I know our government is convulsed at the moment with the Brexit disaster but this does not really excuse the lack of logic and clear thinking about the private rented sector.
Let’s take a look at where we are today and how we got there.
A bit of history and Margaret Thatcher
In the 1970’s and 1980’s the private rented sector was fairly small (about 8% of households). Most people either owned their own home or lived in Council accommodation. Such private rented accommodation as there was, tended to be fairly basic.
Then, as I described in my history post about section 21 there was a major change in the law in the 1980’s brought in by Mrs Thatcher’s Tory government. The premise behind these reforms was fairly simple
- Get rid of social housing
- Replace it with the private rented sector
Over the following 30 years, this policy was followed by both Tory and Labour governments. As a result, we have a greatly diminished social housing sector and a greatly inflated private rented sector.
This was brought about by light-touch regulation of the private rented sector along with the ability to evict as of right after the end of the fixed term, along with the selling off social housing under the right to buy.
However, this has brought problems unforeseen by the Thatcher government in the 1980’s.
Unforeseen housing-related problems
A large percentage of the social housing sold off to tenants has now been sold on and has passed into the hands of private landlords (it is believed some 40%). As private landlords are ‘for profit’ rather than ‘not for profit’, these properties are being let out at substantially higher rents thus increasing the benefit bill
The dramatic reduction in social housing means that the government is not able to provide enough housing (through local authorities and social housing landlords) to those in need and is heavily dependent on the private sector.
However, the big problem for the government is that they have no or very little control over the private rented sector. Private landlords can
- Rent to whom they like
- Charge the rent that they want, and also
- Change the type of letting that they offer (I’ll come back to this in a minute).
Big Problems for Local Authorities
Local Authorities currently have big problems as they have a statutory duty to rehouse families in need (who are mostly on some form of benefit) but no longer have the properties themselves to do this with.
So they are dependent on the private rented sector. But the Private Rented Sector is on the whole unwilling to let to ‘benefit tenants’ as
- The benefit payment system is unreliable and problematic
- Benefit tenants are often perceived as ‘difficult’, and also
- The Councils themselves often tend to have a hostile attitude (despite their reliance on them) to private landlords meaning landlords are unwilling to work with them.
This means that in order to perform their statutory duty, Councils often have to work with landlords who provide substandard housing and/or are actually criminal.
Big Problems for Government
The problem with moving the responsibility for housing up to 25% of the population to private landlords is that Government has no control over them and what they do.
Government has finally woken up to the fact that vast numbers of tenants are unhappy with the accommodation provided to them and is putting in place a tighter regulatory system.
This is good and most landlords, most good landlords that is, will not have a problem with that (other than with the speed of the changes).
However more serious is the increased taxation and the threat to remove the right to evict under section 21.
Landlords are ‘for profit’ rather than ‘not for profit’. So if renting becomes unsustainable financially – either because they are being taxed too high or because they are unable to easily evict non paying tenants – then landlords will have to respond to this.
But they may not respond in the way that government want or expect. As I see it there are three things they could do
1 Sell up.
This may be what Government want as it will make more housing available for those potentially Tory voting first-time buyers and families.
2 Turn their properties to holiday lets.
Airbnb and their ilk have resulted in a huge increase in holiday lets and many traditional landlords are jumping on the bandwagon.
3 Change the way they rent and turn properties into serviced accommodation.
The big advantage of this for landlords is that the occupiers will be licensees rather than tenants. Meaning that they can be more easily evicted and without the need for section 21.
What this means:
None of these moves are going to help tenants – other than the lucky few who will be able to afford the properties sold. But these will be the richer tenants. For most tenants, property prices mean that home-ownership is an impossible dream.
Increased holiday lets will remove potential homes for families from the pool of available accommodation and also can have negative effects on nearby housing.
Increased use of residential licensing will make accommodation even more insecure for the licensees than it currently is for tenants threatened by section 21.
Having over the past 30 years moved some 20-25% of the population into private housing, government is now in a position where they are dependent on people they can’t control for performing one of the most important social needs – housing.
This is not a good position to be in.
Housing is a critical human need. It’s not something that should be messed around with lightly.
Although some changes have been good, the situation as a whole is not. The number of recent changes has caused many landlords to think again. And they may not respond in the way that government want.
My advice would be to be careful about further changes (at least until the Bexit crisis is over), remove the right to buy and build up social housing. So housing low-income families is not in the hands of an uncontrollable (and sometimes rogue or criminal) private sector. It needs to be brought back in-house.
Then you will be in a stronger position to introduce other changes.