Communities and Local Government CommitteeWritten evidence submitted by Bespoke Property Consultants

I am sure you will have received evidence from other bodies in respect of the size of the Private Rental Sector, including the “buy to let” market and its important part in supplying housing for many people who choose not to buy, or cannot afford to buy their own property.

Studies have shown that over a person’s lifetime renting is often cheaper than home ownership, but clearly does not come with the potential benefit of a capital gain as owning does.

To make good on the cultural shift towards renting for the benefit of the economy and the costs to government, two things need to happen:

1. Those renters who would eventually like to own their home need an easy transition from renting to buying.

2. The rental sector needs large scale professional management with no separation between affordable renting tenures and private rental.

Government policy allows for Registered Providers to create intermediate tenures such as “rent to buy” products but gives no guidance or encouragement to those in the private sector who would be prepared to do the same. The new PRS Taskforce should be asked to consider this strategy as a way of encouraging those who want to eventually buy the property they live in. Investors and developers should be encouraged in this by including PRS “Rent to Buy” schemes within their affordable housing quota in a planning application. It will give the developer an incentive with a higher capital value and an investor the opportunity of an improved yield over time.

Moving on from the issue of tenure, if we are to create attractive places for people to live we need to focus attention on the public realm which all too often gets forgotten in a developer’s or housebuilder’s quest for short term profit. That is a factor of the manufacturer based concept we in the industry have and funders have, of how housebuilders or developers should perform.

There is an opportunity to create a hybrid developer/investor model which would see long term income and value in maintaining properties well and in particular, looking after the public realm to ensure tenants and leaseholders wanted to stay long term.

Such companies already exist in the commercial sector (eg British Land, Land Securities, Grosvenor Estates). They also exist in the form of large Registered Providers of affordable housing.

There is a need to encourage more of those vehicles and for them to become the mainstream of providing rental property. The aim should be to blur the differences between tenures in terms of the types of property and their finishes, such that the tenure becomes the lifestyle choice, not determining those in affordable housing to be second class citizens. This needs seamless management and economies of scale. Investors need to be encouraged into the market by the creation of a stable regulatory environment with certainty of rental income, professional management and an ability to invest easily across all tenure types.

The HCA’s consultation on “ring fencing” social housing assets presents an opportunity to deliver the first two points, but as currently set out may make the third point difficult, if not impossible to deliver as segregating assets increases costs.

Lastly I would like to welcome the moves by the committee and subsequently the government to seek to regulate letting agents. Driving out rogue agents, with high fees and poor practices is imperative if this sector is to win the public’s trust and provide a service that all would wish to use.

I would like to highlight one little known, but unfortunately common problem which befell my company as a landlord using a letting agent. When a deposit is held by the agent and insured by one of the government schemes, it is only insured in respect of the tenant’s interest (ie in the event that there is a dispute at the end of the tenancy). It is not insured in respect of the money being taken by the letting agent and used for other purposes. In our case the agent removed the money from the client account and put it into their current account in the same week as going into administration. The money was therefore lost to their bank. They were in the Ombudsman scheme, but that is not insured and it only useful if a dispute arises with a solvent entity. The solution is simple; all deposits should be insured for the benefit of landlord and tenant. That way those administering the schemes would take a stronger interest in letting agents’ practices.

Thank you for the time taken to consider this evidence and trust your report will proactively influence government policy.

May 2013

Prepared 16th July 2013