4Innovative approaches in the private rented sector
119.While the focus of our inquiry has been on the ability of local authorities to tackle low standards in the private rented sector, we were also interested to hear about the innovative approaches many were taking to promote high quality and affordable private rented accommodation in their areas.
Council-owned private rented properties
120.The LGA highlighted that many local authorities had responded to a shortage of good quality private rented accommodation by developing their own portfolios for market rents.236 For example, Birmingham City Council had built 92 homes for private rent through a wholly-owned company. Similarly, the London Borough of Newham told us about their wholly-owned company, Red Door Ventures, which builds homes for private rent, to generate a long-term return for the council.237 To date, Red Door Ventures has built 59 properties, with a further 615 at planning stage and an intention to build a further 2,500.
121.As well as building new homes, many local authorities were buying and regenerating older housing stock for rental. For example, Councillor Blackburn told us that Blackpool Council had set up a private housing company—My Blackpool Home—for which the council had been successful in attracting £28 million of borrowing from the Treasury through the Regional Growth Fund.238 The money was used to purchase and renovate poor quality private rented housing:
[ … ] we found a property for sale that was converted into 12 bedsits, which was on the market for £150,000. We bought it for £150,000 and spent £300,000 on it, so the total investment was £450,000. We turned it from 12 bedsits into three very pleasant, very high-quality, three-bedroom flats. We are able to rent that out to tenants and to make a return of between 6% and 7% a year.
122.Councillor Newman highlighted the work of the Co-operative Councils’ Innovation Network (CCIN) and its recent report on the role for local authorities in Community-Led Housing (CLH).239 CLH refers to schemes where the community is involved in key housing decisions, and includes housing co-operatives, community land trusts, tenant management organisations, co-housing, community self-build schemes and self-help housing groups that renew empty homes. CCIN’s report promoted good practice and innovation by councils in this area, and called for CLH to be “added to the strategic mix to increase the supply of homes that local people can afford”.240
Other innovative approaches
123.As well as building and renovating properties for rental at market rates, we heard about several other innovative approaches local authorities had taken to support tenants in the private rented sector. The District Council Network highlighted examples including Rent Deposit Schemes, through which districts could negotiate down excessive rents in private rented properties where a deposit for the rent in advance is provided, and Empty Homes Initiatives, where local authorities offer grants to owners of empty properties on agreement that they will be rented under certain criteria or through a council’s leasing scheme.241 Bristol City Council told us about their bond scheme for the private rented sector, where the council pays a bond to a landlord, subject to an upfront inspection to ensure the property is compliant with agreed standards.242
124.Referring to such schemes, the Minister told us, “I know councils who have been doing it for 20 years, and I am amazed other councils have not”.243 She highlighted the example that many local authorities provide a property management service for landlords, which was far cheaper than through a professional letting agent. In the Autumn Budget 2017, the Government announced funding of £20 million to support people at risk of homelessness to access and sustain tenancies in the private rented sector.244 This would include a rental deposit scheme, although detailed proposals have yet to be published.
125.We support the innovative approaches adopted by many local authorities to increase the supply of high-quality, affordable private rented accommodation in their areas. We note that the Government announced funding of £20 million in the Autumn Budget 2017 to develop private rented sector access, including a rental deposit scheme, and we urge it to roll-out such innovative schemes and proposals. The Local Government Association has an important role to play in supporting local authorities to share best practice in these areas.
238 Q169 (Councillor Simon Blackburn, Blackpool Council)
239 Q169 (Councillor Tony Newman, Local Government Association), and subsequent correspondence, 15 March 2018; referring to Community-Led Housing: a Key Role for Local Authorities, Co-operative Councils’ Innovation Network, January 2018
240 Correspondence from Councillor Tony Newman, 15 March 2018
243 Q328 (Heather Wheeler MP, Minister for Housing and Homelessness)
244 Autumn Budget 2017: Building the homes the country needs, HM Treasury, para 9
Published: 19 April 2018