A clear and positive agenda for the private rented sector
Almost 20% of all households are in the private rented sector. According to some estimates, 1.2 million new households will be created over the next five years, of which almost 600,000 are likely to be in the private rented sector.
It is vital that the next Government develops a clear and positive agenda for the private rented sector that supports good landlords to provide the homes to rent the country needs; finds and roots out once and for all criminals who have no place in the market; supports vulnerable tenants; improves access to justice and develops long term tenancy models that have the confidence of both tenants and landlords.
That is why we are calling on all parties to adopt our positive, pragmatic programme for the sector.
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OUR KEY CAMPAIGNS
|Boosting Supply to Meet Demand|
The private rented sector (PRS) now provides a home for one in five UK households. Buying a home is out of reach for many people, and the demand for private renting is set to increase. The Royal Incorporation of Chartered Surveyors (RICS) estimates that 1.8 million new homes to rent are required by 2025.
Despite this, little is being done to create a pro-growth tax environment for the sector. In fact, the tax environment is actively dissuading landlords from investing in new properties or releasing old ones for purchase.
The majority of PRS accommodation is supplied by ordinary people who own one or two properties, investing as an alternative to a pension. Government policy has undermined the confidence of private landlords. Recent tax changes, including restrictions on mortgage interest relief and an additional 3% surcharge on stamp duty have deterred investment by landlords and stalled the whole housing market.
The RLA is calling on all parties to commit to -
The demand for rental properties continues to increase, with 25% of landlords reporting increased demand in the RLA's most recent research. The Royal Incorporation of Chartered Surveyors (RICS) estimates that 1.8 million new homes to rent are required by 2025 to keep up with supply. Despite this, confidence in the sector continues to deteriorate with more landlords selling properties than buying them.
Landlords have to pay an additional levy on stamp duty when buying a new home. This change was introduced by George Osborne as an attempt to 'level the playing field between first-time buyers and landlords'. However, in reality, the cross-over between the two groups is small and the change only serves to put landlords off from providing the homes that tenants desperately need. Research by the University of Cambridge shows that 69% of landlords were put off providing new homes by these changes.
If the supply of homes is to be maintained then more needs to be done to incentivise landlords to invest in bringing empty homes to the market. That is why the RLA is calling for the removal of the stamp duty levy where they will be purchasing property with the intention of increasing supply. This includes bringing empty homes back into use, converting commercial buildings to residential, developing new properties or converting larger properties into smaller, more affordable rental properties.
Where there is scope for tenants to become owner-occupiers, the current capital gains tax (CGT) regime makes this less likely. This is because landlords pay more CGT when selling a property than they would with any other investment. Our research has shown that capital gains tax reduces the supply of homes for owner-occupiers as landlords are less likely to sell where they would normally want to. The RLA is calling for reforms so that property sold to tenants leads to a lower rate of CGT needing to be paid.
Mortgage interest relief (MIR) changes are a major cause of the lack of landlord confidence. With 53% of landlord expect to be affected by it by 2020/21 many landlords are in a position where their investments are no longer viable. This means that a significant proportion of landlords may have to leave the sector in the next few years to protect themselves. The RLA is calling for the removal of the MIR changes to give landlords the confidence they need to continue to provide the high-quality homes that tenants badly need.
The majority of PRS accommodation is supplied by ordinary people who own one or two properties, investing as an alternative to a pension. The RLA believes that the tax regime should support a positive, pragmatic approach that promotes growth of the homes tenants need, while providing these landlords with the security their investments are safe. That is why we are calling on all parties to adopt our proposals for a positive future for the PRS.
Everyone deserves a right to live in a decent home and in most cases tenants do. However, there is a small number of criminal landlords who provide substandard, unsafe homes. These criminals are often the cause of people saying that the sector is unregulated but this could not be further from the truth. There are over 150 acts of parliament that create over 400 legal obligations on a landlord. The vast majority of landlords are committed to providing good quality and follow all of these obligations.
However, where the tiny minority of criminal landlords ignore the law, it is up to the local authority to use their significant enforcement powers to root these criminals out of the sector. Our research is showing that unfortunately this is not the case. Despite civil penalties providing effective funding for them, only 11% of local authorities had served a civil penalty notice in 2018. More than half did not even have a policy in place to use them. Similarly, 67% of local authorities had also not attempted to prosecute a landlord in that time. The end result is that, outside London, enforcement is often non-existant.
Instead of using their powers to identify and tackle the small number of criminals, local authorities often prefer to penalise good landlords through blanket licensing schemes that have little to no effect. This serves to increase the costs on the majority of landlords who wish to provide good quality homes, while doing nothing to the criminal landlords who will continue to ignore their legal obligations.
What is the RLA calling for?
The RLA is calling for local authorities to use the extensive enforcement powers they already have. Licensing schemes do not have any impact on criminal landlords and only increase the costs for tenants and the bureaucratic burden on good landlords.
At a time of budget cuts, it makes no sense for them not to use their powers. Local authorities can issue civil penalty notices for up to £30,000 to criminal landlords. Crucially, they get to keep this money for their own budgets to allow them to better enforce standards across the board. However our research has shown that few local authorities are using these powers, preferring instead to hamper the sector with unnecessary selective licensing schemes.
Landlords do not have to go to court often. Generally, most tenants pay their rent and do not breach their contract. However, when they are forced to go to court by poor tenant behaviour it is clear that the justice system is failing them.
The process is expensive, beset by delays with judges often unaware of the nuances of landlord and tenant law. Landlords and tenants are confused and frustrated by the system. 79% of landlords who used the court's say they were dissatisfied in our research. Citizen's Advice has also found that tenants are put off seeking redress by the complexity and delays.
The courts are overstretched and underfunded. Worse the bailiff service is so slow that in some areas of the country it can take over a year for one enforce a possession order.
It is little wonder then that landlords prefer to simplify this process as much as possible. They do this by using a section 21 notice to regain possession of their property when the tenant has breached the terms of their contract. Good landlords who have protected their deposits properly, given all the paperwork they are required to and provided the tenants with a safe home, can reliably regain the property at the end of the fixed term with this notice.
What is the RLA calling for?
What is the RLA calling for on court reform?
The RLA is calling for wholesale reform of the justice system. We believe that the only way to solve these delays is to introduce a specialist low-cost housing court with judges who are experts in housing law. this would not only improve the experience for landlords but it would allow tenants to feel comfortable seeking redress from the few criminal landlords.
Our research has shown that 98% of landlords would support the introduction of a new court. We have supported landlords by making the case for this in consultations and meetings with the government and we are now calling on all parties to commit to this in the election.
Similarly, landlords should not have to face a 5-month delay in regaining possession of their property when their tenant is anti-social or in rent arrears. The wait for bailiffs is far too long. In some areas of the country it can take over a year for a bailiff to visit the property after the landlord has applied to court.
We have made the case to the government that the bailiff service must be improved so that it becomes as efficent and effective as the High Court Enforcement Officers.
There is no major city in Western Europe or the USA where it can be demonstrated rent controls have been a consistent factor in making housing more affordable. Yet there is continued interest in applying rent controls in the Private Rented Sector (PRS).
Research from the RLA highlights the inescapable truth that rent controls simply do not work. A lack of new social housing and flat real wage growth are factors common across cities in Europe and the USA. The presence of rent controls – where they exist – have done nothing to address affordability.
The RLA call on each of the mainstream parties to rule out the introduction of rent controls to ensure that -
Impact of rent control
More and more households are looking to the private rented sector for a home, including increasing numbers of families – and they are staying for longer. Therefore now, more than ever housing policy needs to be focused on encouraging the supply of private homes to rent. A shortage of homes to let has driven up rents irrespective of whether rent controls are in operation or not. Research indicates:
|Right to Rent|
In 2014, the government introduced new obligations on landlords that made them responsible for checking their tenant's immigration status before granting a tenancy. Landlords had to comply with these 'right to rent' checks or face large fines or potential jail sentences.
Many landlords were overwhelmed by this as it effectively forced them to act as part of the UK's border control without offering any training in the matter.
Worse, due to the confusing way the legislation was set out, where the landlords did fully understand their requirements many found it extremely difficult, if not impossible, to check their tenant's right to rent status before granting a tenancy.
For example, EU citizens moving from their home country to the UK would have to meet the landlord in person before granting the tenancy. Similarly, only 76% of the population of England and Wales had a UK passport in the last census making it difficult for British nationals to prove their status too.
The RLA is calling on all parties to scrap the right to rent requirements and stop forcing landlords to discriminate against tenants.
what is the issue?
Since the right to rent checks were introduced, the RLA has argued that it effectively forces them to discriminate against tenants, breaching their human rights in the process.
Our research found that the fear of getting things wrong led to 44% of private landlords being less likely to rent to those without a British passport.
It also found 53% of landlords were less likely to rent to those with limited time to remain in the UK, whilst 20 per cent said that they were less likely to consider letting property to EU or EEA nationals.
With that in mind we supported a case in the High Court regarding right to rent. Justice Spencer in giving his judgement was clear that right to rent -
|Supporting Vulnerable Tenants|
Increasing numbers of tenants in receipt of benefits now rely on the private rented sector for a place to live. Despite this, changes to the benefits system have reduced the likelihood of landlords renting out to vulnerable tenants. RLA research has shown that Universal Credit is causing rent arrears while preventing landlords from receiving direct payments. At the same time, the Local Housing Allowance Cap has stopped housing payments reflecting local rents in the area.
With Universal Credit now rolled out to most claimants, the flaws in the system are putting more vulnerable tenants in jeopardy than ever before. A great deal needs to be done to improve the system to ensure that landlords can feel confident providing homes to vulnerable tenants.
the main barriers to providing homes to vulnerable tenants
The systems around Universal Credit are failing to protect vulnerable tenants. Alternative payment arrangements (APA) which would allow landlords to be directly paid are difficult to access. Job coaches are not identifying vulnerable tenants so that APA is arranged at the point the claim is made.
It is also incredibly difficult for landlords to communicate with the DWP where Universal Credit payments are not made. Data sharing limitations mean landlords can only discuss a claim once over the phone before their permission to discuss it is revoked. It is little wonder then that payments often continue to the tenant even where they are in 2 months arrears and the landlord has applied for direct payments.
Where these inefficiencies result in malpractice, there is also evidence to suggest that the courts are not providing compensation to landlords.
At the local level, the cap on housing payments has resulted in a shrinking of housing stock available to tenants in receipt of benefits. While local authorities offer a rent guarantee scheme that provides landlords with guaranteed rent if the rent matches the housing rate, more needs to be done to promote this and many landlords cannot access it.
It is little surprise then that more and more landlords are unwilling to rent out to vulnerable tenants. Without reliable payments that reflect the rent in their area this problem is likely to grow worse.
Everything you need to know about the campaign
What the RLA is aiming for with the campaign
A short summary of the issues involved