Patrick Mooney asks whether the new housing ministers will overhaul the legal system for the rental sector
The change of Government ministers responsible for housing policies is likely to see some significant changes in the relationship between Whitehall and landlords in the private rented sector.
Over the past three years Theresa May’s administration implemented a raft of legislative changes affecting private landlords, resulting in many of them threatening to vote with their feet by selling up properties, or greatly reducing the number they let out.
But the focus of new Prime Minister Boris Johnson is expected to be on stimulating greater housebuilding and possibly implementing deregulatory measures – when he’s not dealing with the Brexit crisis.
New faces, new approach?
James Brokenshire and Kit Malthouse have been replaced by Robert Jenrick and Esther McVey, who previously worked together at the Department of Work and Pensions, but are now charged with getting the construction sector building significantly more new homes.
This then puts a big question mark over their approach to the rental market. For instance will they continue with May and Brokenshire’s measures designed to give greater protection to tenants and make the rented sector more professional?
Earlier this summer the Letting Fees ban came into force, the Right to Rent is still being tinkered with and reform of the Section 21 process for evicting tenants is currently open to public consultation.
This is due to close in mid-October, just weeks before the next Brexit departure date expires.
Support for a specialist Housing Court
While preparing its response to the consultation, the Residential Landlords Association (RLA) conducted one of its biggest ever surveys of landlords and letting agents to find out their views on the legal processes for recovering possession of their properties.
This received over 6,000 responses and found a whopping 91 per cent are in favour of the introduction of a specialist Housing Court, with dedicated judges able to focus exclusively on property issues and a privatised bailiff service.
Almost eight out of ten private landlords with experience of using the current court system to repossess their properties are dis-satisfied with how they work and are demanding changes.
The RLA is encouraging its members to write to MPs with their experiences of the possession process.
Lengthy delays
One of their main gripes is that it currently takes an average of over five months from a landlord applying to court, for a property to be returned to them.
The RLA is arguing that simply tinkering with the existing system is not good enough. It wants the Government to establish a single, dedicated housing court that is properly funded and properly staffed.
When similar changes were made in Scotland, the Government had to invest new money and provide more administrative staff after it underestimated the increased pressures brought on the court system.
Warnings of chaos
David Smith, Policy Director for the Residential Landlords Association, said:
“Ministers are proposing some of the most far reaching changes the private rented sector has ever seen. If the new Government decides it wants to proceed with these it is vital that significant and bold reforms are made to the court system.
“With landlords and tenants failing to secure justice in a timely fashion when things do go wrong, anything other than wholesale changes with proper funding to support it will lead to chaos.”
The main demand from private landlords is that Ministers should retain Section 21 as a quick and effective means of recovering rental properties.
On the back of the recent survey it is being claimed that revoking the Section 21 notice could drive more than 40 per cent of landlords out of the sector.
Loss of rental properties
This would be a huge shock to the housing market, making it considerably harder for tenants to find a home to live in. The impact on vulnerable tenants, such as the elderly, those on low incomes or families with a disabled member, could be particularly profound.
Evidence from the RLA survey suggests a large majority of landlords will also become more risk averse and even be unwilling to let their properties to tenants in receipt of benefits.
At present private landlords are five times more likely to use Section 21 than Section 8, even though the latter is the process that is supposed to be used where the tenant is not paying their rent on a regular basis or is causing a nuisance to neighbours.
Fit for purpose alternatives
If Section 21 is removed, then landlords want an alternative that is fit for purpose. The current Section 8 process is used far less often than Section 21 and is regarded as unreliable and slow.
If it becomes the only grounds for possession they claim the delays will worsen, with a lot more cases requiring a court hearing.
Landlords say Section 8 processes need to be improved with additional grounds, amendments to existing ones, and access to an accelerated possession route, such as when they wish to sell their property.
They would also like changes in how tenanted properties (with a rental stream) are valued as the current system encourages landlords to secure vacant possession, before they put a property on the market.
Tenant dis-satisfaction
Interestingly the RLA points out that tenants and other groups are also dis-satisfied with the current legal process and court system.
According to previous research published by Citizens Advice, 54 per cent of tenants have said that the complexity of the process puts them off taking landlords to court where their landlord is failing to look after their property.
A slightly smaller number, 45 per cent of tenants said that the time involved put them off taking action through the courts.
Just over a month to go
With the consultation on scrapping Section 21 processes due to close on 12 October, landlords and tenants in the private rented sector will be eager to see how the new housing ministers react to feedback and formal responses.
When the new Prime Minister was Mayor of London he made a number of statements about the private rental market, which suggest his tendancies lean towards deregulation. This could prove an interesting test of that principle.
Brexit is already having a severe dampening effect on the sales of private housing, with potential buyers increasingly nervous about taking on new loans.
The last thing ministers will want to see is a jittery private rental sector which contracts and reduces in size.