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.
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.
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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