This is the second in my series of posts looking at the Generation Rent Manifesto. You can see the last post here.
Last time we looked at security of tenure issues. Today I am looking at the next part of the manifesto which is on
Affordability
Everyone knows that the real problem with the housing market is lack of housing. But how can we get more housing built?
One interesting suggestion put forward is to use public land requisitioned by the government to build houses to sell at cost but with covenants prohibiting the owners from renting other than at regulated rents.
This is a bit outside my area of expertise but I quite like the idea. One problem which occurs to me however is enforceability. How do you stop people from renting property out, eg to people not in a position to complain such as illegal immigrants, at a premium?
Here are some suggestions:
- If owners are found renting in excess of the approved rent, any excess should be recoverable from them to be paid into a fund to be managed by the company licensed by the government to run the scheme.
- Tenants to be entitled to reclaim excess rent from this fund, whether or not their landlord had paid into it (tenants claims would trigger action by the fund to recover the money from the landlord). The fund could also be used to pay for further building
- If the owner fails to pay the sum specified into the fund within a defined period of time, their property to be forfeit (on application to the Court) with title reverting back to the organisation licensed by the Government to manage the scheme.
I don’t feel qualified to comment on the next section looking at other proposals to build new housing. However the following section is on
Controlling rents
One proposal is effectively a return to fair rents being set by valuation offices. Another is limiting rent increases.
Although I agree that there is a lot of unfairness at present, I have deep reservations about these proposals, particularly in view of the history of rent control in the last century. I would prefer to see the issue tackled in some other way.
Letting agents fees
Our unregulated letting agent industry is a big part of the general housing problem (although the introduction of mandatory membership of redress schemes later this year may ameliorate this).
I agree with the proposal that letting agent fees should be paid by landlords rather than tenants. After all the agent is working for the landlord not the tenant. However one has to be careful about restricting agent fees too much. They have to earn a living and letting agents employ a lot of people.
So there may be a place for an up front fee to be paid by tenants as a surety of good faith, to be offset against the rent if the tenancy goes ahead (when the agent will be entitled to his fee from the landlord) but to be forfeit to the agents (or landlord if there is no agent) if the tenant unreasonably withdraws from the contract.
Other proposals
The tenancy deposit support scheme looks like a good idea to me and would also be a good solution to the problem of the tenant who wants to pay the deposit by installments. This can cause big problems for landlords due to the unacceptable amount of administration incurred by having to re-protect each of the instalments within the 30 day limit.
The rent a room tax break is well overdue for increase and indeed could usefully be reviewed on a regular basis and increased in line with inflation.
The right to buy proposal will probably get a ‘no’ vote from the landlord community but I think that provided it was properly regulated it could work. For example it would have helped the hapless (albeit thick) tenant in my horror story here.
Next time I will be looking at the proposals on Management. See the Generation Rent Manifesto here.
Note – My Landlord Law service has ALWAYS catered for tenants as well as landlords. >> Click here to find out more about our services for tenants.
Letting Agents fees.
We charge a referencing fee to all applicants. Not all applications are successful (due to personal circumstances). They could either get a guarantor, find another property within their price range or we would decline to rent to them based on the information we receive from the referencing company.
By paying the referencing fee prospective tenants are committing to the property and we hold it for 7 days to allow referencing to progress.
We use an external company to complete our references and this has to be paid for by someone.
If the prospective tenants don’t pay a referencing fee there is no commitment on their part. Plus a landlord could pay for a number of references before he/she found a successful tenant. This in turn would put the cost of the rent up.
I don’t like any social housing type setup when rents are below market level. They tent to reward people that don’t take responsibility for their own life with a house for life at a low rent level. These people then can’t move for work.
We have housing benefit to allow people on low incomes to rent, so I don’t see a need for a segment of the market with rents forced low as well.
The solution is simple; just enable a lot more homes to be built, the market will then sort out the rent level.
The “Right to Buy” with a discount for any tenant that has been in a property for more than 5 years, would lead to landlord asking ALL tenants to leave after 4 years.
Having to give longer notice to tenants that have been in a property for a long time, could also make me think about how long it is safe to allow a tenant to remain. After all any tenant can stop paying the rent, or get a new boy friend, however good they have been for many years.
Building affordable housing on cheap pubic land is the only way out of the housing shortage unless planning laws are relaxed. The cheaper land means developpers can build good quality homes more cheaply.
Asking local authorities to police fair rent covenants is nonsense when they don’t even have the resources to effectively police sub-letting by social tenants.
Deposit schemes are a good idea. Local authorites and charities already help some of our more needy tenants with bonds and guarantees etc. but any extra assistance here would be welcome.
Right of First Refusal sounds nice in theory but some portfolios contain thousands of properties. If they wanted to sell it to another investor it would be impossible if every tenant had the right of first refusal. Besides, I think it fundamentally undermines a property owner’s rights.
Right of First Refusal sounds nice in theory but some portfolios contain thousands of properties. If they wanted to sell it to another investor it would be impossible if every tenant had the right of first refusal. Besides, I think it fundamentally undermines a property owner’s rights.”
You’ve widly missed the point – that homes are for owner occupiers to live in, and no-one deserves a property potfolio, nor should they be encouraged to keep one.
That’s rather an idealistic view and doesn’t reflect the practicalities of the current market.
Our firm has thousands of satisfied tenants, many of whom would potentially be homeless without the institutional and private landlords we represent. Many of them could never afford to buy their own home even at one tenth of current prices. Who is going to provide for their long term housing needs if the local authorities and housing associations don’t have the stock?
Many landlords are very responsible but this manifesto always assumes the worst and that the PRS is a failure and I disagree with that.
And every home owned by a landlord is one that a would-be owner-occupier can’t buy. Which reduces supply, and sends prices up. If many landlords are responsible, this has no bearing on the point.
Re Just Saying,
Every renter that decided to buy a home is one less customer for landlords, so making it more likely that landlords will sell up.
However I don’t see my tenants forgoing trips to the pub and making their own pack lunches so they can save a deposit to buy their own home.
Most landlords started out by saving very hard, not going out at the weekend, not smoking or drinking, work hard for their employer, choosing to live in a affordable area etc, so as to save the deposit to buy their own home.
There is nothing to stop my tenants doing the same apart from a lack of willingness to make the effort.
PS,
Someone that wishes to buy their own home only has to save 5%, a landlord has to put in at least 15%, often 25%.
No one can deny that people buying second homes for holidays or investment has contributed to the rise in house prices making it more expensive for first time buyers. It’s also worth noting that it makes it more expensive for everyone, including those like me who need a bigger property for a growing family and need to move up the chain.
However, rightly or wrongly, that’s the position we’re now in. Rather than simply demonising landlords – many of whom are responsible people just trying to provide for their retirement – what do you realistically propose as a solution to the problem?