It is common to hear from both politicians and campaign groups that the Private Rented Sector (PRS) needs more regulation.

But the question they have not addressed is what the purpose of this regulation will be.

If it’s to drive landlords out of the market, then it will succeed. If it’s to drive bad landlords out of the market, then it will not. That sounds wrongheaded but let me explain.

We have a very unusual market made up of millions of small landlords owning less than three properties who often do not have the capital resources to deal with onerous regulations.

Many of them want to comply with the current rules and most provide homes that range from very good to OK.

But if they are faced with new regulations that they cannot afford to meet then they will leave the market.

The bad landlords who do not comply with the existing rules are unlikely to comply with any new ones.

What is more, if as a result of good landlords leaving the market there is a massive surge in demand the bad ones will see this as an opportunity.

As more tenants are forced to occupy their properties at higher rents because they have nowhere else to go, so bad landlords will prosper.

But surely, you say, the new rules will drive them out of the market?

No – enforcement in practice does not work because it’s incredibly expensive to enforce rules against those who will not comply because, although they are a small percentage of the overall market, it still means policing 100,000s of properties.

What’s our PLAN?

History shows that if you want to create new conditions the carrot is far more effective than the stick.

If the objective of a policy is to create more landlords providing better homes, then we must encourage more landlords into the market who have the resources and scale to create good homes for tenants.

Such landlords will have the capital resources to invest in properties, comply with regulations and provide good homes.

To do that, you need to create a framework that incentivises such landlords to come into the market.

Instead of cutting supply, you will increase it. And if you increase the supply then you give tenants more choice and create the right market, one which will respond positively to regulations.

Surely that should be the objective of policy for all parties and stakeholders be they Conservative, Labour, Generation Rent, Shelter or whoever?

Unfortunately, it does not appear the be. My organisation, PLAN, is trying to win support to rethink the whole strategy for the PRS and appeal to those who agree with this to support us.

4 COMMENTS

  1. Corporate landlords (banks, investment firms etc) are being encouraged into the sector as its felt they will be more professional than the small 1 to 3 unit landlords.

    The problem arises when these institutions need to show a % profit to investors.

    I keep reading of small scale landlords asking if others think a £25pcm incresse is reasonable after a 7 year period of no rent increases lol

    Anyone who believes the “big boys” will go 7 years with no rent increases is nuts; they’ll be on inflation plus x% plus added costs EVERY YEAR.

    And, the broken social housing system has already shown that large scale housing simply doesn’t work very well.

    I shall continue to pass on every cost forced upon me, with a healthy % increase to ensure my BUSINESS is successful.

    Gov can make it as complicated as they wish – the only ones who’ll suffer are tenants with even higher rents.

  2. “Marcus, who is part of a consortium of companies operating a sizeable portfolio” would say that, wouldn’t he? The assumption that large corporate bodies will automatically be good landlords could be mistaken?

  3. Rent controls are a massive threat to corporates.

    Any company restricted in ability to increase prices ISN’T worth investing in.

    Labour want to get rid of all LL.

    They want RTB as well.

    So COMMUNIST sequestration of private property assets.

    Being a BTR corporate LL is a very risky business proposition.

  4. I think that there needs to be a fair consideration for what might be “Medium Sized Landlords”.

    I may be right or wrong and I am willing to be corrected, but I would suggests that consideration is quite clearly needed for smaller landlords.

    I would suggest that landlords with 1 to 3 properties to be start-up landlords or perhaps “accidental” landlords. These landlords need a lot of help and encouragement and are very important. Any void periods or bad tenants can cause their world to collapse.

    Landlords with up to 10 properties have decided to make a full time business out of being a landlord. They are running a Small to Medium sized business (SMB). They need a lot of help because they are fully stretched and as all SMB’s know they are running at their limits and are not big enough to have any employees except family members. Their local reputation is critical and they know their market very well.

    Landlords with up to 30 properties will be running out of an office with perhaps one full time employee and a couple of part time employees such as a bookkeeper and handyman.

    The smaller landlords with up to 10 properties, care about the tenants and the properties much more than the larger landlords.

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