Communities and Local Government CommitteeWritten evidence submitted by Home Counties Property

In response to the inquiry into the private rented housing sector, I would like to submit the following:

I run a small lettings business in the Home Counties and also myself and my wife have approximately ten small properties which we let.

The availability of rental properties in the market must be the key consideration, when evaluating further imposition of red tape and government controls. It is the availability of such properties, in a free market, that will help to keep rents down and quality up.

Rent Control

Historical attempts at government rent control saw a significant reduction of landlords prepared to invest in the sector and reduced the amount of accommodation available. Additionally the quality of that accommodation deteriorated over time, as landlords were not prepared to invest in it. Only when controls were lifted and a freer market returned, did the availability increase and this availability, after an initial correction, maintained rents at a sustainable level. The private sector simply will not invest their money in supplying a product, in any sector, if they cannot make a reasonable return on that product and there is no reason why landlords would look any differently at the situation. So unless local authorities are going to provide subsidised accommodation, rent controls will merely reduce the amount and quality of available housing.

Regulation of Landlords

Much is spoken about rogue landlords and very little about the vast majority of landlords that provide high quality accommodation and act in a fair and reasonable manner. The last attempt to impose some sort of regulation on landlords via the various tenancy deposit schemes has established a multi billion pound industry, which all reputable landlords and agents adhere to and incur significant additional costs in doing so, yet there is little evidence that this has benefitted tenants or the industry in general. The odd rogue landlords have and will continue to ignore this and future legislation. Further regulation will merely continue to make it less attractive for good landlords to let property, thus reduce supply from the type of landlords that the industry wants and consequently will increase rents. Rogues ignore regulation, so the additional red tape only harms those that it was not intended for.

Regulation of Letting Agents

Many letting agent organisations eg ARLA and letting agents have been calling for regulation of agents, over the years. The letting agent organisations are the ones who would build up their membership if such regulation were introduced allowing them to be more powerful. Many letting agents, especially the larger ones, want the imposition of barriers to competitors entering the market, in order to protect their position. The reality is that for every piece of additional regulation, small businesses have to incur a disproportionate high additional cost, waste considerable extra time or run the risk of not fully conforming and being brought to book. The additional red tape hampers the smooth running of lettings businesses and does nothing to protect tenants. Much is often made of protection of tenant deposits. Not satisfied with the imposition of the multi billon pound bureaucracy already created, some call for compulsory deposit protection insurance in case the letting agent unlawfully steels the deposits. The reality is that such monies are client monies and not owned by the agent, so any such misappropriation is a criminal act and is already currently dealt with very severely by the courts on that basis. Why then is it necessary to require the agent to take out additional insurance or join some organisation in case he decides to steal somebody’s money? This is akin to asking everybody that goes into a bank to join some organisation and take out a special insurance in case they decide to rob it. Is a prison sentence not a strong enough sanction?

Housing Allowance

The government has set housing allowance rates at a level slightly below the average for a particular area, so that councils are not paying for claimants to benefit from enjoying a higher standard of accommodation than those that are working and paying for it through their own resources. It should therefore be no surprise that this accommodation is harder to find and not “top of the range”, since this was the objective of the policy in the first place. Rather it suggests that the policy is being successful, which might then encourage some claimants to strive for a higher level of financial independence.

How to Improve the Industry

The objective is to increase the availability of reasonable quality rental properties, this will dampen price increases and provide homes for people. The way to do this is to lift regulation such as the tenancy deposit scheme, PI insurance requirements and not to increase once again the amount of red tape within the industry.

The private rented sector has grown considerably over the past ten years, mainly as a result of private individuals investing their own and borrowed money into housing. The quality of this property has improved as tenants have demanded a higher standard of accommodation, leaving poorer quality houses to sit empty. Is there really so much wrong with allowing the free market to function properly?

January 2013

Prepared 16th July 2013