Communities and Local Government CommitteeWritten evidence submitted by Haringey Council
1. Executive Summary
1.1 A number of factors including increased migration, welfare reform and the spiralling cost of property and lack of mortgage finance have led to a dramatic increase in the number of private rented sector dwellings since the 2001 Census.
1.2 Poorer areas, such as Tottenham in the east of Haringey, are home to very low cost private rented accommodation that is often of very low quality, overcrowded and that falls well below minimum health and safety requirements. Especially within Tottenham, there is a proliferation of properties illegally converted in order to maximise rental income for landlords.
1.3 Despite there being a wealth of legislation governing the private rented sector, it is disjointed, enabling rogue landlords to take advantage of loopholes in the legislation relating to specifically Housing, Planning and Building Control, Council Tax and Housing Benefit.
1.4 The imposition of tougher sanctions for the worst rogue landlords and regulation of the lettings industry would improve conditions for tenants and landlords alike.
2. Introduction
2.1 At the 2001 Census, there was a higher than average number of households renting from private landlords or letting agencies in Haringey; 20.1% of Haringey households lived in this accommodation compared to 14.3% in London and 8.7% in England and Wales. High house prices, stricter mortgage eligibility criteria and strong demand have since fuelled an increase in the level of private renting in London. The 2011 Census reveals that since 2001 the private rented sector in Haringey has grown by around 70%, replacing social housing as the second most dominant tenure after owner occupation. Haringey’s private rented sector now accounts for 30.3% of our households compared with 23.7% in London.
2.2 Demand, particularly for low cost private rented accommodation has increased alongside the notable swell in the number of migrant workers coming to Haringey following expansion of the EU. Between 2002–03 and 2011–12, the Department for Work and Pensions completed just over 102,790 new national insurance registrations in Haringey for overseas nationals (the 6th highest in London). 67% of these migrant workers recorded the Parliamentary Constituency of Tottenham as home and many of these newly forming households are engaged in low paid employment and seek out private rented accommodation at the cheaper end of the market.
2.3 There has also been increased demand for low cost accommodation fuelled by the government’s welfare reforms. Low income households will increasingly be forced to migrate from those areas with higher rents in central London to areas (such as Tottenham) where housing costs are lower. Furthermore, the restriction on the amount of housing benefit that can be claimed by single people under the age of 35 has substantially increased the demand for low cost shared housing. These factors combined have created a housing market that is very lucrative for rogue landlords operating at the margins of the law.
2.4 Despite the majority of landlords in Haringey being excellent, there is a growing problem with some landlords increasingly converting properties into very small units, exploiting the relatively cheaper housing market in Haringey, and especially Tottenham, to maximise returns through housing benefit.
2.5 Poor quality housing and badly managed houses in multiple occupation can have a massive impact on quality of life, they can contribute to ill health and blight communities. The 2009–10 English Housing Survey revealed that private rented dwellings had the highest incidence of non-decency at 41% and are considerably more likely to experience damp. In Haringey, the majority of complaints relating to the condition of private sector rented accommodation come from households in the poorer areas of the borough, namely Tottenham. Some examples of poor quality accommodation are included at the end of this submission including a press release detailing a recent successful prosecution.
2.6 Over the past couple of years Haringey Council has increased its activity in this area with increased political leadership, engagement through a landlord accreditation scheme, close partnership with the police and fire service, the creation of our planning enforcement team, and more recently the launch of an additional licensing pilot for small HMOs. We are now expanding the licensing scheme to the worst affected areas of Tottenham and introducing an Article 4 Direction in the east of the borough to remove permitted development rights and better control the growth of new HMOs. However, there are a number of areas that could be addressed in order to assist local authorities to improve neighbourhoods blighted by rogue landlords.
3. Concerns around the Legislative Framework
3.1 Government legislation has become increasing disjointed over the years and has somewhat lost the concept that private rented accommodation should be fit for purpose in all respects.
3.2 Poor quality property conversions (often carried out without planning permission or building regulations approval) create overcrowding, compromise amenity and fire safety standards and result in substandard housing. Haringey Council has a series of ongoing cases where properties are claiming immunity from planning enforcement using the 4 year rule laid down by Section 171B of the Town and Country Planning Act 1990. Under the planning legislation we are unable to take enforcement action against landlords, even if properties do not meet minimum standards. Also from the point of knowing, we can make the landlord pay council tax for the new units of accommodation but we cannot reclaim the unpaid tax from the period prior to discovering the conversion. Through this loophole, landlords are able to effectively cheat the system and in so doing, maximise their profits. Below is an example of what can and does happen in practice and likely to be made worse by reducing local authority resources and budgets.
3.3 Haringey Council has identified one landlord who owns seven properties that have all been converted into very small studio units, none of which can adequately house all the required facilities. They are of very poor quality and were created without planning permission, which they would not have gained as they are well below the space standards required. The units also do not have building regulation approval for conversion and therefore fall well short on required building regulations, including sufficient fire protection and sound proofing. At one of the properties the landlord is claiming full housing benefit at the studio/one bedroom rate for 9 units, receiving income in the region of £8,000 a month. The Council has no option but to pay housing benefit as the legislation does not take into account whether a property is adequate or has the relevant consents.
3.4 In this case the Council closed down the property using planning enforcement action, but the landlord had been receiving housing benefit for over a year. If he had not been detected and therefore gained immunity from enforcement action under the four year rule, the properties would have been established and would have needed to be tackled through different legislation. This would have ultimately cost even more in housing benefit. Every day we deal with other properties under similar circumstances.
3.5 We do however acknowledge the provision at Section 124 of the Localism Act that allows for planning enforcement notices to be issued after the four year period in cases where there has been “deliberate concealment”. However, this is not defined in the legalisation and is left to the discretion of the courts to decide what constitutes a wilful act of concealment.
Recommendations to improve the quality of the private rented sector
3.6 We recommend that the select committee considers the removal of the immunity periods of four years and two years for planning and building control respectively. The most significant concern in Haringey is the internal conversion of properties to smaller unsuitable dwellings, so if not deemed possible to totally remove these time periods then they should only apply to conversions where there has been material change to the exterior of a property. In cases where there have been changes to the interior of the property, specifically for the purpose of increasing landlord profit and in so doing producing sub-standard units, these time periods should not apply.
3.7 “Deliberate concealment” under Section 124 of the Localism Act should be properly defined for the courts, without overly stringent burden of proof requirements placed on local authorities eg if a landlord has not declared a conversion in terms of council tax it should constitute deliberate concealment.
3.8 We would also advocate that cases where a developer converts a house into multiple occupation without seeking planning consent should constitute an offence, without the need to serve an enforcement notice. Courts should be able to take into account the derived benefit of such a development and the developer should not benefit from the proceeds of that crime. In this way councils could reclaim paid housing benefit and council tax. Persons convicted should also be deemed to be unsuitable for holding a HMO licence. It is recognised that there are difficulties proving a breach and that this proposal may be more effective for conversions of properties into self-contained residential units.
3.9 Greater power to subject landlords (who set out to deliberately mislead or avoid local authorities) to financial loss would be a valuable tool to prevent landlords exploiting the current system. We acknowledge that the Legal Aid Sentencing and Punishment of Offenders Act 2012 has removed the upper fine limit that courts can oppose on landlords, however historically, the setting of fines has been quite arbitrary and sometimes very low in relation to the high profits enjoyed by some rogue landlords. Haringey Council has previously lobbied on this point before; we believe that guidance should be issued to courts on appropriate fines to impose. In cases where split properties have not been declared for council tax purposes; significant financial penalties for landlords profiteering from sub-standard properties would send a stark message to the market.
3.10 Housing benefit legislation should be tied into quality of housing conditions and linked to planning, building control and housing legislation with severe sanctions for non compliance. Local authorities should have the power to claw back housing benefit from landlords who have converted without planning permission and building regulation approval and on those properties that do not comply with Housing Act regulations. We recognise that placing the burden to ensure compliance before housing benefit (or the subsequent element of the Universal Credit) is paid, would be unduly cumbersome. Instead of this we suggest that authorities are given the power to reclaim benefits where breaches occur without the requirement to apply to take enforcement action through the courts.
3.11 The admission in late 2012 by HMRC that the private rented sector is a key area where the government is losing tax revenue demonstrates that many landlords, if they feel that they can, will attempt to dodge their responsibilities. We welcome the creation of an HMRC taskforce to investigate this issue and advocate closer working with local authorities to crack down on rogue landlords cheating the tax system.
4. Concerns about the Role of some Letting Agents
4.1 Whilst Haringey is home to a number of excellent letting agents, there are those that are unscrupulous and pose a risk to tenants and landlords alike. A lack of any regulation in the sector means that some agents are able to take financial advantage of landlords and tenants by charging unnecessary fees as well as misappropriating funds that should be kept in deposit protection schemes.
4.2 Equally, the lack of suitably trained staff and knowledge of basic housing law means that many properties that are let fall well short of basic health and safety standards. Letting agents that do not know about deposit protection schemes, category 1 hazards or notices seeking possession for example, should not be operating in the industry but are currently able to do so with impunity.
4.3 Similarly some letting agents and landlords show very little ability or desire to adequately manage their properties, in terms of waste management and anti-social behaviour, including nuisance and noise.
4.4 The recently published Mayor’s Housing Covenant sets out a “London Rental Standard” to be applied to all accrediting organisations of landlords and agents. Whilst certainly a step forward, moves like this will not impact on rogue landlords and agents ie that are not members of an accreditation scheme.
Recommendations to improve the lettings industry
4.5 We advocate that the industry should be subject to greater regulation and do not agree with the government assertion that this would cause too much “red tape”. Letting agents should be required to register with a recognised professional body such as The Association of Residential Letting Agents (ARLA), the Royal Institution of Chartered Surveyors (RICS), The UK Association of Letting Agents or the National Approved Letting Scheme, and be regulated by an overarching body ie the Office of Fair Trading.
4.6 Furthermore, a minimum requirement for training should be imposed for agents in order for them to establish a business, such as that proposed under the Mayor’s Housing Covenant. Breaches of minimum standards should be subject to sanctions and ultimately the regulator should have the power to “strike off” an agent for continued contravention of regulations.
4.7 A further measure that could be employed would be to make the owner of a property fully accountable for ensuring that properties are fit for purpose even when they are managed by an agent. This would put greater onus on property owners to make sure agents have the proper accreditation.
4.8 Both landlords and letting agents should be made culpable for the adequate management of their properties including levels of waste and anti-social behaviour.
5. Length of Tenancies
5.1 As a council we aim to negotiate longer term private rented tenancies with landlords but the majority of Assured Shorthold Tenancies in the general market only meet the minimum 6 month requirement. Many landlords decide after this period to end a tenancy with very little explanation besides the end of the tenancy period. This can lead to greater churn in the sector and makes many unable to feel settled in a community.
Recommendation for increasing the minimum tenancy period
5.2 The minimum period for an Assured Shorthold Tenancy should be increased to two years with additional safeguards to ensure that if there is a problem with either party that break clauses would more readily kick in, in order to safeguard both landlord and tenant.
6. Rent Control
6.1 Generally speaking rent controls introduced to address the disparity between rents and incomes do not work. A broad brush rental ceiling across the sector could stifle the market, with fewer landlords investing in property as lower rents decrease profitability. This type of rent control also removes the incentive for landlords to improve property if they know that they can only charge up to the rent ceiling. The medium to high-end of the property market, with a better track record in terms of standards is best left to market forces to determine rent.
6.2 However, there are situations where we believe where limited use of rent control could be a valuable tool to help improve the private rented sector. Linking rents to property condition at the lower end of the market would have the effect of driving up property standards. If properties do not meet a minimum acceptable standard a low rent ceiling could be imposed until landlords complete the necessary improvements. The rent ceiling that is set should be sufficiently punitive to compel landlords to act.
6.3 Another scenario where rent controls could be of use is in the case of conversions to HMOs that do not meet minimum standards, especially in terms of space. Where family houses have been converted and the resulting units are substandard, in order to prevent a landlord unduly profiting a rent ceiling could be placed on each unit to ensure that the overall income of the HMO is no greater than that which the house as a whole could attract.
6.4 In these cases, following inspection of a property not meeting minimum standards, a local authority should be able to impose rent control until a property is brought up to standards.
Recommendation to improve the private rented sector through rent control
6.5 We recommend that the committee consider rent control as a supplementary tool to drive up standards in the private sector but not as a holistic measure to address affordability in the sector.
7. Discharge of the Homelessness Duty to the Private Sector
7.1 Haringey Council has already responded to the government’s “Suitability of Accommodation” consultation listing recommendations for the discharge of the homelessness duty to the private rented sector.
7.2 The following are the main recommendations raised by our response:
Affordability of accommodation and satisfaction that a household would be able to sustain the tenancy should be included in the requirements.
Safeguards should be put in place to prevent local authorities placing households in accommodation that is overcrowded, unsafe or sub-standard.
We would strongly recommend that accommodation should not be deemed suitable if the local authority is of the view that the accommodation contains one or more category 1 hazards.
The existing provisions in relation to the placement of “vulnerable families” in out of borough temporary accommodation should be strengthened ie children subject to a child protection plan, cases of severe disability etc.
The requirement for local authorities to notify other borough of out-of-borough placements should be strengthened and be expanded to include a national version of London’s NOTIFY scheme.
Considering the huge pressure on London’s limited stock of temporary accommodation (as evidenced by the increasing use of Bed & Breakfast provision) local authorities should not be bound to any restrictions that require them to do more than is reasonably practical.
APPENDIX
1. Recent Haringey Press Release
ROGUE LANDLORD BACK IN COURT FOR MORE FINES
A Haringey rogue landlord was back in court and fined £40,000 less than two months after paying out fines and costs of more than £25,000.
The courts were told he may now need to sell a property to pay his fines.
Mehmet Parlak, director of two Tottenham property companies, Watchstar Ltd and Watchacre Properties Limited, found himself back at Tottenham Magistrates’ Court at the beginning of January.
He faced charges brought by Haringey Council relating to offences under the HMO Management Regulations relating to four Tottenham properties: 683 High Road; 783 High Road; 105 Pembury Road and 23 Ruskin Road, as well as a failure to apply for HMO licences for two of these.
When visiting the properties, some of which housed young children, council inspectors found various management failures including:
a faulty automatic fire detection system;
a broken fire control panel;
obstructed means of escape;
two failures to submit an HMO licence application;
no test certificates for a fire detection and emergency lighting system;
damaged smoke seals to some fire doors;
failure to return a gas safety certificate; and
Cllr Nilgun Canver, Cabinet Member for the Environment, said:
“It is not right that people should be paying rent to live in sometimes unsafe and unhygienic properties.”
“The law stipulates that certain houses in multiple occupation must be licensed, this protects tenants by making sure the property meets certain standards of space and safety. We also expect any let properties to meet certain standards and I hope these fines remind all landlords that we will take action where we find they do not.”
Although Mr Parlak pleaded guilty to all charges, the prior conviction records of his two companies, including those in November 2012, resulted in the magistrates imposing fines totalling £40,000 and awarding Haringey Council £4,462.50 in costs.
The council is now looking to reclaim housing benefit payments relating to the unlicensed properties.
2. Examples of Poor Quality Accommodation
Figures 1 to 4 illustrate the type of poor quality private rented housing that the Housing Improvement Team (Private Sector) regularly comes across in the course of its work in Tottenham.
