Communities and Local Government CommitteeWritten evidence submitted by Finders Keepers

Thank you for giving us the opportunity to contribute to the debate. For context Finders Keepers is a family-run letting agent with eight offices in Oxfordshire. Our views are below.

The PRS is at a real inflection point—we hope you can bring real common sense to bear on a situation that is being inflamed by too much emotion and too little analysis of the real state of affairs.

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

1. First we have to define “acceptable” and there is no nationally understood definition today.

2. However ARLA’s code of conduct is a great start1

3. …and we agree with the Mayor of London’s recent draft London Rental Standard:2

(1)It includes 12 points which agents and landlords should follow.

(2)Most good agents are doing all 12 items today—we are.

4. However we do not need more legislation—we have more than enough laws to tackle “unacceptable” housing:

(1)As with “rogue landlords” below, the problem is not the lack of legislation but the lack of resources to police and tackle those offending.

(2)More legislation will not magically create more resources.

5. Government resources should focus on (a) licensing agents, (b) increasing the supply of housing, not adding even more legislation about environmental and property management issues.

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

1. Be wary of the hype about “dramatically increased rents”.

(1)The average rent for 2,750 managed properties across Oxfordshire rose 3.4%3 in 2012 vs 2011 while RPI inflation in November 2012 was 3.1%. So rents are going up just above inflation.

(2)Indeed another index has rents in 2012 still 2.4% below the heights of 2007.4

(3)Rents go up and down. In the winter of 2008–09 many rents fell as the supply of property increased dramatically.

(4)Today the PRS is defined by two contradictory forces: an increase in demand from younger tenants but a struggling economy where people have low confidence

(5)So in our region (Oxfordshire) the low confidence acts as a brake on rental increases. Given that most forecasts for the economy are long-term mediocre, we do not see high rental growth for the next five years.

2. Do not allow problems in London to pollute the argument about the PRS across the whole of the UK. In fact the latest report has rents falling in London5 by 2.3% in the last 3 months of 2012

3. Moves to cap rents would be a disaster:

(1)It would stop investment in the rental sector. Boris Johnson has got this one correct:

“It is clear that top-down regulation, including rent controls, will only serve to deter investors at a time when more, not less, investment is needed”6

(2)It would result in landlords selling their properties—reducing PRS supply at a time when we need more not less rental property.

4. Moves to cap rents would destroy the Montague Review’s recommendations and attempts to grow investment from the City and financial institutions in “build-to-rent” development.

5. The investment case for rental property is South East and London biased. We argue that the PRS needs help to boost investment, not stop it, and capping rents would be a negative:

(1)The property analysis firm Hometrack believe that rental property as an investment is “inactive” in 71% of the country.7

6. Over half the rental stock in the UK is held by landlords with five properties or fewer, so in fact the stereotype of a landlord is someone for whom their property investments are a subsidiary income, not their main income, more often than not a hedge against declining pension types.

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

1. We do not believe in regulating landlords.

(1)It cannot be policed.

(2)It would be preaching to the converted.

(3)It will deter new landlords coming into the market and we need more stock

2. Rogue landlords can be dealt with today by plenty of legislation, eg:

(1)Fraud—plenty of common law.

(2)Environmental health—HHSRS, Housing Act 2004.

(3)Unfair eviction—Protection from Eviction Act 1977; Housing Act 1988/1996/2004.

(4)Gas issues—Gas Safety (Installation and Use) Regulations 1998.

(5)Various HMO regulations.

(6)And so on.

3. The real issue with rogue landlords is the resources to catch offenders, not the legislation:

(1)Any “rogue” landlord in breach of the law will ignore compulsory regulation.

(2)So the solution needs to be to increase resources rather than legislation.

Regulation of letting agents, including agents’ fees and charges

1. We agree with licensing of agents, to check that sufficient training and expertise has taken place. It should be self-funding and based on a mixture of ARLA’s Code of Conduct and The Mayor of London’s new 12 point London Rental Standard:

(1)Note that ARLA already “polices” its member agents by inspecting the processes by which they handle client funds. This is good for the tenant, landlord and agent.

2. Under new licensing we believe that the NFoPP Technical Award in Residential Letting and Management8 should be compulsory by law for any practitioner with more than 18 months experience

(1)If we make the industry more like chartered surveying or the legal profession, then standards will rise. It is that simple (and that complicated).

3. Using a licensed agent could then be a proxy for landlords to be regulated.

4. Agent fees should not be regulated—fees are falling as there is an oversupply of agents.

5. The beauty of an over-supplied market (for the consumer, not the agent!) is that he/she can walk away from any agent who is charging more than the value perceived.

6. We agree that any fees to tenants should be transparent upfront.

7. However, legislating to reduce fees to tenants will lead to lower standards.

(1)There is a lack of understanding of the complexity of tenant referencing, something which is becoming more difficult paradoxically with the introduction of 3rd party credit referencing.

(2)Many people have “bad credit” and so extra work is needed by the agent to manage and negotiate the prospective tenancy where the new tenant has a CCJ or a poor credit rating.

(3)An increasing number of applicants need guarantors which takes more time (and therefore cost) to administer.

8. Application fees are a grudge purchase, but that does not make them wrong:

(1)Whether appreciated or not, the application process is a service provided.

(2)You cannot have well-referenced tenants with thorough background checks and a robust tenancy agreement for no money.

9. There is a hypocrisy in wanting a safer, more ethical PRS but also fighting to lower agent fees

(1)If you lower the application fees then corners will be cut and standards will fall, not rise—beware the unintended consequence.

10. And so the issue comes back to transparency.

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

1. We disagree with limiting the number of HMOs in a street, as Oxford City Council has done by using Article 4 Direction planning powers to refuse HMO license applications in East Oxford and setting a 20% cap for each 200m stretch of road in other areas.

2. Already we are seeing a shortage of property for “sharers” which does not just mean students: three trainee nurses are “sharers”:

(1)So “sharers” face higher rents and fewer rental options—is this what the HMO legislation wanted to happen?

3. We recommend:

(1)Article 4 Direction powers should only be able to apply to dwellings of 5+ occupants.

Tenancy agreements and length and security of tenure; and

1. There is a lot of tenancy legislation (Housing Act 1988/1996/2004) and it works well. The PRS is a fluid market. Its flexibility is the key to its success.

2. Long tenancies are easy to administer under current legislation. Today, an Assured Shorthold Tenancy can be signed as a deed and go beyond three years.

3. Our survey of 600 tenants across Oxfordshire during September 2012 showed that only 6% want tenancies over three years. The demand is not there for long tenancies:

4. Tenants have more protection if their tenancies do not run periodic:

(1)If a tenancy runs periodic then landlords can give two months notice.

(2)So one idea would be to give tenants legal rights for their tenancies not to run periodic. Then they have security of tenure for the duration of the tenancy agreement.

5. Giving unequal power to the tenant would be a disaster (eg in Germany the tenant has tenure almost indefinitely):

(1)It would destroy the parity upon which the current system is based.

(2)It would deter landlords from being landlords.

(3)It would reduce the available rental stock.

(4)It would create reservoirs of ill-will from landlord to tenant—it can be hard enough today persuading landlords to invest and maintain their properties sufficiently.

January 2013

1 http://www.arla.co.uk/media/48670/TPOS_Code_of_practice.pdf#search=

2 Download the Mayor’s Housing Covenant at http://www.london.gov.uk/housingcovenant

3 Internal Finders Keepers data

4 http://www.lettingagenttoday.co.uk/news_features/True-picture-of-rent-movements-defies-hype-says-Belvoir

5 http://www.lettingagenttoday.co.uk/news_features/Rents-drop-but-buy-to-let-investors-still-head-for-London

6 From the Mayor’s Housing Covenant, download it at http://www.london.gov.uk/housingcovenant

7 Hometrack 13/12/12

8 The syllabus is at https://www.nfopp-awardingbody.co.uk/media/81122/New%20Syllabus.pdf

Prepared 16th July 2013