Flats to Rent in 2020

Labour Government

I thought it would be interesting to look to the future and see how we will be renting flats in 5+ years time. There are two certainties that we can predict – firstly there won’t be a recession, it beggars belief that we could go a decade or more with a stagnant economy, so I think that it will be safe to assume some sort of economic recovery will have been underway. Secondly there will be a change of government in 2015 – whether the coalition implodes, explodes, or simply fades away I think it is a safe assumption that we will NOT have a centre right government running the show. I will readily concede that it’s not clear whether we will lurch to the left or right, but I think the most likely outcome in 2015 will be a labour government. Helped by three recent publications of the Labour Party Policy views on Housing we can see what renting in the next decade will be like.

Private Rental Sector (PRS) Center Stage

There are some very big surprises – not least that the documents lay out a future for housing which would surprise a labour supporter of the 70s 80s or 90s – the Private Rental Sector (PRS) is center stage in providing homes. Labour is determined that everyone should have a home at a price they can afford, labelled A One Nation housing policy. It intends to achieve this by supporting renters and the majority who are responsible landlords, ensuring that they are not undercut by a minority of rogue landlords. However Labour also clearly sees the PRS in it’s current form as broken, and not working.

Labour acknowledges that most people want to own their own home, however Britain faces the biggest housing crisis in a generation and therefore many people will take longer to buy and will be renting for much longer than in the past. As a consequence, the private rented sector under Labour will play an ever increasing role in meeting housing need.

Private Rental Sector (PRS) Broken

Labour sees the PRS as not fit for purpose. It sees private renting as unaffordable, unstable and subject to poor conditions and bad management.

  1. It sees a need to tackle unscrupulous letting agents and end rip-off charges.
  2. It also wants to give renting families private rented homes that are affordable and stable, providing the predictability and security that allow families to plan ahead.
  3. It considers that there are too many bad landlords who prey on vulnerable tenants and that 35% of private rented stock that is non-decent.
  4. It also sees that the £8.6billion a year paid in Housing Benefit is going to private sector landlords who provide poor and sub-standard housing that ultimately serves to create further socio-economic costs for the public purse.
  5. It also sees amateur landlords who are well meaning but unaware of their responsibilities as a problem.


Private Rental Sector (PRS) Solutions

Across the 3 policy documents there are some clear recommendations which are in part already being implemented by some local authorities, and are “Good to Go” as soon as the new government hits the road:

1. A National Register of Landlords

Interestingly HMRC is specifically associated with the register, and no doubt a lot of links will be tied up so that right to operate as a landlord, and use the legal system to recover debts, be paid housing benefit, recover possession of a property will be linked to being on the register, and paying tax on rental income (Landlord Tax Evasion is estimated at £500,000,000).

2. A National Private Rented Property Standard

This is a change from the Housing health and safety rating system (HHSRS) philosophy introduced in the 2004 Housing Act which moved away from prescribed standards, and made the Landlord responsible for assessing and implementing an appropriate level of Health and Safety. The review specifically identifies:

  1. Tenancy deposits
  2. Energy efficiency
  3. Property conditions
  4. Response times and repairs
  5. Improved local enforcement intended to make it easier for local authorities to introduce licensing schemes

3. Tougher sanctions on bad landlords

  1. Reviewing penalties and sentencing guidelines (expect major increases).
  2. Stamping out retaliatory eviction.
  3. Removing bad landlords from the national register so they can no longer operate.

4. Regulation of Letting Agencies

  1. A code of code of conduct
  2. Entry requirements for letting agents
  3. Compulsory business and consumer protection measures.
  4. A regulatory body with enforcement powers.
  5. Transparency, clarity and accessibility of information relating to fees and charges which are easily understandable, upfront and comparable across agents
  6. Restriction on the level and extent of activities that can be charged for, the size of deposits required in proportion to rent and the level of ‘administration’ fees for basic services, such as those for changing rental contracts.

5. New Laws on Tenancy Agreements

This area is potentially the most far reaching, and from a Socio-Economic POV a radical departure from the home owning model of the last few generations. Labour recognise that our society has changed. In previous generations education ended somewhere between 15 & 21, but currently the world of work seems to start somewhere north of 21, if ever. The home ownership model is now a thing for middle age, families are renting much as they did in Victorian times – however the tenancy contract used by landlords (The Assured Shorthold Tenancy Agreement) was designed in 1988 to be used specifically for accidental Landlords. It was intended solely to be used for the renting of property which would otherwise have stood empty whilst waiting to be sold, and the Assured Tenancy introduced in the same Housing Act was intended to be the Tenancy Agreement used by the PRS.

So 25 years later we have a PRS based  around a tenancy agreement designed for 6 month tenancies, but a requirement for 5 – 30 year tenancies. The only surprising thing is that Labour is the only political party to recognise this as a problem. Fortunately they also recognise that their 1977 attempt to create a level playing field was a disaster, and they make it clear that they will not be going down the road of regulated tenancies. The changes that they have indicated are less clear than in the other areas, but expect:

  1. Incentives that will form part of a “something for something” deal for landlords
  2. Direct payment of housing benefit to private sector landlords and housing associations who provide longer tenancies and predictable rents
  3. An improved legal process for long lets to evict renters who fail to pay rent and commit anti-social behaviour, including damage to the property.
  4. Current benefits of the tax system only available to landlords offering longer term stable tenancies.


Labour Party Policy Reviews

Private Rented Housing: Improving standards for all

Private Rented Housing: Providing stability and affordability for renters and families

Private Rented Housing

Renting Law Changes (April 2012)

Apart from the passing of the 1988 & 2004 Housing Acts by Parliament I have never experienced such a collection of changes to renting a flat all in one go. The following Legislation has just become effective (April 2012).

  • Tenancy Deposit Protection information must now be provided within 30 days or you may be fined and invalidate your right to evict a Tenant by issuing a S21 notice.
  • An EPC must be commissioned before a property can be marketed and the EPC must actually be issued within 7 days of marketing.
  • In 2018, rental properties with the two lowest EPC scores are due to be banned from the market, meaning that landlords must have improved them by then.
  • DHSS allowances for Housing Benefit (LHA) change dramatically.
    • The age limit of the Single Room Rate (SRR) rose from 25 to 35 years old. Anyone under 35 yrs will only get Bedsit LHA
    • The five bedroom Local Housing Allowance rate has gone so that the maximum level is for a four bedroom flat.
    • Local Housing Allowance rates are reduced so that about 3 in 10 properties for rent in the area should be affordable to people on Housing Benefit, rather than every 5 in 10 properties as before.
    • Local Housing Allowance weekly rates in any area cannot exceed:
      • £250 for a one bedroom property
      • £290 for a two bedroom property
      • £340 for a three bedroom property
      • £400 for a four bedroom property
    • Local Housing Allowance (Housing Benefits) will be set in line with the Consumer Prices Index (CPI) instead of the Retail Prices Index (RPI)
  • Small-shared houses or flats occupied by between 3 and 6 unrelated individuals who share basic amenities were reclassified under planning laws from “C3 Dwelling Houses” to “C4 Houses in Multiple Occupation“. Depending in which part of the country you are you may need Planning Permission to rent these.

So from today the tenancy agreements that you use should be different to the ones that you used to use. The way that I keep up to date with legislation is through my membership of the Guild of Landlords which costs me £80 p.a. and provides me with current documents and a legal advice line to advise me on their use.  I chose the Guild because it was strongly recommended to me, and I appreciate the personal nature of the organisation. However the other landlord organisations have their own supporters, and I don’t think that it is important which one you join, just that you do join one of them.

Guild normal logo

Right to Buy hits Pimlico Rents for Westminster Council

Margaret Thatcher

Margaret Thatcher

An interesting article today in Social Housing and Local Government news website about how Right To Buy has affected Westminster Council.

Nearly half of Westminster’s 22,000 council homes have been sold through Right-to-Buy in the past 30 years, and because government rules don’t allow local authorities to keep the proceeds of sale the properties haven’t been replaced by further social housing. Of course many of the flats purchased under Rent to Buy have been recycled into Private Sector renting – I personally know of 4 people who were able to retire to the country in middle age on the proceeds of the Right to Buy windfall which could be as much as several hundred thousand pounds in extreme cases.

This has left the council with a situation where they are paying housing benefit to tenants who are renting ex-council properties from private landlords – and this costs the council around four times the rent charged for a council home rented directly from the council, and on occasions up to five or six times the council rent.

What a mess – but probably not a mess that the government wishes to acknowledge as it stems from a conservative policy a generation ago, rather than something that can be neatly pinned on the last government.

Pimlico Flats December Newsletter 2010

Coat of arms of Westminster City Council

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This month I had a very good reason for being late with the Newsletter – I’m making 11 people homeless and I wanted to talk to them about it first.

It has been a long time coming and I think that most of us knew that it was on the cards, nevertheless when the time came it has been a hard parting of the ways. Modern housing standards require more space for people than those of the past, and this means that cheap small properties must be converted into more expensive larger ones. Consequently the 11 Flats of 71 Winchester Street are due to be converted into 6 Flats as detailed by Westminster Council .

I have now served section 21 notices on all the tenants of 71 Winchester St. that their tenancies are terminated in 2 months. I consider all my tenants personal friends and I like to think that I treat everybody as such, and that they treat me as a friend also. As such I am in the process of making a friend of 21 years homeless. I am also making two friends of 13 years homeless. These things are not lightly done, but I am prepared to take the criticism that I deserve. I have written to Westminster City Council asking them to rehouse my friends, and they have replied telling me that homeless people are not their responsibility.

Their reply makes me angry because I know full well that the council is playing a game with people’s lives.  I look at the lives of my 3 friends who have been living with me over the last two decades – one has worked for the charity Brick by Brick housing the homeless another runs their own photography business, and the third is a chauffeur. These are people contributing to society, who I am making homeless through no fault of theirs. Can you understand why I feel that my council is letting us all down?

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A History of Rent and Housing Benefit

Former British Prime Minister Margaret Thatcher

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Last week saw an announcement about Housing Benefit that has extraordinarily far reaching effects that most of the population are yet to grasp. Until last week the principle of the UK Social Security System was that those unable to earn their own income would be supported by the State, and part of that support was the provision of reasonable quality accommodation where the recipient lived. Last week saw that tenet deleted and I think we are all left wondering what the future will bring.

The documented history of social housing in Britain starts with Almshouses which were established from the 10th century, to provide a place of residence for “poor, old and distressed folk”. The first recorded Almshouse was founded in York by King Athelstan, and the oldest still in existence is the Hospital of St. Cross in Winchester, dating to circa 1133. During the Industrial Revolution factory owners built entire villages for their workers such as Saltair (1853), Bournville(1879), Port SunlightStewartby, and Silver End. After the first world war a campaign known as Homes fit for heroes initiated state provision of working class housing, and in 1919 the Government first required councils to provide housing, helping them to do so through the provision of subsidies, under the Housing Act 1919. The campaign to provide decent housing for the common man in quantity was interrupted by the Second World War but continued through the 50s and 60s, housing was considered such a priority that Housing Minister was a Cabinet post, and political parties vied with each other at election time to commit to greater targets for house building. During this period provision of Social Housing was seen as responsibility of Central Government, implemented by Local Authorities, and by 1979 almost half of the British population lived in council housing.

That all came to a shuddering halt in 1980 when Margaret Thatcher reversed the concept of local authorities as providers of housing and supported a free market approach allowing Council Tenants “the Right to Buy” in the Housing Act 1980. Proceeds of the sales were paid to the local authorities, but they were restricted to spending the money on reducing their debt, rather than being able to spend it on building more homes.

So from 1980 the onus for the provision of social housing increasingly fell on the Private Rental Sector, and in 1982 Housing Benefit was created in order to provide a mechanism whereby Social Housing could be funded from the private sector. At the time things were quite straight forward – the 1977 Rent Act provided a clear system whereby tenants had security of tenure (provided they paid their rent they couldn’t be evicted, and they were known as “Protected Tenants”), and a mechanism for establishing a “Fair Rent” which was defined as the rent that would apply in a market with an equal number of tenants and landlords. There were no issues about Housing Benefit – the Rent Officer would assess the “Fair Rent” and the Local Authority would pay it.

Unfortunately the market didn’t fall into line with the system. Rent Officers assessed “Fair Rents” at about 30% of the market rate, and Banks and Building Societies wouldn’t lend money to purchase property where the owner couldn’t evict the tenant, and consequently the Private Rental Sector had all but disappeared. Even when a property owner was vacating their property for a number of years (e.g. a job move overseas) they dare not risk renting the property out lest on their return they were unable to re-occupy their home. In 1900, 90% of all UK households were tenants, by the year 2000 70% of households were owner-occupiers, and only 9% rented from private landlords.

It would be logical to say that Government recognised the issues, the problems, and introduced legislation in the form of the 1988 Housing Act to rectify the problem, and revive the PRS – for that is what happened. But as with much of politics it happened by accident, although no doubt when the history books are written they will tell a tale of logic and sense. Whatever you have heard, in 1988 the Government had no intention of changing the basis of rental law, and had no idea that Banks might make commercial loans to Landlords. The Tenancy Agreement that the 1988 Act introduced was the Assured Tenancy Agreement which retained the tenants right of tenure, but established a new basis for Rent Officers to assign rents. Instead of  assuming a perfect market of equal numbers of tenants and landlords rents were now to reflect market reality. Given the acute shortage of rental property the government looked to bring back into rental the empty properties and in an aside to the 1988 Housing Act the government added an alternative tenancy agreement called the Assured Shorthold Tenancy Agreement. The intention of this tenancy was to be a niche product allowing empty homes to be temporarily rented out, and an Assured Shorthold Tenancy Agreement wasn’t valid unless a “Section 20 Memorandum” had previously been served on the tenant warning them to take legal advice, and that they no longer had security of tenure under an AST. Solicitors at the time advised  professional landlords not to use the AST because it was not intended for long term tenancies, and it hadn’t been tested in the courts. Nevertheless Landlords recognised that the value of their property would increase by 40% if they had “vacant possession” and from the moment that the 1988 Act was introduced the Assured Tenancy was dead in the water, and the only tenancy agreement offered was the Assured Shorthold Tenancy Agreement.

The next jigsaw piece in the accident that defines where we are is “Buy to Let”. Letting Agents had suffered from the decline in the PRS and in 1995 ARLA (Association of Residential Letting Agents) marketed “Buy to Let” as a way of boosting their member’s business. At the time loans for landlords were rare and difficult to obtain, ARLA arranged for loans to be available on the condition that properties were let out through an ARLA agent and soon after a whole new business model was born. These two changes came together, fertilised, and gave birth to the new Private Rental Sector, and as with everything Darwinian – it was a total accident!

So where does Housing Benefit fit into this? ….. The Market. Between Housing benefit’s introduction in 1982 and the establishment of a Private Rental Sector market in the late 1990s rents were controlled, but since then Housing Benefit has been at the mercy of the market.

DHSS tenants bring a host of extra costs, and management issues to Landlords. Rental law is based around a monthly tenancy paid in advance, but Housing Benefit is paid in arrears weekly. Housing Benefit tenants generally come with special needs and since “Care in the Community” it is often the Landlord at the frontline of addressing those needs. Additionally a generation of “Benefit Tenants” have grown up, making their living out of living off the Housing Benefit before moving on to another Landlord. Local Authorities are obstructive to landlords trying to recover these bad debts allowing the claimants to move between authorities and landlords, “earning” massive salaries from their fraud. When Benefit is paid to tenants rather than Landlords around 30% of Housing Benefit goes into fraud of this kind.

To date the Government/Local Authorities have looked to landlords to accept those extra costs, and the looseness of the rent assessment system has allowed landlords to cover their extra costs by charging higher rents to Housing Benefit Tenants. At various times in the last 10 years the Benefit System has tried to cap the Housing Benefit available, the most effective being the “Reference Rent” system. The fundamental truth that the Government has never grasped is that in a Capitalist Market Economy the product is traded at the market price. Once the “Reference Rent” bit Landlords stopped renting to DHSS tenants so Westminster City Council had to start paying a £2000 bounty to Landlords who would rent to DHSS tenants……

So that’s how we got to where we are last week. We have a healthy Private Rental Sector operating in a market economy. We have a total lack of building of homes, and a social housing sector which is looking to the PRS to provide the supply to meet it’s demand, but doesn’t want to pay the market rate. That’s my summary, without any political bias – now what is your view?

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