Communities and Local Government CommitteeWritten evidence submitted by Fizzy Living (PRS 159)

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

1.1 There is need to acknowledge that the PRS is of varying quality and how it can be grown.

1.2 Currently 99% of the PRS is owned by Landlords with fewer than 10 properties. It is important that these “amateur landlords” are not discouraged or driven away through draconian regulations.

1.3 To monitor the standard of the existing PRS estate, perhaps a voluntary/discretionary kite mark should be introduced, membership of which confirms that the following have been certified as satisfactory at the date of inspection:

Occupied in accordance with Approved Planning status.

Heating/hot water system regularly serviced.

Kitchen/bathroom(s) serviceable.

Smoke/CO2 alarm serviced and operational.

Security/locks operational.

Rent Deposit scheme in operation.

24/7 fault reporting system in operation.

1.4 The aim must be to bring substantial numbers of new units to PRS. The current delivery model is via private developers and house builders, who meet their banking covenants by selling off plan units to overseas investors. The investors either flip the apartment at completion, or put it up for rent.

1.5 PRS requires substantial (C 100 unit) purpose built residential blocks to be built either as stand-alone developments or as part of mixed use schemes. The demand is out there; planning regulations need to be relaxed so that the added management costs of professionally run PRS buildings can be covered without affecting the net yield performance of the investment.

2.0 Levels of rent within the PRS, including the possibility of rent control and the interaction between housing benefit and rents

2.1 PRS is by definition private, and therefore is governed by supply and demand in the market. Buildings need to deliver a financial return to their owners, so occupancy levels are as important as rent levels. The market sets that level.

2.2 Rent controls will drive away the majority of PRS landlords, both professional and amateur.

2.3 Housing benefit is a subsidy to individuals on low incomes unable to pay market rates. Subsidy can be provided in the form of revenue or capital. It has been shown that capital subsidy is more effective than a revenue subsidy. With a reduction of affordable housing and a growth in PRS, it is inevitable that housing benefit rates will increase overall. Local authorities with a clear strategy for PRS can use land or zone areas where an effective PRS could operate for those on lower incomes, bringing down the rents. Landlords are less likely to take housing benefit clients if rents are not paid directly or guaranteed where supply is so restricted that there is enough choice to take those not reliant on benefit.

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

3.1 As noted above, the vast majority of PRS Landlords do a good job, so regulation must be seen as an enhancement to their offer. Were a kite mark system be introduced as proposed in outline above, the market would have clear warning of each landlord’s management structure, and would make their property selection based on that information.

3.2 However, rogue landlords do exist and Local Authorities do have powers to deal with them. This is not currently effective as the courts are not effective so any change to Local Authority powers must be backed by appropriate court action and fines. Fines should be increased substantially otherwise it will be more lucrative to continue to ignore landlord responsibilities. Local Authorities need the right resources to do this effectively.

4.0 Regulation of Letting Agents, including agents’ fees and charges

4.1 Letting agents already have a supervisory body in ARLA, the Association of Residential Letting Agents. ARLA lobbies on behalf of that industry, and does a perfectly adequate job. There will always be agents who choose not to operate under nationally approved guide lines, though a kite mark system might begin the process of reducing the occurrence of bad practice. Our experience has been that tenants have had poor experiences, high fees and delayed responses from landlords. It is important that there is total transparency on fees, the service offered and the deposits paid.

4.2 Fees and charges are market driven. As PRS grows, it is likely that increased competition will drive fees and charges downwards. It may be possible to have a cap on fees to ensure they are not over inflated.

5.0 Tenancy Agreements and length of security of tenure

5.1 Increasing length of tenure is not necessarily a benefit to a tenant. A long term professional landlord (such as Fizzy Living) will push tenants to sign leases with as long a term as possible. However it is our experience that tenants have come to us because of our long term commitment to the sector, so they know that we will not be giving them notice to leave anytime soon.

5.2 However, it is particularly important for tenants with families to have the flexibility and security to have longer term tenancies. Longer term tenancies could be given in exchange to the landlord for a tax break. This would encourage longer term PRS landlords to the market.

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

6.1 It is important for existing tenants that they have some kind of priority for re-housing over homeless households. The perception of fairness in the system has been skewed in the past. Having said that, it is increasingly difficult for Local Authorities to make use of the private rented sector in the current climate. Rent deposit schemes or guarantee schemes can help. The current Local Housing Allowance cap restricts the use of the wider private rented sector and the use of Bed and Breakfast is increasing. Local Authority borough boundaries may currently be restricting access. It may be better to make use of regions.

January 2013

Prepared 16th July 2013