Tenant Fees Bill

Written evidence submitted by the London Borough of Newham (TFB49)

1. Background

1.1 The private rented sector in Newham has grown rapidly and renting has now overtaken owner occupation as the main form of tenure in the borough. Back in 2006, 21% of households were in the private rented sector, now the private rented sector constitutes 46% of all properties. Between 2012 and 2017, private rents rose 50%, while wages stagnated.

1.2 Legislation has failed to keep pace with the scale of this change. The weak and inadequate regulatory framework covering the private rented sector has left vulnerable tenants and families unprotected from exploitation by criminal landlords and rogue letting agents.

1.3 In response to widespread concerns about poor practices within the lettings sector, Newham became the first local authority in the country to introduce a letting agents rating scheme.

1.4 Newham has audited all the letting agents in the borough based on past performance, compliance with the law and delivery of best practice and given them a zero to five star rating, which is published on the Council’s website. In order to achieve the top, five star rating, a residential letting agent must either not charge fees or must provide a credit rating service for tenants.

1.5 In the absence of sufficient legislation in this area, this initiative sought to drive up standards and increase the professionalism in the industry. When Newham started working with agents two years ago, out of 185 businesses only 65 were considered compliant. Today, as a result of working with agents and enforcement action, only 25 businesses out of 159 in Newham are considered non-compliant. However, we recognise that more needs to be done and this legislation is a welcome first step.

2. Summary

2.1 The London Borough of Newham supports the intention of the bill to ban letting agent fees paid by tenants in England and improve fairness and affordability within the lettings sector. However, we believe that it needs to go further if it is to provide effective regulation of the residential letting agent sector and genuinely protect tenants:

· The cap on tenancy deposits (Schedule 1) should be four weeks’ rent or less. Median rent in Newham is £1,401 a month, which means that the median six week rent deposit would be £1,902, which would represent a significant barriers to local residents on low incomes. We already know that almost half of our residents are in poverty once housing is accounted for.

· It is essential that the Government provides additional funding to local authorities for enforcing the legislation. We support a new clause to ensure that any costs incurrent by a local authority in the exercise of its duties under this Act would be reimbursed by Government.

· Government should introduce a licensing scheme, requiring residential letting agents to register with their local authority, building on Newham’s successful private rented licensing scheme. We suggest a new clause giving local authorities the power to introduce residential letting agent licensing schemes.

3. Cap tenancy deposits

3.1 The London Borough of Newham welcomes the introduction of a cap on deposits but believes that deposits should be capped at four weeks’ rent or less (Schedule 1). We note that two-thirds of tenants responding to the Government’s own consultation on this issue suggested a cap of one month’s rent or less in recognition of the strain that large up-front deposits can put on people’s finances.

3.2 This is particularly true in areas like Newham, which has seen a 50% increase in private rents between 2012 and 2017, while wages have stagnated.

3.3 It is our view that the current suggested six-week cap does not go far enough and would still place an unacceptable strain on the finances of low-income families and present a significant barrier to individuals and families accessing accommodation.

3.4 We support the amendments to Schedule 1 , page 23 reducing the maximum deposit from six weeks’ rent to three weeks’ rent.

4. Funding local authorities’ enforcement costs and trading standards services

4.1 The Tenant Fees’ Bill specifies that local authorities’ trading standards services will be primarily responsible for enforcing the ban on tenant fees. We are concerned that the present iteration of the Bill does not provide any additional funding to local authorities and we do not consider that monies recovered through the civil penalties will adequately cover local authorities’ enforcement costs.

4.2 Local authorities are currently facing significant financial challenges and in Newham alone we have lost nearly half our grant funding since 2010/11. It is, therefore, important that these new responsibilities are appropriately funded.

4.3 We support the amendment proposing a new clause to ensure that any costs incurred by a local authority in the exercise of its duties under this Act would be reimbursed by Government.

5. Introduce a licensing scheme

5.1 The London Borough of Newham believes that local authorities, with our local knowledge and expertise, are best placed to regulate letting agents.

5.2 Newham’s private rented sector licensing scheme demonstrates how effective local authorities can be regulating the private rented sector and tackling poor practice when given sufficient powers, with 60% of all prosecutions against criminal landlords in London being initiated by the London Borough of Newham. We are currently looking to build on our private rented sector licensing scheme and, giving local authorities the powers to licence letting agents, would enable us to tackle criminal landlords and rogue agents more vigorously and better protect vulnerable tenants.

5.3 We would suggest a new clause enabling local authorities to introduce licensing schemes for residential letting agents, requiring letting agents to register with their local authority, similar to Newham’s successful private rented sector licensing scheme.

June 2018

 

Prepared 13th June 2018