtain, and often available only to those with specific local connections. For those on benefits the only option was the bottom end of the private rented sector. They said that prospective tenants found it difficult to shop around or to move because they were in urgent and acute need of accommodation, that it was very difficult to put up a bond for accommodation and that accepting bad accommodation in a good location was sometimes a way into work—for example, it could reduce or obviate travel costs.

One tenant, however, offered more positive reasons for his living in the private rented sector. Rented privately suited his particular circumstances: it was a more flexible tenure and avoid the labyrinthine process involved in buying and selling property.

The meeting then considered problems in the private rented sector housing. Those present said that some landlords took tenants’ money and provided nothing in return, that information and requests to agents were not passed to landlords, landlords (and their agents) were slow to carry out repairs and in one case, even when the council had successfully taken their landlord to court, no remedial action had been carried out. The point was also made that, in contrast to social landlords who were known to tenants and who knew how to deal with problems, private landlords were often unknown to tenants and their varied widely. The tenants present doubted that bad landlords would join an accreditation scheme. Similarly, bad landlords were always going to exist even with increased regulation.

The Committee pointed out that in oral evidence sessions some had said that poor quality accommodation and inadequate responses to tenants’ concerns could be attributed to landlords seeking to squeeze as much money from their assets, while others had said that it was lack of landlords’ resources. In response it was pointed out that recent improvements in the quality of student accommodation had been driven by competition on quality. Some landlords, especially the so-called accidental landlords—ie owners unable to sell a dwelling—lacked the resources, time and skills to be good landlords.

There was general agreement that local authorities had a vital job in ensuring the private rented sector operated efficiently and equitably. But local authorities often had insufficient resources to support the private sector, in particular, to take enforcement action against bad landlords. In addition, councils were concerned that, if they pressed too hard, landlords would pull out of the market. There was general agreement that local authorities should have greater powers to make landlords maintain properties and treat tenants fairly. It would be helpful to have a clear checklist of expected standards.

The housing market in Leeds was examined. The number of private tenants was growing and recently had been included in the Leeds Housing Federation, which had previously focussed on those in the local authority or social sectors. Leeds Council’s attention was similarly shifting as for the first time there were more private rented sector tenants then social tenants. The private rented sector was diverse: 10% was top end—for professionals with a principal home outside the area—paying around £700 per month; 30–35% was in the middle—for example, new build in the suburbs build that could not be sold—and catered to the upwardly mobile; 30% was for students paying about £120 per week; and 10–15% was at the bottom end with rents around £75 per week. In some cases, the Local Housing Allowance was insufficient to meet the costs of the rent.

On letting agents, the tenants present had paid charges levied by agents. They said that agents charged for putting prospective tenants on their lists, that charges were not made clear at the outset and that, once a tenant entered a tenancy, extra, unexpected charges appeared. Agents would also charge to renew a tenancy. Typically agents took tenants’ money for very poor or no services. They did not offer value for money for tenants.

The meeting considered arrangements for renewing tenancies. One tenant had refused to sign a new tenancy agreement until repairs were carried out but nothing had been done. Many continued to occupy homes after the expiry of a tenancy without signing a renewal. The benefit to the tenant was that the rent remained unchanged.

All agreed that tenants needed to be better informed of their rights. Many tenants did not read their contracts or realise that contracts were often weighted in favour of landlords with the imposition of obligations on tenants. In addition, changes were made to tenancy agreements without notification to tenants in breach of the law.

Finally, on deposits, one tenant had mistakenly paid the deposit to the landlord and he had ignored requests to return it.

2. Meeting with Landlords

Landlords present:

Andy Francis

Tim Hunter

Andrew Stone

Jonathan Morgan

Michael Troke

Steve Rowley

Clive Betts welcomed the landlords to the meeting and explained the purpose of the inquiry.

The landlords were asked why they had entered the private rented sector. Most had done so as an investment, looking for a balance between rental income and capital growth. One landlord had wanted to give something back to society, having been brought up in a council house. Another had used the sector as a safety net, keeping hold of the properties he had lived in as he moved from place to place. Some participants saw being a landlord as a profession, rather than an investment. Indeed, one had become a landlord because he was looking for employment.

The landlords considered that renting property was no longer lucrative, either in terms of rental returns or capital growth. Nevertheless, all but one of the landlords had added to their portfolio in recent years. 5% was a typical rate of return, but returns could be slightly higher when the landlord had held the property for a long time. Lenders were not supportive, and insisted on loan-to-value rates of 60% or under. Valuers were instructed to be cautious about the figures they put on landlords’ existing property. One landlord said that banks’ requirements were so stringent that any additions to his stock had to be cash purchases. Banks were looking for opportunities to revalue property so that they could foreclose if mortgage to value rate was breached. It was also suggested that some people were using buy-to-let mortgages to fund homes for owner occupation. One landlord suggested that selective licensing, which had been introduced in part of Leeds, made banks nervous. The potential for the council to close down a property caused lenders concern. Lenders’ caution was spurred by unfamiliarity rather than any inherent risks in licensing areas.

The landlords had different experiences on the length of tenancies. Some said that the average tenancy lasted between six and 12 months; another said that in his experience an assured shorthold tenancy would be renewed at least once. One landlord said that he would like to put tenants in for five years, but that the bank would not allow it. Landlords were sometimes prepared to take a hit on rents in order to keep tenants for longer. The participants pointed out that not all tenants wanted longer tenancies: most students only wanted their house for 12 months and some people lived in the private rented sector because of the flexibility it provided. In North Leeds, where there was more choice for tenants, people would move house for a saving of £10 a month or for a better view. Within the city centre, there were 10,500 apartments and the occupancy rate was very high, with the average tenancy lasting nine months.

In the higher end of the sector, it was common for tenancies to be renewed and rents increased, but when tenants were on housing benefit there was no point in trying to increase the rent because they would not be able to pay.

Within houses of multiple occupation, the turnover was very high because of tenants’ changing circumstances. There were substantial void periods and losses for landlords. One landlord had 35 properties for tenants on housing benefit but over the last 12 months had only been paid for 28. Another said that he had lost over 7% of his annualised income either because housing benefit had been held back or the tenant had received it and moved on without paying the rent. This figure had increased from 4–4.5%. One landlord commented that people were living more chaotic lives. The landlords were concerned about direct payments to tenants. Rent was often the last expense tenants would pay, and tenants would abscond if they thought they owed the landlord money. When establishing a tenancy, landlords reducing rent to bring it in line with local housing allowance could currently opt to have the housing benefit paid to them. This would not be the case in future and would affect landlords’ willingness to offer lower rents.

In cases where tenants did not pay the rent, the attitude of tenant would determine whether court action was necessary. Some landlords said that it could take around 12 weeks to remove a tenant; others said the process could take up to six months. Landlords had requested that the council establish a tenant referencing scheme, but the council had been concerned about data protection.

The meeting considered Leeds Council’s use of Article 4 Directions. Landlords expressed concern that the Directions did not permit change of use from family house back to house of multiple occupation. Landlords currently letting to sharers were therefore put off letting to families.

All landlords were members of the Leeds accreditation scheme, which they said had helped to raise standards and drive out bad landlords. Through the scheme, the council educated landlords on their roles and responsibilities. The scheme cost £100–140 a year on average. The landlords considered that such schemes should be compulsory for all landlords. One landlord taking tenants from the council had been assigned a housing manager through the scheme, who visited the property every six weeks. There was no need for a letting agent, as the council would find tenants for the landlord. There was support for local authorities to run tenant referring schemes.

There were differing views about the respective merits of local and national accreditation schemes. Landlords operating across a number of local authorities would tend to prefer a standardised national scheme, such as those operated by the National Landlords Association and Residential Landlords Association. One landlord, however, favoured accreditation schemes operated by local authorities, as they were more likely to be based on an understanding of local housing needs. A compromise might be a scheme with national minimum requirements, upon which local adjustments could be built.

The meeting discussed landlords operating in the black economy, who gave the sector as a whole a bad reputation. Participants considered it important that local authorities target these bad landlords, but acknowledged that this was not always easy. One way of raising standards would be not to pay housing benefit where landlords were unaccredited.

Local authorities lacked powers to deal with empty homes. It was suggested that the authorities’ hands were tied by legislation. Within the selective licensing area, empty properties were dealt with more effectively. Overall, the landlords thought that selective licensing had been effective at tackling problems. The initial form had been quite long and cumbersome, but after that the process had been straightforward.

One landlord drew the Committee’s attention to the “Let’s Help You” scheme, a free website to help people in need of “affordable” housing connect with landlords prepared to house them. This was operating initially in West Yorkshire and was gradually being rolled out nationally. In addition, Leeds Council held bi-monthly meetings to provide information and training for landlords, which was especially useful for accidental landlords.

Participants were concerned about the proposal in the Queen’s Speech to require landlords to check tenants’ immigration status. They were unclear how they would go about conducting checks.

One landlord said that the Green Deal could be seen as a success story. It was a good example of self-regulation, and the take-up had been very high. The process was seen as simple and straightforward.

Prepared 16th July 2013