RLA News Service

The RLA strongly believes that decent and safe accommodation is best achieved by landlords who receive high quality and regular education and training, enabling them to understand and implement best practice. As such, through a dedicated helpdesk, and provision of regularly updated literature and through the organisation of pertinent training events, the RLA seeks to promote all opportunities to improve standards across the sector. The RLA is the only national landlords organisation to host a web-based forum enabling the instant exchange of best practices.

The RLA looks forward to working closely with government, opposition parties and local authorities in raising standards and securing a vibrant, safe, tenant driven private rented sector.

Overview

This manifesto sets out the key challenges facing the private rented sector, challenges which will require action by Government of whatever political persuasion, after the next election.

At its heart, it aims to provide constructive solutions to enable local authorities and government to better use finite resources to target the minority of landlords who fail to provide the service that tenants have a right to expect.

As such, the RLA’s overall aims are:

• To achieve a more professional PRS, in which renting property is seen as a business, with tenants at the heart of the market as well informed consumers with adequate rights to protect them from unscrupulous landlords.
• To establish a robust self-regulatory regime which enables local authorities to better use finite resources to address the actions of those landlords who fail to fulfil their obligations to their tenants and the law.

To ensure that the PRS gains the support needed from Government and elsewhere to unlock its potential to provide housing to those most in need and make a full contribution to improving communities, tackling climate change and clamping down on anti-social behaviour.

Executive Summary

• The rule by which the Local Housing Allowance (LHA) can be paid directly to landlords only once a claimant becomes 8 weeks in arrears should be replaced by a policy that requires direct payment to landlords when a sum of the equivalent to one contract periods rent (e.g one month) falls into arrears for 14 days.

• We call for the decision in the 2009 Budget to abolish the right for claimants to keep up to a maximum of £15 of excess LHA to be reversed.

• The RLA is calling for the policy under which under 25s are only able to access LHA for a room in shared accommodation, even if they reside in a self contained property to be revoked.

• Given that many households now find themselves needing all the financial support they can access, the RLA is calling for benefit processing and payment posts to be protected when cuts are made by local authorities.

• The Local Housing Allowance should operate to assist tenants in paying their rent, and should not be seen as a subsidy for the private rented sector.

• The RLA is opposed to any major overhaul of the system of housing allowances, subject to changes to the direct payment rule.

• We support calls from organisations, such as Crisis, for LHA claimants to be given the opportunity to choose who receives their allowance, themselves or their landlord.

• For accredited landlords, Tenancy Deposit Protection should be dealt with through the accreditation scheme, with appropriate financial bonding. If new contracts are awarded there needs to be a major reconsideration/overhaul of the scheme.

• The adjudication scheme, which deals with complaints regarding Tenancy Deposits, is unfair. Often landlord’s cases are rejected for technical reasons without even being properly considered. Thoroughgoing reform is needed.

• To prevent problems from large concentrations of students living in an area, greater efforts should be made to better educate students in HMOs on their responsibilities to the wider community; ensure the proper enforcement of existing legislation on anti-social behaviour and environmental concerns and better educate landlords to understand their responsibilities under existing regulations. The Government’s recent changes to the Use Classes Order should be reversed.

• Mechanisms should be put in place to enable landlords and local authorities to share best practice on how to address, on a non-statutory basis, the perceived problems associated with the development of HMOs.

• Existing rules and regulations should be better enforced, targeting those landlords who seek to evade regulation and who tarnish the reputation of the private rented sector (PRS). Responsible landlords who join accreditation schemes should be subject to self regulation rather than local authority enforcement. They should still have to comply with the same legal obligations.

• Selective licensing schemes should not be extended.

• The RLA believes in a system of robust self-regulation based on an industry run accreditation scheme.

• To encourage landlords to improve the standard of their properties, including making them more energy efficient, we call on the Government to alter the rate of VAT on housing repair and renewal to 5% in line with changes to EU policy.

• There should be a reformed Housing Health and Safety Rating System, in which landlords are provided with greater guidance on the operation of the system, explaining exactly what is required of them.

• The rent a room tax allowance (currently £4250 p.a.) has not been increased since 1997. It is a way of encouraging the letting of spare bedrooms. It should be reviewed and increased in line with inflation.

• Private rented accommodation should be treated as a business and taxed accordingly. This would enable landlords to claim Capital Gains Tax rollover relief for reinvestment.

• Portfolio sales should not be aggregated, so stamp duty land tax is paid instead on the value of individual properties.

• Tenants should be better informed about both their legal rights and responsibilities before signing a contract.

Private Rented Sector

Figures in the English Housing Survey (2010) show that the private rented sector now represents 14.2% of the entire housing market, up from 10% in 2001. That means that 3.1 million properties are currently rented in the private sector.

In the same survey, it was found that 82% of tenants in the PRS were either very or fairly satisfied with their housing, a higher number than those in social rented accommodation. Whilst in no way complacent about the challenges facing the industry, the RLA believes such figures demonstrate the efforts that landlords are making to ensure the supply of decent accommodation, as part of a vibrant, well-run sector, based on the demands of tenants themselves.

However, the next Government, of whatever party, will be faced by a difficult housing market:

• Figures from the Council for Mortgage Lenders show that in January, mortgage lending reached a 10-year low.

• The National Housing Federation have predicted that the total number of households waiting for new social housing will reach a record 2 million next year, part of a long term trend that has seen waiting lists for such properties increase by 55% over the past five years.

• Between 2004 and 2009, the number of repossessions rose from 8,000 to 46,000.

With access to mortgages increasingly difficult, waiting lists for social housing reaching record numbers and repossessions continuing to rise, for many, the private rented sector is the only viable option for meeting their accommodation needs.

What is more, for an increasing number, renting from the private sector is now a lifestyle choice proving a more appealing option than paying for a more expensive mortgage. As the English Housing Survey noted, 62% of PRS tenants have previously resided in other private rented accommodation.

Given this, the RLA believes that the private rented sector has the potential to play an important role in stimulating both the housing market and the wider economy. For example, landlords in the PRS are continuing to support the construction industry through the employment of workers to improve and repair their stock. However, in order to fulfil its potential, the RLA are calling for the next Government to take a number of steps as set out below.

Local Housing Allowance

The Local Housing Allowance (LHA) was rolled out across the country in April 2008 following a series of pathfinder trials.

The LHA replaced the system of Housing Benefit, which was calculated based on rents. Under the allowance, payments are calculated on the basis of the size, composition and location of tenants’ households.

When the Government introduced the new system, it hailed the system as an opportunity to foster and promote financial responsibility among those for whom such skills would be most beneficial. To that extent, tenants have a choice of how to use their LHA, with the possibility of keeping any excess up to the value of £15 as disposable income. The idea is relatively simple, for a household looking for a new property to rent, they can either spend all of their LHA on the basis of seeking quality accommodation, or spend some of it, in the knowledge that they can keep up to £15 a week excess.

• The RLA is clear in its view that the Local Housing Allowance should operate to assist tenants in paying their rent, and should not be seen as a subsidy for the private rented sector. As such, the RLA believe that allowances must be linked to market rents, and the systems need to be both fair and transparent for all parties.

In light of this, we welcome the publication of LHA rents as a measure to aid transparency. However, we remain concerned about the direction the allowance is heading, particularly in light of the Government’s recent consultation on the LHA and Housing Benefit.

• At the outset, the RLA is opposed to any major overhaul of the system of housing allowances subject to changes to the direct payment rule (see below). Having only been rolled out nationally two years ago, we believe it sensible to allow greater time for the system to bed down and for local authorities to enjoy a period of relative stability in this area.

We remain concerned that the Government is continuing to pursue a policy of direct payments. Under this system LHA can only be paid directly to a tenant and not to a landlord, even if a tenant expresses a wish to have payments paid directly to their landlord. The exception to this rule occurs when a claimant is more than 8 weeks in arrears on their rent, unlikely to pay their rent, or is deemed incapable of managing their financial affairs.

The RLA is concerned that by failing to allow tenants to opt for a system of direct payments of their LHA to pay their rent, landlords are being expected to act as involuntary creditors as arrears mount up whilst they continue to provide housing. A recent survey of landlords on the RLA website found:

• 97% supported a policy of direct payments of LHA to landlords.

• Just 54% of those currently letting to LHA claimants would do so again. This number falls to 42% when including all landlords who responded.

• 72% of those currently letting to LHA claimants have had to request direct payments as a result of tenants rents falling into 8 weeks or more arrears.

These findings echo research carried out by Crisis one year after the LHA system was introduced. In its poll of private sector landlords, Crisis found:

• 82% of respondents reported that LHA claimants fell behind in their rent payments, the same proportion that reported that more tenancies were being terminated as a result of rent arrears by those in receipt of the allowance.

• 62% reported that paying LHA to tenants as opposed to landlords made it more difficult for claimants to access private rented sector accommodation.

• 92% believed that claimants should have the right to choose whether to have LHA paid directly to themselves or their landlord.

• 80% of respondents concluded that direct payments to claimants had hindered their ability to manage their finances effectively whilst 66% reported that claimants either rarely or never liked having to pay the rents themselves.

The current policy of paying LHA directly to claimants was, the Government argued, based on the idea that it would promote financial responsibility, and empower claimants. However, as results from both Crisis and the RLA show, it is having the net effect of increasing rent arrears, making landlords increasingly hostile to accepting LHA claimants as tenants. What is more, claimants themselves are clear in their wish to be able to have their allowance paid directly to landlords, which would provide them with much greater security and piece of mind.

• In view of the concerns of both landlords and claimants themselves the RLA supports calls from organisations such as Crisis for claimants to be given the opportunity to choose who should receive their allowance.. Such a policy would further the Government’s aims of promoting financial responsibility by empowering claimants to choose whatever method of payment best suits their needs.

• The RLA further believes that the rule by which LHA can be paid directly to landlords, only once a claimant becomes 8 weeks in arrears should be replaced by a policy that requires direct payment to landlords when a sum of the equivalent to one contract periods rent (e.g one month) falls into arrears for 14 days.

Aside from concerns on direct payments, the RLA believes that further measures could be taken to improve the operation and fairness of the LHA:

• We call on the Government to reverse its decision in the 2009 Budget to abolish the right for claimants to keep up to a maximum of £15 of LHA excess. Abolishing this rule would undermine a tenant’s ability to make a genuine choice between paying that little bit more for better quality accommodation, or a little less in order to use the excess for other purposes. Furthermore, it would end the ability of tenants to negotiate lower rents. By removing the opportunity to keep capped excess, the Government will make it more difficult to meet its legally binding target of eradicating child poverty by 2020 as set out in the Child Poverty Bill.

• The rule by which under 25s are only able to access LHA for a room in shared accommodation, even if they reside in a self contained property serves only to restrict the availability of property for a group that is finding it increasingly difficult to access housing across most, if not all, sectors. The Government should revoke this policy to provide greater fairness in the system for young people.

• Recent survey evidence from the BBC suggests that 25,000 jobs could be cut as a result of the financial pressures facing local authorities across England. Tony Travers, Professor of Local Government at the LSE, has suggested that such a figure could be optimistic, with his predication that job losses could total 100,000. Either way, councils will face significant pressures as budgets are squeezed to rein in the deficit and jobs are lost as a result. The RLA are deeply concerned that such cuts will squeeze local housing authorities to a point at which they do not have sufficient capacity to deal efficiently with the volume of Local Housing Allowance claims. Given that many households now find themselves needing all the financial support they can access, the RLA is calling for benefit processing and payment posts to be protected.

Tenancy Deposits

We agree that it is important to protect a tenant’s deposit in terms of financial security. We have major concerns with the current tenancy deposit scheme. It results from rushing through ill thought out legislation.

• We believe that for accredited landlords Tenancy Deposit Protection should be dealt with through the accreditation scheme, with appropriate financial bonding. If new contracts are awarded there needs to be a major reconsideration and overhaul of the scheme.

Our major concern is in relation to the penalty regime. There is a mandatory penalty three times the amount of the deposit payable. There is no power for the Court to mitigate this. This is outrageous. This means that someone who wilfully ignores the scheme is punished in the same way as someone who has made a technical slip up and failed to give the correct information to the tenant. The adjudication scheme, which deals with complaints, is unfair. Often landlords’ cases are rejected for technical reasons without even being properly considered. Thoroughgoing reform is needed.

Planning and Shared houses

In August last year the Government published its consultation on planning responses to the growth of Houses of Multiple Occupancy (HMOs). On the basis of responses received, it was decided that as of April this year, a new planning class would be established for HMOs.

These changes mean that landlords will be required to obtain planning permission where a material change of use occurs for an HMO consisting of three or more occupants who are not members of the same family and who share basic amenities. At present, the threshold stands at six people.

In a statement announcing the planned changes, Housing Minister, John Healey, spoke of “problems due to large student populations and HMOs, meaning shops, businesses and pubs simply close down creating ‘ghost neighbourhoods.” In effect, it is a measure designed to address the phenomenon now known as “studentification” where areas become dominated by student tenants and other residents feel alienated or suffer inconvenience from noise and mess.

The Government’s plan to see the establishment of 20 new universities is recognition of the important contribution made by universities both to the national and regional economies. Indeed, many businesses such as bars, clubs and shops now thrive as a result of student populations, businesses which could be threatened if landlords find it difficult to provide the sorts of housing demanded by students. Taken together with the current aspiration to see 50% of young people accessing higher education, demand for accommodation by students close to their universities will become even greater.

Given this, the RLA is concerned that the new guidance will prove ineffective and could serve to damage the economies of those areas that now depend on the student population. It could also lead to further burdens being placed on compliant landlords at the expense of those who flout the rules. The consequence for restricting permission for houses to be converted to HMOs will be the spreading of student areas as properties in adjacent streets, not currently dominated by HMOs, more easily receive planning permission. Those residing in these areas previously free from students will instead find an increasing number of neighbouring properties formerly lived in by owner-occupiers being let out to students or other tenants.

The Rugg Review into the PRS noted census data that suggested that the problem of “studentification” was not as common as might be thought, affecting just 0.7% of all council wards in England.

Whilst the RLA understands the concerns of some over the growth of HMOs, we do not believe that it is the material existence of such accommodation that causes communities concern. Rather, it is the behaviour of those occupying such properties who cause problems for communities by way of anti-social behaviour, and environmental concerns. We agree with the assessment of Dr Julie Rugg that changing planning laws in this way would prove an ineffective way of dealing with such problems. The RLA believe:

• Rather than using planning law to address concerns about the behaviour of certain occupants of HMOs, greater emphasis needs to be placed on:

  a) Students being better educated about their responsibilities and role within the wider community.
  b) The proper enforcement of existing legislation to combat anti-social behaviour and environmental concerns relating to the behaviour of certain tenants, in partnership with landlords.
  c) Educating landlords. In Leeds, since 2007, working in partnership with the City Council and the city’s Landlord’s Accreditation Scheme, the RLA provides a one day professional development course for landlords, covering essential topics such as managing tenancies and their health and safety obligations which are required to comply with existing HMO licensing. We would therefore call for the roll out, across the country, of similar schemes with an aim of enforcing existing legislation and regulation more effectively.

• Mechanisms should be put in place to enable landlords and local authorities to share best practice on how to address, on a non-statutory basis, the perceived problems associated with the development of HMOs.

Regulation and Accreditation

The RLA is supportive of efforts to improve the professionalism of the private rented sector and much of the work undertaken by the Association is targeted towards providing our members with the training, advice and education needed to perform their responsibilities to a high standard.

• At present, it is compliant landlords who most feel the burden of regulation and inspection by Environmental Health Officers who continue to be overstretched and under staffed. The RLA is therefore calling for existing rules and regulations to be better enforced, especially targeting those landlords seeking to evade regulation who tarnish the reputation of the PRS.

However, the RLA believes that the current statutory regime, by which local authorities are responsible for the enforcement of standards, is not sufficiently robust to root out those landlords who fail to perform their responsibilities to a high standard. Indeed, it could be argued that councils face somewhat of a conflict of interest acting as both a facilitator of private rented accommodation as well as the enforcer of standards.

As a result, local authorities find themselves spending a great deal of time enforcing standards on compliant landlords as they are easy to identify at the expense of tracking down those who seek to evade their attention.

We support the recommendation of the Rugg Review that greater emphasis should be placed on self-regulation within the sector, freeing councils up to enforce standards against the minority of landlords who fail to provide the quality of housing tenants should have a right to expect. As the report itself concludes:

“The task of policing the PRS should be expanded so that the burden does not rest so heavily on local authorities….Local authorities should focus on the tasks of targeting the worst properties and expelling the worst landlords from the market.”

• There should be system of self-regulation based on an industry run accreditation scheme under which compliant landlords could be taken out of the purview of local authority control so that they can concentrate on the minority of unscrupulous landlords.

• The RLA has developed a detailed plan for the establishment of a robust self-accreditation scheme under which all members would be obliged not only to abide by statutory minimum standards, but in some case go further. There should be no question of landlords seeing self-regulation as an opportunity to let standards slip.

• Under our proposals, access to such an accreditation scheme would be subject to pre-entry vetting with probationary membership where there are reservations about full membership. Membership would entail a regular programme of education to ensure that landlords are fully up to date on best practice and given the support to fulfil their obligations to a high standard. In return, membership of a properly run scheme should then release landlords from certain regulations such as the need for HMO licences and selective licensing. Similarly, Tenancy Deposit Protection could then be dealt with through a proper bonding scheme for accredited members.

The RLA further believes that plans for a national register could, at £300 million, prove a costly and ineffective measure. Properly run accreditation would instead be able to administer a scheme which would save the Government money and crucially target the landlord as opposed to the property.

As current regulations stand, much of the emphasis is on the quality and standards of individual properties. The RLA however argue that through accreditation, the emphasis should be on individual landlords. It remains the case that houses fall into states of disrepair or become unsafe to live in because of the actions, or not, of landlords.

Tenant Protection

As previously noted in this paper, the RLA is firmly of the view that the private rented sector should be seen as a business. As such, we strongly support the principle that tenants should be viewed as consumers with landlords providing a service to them.

By treating them as customers, much of the sector will be led by tenant demand and needs. If a landlord failed to provide the quality of housing demanded by the consumer, they would soon find themselves out of the market.

For tenants to be treated as customers requires them to have a better understanding of both their rights and responsibilities. The RLA remains concerned, for example, that many tenants are unaware that landlords are obliged to show their gas safety certificate to a new tenant. As such:

• The RLA believes that tenants should be better informed about both their legal rights and responsibilities before signing a contract. We support the principle of better education, which for students could be provided by student unions and for the wider tenant population, through the publication of a Government financed education campaign, such as through the publication of an information brochure.

Together with a better understanding of their rights and responsibilities, the RLA also believes that legal protection should be in place when tenants are faced by one of the minority of unscrupulous landlords who tarnish the reputation of the PRS. It is for that reason that the RLA support Brian Iddon MP’s Mortgage Repossessions (Protection of Tenants Etc) Bill. By providing greater protection for those innocent tenants who find themselves vulnerable when landlords default on their mortgage payments, the RLA believes that this legislation can go a long way to addressing the problem of landlords who fail to fulfil their obligations to their tenants.

Home Improvements and Energy Efficiency

As the English Housing Survey has noted, 40% of all housing stock in the PRS was constructed before 1919, a higher proportion than any other tenure. Given this, landlords in the sector face a unique set of pressures when looking to improve their stock and ensure they maintain high levels of energy efficiency, faced as they are with some of the oldest stock in the housing market.

We welcome John Healey’s comments that landlords will be provided with help as part of the Government programme to improve the energy efficiency of the UK’s housing sock under the Government’s recently published strategy, designed to aid ambitions to reduce by carbon emissions by 29% from housing by 2020. However, the RLA remains concerned at talk of more regulation if, as the Minister concludes, “landlords will not do the green refurbishment needed.”

The Private Rented Sector has an important role to play in relieving pressure on social housing waiting lists and providing accommodation to those struggling to get a foot on the housing ladder. As such, the RLA are calling for a number of measures aimed as supporting private landlords to carry out the improvements to properties and energy efficiency measures being expected of them by Government.

• Last year, the Economic and Financial Affairs Council of the EU voted to allow member states to reduce the rate of VAT on renovation and repair on private dwellings to 5%. We therefore call on the Government to alter VAT on such work in the UK accordingly. This will provide a real boost, encouraging landlords to bring forward programmes for renovations and repairs. Such action would further provide a boost for a construction industry that has been badly hit by the recession. Likewise, such support would constitute an important part of the Government’s efforts to reduce carbon emissions from the UK’s housing stock.

At present the Housing Health and Safety Rating System (HHSRS), sets the standards expected of PRS housing. It is based on a case-by-case risk assessment, acting principally as an enforcement tool for councils, rather than a guide for landlords. As such, a large degree of ambiguity and uncertainty exists for landlords, unsure about the exact criteria used to judge the safety, or not, of a property. The RLA proposes a reformed HHSRS, in which landlords are provided with greater guidance on the operation of the system, explaining exactly what is required of them.

Rent a room

The rent a room tax allowance (currently £4250 p.a.) has not been increased since 1997. It is a way of encouraging the letting of spare bedrooms. It should be reviewed and increased in line with inflation.

Renting as a Business

Landlords should be treated as businesses, with taxation treatment altered to take account of such a change in status in line with the recommendations of the 2008 Rugg Review*. The RLA have long argued that the business of renting properties as accommodation is economically important and should be recognised as such by the taxation system.

• A consequence of this would be to enable those managing residential property as a business to claim Capital Gains Tax rollover relief for reinvestment. This would free up what is a largely stagnant property investment market with landlords currently more likely to sit on properties due to potential CGT liabilities. Changing this policy would:
  • Lead to properties changing hands more often, with landlords more likely to refurbish and improve a property when it changes ownership.

  • Increase tax receipts for the Government from stamp duty, land tax and other taxes as a result of properties changing hands more easily.

• Portfolio sales should not be aggregated, so stamp duty is paid instead on the value of individual properties.

*In 2008 Dr Julie Rugg and David Rhodes of York University’s Centre for Housing Policy published their Government financed review into the Private Rented Sector.

Selective Licensing

The RLA has concerns about the operation of selective licensing. Introduced in 2006, selective licenses were established aiming to address the twin problems of a) anti-social behaviour and b) landlords who capitalise on low prices in areas of low housing demand, but perform their duties as a landlord in an unprofessional manner, disregarding their obligations to provide decent and safe accommodation.

Under the scheme, local authorities can apply for powers to force all private landlords within a given area to apply for a licence in order to operate with an obligation to enforce certain management standards.

The RLA remain committed to working in partnership with communities, local authorities, Government and the police to address the problem of anti-social behaviour and unscrupulous landlords. However, we remain concerned that the use of selective licensing represents too blunt an instrument to achieve such laudable aims. By taking a broad brush approach in this way, local authorities serve only to tarnish the reputation of a community, causing a reluctance on the part of mortgage lenders to provide finance for both landlords and home owners in areas covered by a licensing regime. The RLA view is that selective licensing should not be extended further.

• A more targeted regime is needed, which seeks to pinpoint and address individual landlords engaging in bad practice who permit anti-social tenants to reside in their properties unchecked. Such a regime would enable already hard-pressed local authorities to concentrate their resources more effectively on those landlords who flout the rules.

Conclusions

The RLA acknowledges that the private rented sector faces a number of key challenges to ensure all tenants are able to enjoy decent accommodation and unscrupulous landlords are rooted out of the system.

We believe that the current system of regulation and taxation however is putting many people off entering the sector, despite having much to offer. With public finances almost certain to be squeezed, we look forward to supporting public authorities in using finite resources as effectively as possible, so that efforts concentrate on rooting out the minority of landlords who persist in flouting rules to the detriment of tenants and fellow landlords alike but leave the majority of decent landlords to a self regulatory regime.

By moving to a system in which well run self-regulatory and accreditation regimes can be established, public resources can then be used to provide value for money in tackling the bad practices of a minority of landlords.

Whatever the result of the next election, housing will be a crucial issue, both to meet people’s demands and expectations, and in stimulating the economy. The RLA looks forward to working constructively with all Parties in the next Parliament to ensure the private rented sector can play a full and active part in the provision of decent, well run and safe accommodation for all those for whom the sector provides hope for housing.