Ministry of Magic speak

Fiction is often a frightening reflection of reality and I think there is a lot of similarity between the governments comments about the likely effect of these reforms on the homelessness figures, and the Ministry of Magic’s pronouncements on the likely return of He Who Must Not Be Named in Harry Potter 5.

It now appears that, like the Minister for Magic, the government had been told about the true situation all along.

Common sense?

To most people the combination of lower housing benefit rates + a shortage of housing + landlords wanting to earn money rather than run their business as a housing charity (not an unreasonable approach) = greater homelessness.

Housing charities have been saying it, landlords organisation have been saying it, the press have been saying it, we have mentioned it from time to time on this very blog, now it appears that even officials in the relevant government department were saying it, but STILL government told us that the reforms would not result in any big problems, just a long overdue saving of money currently being wasted on greedy families living in houses they otherwise could not afford.

I should perhaps say here that I too am uneasy about non working families getting a bigger income on benefit than they would if they were working.  But it is part of this topsy turvey world we live in.  I don’t think the answer is cutting off the funds so they are made homeless.  Not if there are children involved.

What the letter said

So what did the Pickes (office of) letter say?  I have just had a look at it, and the salient points appear to be as follows:

• the estimated £270 million savings does not take into account the extra costs to Local Authorities of homelessness and temporary accommodation.  So actually it looks like the reforms are going to cost us all more money.
• The lower benefit available to pay rents is going to mean that it is not going to be economic for builders to build ‘affordable’ housing, and that therefore probably about 1/2 of the planned housing will not be built.  Even worse – the half that won’t be built will be the half with all the family homes in it, not the half with all the small flats.  (What happened by the way, to all those surplus flats built before the smash?  Are they still empty?)
• Then thirdly, the benefit cap will result in some 20,000 extra homelessness acceptances in addition to the 20,000 which will result from other changes to housing benefit.  Homelessness acceptances that is.  What about the ones that aren’t accepted?  Presumably they will be homeless too but won’t appear in the figures so they won’t count.

There is also a reference to ‘difficult handling locally’.  Does this perchance mean outraged residents wanting to smash up the benefits office when they find out they aren’t getting enough money?

The letter thinks that things may be improved by removing child benefit from the cap, which would, says the writer, allow a family with four children to live anywhere but London.  So what are the London families with four children going to do then?  Although presumably as nobody has taken any notice of the letter, all families are going to find it difficult to find accommodation, in all areas of the country.

It will be interesting to see what reactions follow the disclosure of this letter, and whether the HB proposals are modified.  Now, as it were, Voldemort has been known to have been seen by ministers.  Common sense says that the proposals will HAVE to be modified now, but is common sense something which exists in the rarified upper echelons of the coalition?

What do you think?

Note – since writing the above I have seen an excellent report from Nearly Legal which looks at the ‘Minister for Magic like’ pronouncements being made by Housing Ministers long after this letter is known to have been written.

Harry Potter books picture is Wilipedia commons

The report considers what seems to be a permanent trend – the decline in home ownership in this country.  Together with the worrying fact that this does not appear to be relected in government policy, which is still based on the idea of increasing home ownership.

Decline in home ownership

The peak of home ownership it seems was in 2003 with 70.9%. It has now slid down to 67.4% in 2009/10.

There are a number of reasons for this:

• property prices are high meaning that it is beyond the reach of most people
• Greater personal debt, in particular
• young people leaving full time education having to pay off loans taken out to pay for tuition and other expenses
• Since the financial crises mortgages have been harder to obtain, and
• Changing work patterns and increased mobility make renting more attractive

Problems for government

Heywood states that the English population is set to increase by about 30% in the next 25 years which equates to some 250,000 households per year. With house building at an all time low, this is worrying.

However government seems to be turning a blind eye. The coalition has affirmed its commitment to extending home ownership, for example  Grant Shapps ‘Age of Aspiration’ speech. To quote from the paper

Much government policy and activity is predicated on high and rising levels of home ownership. This includes economic policy, asset-based welfare policies such as elderly care in the community, revenue from taxation including stamp duty land tax, and a range of other services.

Asset based welfare policies are those which provide service on the basis that they will be paid back by the recipients from their assets – in most cases the family home.  However if people are living in rented accommodation this will not be possible – meaning in most cases that government will not get repaid.

Pluses and minuses

However it is not all bad news. Here are some positive points on a declining home ownership:

• the private rented sector is more suitable for a more mobile work force which may be needed in future.

• a contracting housing market may be less prone to ‘bubbles’ and if less volatile this may  help improve economic performance

• if less personal wealth is locked up in housing this may result in a different pattern of saving which could benefit other parts of the economy such as manufacturing

On the other hand:

• would the fact that fewer people will have access to the equity in their properties to fund purchases result in a lower level of consumption, and

• would a lower consumption in owner occupier related expenditure such as DIY products have a negative effect?

Social housing

Turning to social housing providers, Heywood makes the point that falling home ownership levels (and an increasing population) will only exacerbate the current problems of finding affordable housing for those unable to buy.

If the government wants housing to be available at ‘affordable’ sub market rates, then government is going to have to get involved.  It is not reasonable or realistic to expect the private sector to provide this. However the current government does not seem poised to take any significant action.

Conclusions

I have only been able to skim through the report and it really needs a more careful analysis than I am able to provide. However some of the main concluding points are:

• Government must come to terms with the fact that its current policy of extending home ownership is unrealistic unless it is able to provide substantial investment – which we all know is not going to happen

• It must also look at how to bring in institutional investment and expand the corporate landlord sector. Bearing in mind that a large proportion of current landlords in the private rented sector are private individuals with only few properties.

• There is also the huge problem of how to increase housing supply from its current catastrophic levels.

• Plus there are also implications for other government activities as the assumption of high and rising levels of owner occupation are embedded in policies.

The report concludes as follows

In considering a strategic response to what could prove a continuing shift in the balance of tenures, the issue of an alternative social vision will therefore inevitably be raised. Such a vision will have to encompass the role of the state, the funding of welfare, and the relationship between housing tenure and the culture of citizenship. It will involve developing new concepts, but it will also involve a clear-sighted application of those new concepts across the full breadth of public policy formation.

You will find the report online here.  What do you think about this?  Do you think Heywood is right?  What action do you think government  should take in view of falling home ownership levels?

I’m looking into my crystal ball this week.

Despite being called ‘Landlord Law Blog’ I know that Tessa’s readers aren’t just landlords. It is read by tenants, lawyers, housing advisers, estate agents, homeless teams and a whole host of others.

So I am going to stretch my readers a bit this week by dragging most of you into unfamiliar territory….Homelessness, and a prediction or two.

How homelessness will affect YOU

Don’t hit the delete button just yet, I mean where homelessness is going to sit in the great scheme of things for landlords, tenants, lawyers and everyone else in the very near future.

It will affect everyone in the housing community, in both good and bad ways, depending on your viewpoint or vested interests.

What prompted this was a press release that came my way from the government’s communities website on Wednesday.

Changes they are a commin’

It’s a heads up for homelessness units around the country to get used to the new changes that are going to be ushered in with the Localism bill, that last week had it’s second reading and whose introduction is immanent.

It’s no secret, it has been widely reported but what slightly amazes me is the way homelessness units I know don’t seem to be preparing for it.

How it works

A short lesson. A person goes to a homelessness unit for assistance. Commonly they think they are going to get a council house…..If I could laugh like Brian Blessed at this point I would.

The homelessness unit investigate their case and if all is well they are owed a housing duty. Nowadays the council will offer to set them up with a private landlord because all the council houses have been sold off on the right to buy. But, if the person turns it down they can hang on for social housing, which might mean sitting in temporary accommodation for a couple of years until one comes up. Its called a ‘Qualifying offer’.

What the Localism Bill is ushering in is the eradication of the qualifying offer. So the new scenario will be, person goes homeless, council offer a private rental, person turns it down, council say duty discharged, your own your own.

A logical step?

Now as I mentioned above, depending on your perspective or vested interests you may think this is either long overdue or a living outrage.

For my part it just seems a logical solution for councils who don’t have properties anyway.

Another way ... ?

What does this mean to you?

Well it means that council’s are going to need more private rentals in order to be able to discharge their statutory duties. They will also have to do something that is for most of them a completely alien activity, building relationships and doing deals with the private sector.

To be fair some ground breaking authorities have already picked up the baton on that.

Landlords will have a ready market of tenants and may find it better to go to them rather than through accommodation agents, who in many areas don’t have the best reputations…..particularly my area.

Lets R Us – coming to a Council near you …

I know some people in homelessness units who have already clocked this and are looking to start their own agencies through which they can work to improve property conditions and security by having a comprehensive in-house approach.

Lets face it, what high street agent can boast a team of environmental health officers, housing advisers, grants teams, tenant finding service and hot line to housing benefit? Maybe this is the way forward. If the government continues to refuse to regulate agents council’s could step in.

If you shout loudly enough they’ll understand …

In areas where the council don’t go down this road, local agents will be able to provide a service. However, Public sector and private sector need to learn each other’s language.

Any agent thinking this might be a good idea to get in on needs to be mindful of the idea that councils are traditionally very risk averse organisations, they ‘re not natural entrepreneurs.

Orchard Shipman have already twigged to this and are making inroads as agent of choice for many councils, because they understand the needs of the culture.

Better for tenants?

Tenants? The response to the new laws may just help improve conditions if council’s insist on specific safeguards, which they will do (remember they are risk averse) because under the new law they must ensure that a property they are offering is suitable. For instance electricity safety certificates aren’t mandatory but most council procurement schemes that I know insist on them.

Also the Localism bill will require properties to be let for a minimum of 12 months, so hopefully tenants will have to move less and communities can build.

Much as it galls me to admit it, this particular part of the Localism Bill and the possible reactions to it, which are being discussed in councils up and down the land might just improve things in the private rental sector if council’s get their acts together.

Losers and lawyers

The losers will be homelessness applicants who go through the system expecting council housing but that hardly happens anyway, so what are they really losing apart from unrealistic expectations?.

And what about the lawyers? What do they get out of it? At the moment they can earn money challenging the council’s decisions but when legal aid cuts come in that will go.

Where will the affordable properties come from?

But I have a major concern. If rents remain high, and they show no signs of dropping, and housing benefit is taking a dive, how are these offers of accommodation going to be affordable for the tenants?

If they aren’t affordable they wont be reasonable so cant be offered. The glitch in the system perhaps. [Bear in mind also that affordable probably isn't really affordable anyway - Ed]

Housing benefit changes to be challenged in court

But that might get fixed too. Some of you may have heard that the Child Poverty action Group is taking the government to court to challenge the lawfulness of certain changes to Housing Benefit

If they are successful they might have to climb down.

If they don’t then I am concerned by the National Landlord’s Association survey this week that shows 58% of landlords moving away from housing benefit tenants because of restrictions.

That’s the problem with the present system. None of it quite fits together.

Brian Blessed picture by ssoosay, Homeless Bill from jsweiringa

The Legal Action Magazine section on recent developments in housing law has some interesting notes on what is going on, and I was particularly interested to see the reference to a Ministry of Justice report on the implementation of past Law Commission projects.

Here are some extracts about those Law Commission projects which particularly affected housing and landlord and tenant law, with a few notes from me in brackets.  The numbers are the paragraph numbers in the report:

Proposals which have not yet been implemented

(But presumably will be sometime)

Unfair Terms in Contracts

18. The present law on unfair contract terms is covered by two pieces of UK legislation which are confusing and contain inconsistent and overlapping provisions.

19. This report, which was a joint Law Commission and Scottish Law Commission report, was accepted in principle by the previous Government in 2006. Implementation of the Commissions’ recommendations is on hold pending negotiation of the draft EU Consumer Rights Directive. Negotiations on the Directive are expected to conclude in late-2011.

(The unfair terms in consumer contracts regulations are very important for tenancy agreements and indeed, as the Foxton litigation showed, for agents’ terms and conditions.)

Termination of Tenancies

24. This report examined the means whereby a landlord can take back a property let to a tenant because the tenant has not complied with his or her obligations under the lease. This is an issue of great practical importance for many landlords and tenants of residential and commercial properties. The current law is difficult to use and littered with pitfalls for both the lay person and the unwary practitioner.

25. The Government is undertaking work to study and consider this report and aims to respond early this year.

(This will not affect assured shorthold tenancies where forfeiture is specifically prohibited by the legislation, but may be relevant for common law tenancies and protected tenancies under the Rent Act 1977).

Decisions taken not to implement

(Ie where the work of the Law Commission is effectively wasted, and they might just as well not have bothered)

Landlord and Tenant: Responsibility for State and Condition of Property

46. This report examined the law regulating the responsibilities of landlord and tenant for the repair and maintenance of leased premises. The law is unsatisfactory as there is no acceptable standard which has to be met by leased premise, there is no legal requirement that the responsibility for the repair of the property should be specifically allocated, and the remedies for the enforcement of repairing obligations were not always effective to ensure that the necessary repairs were carried out.

47. The Government does not consider that the problems with the law in this area are sufficient to require legislative intervention. There are no current plans, therefore, to implement the proposals contained within this report.

Housing: Encouraging Responsible Letting and Renting Homes: The Final Report.

The report made recommendations to strengthen self-regulation of landlords in the private rented sector, and introduce compulsory regulation for letting agents. The Law Commission recommended that a scheme of “enforced self-regulation” should be introduced if self-regulation failed to drive up housing standards in the sector.

56. Whilst some of the proposals contained within these reports were accepted in principle by the previous Government, given that reform of this area of the law is not in line with the current Government’s deregulatory priorities, the Government currently has no plans to implement the Law Commission’s recommendations by amending the regulations governing private landlords or letting agents or by further regulating the sector. The Government is, however, exploring with partners from the industry how best to counter poor practice by letting and managing agents and will keep the matter under consideration.

No doubt some faithful readers will have a few comments on all this. I feel particularly sad about the Renting Homes project as SUCH a lot of work went into that, and there was a massive consultation exercise. All for nothing.

You can see the MOJ report here.  The Renting Homes and other housing related projects can be see on the Law Commission website.  Incidentally they don’t seem to have mentioned the report on proportionate dispute resolution.

Photo by khrawlings

The Tiensia case more or less put a coach and horses through the tenancy deposit regulations.

In fact when I spoke at a Landlords Association meeting recently, one of the things I was asked to speak about was the ‘new’ tenancy deposit rules.

“Is it now necessary to lodge them or can you hold them in a separate account as before but then lodge them if there is a contention?” was the question put to me.

There is no point in having tenancy deposit regulations if there is no penalty for non compliance. Landlords will inevitably fail to comply (not all, but certainly some). So it seems that the Localism Bill is going to be used to plug the loopholes exposed by the recent cases.

The Commons Committee considering the Localism Bill will be debating amendments to the Housing provisions in Part 6 of the Bill this week. You can see the current list of amendments tabled for debate here.

Interesting points are:

• The period for protection looks as if it is going to remain 14 days, despite complaints that this is too short. The period suggested in the Scottish regulations was 30 days.

• The amendments provide that a deposit must be protected at the start of ‘a replacement tenancy’ if the deposit money is retained, and the definition given follows the wording of s5 of the Housing Act 1988 – meaning that landlords will no longer be able to avoid the tenancy deposit regulations by allowing the tenancy to run on as a periodic.

• The penalty is no longer going to be fixed at three times the deposit sum. The Judges are gong to be given a discretion to award a sum they consider reasonable up to a maximum of three times the deposit sum.  Which will please the Judges greatly.  One of their main objections to the current rules is that (before the loopholes were exposed) they were being forced to make the award in circumstances where they considered it unfair (such as this case).

These are just proposals and may not reach the final version of the Bill.  However, David Smith writing in the Nearly Legal blog considers that something like these amendments are likely to survive.

In which case the Landlord Law Tenancy Deposit claim scheme can be restored – at present we have withdrawn it due to the difficulties raised by the recent case law.

What do you think of the proposals?