A blueprint for building a new sector in 2015
The tenants’ organisation Generation Rent have just published their manifesto. It is a good document and deserves a proper review.
As it covers a lot of important issues, I have decided to publish my comments over several posts. Note that these are just my own opinions and I could be wrong ….
As you can see from the picture, the manifesto has a rather snazzy blueprint themed cover featuring a house plan with a room for each of the main issues. I have adapted this for this series – I hope thats OK, Generation Rent people!
The foreword sets out the scene clearly – a big increase in renting but poor standards, amateur landlords, unregulated letting agents, overhigh rents and a lack of information about the numbers of landlords and rented properties out there …
A number of solutions are put forward. Lets take a look at them, starting with
Security of tenure
The main plank of the proposals here is to prohibit landlords from using section 21 during the first five years of the tenancy, while allowing tenants to move out after one year if they wish.
I have deep reservations here. We all know how private renting fell from 80% to about 8% of households between around 1918 and 1990 partly as a result of the Rent Act and its predecessors.
Contrary to popular vision, many small landlords are not wealthy people. Some are pensioners depending on the rent for their main income.
I fully accept that it would be far better for society to allow tenants more security of tenure so they are able to commit more to their home and the local community.
However this should not be at the expense of landlords rights. We have to get the balance right.
The problems with forced longer fixed terms
Not all tenants want longer fixed terms. Some will not want a fixed term of more than six months as they will want to move on elsewhere. Some may want an even shorter period, as is allowable under the present system.
Landlords will be most unhappy about being forced to let to the same tenant for five years. Bearing in mind the time it takes to evict, even under the mandatory grounds, and the virtual impossibility of evicting unsatisfactory tenants at all where the mandatory grounds do not apply
Discouraging landlords from renting is not going to help renters as it could reduce the pool of accommodation available to them – as happened in the last century.
Pre-conditions for longer fixed terms
The main stumbling block to longer fixed terms as I see it, is the eviction procedure which is over long for landlords, particularly landlords who are receiving no rent.
Even evicting with section 21 under the present ‘accelerated procedure’ takes four to six months or more and often results in landlords losing thousands of pounds in lost rent.
In my view speeding up the eviction process for bad tenant grounds is an essential pre-condition for bringing in longer fixed terms. The government accepts this and this is the reason for their recent working party on the subject.
I also think, as I set out in my own Bigger Picture ebook, that tenants wishing for longer fixed terms should pay a modest premium (the amount could be regulated) which will compensate landlords for their loss of control over the property.
This was also suggested, if I remember aright, by the Law Commission in their 2006 Renting Homes report.
Other proposals
Tax incentives
I agree with the suggestion that landlords offering longer fixed terms should get tax incentives. Longer fixed terms can benefit society so it is right that landlords should be rewarded in some way. I suspect however that the chances of this happening are fairly remote.
Notice periods
I have mixed views about the notice proposal – ie that the notice period given by landlords should reflect the period of time the tenant has been resident at the property up to a maximum of one year.
What I would suggest instead is that once a landlord has given formal notice asking tenants to vacate, the tenant should be entitled to vacate at any time and their rent should relate to the time they are in actual occupation of the property.
At present if a landlord gives a two month section 21 notice and the tenant finds another property quickly and moves out the following week, the landlord is legally entitled to sue for rent in lieu of notice from the tenant.
Many tenants are unaware that in these circumstances, they need to give notice at all. As technically, they do.
Giving greater flexibility over notice periods in this situation would help tenants finding alternative accommodation.
The rules regarding section 21 should also be amended to give them a limited ‘life’ as is the case with section 8 notices.
Next time I will take a look at the Generation Rent proposals on affordability. You can see the Generation Rent Manifesto here.
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A lot of things to comment on there Tessa and I’m sure many will but I only have time to address the notion that some tenants will only want to rent for 6 months.
I’ve worked in housing virtually all of my life and I rarely see these people, if ever. We have a friend at the moment who is selling his house and hasnt found anywhere suitable to buy yet and so he is looking for a short rent but he is the exception, not the norm. Most people want to just settle.
Landlords always say that they prefer long term tenants, so the demand and the supply is out there. The only sticking point is the eviction process with which I heartily agree with your suggestion to simplify and shorten where the tenant is at fault.
While the old tenant friendly Rent Act may have reduced the private rental market it didnt result in great swathes of homelessness applications, I know, I worked in homeless under that legislation. The simple fact being that with fewer landlords in the game properties were owned by people who now cant afford to and the right to buy had yet to denude the country of social housing stock.
The threat of rent controls always results in a predictable response from the landlord community, that they will get out of the business but they wont be taking their buildings with them. They will still be around to be used in some other form, unless of course they sell to the Chinese…..who I shall be mentioning on my Newsround this week :)
You may be right Ben, I don’t know. Different people and organisations say different things.
However I don’t think we should remove choice. If a tenant wants to have a shorter fixed term they should be able to.
Likewise, landlords should be able to let their properties out for a short period if they want to – for example while they are working abroad (although that is not the only reasonable reason).
The system just needs to be made a bit fairer.
Of course the real problem is not enough houses …
Admittedly I haven’t read it yet, but a minimum tenancy length of 5 years will have a significant impact on the market.
Aside from the fact that this government is unlikely to ever implement it, lenders will not want the added risk. If they are somehow forced to accept it they will simply increase the cost of borrowing according to the risk and this will either reduce supply or push up rents.
It would be OK if the market was dominated by institutional investors instead of BTL investors and forced landlords but it isn’t – mainly because they are so worried about regulation like this and rent control.
Tessa, you have summed it up completely in your last sentence and everything else is just playing around at the edges (although some reform would be welcome).
Landlords and tenants can agree a shorter contract, albeit if there is a later dispute, then the landlord cannot use the no fault S21 ground before 6 months at present.
If the tenant and landlord have both come to an open and honest agreement then the tenant will vacate on the agreed date and the landlord can return from their short term posting. I have not read the detail of the longer tenancies that Shelter proposed in the reseach report last year or in the Gen Rent Manifesto but I doubt that it would prevent such mutual agreements.
In the draft Shelter proposals for restrictions on enforcing S21 Notices in the situation of reported disrepair, there are exceptions where there is evidence of sale or return of the landlord to reside in the property, thus protecting the situation that Tessa raises.
Unfortunately it seems as if the RLA is fundmentally opposed to any change in the law at all. On Radio 4 on 13 June Chris Town complained that the amendment to the legislation would mean that possession proceedings will “drag on for years”.
The Min of Justice and the Judiciary are considering how the Court process can be improved and speeded up, but as the Oxford University report showed, private tenancy cases tend to take double the time of that of mortgage or social sector claims and that private cases are often poorly prepared. They were also critical of some solicitors who had poorly prepared cases. If a landlord has a good case and properly prepared, then judges will normally consider if a defeence is frivolous and if so strike out. Most cases should not in his words “drag on for years”
Ah but this notion of choice always intrigues me. if a landlord has a property that they only want to let for a short period and advertise as such then I have no problem with that. Its exactly what our friend needs right now, he is shopping around for a specific product in a sense.
However the fact is that ASTs offer no such choice for people wanting security and tenants cant choose a different type of agreement, so there is no choice – ASTs are the default tenancy.
When Frazzy and I first moved in together the agent told us what the landlord told them, that he was working abroad for the next two years.
We signed a 12 month AST with a 6 month break clause and settled down for the next two years.
4 months in we got an email thanking us for being such great tenants but advising that he was returning early and wanted his home back.
Not wanting to put him through the possession order process we scrabbled around in the few short weeks available to find somewhere else in order to suit him.
It cost us a total of £3,000 in relocation expenses and even though there was no dispute over the deposit he held onto it for the full 10 days allowed, so we had to borrow from friends.
Despite my job as a defender of possession proceedings I couldnt protect our home, the AST rendered us victims of the vicissitudes of the landlord’s life and whims.
THIS, and what I see daily of the lives of others in my work is why I have signed up and am a staunch defender of the Generation rent manifesto.
I am surprised Generation Rent and other tenant groups have missed this crucial point, that speeding up the eviction process for bad tenants provides significant benefits to the GOOD tenants.
If the possession process (from issuing the first notice to the tenant leaving) was 2-3 months rather than 4-6:
– Bad tenants will leave quicker, encouraging them to take responsibility sooner and preventing them running up huge arrears which are often never recovered.
– Those tenants (a minority, but a lot) who see rent as semi optional would have a stronger incentive to abide by the terms of the tenancy
– Landlords would be able to relax a little with steep tenant criteria, if they know they can evict if the rent isn’t paid – this makes it easier for good tenants to get a tenancy.
– Most crucially landlords will be more likely to grant longer term tenancies if they know that if the tenancy goes bad they can evict in a reasonable time frame
But part of the problem is that when we talk of tenants wanting security what we mean is they want an option (the right but not the obligation) to stay. Many families would love 5yr tenancy agreements, but many other groups would be horrified to find they are tied in for five years. In theory long tenancy could tie the landlord in but not the tenant, but I don’t think that is fair on landlords, and remove all the security any long term tenancy would bring. If the tenant can give 1 month’s notice during a “5yr” tenancy, it provides nothing to the landlord.
From my perspective what bothers me about a 5yr tenancy is that we’re effectively talking about the removal of the s21 and reliance on a s8, so rather than making eviction faster (where it’s really necessary), we’d be making possession more difficult and probably slower as it opens the door to rogue tenants causing damage and making disrepair claims in the courts to delay eviction repeatedly.
Seems Gen.Rent are making fantasy proposals in an attempt to drum up publicity.
But pretending they are to be taken seriously.
5 year tenancies- Average private tenancy length is about 2 years, 95% of those are ended by the tenant (IIRC).
In the unlikely event of this being implemented, someone, somewhere will pay for it. Either in straight monetary terms or by tenant selection.
Why should everyone else pay for the minority that want them?
Re section 21, unless there is a realistic alternative for getting rid of a tenancy breaching tenant, once again the vast majority will pay for the rogue minority.
They’ve not thought through the consequences.
Who are all these ppl that want 6 month tenancies Tessa? Pls, let’s have some sense. Families shouldn’t be at the mercy of the private sector; that’s the blunt truth of it. Profit is the incentive and the motivation of landlords, and there lies the crux of this problem.
Folk want a home. All it takes is rolling contracts that can’t be ended on whim by either party (unless repairs have been ignored. And repairs should come with a process and a deadline). The standard tenancy should be at least 2 years, and the notice period should be agreed (not imposed) upon mutual negotiation, before signing.
Likewise, folk should be able to request a longer term at the outset if, for example, they have children at school. But how do you stop landlords discriminating against families and denying that? I don’t know if you can.. That’s why GR have gone for 5 years. Rock and hard place.
As ever with property we need to be careful not to have unintended side effects. It’s not uncommon for home owners to rent out their home while they work abroad for a year or two, and want to move back in when they return. I do not think they should be prevented from doing so (by a 5yr tenancy minimum), though it is arguable any tenant renting that property should be aware the owner may wish to move back in (with suitable notice).
Landlords WANT longer tenancies. But the crux is they only want them with GOOD tenants. When I argue against longer tenancy minimums it’s not because I don’t want them (I do, I like long term tenants) but what I think landlords, quite reasonably, want to avoid is giving the keys to a tenant on a 5yr term and then finding they’ve gone rogue, damaged the property, not paid their rent, but cannot be evicted under a s21, are reliant on a s8, and then find it takes a year because the tenant knows how to play the system and delay possession as long as possible with spurious claims against an innocent landlord.
Many people don’t “want” a 6month tenancy, but they do want flexibility. They want the right to stay for a long period, but the option to leave when they choose. It’s not an either-or, but a matter of balancing the needs of the landlord and those of the tenant.
I’ve no idea why a landlord would “discriminate” against a family. Most of us love renting to families as they are stable and long term. In my many years as a landlord I’ve evicted three people, and every single one was because they were not paying their rent, and after a great number of opportunities to rectify the situation. One was also subletting, damaging the property and creating fire hazards. People accuse landlords of evicting people for no reason, and it makes no sense at all. We WANT good, long term tenants – just not long-term bad tenants!
Just Saying said;
“Who are all these ppl that want 6 month tenancies Tessa?”
594,000 private renting households (23%) expect to buy within the next 2 years. Taken from 2012/13 English Housing Survey.
If they’re looking to buy then they want flexibility.
Add to that re-locators, short term contractors, students, locum doctors/nurses/surgeons/dentists, corporate lets, overseas workers, property renovators, Armed Forces without quarters, probationers, 6 months left to live’rs, loved up couples trying it out, trial separationists, health tourists, SKIers, snowbirds, free spirits.. and not forgetting Ben’s old mate above.
Tenants wanting 5 year tenancies are the tiny minority.
Ollie,
I think the point about landlords discriminating against families was ‘IF’ 5 year tenancies were compulsory.
Rather than risk being stuck with a rogue tenant family, landlords would err towards those more likely to be short term tenants.
One of the reasons for registration / accreditation is that we may then get some proper statistics to work with.
People who work in the support services such as Shelter, TROs, CABx etc will see mostly the people who are unhappy with the system – that is why they are seeking advice.
I am sure that there are a lot of them and that this shows that the current system is unsatisfactory in many ways. However they are not the whole picture.
Someone who works at a well run letting agency or a landlord offering good quality accommodation and providing a good service will mostly see tenants who are happy with the system.
Both will have very different takes on the industry as a result of their personal experience and both will be valid – in part.
The Welsh are probably going about it the right way – their Housing Bill is bringing in mandatory licensing / accreditation probably in the next 12 months.
They are then looking to introduce a Renting Homes Bill with further changes in about 2015-6 but by them they will hopefully have a better picture of things as a whole as a result of the licensing brought about in the first bill.
It will be interesting to see if or how this affects the development of the second bill.
Tessa, you are right a licensing scheme would provide access to landlords, for education, monitoring etc. I wouldn’t mind that too much if it weren’t for the fees. As an example in August I will be paying £800 to Barking & Dagenham Council for a “license” to be a landlord for a number of properties. I think it’s £180 per property for early registration, after that it is £500 per property. That £800 they are taking off me could have been used to fit a new door, or put towards a new boiler (~£1200) or windows, or redecorate a whole property – instead it gets sucked into local authority inefficiency where they charge me a fee to use to run a scheme where they charge fees – where is the value – for tenants or for landlords?
I would probably support a nationwide scheme IF a) gov & local authorities worked VERY hard to get almost every landlord registered (it will not be easy – many ignore gas regs, they certainly won’t blink at ignoring licensing regs) AND b) the fees are set nationally at a low rate. I’d like to see penalties for breaching the rules set far higher, THAT revenue should be used to pay for more enforcement and licensing, ie let’s get the bad landlords paying for improvements in quality not ones like me who want to spend £800 on improving properties, not paying for enforcement against other landlords.
Those with a vested interest will always plead that a given measure will drive them into the sea – see “Hard Times”. If government always gave into vested interests we would still have small boys climbing up the insides of chimneys.
I agree that some balance is required here, but it is not just about striking a balance between an individual landlord and an individual tenant, but looking at the bigger picture – the society whose existence Margaret Thatcher denied. All parties believe in social stability, but the right makes a big song and dance about “family values”. What the HA 1988 created was a significant group of people who, despite the fact that they may have a landlord who does not want to get rid of them, nevertheless live in the knowledge that a section 21 notice may fall onto the doormat. Tenants with ASTs have places to live but not homes. It should all be about providing homes, not places to live. Families need homes.
Whilst things continental may not currently be in favour with a large section of the British public, most European countries do do it a lot better. A significant difference, I think, is that letting is regarded more as a business than as an investment. That needs to be emphasised. People should regard going into letting as no different to going into news agency. Providing homes is a serious business and needs to be done professionally. Too many go into it without proper investigation or advice. If it does not work out they have a guaranteed get out – serve a section 21 notice. It seems that no one believes there is a market in selling properties with tenants – that is absurd if there are all these people who want to be in on the action.
I agree that the single most important thing that landlords want, and which I suspect they would trade for more security of tenure, is the ability to get rid of bad tenants more quickly. Most people in business who do not get paid have the ability to stop trading with someone who owes them money. Residential letting is different because, quite rightly, it is believed that no one should be deprived of a roof over their head without a proper investigation. The problem is the delays in the court system. There is no real reason why landlords should be given priority over other claimants. The ideal would be a separate system dealing with residential landlord and tenant disputes, but that is not going to happen any time soon. It cannot be beyond the wit of our legislators to come up with a system operating outside the courts which enables landlords to get their properties back more quickly whilst at the same time protecting tenants.
We need something between the indefinite security of tenure of the Rent Acts and the all too short 6 months allowed by the HA 1988. Landlords may in fact find that tenants will be inclined to look after properties better if they know they have at least some reasonable security of tenure. Whilst we have to think carefully before making people homeless, tenants need to be made to realise that non-payment of rent will have potentially serious consequences.
The whole thing needs to be looked at and some creative thinking applied to it.
Casual landlords thinking only of the short term mostly, while tenants think of the long. That’s the crux of it. And illustartes just the PRS is so unfit for purpose. One year at time, it works for landlords doesn’t it. They get on with their lives, deciding whether to sell up, move in, move their family in, rent it out on air bnb, whatever: the list goes on. The flexibility suits them perfectly. And that is why so very many of them crow about longer tenancies “not working”. For them.
Lawcruncher, a calmly written balanced and argued contribution within wat is likely to become a highly charged debate in the country at large.
“The Private Rented Sector is so unfit for purpose”
If you consider the purpose of the PRS is to act like a housing association and fill the gap left by the under-provision of social housing you’re probably right. Private landlords can never be expected to act like that becasue of the level of personal risk involved, but that’s what organisations like Shelter and Generation Rent seem to be expecting.
Build more housing – especially social housing – and at the same time increase the incentives for large institutions to invest in residential lettings and you’ll increase market stability.
” Private landlords can never be expected to act like that because of the level of personal risk involved ”
Then, pls, step out of the game. Because every home owned by a landlord is one less home owned by the owner-occupier. Pls, stop making out that landlords are the service. Landlords are as much a part of the problem.