This week, the Welsh Government announced plans to introduce a pilot ‘lease’ scheme for private landlords, designed to increase housing stock in the country.
The scheme would mean that local authorities in Wales would manage private rented stock themselves on behalf of landlords. In return, landlords would receive a guaranteed rental income at Local Housing Allowance rate for five years.
The scheme, will be trailed in three local authorities to prove the concept and provide the necessary evidence base for a model to be developed for roll out across Wales.
In this blog, RLA Wales policy officer Tim Thomas takes a closer look at what we know about the proposed pilot scheme.
This week, the Welsh Housing Minister Julie James AM announced the trial of a new scheme aimed at increasing the housing stock available to local authorities in discharging their housing duties, and more particularly their Part 2 Housing (Wales) Act 2014 duties.
The concept will involve managing Private Rented Sector stock on behalf of landlords, who in return would receive a guaranteed rental income at Local Housing Allowance rate for five years. On face value, the scheme appears to be possibly attractive to some landlords, especially those that have entered the sector ‘accidentally.’
However, the RLA still has several reservations, notwithstanding the very essence that the scheme takes involvement and control over landlords’ property and would appear to be another attempt to take landlords out the loop altogether.
Nevertheless, proposed benefits of the scheme for landlords include:
- Guaranteed rental payments for up to five years at the relevant Local Housing Allowance rate excluding an agreed percentage for the management fee. The management of the property would be though a short-term lease provided by the owner to a Welsh Government appointed and approved agent who would then sub-let properties to tenants.
- A grant of up to £2,000 to make properties fit for human habitation and to put right any Category 1 and 2 hazards under the Housing Health and Safety Rating System.
- If there was any serious structural damage that would require repairs in excess of £2,000, a loan of £8,000 could be obtained at a 0% interest rate.
- Excluding usual wear and tear, any damage made by tenants, will be repaired and costs covered by agents.
- Support on offer will be provided for vulnerable tenants such as budgeting, coping on benefits, mental health issues and employment support.
The RLA are slightly reassured to learn from the Housing Minister, Julie James AM, that if landlords want to exit the scheme over the five-year term – be that they want to sell or move into the property themselves – they can end the term under these circumstances. We can also see the benefit of eradicating bond schemes as the landlord is protected by the local authority acting as an agent.
However, the very role of the agent asks several questions:
- Are local authorities qualified to act as agents?
- How will they ensure that tenants are aware and take up the scheme?
- In these times of tight public finances, do they have the resources in terms of staff and finance to ensure the schemes can achieve longevity?
In terms of the final point, examples in England have been mixed with some social leasing scheme finding it difficult to balance the social and commercial element of the scheme.
The PRS is increasingly housing more vulnerable tenants, and this won’t change until more social housing is built where vulnerable tenants can be supported more adequately. When vulnerable tenants are housed in social housing, many of their needs are catered for and they are supported. This could include mental health support, accessing benefits or support in finding work. Landlords are in a far weaker position to support these needs, and while it is welcome that the scheme will address these needs, many of the properties might be located in hard-to-rent properties in isolated communities where support is at best limited. This postcode lottery of support needs to be addressed, otherwise the scheme could be guilty of setting up vulnerable tenants for a fall.
In addition, is this scheme financially beneficial? Rents will be at LHA level, we hope that this will also be an opportunity for the Welsh Government to revisit LHA levels and to increase them above the 30th percentile of all local rents.
Clearly new ways of working are required to reduce homelessness and to house vulnerable people, but our conversations with our members suggests that landlords want to be part of the conversation and have greater control over their property. However, this scheme is another part of a package which creates a hostile environment for PRS landlords where they are part of the problem, rather than the solution.
Instead of making them more impotent to help, there needs to be a package which gives them a greater say. The scheme can work for some and has admirable qualities, but a lot of questions surrounding the operational side still surround it, and it is vital these are addressed, or the Welsh Government risks this becoming a good programme in theory, but not practice.
The Welsh Housing Minister Julie James AM is due to speak at our Future Renting Wales conference in Cardiff in just over two weeks time. If you’re a landlord in Wales, this is your chance to hear from an unmissable line-up of speakers about the issues that matter to your lettings. There will be talks about the tenant fees ban, Renting Homes Wales Act, possession reform, tax and much more! Book your Future Renting Wales early bird ticket today, from £35!