Patrick Mooney looks at the pressures building on the private landlord sector and asks for more carrots
After the latest in a series of Government announcements affecting private sector tenancies, landlords are expressing both their frustration and a growing willingness to consider selling their rental properties.
Landlords view the changes very much like a dripping tap, with each small drop building towards a major cumulative loss. The final straw could be if rent controls are introduced next by Ministers as part of their drive to enhance regulation, which landlords condemn as unnecessary red tape.
With the Government now consulting on plans to ban Section 21 evictions and openly discussing the possibility of introducing longer tenancies, a survey of private landlords has revealed that a quarter of them are planning on selling one or more properties within the next year.
As one in five of us are private tenants this could have huge implications for the public at large.
Future of rental sector ‘at risk’
And now David Smith, Policy Director for the Residential Landlords Association, has warned legislators that they are risking the future of the private rental sector.
He summarised his misgivings with the statement: “All the talk of longer tenancies will mean nothing if the homes to rent are not there in the first place.”
What makes this tension between Government and landlords all the more surprising is that the changes are coming from an unexpected source.
The Conservatives have long portrayed themselves as the friends of the private rented sector with Ministers and hundreds of MPs earning income from the letting out of properties.
Electoral necessities
It was only two years ago that they opposed and talked out Karen Buck’s efforts to improve property conditions and tenants’ safety. But how times have changed. Karen Buck’s Bill was re-introduced, it got Government support and it is now on the statute book along with a host of other regulations.
The reason for the abrupt change in Conservative policy has not been fully explained by the Party itself, but plenty of commentators have suggested this is all about political realities.
As home ownership rates have declined among young adults, increasing numbers of 18 to 35 year olds are renting privately. The sector has doubled in size over the last decade, but could that be about to change?
Of almost 2,500 landlords who responded to a survey by the Residential Landlords Association, over 25 per cent said that they were planning to sell at least one property over the next year – the highest proportion since the RLA started asking this question regularly in 2016.
Demand could push up rents
The same survey revealed that 23 per cent of landlords are reporting an increased demand for rental property over the previous three months.
Looking forward, over a third of landlords reported low levels of confidence in the private rented sector over the next 12 months.
These results follow the publication of Government data earlier in the year which found that that 10 per cent of private landlords (representing 18 per cent of tenancies) plan to decrease the number of properties they rent out, while five per cent of landlords (representing five per cent of tenancies) plan to sell all of their properties.
The Royal Institution of Chartered Surveyors has also warned that the imbalance between supply and demand in the rental market is expected to see rent increases averaging three per cent per annum over the next five years.
Competing pressures
Conservative Ministers and policy makers know that this could severely damage their electoral prospects and that measures to please voters are needed to avoid a bad defeat at the polls.
Meanwhile David Smith of the RLA warns them that: “The Government’s tax increases on the sector are already making it difficult for tenants to find a place to live, with many landlords not renewing tenancies.
“If rushed and not thought through, planned changes to the way landlords can repossess properties risk making the situation even worse. Action is needed to stimulate supply with pro-growth taxation and a process for repossessing homes that is fair to all.”
There could be more challenges on the horizon for both Government and private landlords in terms of the changes needed to combat climate change. It’s an issue which is resonating with the public and gaining traction among politicians. It has even knocked Brexit off the front pages in recent weeks.
The time for change
A number of things stand out from the recent youth climate strikes, the visit of Swedish campaigner Greta Thunberg and the mainly peaceful protests of Extinction Rebellion.
Campaigners have been united in their call for politicians and policymakers to tell the truth about climate change – its impacts and the scale of the response required.
They have demanded we treat the climate crisis as an emergency and recognise that “business as usual” is in effect a form of “climate appeasement”.
But they have campaigned with a sense of hope. An increasing number of people, young and old, see that the way we run our economy is damaging our climate, our environment and our society, but that, crucially, it is within our power to change it for the better.
Step change in domestic heating
Disconnecting new homes from the gas grid by 2025 and accelerating heat network deployment in towns and cities are two of the radical recommendations by the Committee on Climate Change (CCC) in its new report ‘Net Zero – The UK’s contribution to stopping global warming’.
“Serious plans are needed to clean up the UK’s heating systems”, warns the CCC, which sets out a broad range of measures that UK, Wales and Scotland governments can take to deliver on a proposed new net-zero greenhouse gas emissions target by 2050.
Richard Slee, CEO of Switch2Energy added: “If policymakers adopt the CCC’s recommendations, the housing industry has a mountain to climb in ensuring that the share of low carbon heating increases from 4.5 per cent today to 90 per cent in 2050.”
The private rented sector has a particularly tough challenge to overcome due to historic issues to do with property conditions. While the quality of accommodation and the way it is managed is by no means universally poor, it is extremely variable.
Resources in short supply
Some 27 per cent of privately rented homes do not meet the decent homes standard, more than in any other tenure. There is a particular problem at the bottom end of the market where unscrupulous landlords exploit, often vulnerable, tenants who have few other housing options.
Targeted action to address this issue is therefore overdue. But the lack of resources within many local authorities remains a major barrier to efforts to tackle rogue landlords.
Government figures show that between 2009/10 and 2015/16 there was a 19 per cent fall in the amount of money local authorities were spending on enforcing standards in the private sector. Anecdotal evidence suggests this has continued in recent years.
Some of the measures that have been introduced, such as new civil penalties, may help to address this.
Collaboration and carrots
The Government could still do more to support councils make better use of these powers, for example by providing better guidance and ‘seed funding’ to enable them to bring in additional resources. Over the longer term, it is likely that many of these teams will be able to become self-financing.
That is why a three-pronged approach involving Government working collaboratively with local councils and representative organisations like the Residential Landlords Association is needed.
Carrots usually work better than sticks – and with so many landlords thinking of leaving the sector, we need to use more incentives to get rental properties improved and made energy efficient before it is too late.