With the rapid growth of renting in the UK over the last several years comes a large cohort of tenants, possibly as many as 10 million. If politicians can tap into their votes, this section of the population could be an election winner if the politicians can get their message across.
According to recent statistics produced by the 2012-13 English Housing Survey, the private rented sector (PRS) reached a watershed and overtook the social rented sector to become the second largest tenure in England. There were an estimated 22.0 million households in England. Overall, 65% or 14.3 million were owner occupiers, 18% (4.0 million) were private renters and 17% (3.7 million) were social renters.
For several reasons this increase in the size of the PRS makes it a political issue, especially in the up-coming general election in 2015: campaigning groups such as Shelter, some MPs and more recently “Generation Rent” have been lobbying for changes to tenancy laws and rent controls; recent enquiries have produced a series of recommended regulatory changes in the sector and Labour have come up with some far reaching proposals which will be included in their manifesto.
The campaigning group Generation Rent are claiming that with the total number of people living in privately rented homes in England put at around 9 million, in the UK as whole, it could be in advance of 10 million. Private renters could hold the deciding vote in 86 parliamentary seats at next year’s General Election. That, they claim, is the big finding of analysis based on a recent ComRes poll.
The poll of 1,004 private renters found that 35% say that they tend to change which party they vote for between different general elections, making them potential swing voters. With these nine million people in the private rented sector in England alone, and rent their largest living cost, there are electoral rewards for any party that can address their concerns.
No surprise then that Labour sees their promised changes in tenancy laws: capping rents, increasing security of tenure for tenants, and a national register for landlords and agents as a real vote winner.
However, The Residential Landlords Association responding to what they term “inaccurate accusations” from Generation Rent, say this is playing to people’s fears on the PRS and failing to provide a true reflection of the sector.
The campaign organisation launched a consultation on its manifesto for the sector but the RLA is warning that it fails to provide a balanced picture of the sector, and instead seeks to exaggerate the scale of the challenges facing tenants.
Generation Rent writes of “soaring rents” leaving many tenants facing financial difficulties. This fails to note however figures from the Office for National Statistics which show that rents in the private rented sector have been increasing by much less than inflation measured both by CPI and RPI. Over the last year they increased by just 1% alone in England and have been increasing by much less than both measures of inflation over the past 9 years as well.
Whilst the consultation calls for rent controls, it fails to address the impact these would have on investment as outlined last year by MPs on the Communities and Local Government Select Committee.
Generation Rent argues that the private rented sector is “characterised by insecure, short-term tenancies”. This fails to recognise that the English Housing Survey itself notes that the average length of residency for a tenant in the private rented sector is now 3.8 years. Furthermore, as the official survey notes, “in general, those who had lived in their home for longer paid less rent.”
In calling for longer tenancies, Generation Rent are failing to address the concerns of those, such as the Chairman of the Cross-Party Communities and Local Government Select Committee, Clive Betts MP who has argued that they are unlikely to stick.
Generation Rent argues that “landlords and letting agents are astonishingly unregulated.” This is despite their being over 100 Acts of Parliament containing around 400 individual requirements
Whilst Generation Rent has also said that “environmental health teams invariably have too few staff to oversee enforcement” they fail to outline how to boost enforcement capacity and to properly find and root out those criminal landlords who persistently operate under the radar whilst the good landlords get burdened with ever growing weights of red tape.
The manifesto consultation further fails to outline how many of its proposals would end up costing the private rented sector more and who would pay for it.
The proposals further fail to mention that:
Government figures show 83% of tenants in the private rented sector are satisfied with their properties compared to 81% in the social sector.
Just 9% of tenancies in the private rented sector are ended by the landlord, mostly as a result of tenants committing anti-social behaviour or failing to pay their rent.
Commenting, Richard Jones, the RLA’s Policy Director has said:
“The RLA recognises that there are many challenges facing the private rented sector. It is however important that policy solutions are rooted in evidence rather seeking to play on and exploit people’s gut fears of the sector.
“It is time the politics of division came to an end in favour of a reasoned and rational debate about how to ensure the sector is fit for the 21st Century, both for landlords and tenants.”
Labour Jumps on the Band Wagon
Labour intends to bring back discredited rent controls, a measure that many now claim reduced the private rented sector in the UK until it served less that 7% of the market in the 1980s.
It’s only since the introduction of the Assured Shorthold Tenancy (AST) and the Buy-to-Let mortgage most in the industry believe that more and more landlords have been encouraged to invest again in the PRS market, providing a much need fillip to the stock of rented housing at a time of decline in social housing investment by local authorities.
Although the Labour Party denies that rent control will be the case, and that it will merely introduce a ‘mechanism’ to cap rent, that looks to most landlords pretty much like rent controls says the Residential Landlords’ Association (RLA).
Mr Miliband has said: “Some landlords will not like this, but millions of tenants will.”
Labour intends to impose three-year tenancies as the default tenancy. No longer will landlords have the option to use the section 21 procedure to evict tenants after a minimum of 6 months. The longer tenancies would give the tenant more security, and make evictions much harder.
A Labour government would also make it illegal for upfront fees (admin fees) to be charged to tenants. One exception to this would be for credit checks, but if the tenant passed the checks and the tenancy went ahead, the tenant would have to be refunded.
Tom Entwistle, editor of the LandlordZONE website said: “This is all a worrying development for landlords, for those who have already committed their hard earned cash into the buy-to-let market, and for those who might be contemplating doing so. The thinking by many with experience in the industry, as opposed to the many protagonists with a fleeting knowledge of how the landlord / tenant relationship pans out in reality, is that these proposals will work against tenants in the long run.”
“Once landlords realise these measures will hamstring their business, how they will be stuck with some really bad tenants without the ability to remove them, investment will inevitably decline, the supply of rentals will start to dry up and rents will increase.”
A misnomer in Labour’s argument, it appears, is that rents have been allowed to rise inexorably. However, Government’s own figures point to rents overall not having risen by anything near the rate of house prices rises or the rate of inflation on any measure – RPI or CPI.
Many economists argue that history has shown time and time again the folly of rent controls, however you dress them up. They result in a decline in housing standards, a decline in the rental property stock and a rise in rent levels.
The RLA says, “it is the three-year default tenancy and the greater difficulty in regaining-possession that raises the most concern for landlords.”
Re-gaining possession is a real issue for landlord now, even with the 6-month tenancy and the accelerated s21 procedure, with a three-year tenancy things could get far worse argues Tom Entwistle.
Julie Herbert, Head of Legal at Landlord Action speaking about court evictions and rent arrears claims in London says “There is a continued lack of resource available to deal with the processing of claims and a limited number of judges to hear cases, especially in areas which are more heavily tenanted, and/or have a high volume of residents that have been impacted by cuts to housing benefit, therefore, more likely to be facing eviction.”
Landlord Action says it tries where possible to mediate between landlords and tenants so that disputes are resolved before they require court action. However, with cuts to housing benefit, a lack of affordable housing supply in the capital and tenants having greater knowledge of the system, many cases still end up this way, with 25% of Landlord Action’s business going through those named as the top five busiest London courts. This means longer waiting times for landlords to the cost of thousands in lost rent, which can result in lenders threatening repossession proceedings.”
Some would say Labour’s proposals are cynical moves to win votes, by pandering to the desires of 10m tenants; after all what tenant in their right mind would turn down the opportunity to have long-term security (even when they behave badly) and a controlled low rent to boot.
On the other hand, what homeowner in their right mind would enter into a tenancy arrangement lasting 3 years, when their intention is to work abroad for 12 months and then return to their own home?
Far from solving the UK’s housing crisis, in the view of many in the industry, these proposals are likely to make matters much worse, but as these politicians know, it might just have their desired electoral result?