More powers needed to tackle private rented accommodation

PRIVATE RENTING: A combination of bad landlords and bad tenants can bring down an area together. How do we tackle this?

PRIVATE landlords divide opinions.

To some they’re the saviour of the state which has failed to build enough social homes for rent. To others they’re money grabbing opportunists who lord over substandard properties while pocketing the cash.

As with most things I suspect people with any knowledge or experience of the private rented sector could make an argument either way – and both statements could be evidenced as truth when a specific example is used.

Clearly the story also varies depending on which part of the UK you come from, your social standing (or ability to pay for choice) and the state of your local housing market.

I should start out here by being clear that the majority of private landlords are good and the majority of private tenants are also well behaved.

The private rented sector in Oldham has grown by a third in 10 years (now over 12,000 homes accounting for 13.6 per cent of the market) and many people clearly see private renting as a necessary affordable option. Of these 12,000 homes, around 55 per cent have tenants claiming some form of Housing Benefit.

One conclusion I’ve reached, however, is that an unhealthy cycle of bad landlords and bad tenants can begin where they bring down an area together – and that particular problem is what I want to focus on in this blog.

Let’s look at things from a landlord’s point of view, first.

Bad tenants? Well, they are a liability, can cost a significant amount of money and put at risk the ability of a landlord to pay their own mortgage – aside from the impact they have on neighbours. With direct payment of Housing Benefit and those on low incomes now forced to pay some element of Council Tax, the rent sometimes comes second place. And, of course, some will just not plan their income and expenditure well and get into debt unwittingly.

What about from a tenant’s point of view?

Bad landlords? Well, they’re in it for the short-term. They’ve bought a property cheaply and just want the maximum return in the shortest time without forking out on anything ‘unnecessary’: even if that is something fundamental to a healthy home, like good heating, water and the property being a decent state of repair. There are sometimes reports of bullying, intimidation and the feeling of being trapped in a property which isn’t decent but where the tenant has little choice. They might not have good credit, for example, or may rely on Housing Benefit and are restricted by rent levels without the means to top up their Housing Benefit entitlement.

In isolation a good housing team would deal with both sides of this issue because – of course – neither is acceptable. A good approach to the private rented sector should address bad tenants and landlords and at the same time support those genuine landlords and tenants who respect their homes and neighbourhoods.

But what do you do when a whole neighbourhood is caught up in this kind of cycle of decline? Poor properties in an area with poor environmental standards will inevitably reach a certain point when those who do have a choice simply decide to leave. Over a period of time the concentration of properties like this ultimately means a concentration of social problems.

Up and down the UK, pockets exist like this which tell the story of a cycle of decline. For decision makers, policy officers and the community this poses a real problem – so what is the solution?

There’s something instinctively wrong for me when public funds are used to pay for private housing in substandard properties. There’s no argument that there isn’t money in poorer areas to pay for property improvements: quite the opposite.

Let’s do some sums…

Let’s suppose that you pick up a cheap terrace house at auction from around £40,000. In Oldham a two-bed terrace house will usually fetch around £395 a month rent in those areas (although examples of particularly poor properties are readily available for much less).

At £395 a month, an annual return of £4,740 on an investment of £40,000 represents a return approaching 12 per cent. That isn’t bad at all when you consider the national average ‘yield’ is 6 per cent. Any suggestion then that in areas of low rents there isn’t the money to invest in creating decent homes is simply untrue.

Clearly there will be cases of accidental landlords who might inherit a property from a relative, or perhaps someone who bought at the very top of the housing market (and that seems like a long time ago now).

It’s more likely to be a statement of attitude about ‘worth’ than any business case. Landlords either feel as though they don’t have to invest because the supply of tenants is strong, or they feel somehow the tenants who do appear will make do, or even unworthy as “they’ll only wreck it”.

My answer would be simple. Don’t allow Housing Benefit to be paid on properties which fail to meet the Decent Homes standard.

I accept there’s a major problem with this approach if done in isolation, however, as there isn’t the supply of decent stock in some areas to house those in receipt of Housing Benefits, which represents a huge failure by successive governments to address the lack of investment in social housing.

If my proposal were implemented in isolation it would clearly have a damaging effect. Landlords unable to carry out the necessary repairs would be stuck with a property they cannot rent to those without the ability to pay themselves.

Perhaps then the solution is for a targeted intervention to take place where there is evidence of poor housing conditions, low rents and property values, and a high turnover of tenancies – plus associated environmental issues.

As it stands, to have any chance of introducing a Licensing Scheme requires evidence of high crime rates linked directly to private rented properties. But the two do not always go together and, if the need is a housing one, then the measure of need should be housing-related.

With a targeted intervention there has to be something in it for everyone if we are to win hearts and minds and make genuine progress.

So, the deal should be two-way, I suggest. If landlords step up and invest to make their homes decent then they should receive more protection from bad tenants too.

You could perhaps go even further. In many countries the relationship is between the state and the landlord with the former paying slightly less in rent in return for taking on responsibility for repairs and maintenance, tenant turnover and vacant periods.

If we accept that part of the reason ‘subprime renting’ takes place is due to the lack of decision makers investing in a sufficient number of decent homes then perhaps this could work. It happens on a smaller scale already in the UK.

We should do far more to encourage good landlords and good tenants than we do. Then, hand in hand, we can have a meaningful system that protects tenants from poor landlords and protects landlords from poor tenants.

As a Council, we are taking tough action on poor-quality privately rented homes and dealt with 279 cases in 2012/13, with 95 per cent of landlords immediately complying.

We’re reviewing our options around selective landlord licensing and are looking to start consultation on specific areas in spring.

We’ve also just launched ‘LetsHelpYou’ – an award-winning free self-service website to support households to access the Private Rented Sector. This encourages better quality properties to be advertised and allows tenants and landlords to match up. It complements our co-operative principles. Click here to find out more.

The Council is also in discussion with the National Landlords Association about how we can encourage smaller-scale landlords who need their advice or support

In spite of our efforts though, it’s clear that councils can’t act alone on this: we need a strong approach from Government on this issue too.

And – just perhaps – when the national media finishes its obsession with negative headlines about benefits claimants it might also get around to shining a clearer light on this issue in a more meaningful way?

We live in hope!

Thanks for listening,

Jim

One thought on “More powers needed to tackle private rented accommodation

  1. Shaun McGrath

    “And – just perhaps – when the national media finishes its obsession with negative headlines about benefits claimants it might also get around to shining a clearer light on this issue in a more meaningful way?”

    In that case, some time around the point at which the Universe stops expanding and begins its inevitable implosion.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s