On Wednesday 25th June, Shadow Housing Minister Emma Reynolds presented to the House of Commons Labour’s proposals for the private rented sector. Far from being not ‘fit for purpose’ as suggested by the Labour Minister, the RLA believes that the private rented sector provides a crucial service to a growing and varied demographic of tenants.
Below is our response to a number of key points from the debate.
A Rent ‘Ceiling’ otherwise known as Rent Controls
The opposition used the term ‘rent ceiling’ to package their proposals for putting an upper limit on rent based on average market rates under a future Labour Government. However, we believe that evidence from other countries shows ‘rent controls’ lead to poorer quality accommodation, fewer homes being rented and ultimately higher rents. ONS figures show very clearly that average rents across England have fallen in real terms over the last year as well as since 2005.
|% rent increase||12 months to March 2014||9 YEARS March 2005-2014|
|England excluding London||0.7%||7.9%|
|RPI over the period||2.5%||33.8%|
|CPI over the period||1.7%||13.3%|
Source: Index of Private Housing Rental Prices (ONS, Published 25th April 2014)
In comparison, figures published by DCLG show that in the eight year period between 2005/06 and 2012/13 local authority housing average weekly rents in England increased by 42.5% and housing association rents by 43.8%.Source: Index of Private Housing Rental Prices (ONS, Published 25th April 2014)
Rent controls, linked to inflation would clearly leave many, if not most, tenants paying higher rents than they do already. Also, the evidence is clear that such controls would critically damage much needed investment in the sector.
The Shadow Housing Minister proposed that a minimum 3 year tenancy should be standard in the PRS in England. Whilst the RLA believes that longer tenancies should be used where needed, it does not believe that such a model should be the default position.
Under the RLA’s model, tenants would have a right to renew their existing tenancies based on the current short-hold tenancy agreement. Where a disagreement ensued about renewal, the landlord or tenant could take the matter to adjudication. Such a model would crucially be possible now, as unlike proposals for a five year tenancy agreement, it would require no new legislation.
In reality just nine per cent of tenancies are ended by a landlord, showing that the majority much prefer to keep tenants on than face an empty property.
Using Ireland as a model for PRS in England
The Shadow Housing Minister used Ireland as a case study for how a four year tenancy could be used in England.
However in Ireland, landlords find that they are operating in a system that makes it incredibly difficult to regain possession for legitimate reasons even after 6 months. For a tenancy between 3 and four years 84 days’ notice would be required. This leaves the landlord in a potentially damaging situation if that tenant is not paying rent in their notice period and the fall behind on Mortgage repayments.
We feel that if this model was rolled out in England on a basis of using a minimum 3 year tenancy landlords would simply leave the market altogether. Landlords will not take on the development and lease of properties if they are facing potential problems such as prolonged eviction procedures with no protection. Instead you will end up with a huge number of empty homes with no investment coming in from private investors like Landlords. This is the reality of what is actually happening in Ireland.
The banning of letting agents fees
Under the Labour party’s plans estate agents would no longer be able to charge a letting fee for renting out properties in addition to requiring a deposit and the first month’s rent upfront. Currently, letting agents share the costs of providing their services including, marketing, contract preparation and credit checking between the landlord and the tenants. If all the fees are loaded onto the landlord, they will have to pass these on to the tenant through the rent.
We feel that such a policy would in fact leave many tenants far worse off than they are at present from paying a one-off fee to letting agents. The RLA is calling for letting agents to provide tenants and landlords with a breakdown of what is covered by the fees they charge. Such transparency would enable tenants and landlords to shop around for agents them to offer competitive fees.
Conservative and Liberal Democrat MPs voted against the Labour Party’s motions at this session.
The RLA believes that the only way to reduce the cost of living for tenants is to boost the supply of homes to rent .We think that Labour’s policies will have the opposite effect by discouraging landlords from investing altogether.