Tenants and landlords are paying the price of the rising tide of regulation in the private sector – while rogue landlords get away with poor practice, according to a new report launched today.
The study by Michael Ball, Professor of Urban and Property Economics at the University of Reading’s Henley Business School, says costly and complex regulatory systems are pushing up rents and preventing more investment in the private rented sector at a time when it needs to expand to help tackle the housing crisis.
The impact of regulation on the private rented sector, commissioned by the Residential Landlords Association, says:
- The worst landlords are unlikely to co-operate with current legislation as they are simply “unfazed” by the prospect of facing punishment.
- Landlords surveyed for the report support regulation to drive out rogue operators. But they find the current system unfair and burdensome and say it doesn’t help them deal with problem tenants.
- Tenancy deposit schemes are poor value for money- costing the sector more than £275a year in fees and administration, when only £7m is returned to tenants annually in deposits judged to have been unreasonably withheld.
- Landlord registration schemes are costly and ineffective. The worst landlords avoid the schemes- with better landlords picking up the costs.
- The poorest tenants and the most affordable properties are the worst affected by the costs of regulation.
“Further major private investment in rental housing is needed in the face of the UK’s growing housing crisis.” Professor Ball says. “But it is likely to be held back by a failure to recognise the negative consequences of the way in which state regulation currently engages with the private rented sector.”
“Regulation has a perverse effect of raising better landlords’ costs but not those of poor ones, because unscrupulous landlords continue to ignore legislation and so face no costs of it,” he says. “Therefore, paradoxically, regulation can worsen the position of better landlords and thereby leave more of the market to bad ones.”
The report recommends an extensive cost benefit review of all current and future regulation to encourage more investment in the sector.In response to the report, the Chairman of the Residential Landlords Association, Alan Ward, said:
“I would urge the government and opposition to listen to Professor Ball’s findings. Given that there are over 400 different regulations applying to the private rented sector, a cost benefit review of all of them is needed to ensure that we have effective regulation which is not placing an unnecessary cost burden on landlords and tenants.
“At the local level, a system of co-regulation would enable landlords to join an industry-led accreditation scheme that would use strong sanctions such as independent property inspections as a measure of deterrence against poor practice. This would give councils the freedom to target non-members who do not act within the remits of the law.”