NEWHAM CASE PROVES NEED TO SUPPORT INVESTMENT IN NEW RENTED PROPERTIES
News today that Newham Council in London is looking to Stoke-on-Trent in Staffordshire to provide spare accommodation for up to 500 families on benefits proves the case for more to be done to encourage greater investment in the private rental market, one of the country’s leading landlords organisations has said today.
Across London, rent for a two bedroom property averages 53% of the average single person's salary whilst in the North East the figure stands at 25%. Last year across London, rents increased by 7.2%, according to Savills.
Agreeing with the Mayor of Newham, Sir Robin Wales, that the private rental sector across the capital and Newham in particular, is beginning to “overheat”, the Residential Landlords Association (RLA) is calling for greater efforts to boost the supply of private rented properties and for the Government and local authorities to do more to reduce the costs of renting.
In its latest analysis of the market, the estate agency Countrywide highlighted that demand for rental properties is so high that it is causing a growing number of rental properties to be let before they are even advertised, leading it to warn that “with a record number of tenants entering the private rental sector, there is a vast shortage of properties available in all areas of UK, which could potentially fuel a steady rise in rent prices throughout 2012."
A recent report for the RLA by Professor Michael Ball of Reading University has further warned that the unfavourable tax and regulatory environment in which the private rental operates inevitably leads to high costs for landlords which are then invariably passed on to tenants in higher rents.
Meanwhile, in Newham, the Council is considering introducing a selective licensing scheme to cover the whole of the Borough. This will mean that fees have to be paid by landlords which, in turn, will be passed on to their tenants, thus increasing the amount of rent payable.
RLA Policy Director, Richard Jones explained:
“At the heart of the crisis now being found in the private rental market in London is a chronic shortage of rental properties, and a tax and regulatory environment which serves to dissuade investment in new properties and increase the costs borne by tenants. According to Professor Ball, an average of 17% of a tenant’s total rent is the sum landlords need to pay the taxes associated with renting a property.
“If rents are to be prevented from becoming completely unaffordable, the Government must act to establish a more favourable environment in which to invest in new rental property. The RLA will shortly be discussing with the Treasury a series of taxation reforms that would substantially boost the supply of properties without an adverse impact on Government revenue.
“Likewise, just as the tax environment is a barrier to investment, so too is the haphazard regulatory environment in which the sector operates, with many regulations, such as selective licensing as called for by Newham’s Mayor, Sir Robin Wales, simply bureaucratic and serving only to drive up costs.
“When it comes to regulation what is needed is a robust system of self-regulation and accreditation for the many responsible landlords and for tenants to be given all the information they need to properly hold their landlords to account. We also need improved legal training for Environmental Health Officers leading to speedy prosecutions against criminal landlords. Local authorities can then better use their finite resources to root out those landlords who should not be allowed to rent.
“Some such as Ken Livingstone are calling for rent controls. This would be a disaster and would make matters far worse.”