Sometimes government policy doesn’t seem to join up too well – with different policies apparently conflicting with each other.
Two good examples are (1) the lending activities of state owned banks which appear to hamper what local councils are trying to do with their private rented sector access schemes, especially lease schemes and (2) policies on HMOs which appear to be working against the recent change to the rate of LHA for single people under 35.
Let’s look at the first example first.
State Owned Banks Not Exactly Helping Those in Housing Need
Someone working in temporary housing in Exeter emailed me to complain that a state owned bank, Northern Rock, would not allow her private landlord client (whose buy to let mortgage is with Northern Rock) to let his property under a 3 year lease scheme to the council. And could I help?
First, for non-housing people reading this blog, we will briefly explain what a private lease scheme is.
Under long lease schemes a private landlord can get a guaranteed rent (albeit a little below market rents) from letting to the council or housing association. The council in turn lets the property to people in housing need. The landlord gets no voids for 3 years and the property back at the end or however long the lease term is and everyone should be happy.
But this mortgage lender apparently insists that lettings are only on a standard assured shorthold tenancy or lease of less than a year. Never mind that landlords who have entered into long leases are getting a guaranteed rent (courtesy of the taxpayer ultimately), suffering no voids and won’t have to pay letting fees and are therefore presumably less likely to default on their buy to let mortgages as a result.
As Northern Rock mortgages are now owned by the state, readers of this blog might like to consider the irony that a state owned bank won’t consider these schemes which, of course, are meant to house those in housing need.
According to James Ball at www.LannerCapital.co.uk other part state owned banks who also “Like to say No” to lease schemes of this type and length are Lloyds Banking Group (BM Solutions and HBOS) and Nat West (part of RBS.)
BM Solutions and Northern Rock go further and are among the state owned banks who will also not lend to landlords who wish to let to people on Local Housing Allowance.
Not Joined Up
At the same time, local councils that we advise and many others across the land are very busy trying to attract landlords to their private rented sector schemes (including lease schemes) as a home in the private rented sector is often the only housing option they can offer.
Much money and effort is spent on local councils’ endeavours on this kind of work only to be thwarted by state owned banks that won’t let their landlord customers let to these same people that the councils are trying to help.
Perhaps someone senior in Housing at the government or in local authorities ought to have a word with whomever controls lending at these state owned banks.
HMO Article 4 Directions Seem at Odds with Policy on Local Housing Allowance
Now let’s look at HMOs.
For the uninitiated an HMO is a House in Multiple Occupation – basically a house shared by people who form more than two “households.”
First some background. (Journalists with short attention spans should skip the next two paragraphs.)
The Coalition Government allowed the creation of HMOs without the need for planning permission. But at the same time, they made it easier for local authorities to use planning laws to restrict HMOs locally – through a mechanism called an “Article 4 Direction.”
These Article 4 Directions, where implemented, remove “permitted development rights” in a specific geographical area and require planning permission for the creation of all new HMOs. The Directions are commonly likely only to be applied for and implemented in towns and cities that have a high proportion of shared housing, such as university towns or areas with a large number of low income households.
For those with short attention spans it simply boils down to local councils being able to apply to restrict HMOs in their area.
NLA Objections
Landlords’ groups like the National Landlords Association (the NLA) have expressed concern that the Article 4 Directions are likely to displace students from the streets around universities and push them to other areas where HMOs are currently occupied by tenants dependent on Local Housing Allowance (LHA) to pay their rent and other low income households.
The result, they say could be fewer properties available for those on low incomes – potentially increasing housing waiting lists and costing local authorities significant amounts of money for temporary B&B accommodation.
We think this is possible too.
Worse Still
But at LettingFocus, we think the situation could be made worse still from April 2012 when the shared room rate (room in a shared house) is extended from age 25 up to age 35 – meaning that single people under 35 who are on Local Housing Allowance will be paid a shared room rate rather than a rate for a flat.
This move can only further increase the demand for just this type of HMO at the same time as local Article 4 Directions reduces its supply. Again, this does not seem like joined up policy to us.
MORE ABOUT LETTINGFOCUS AND WHAT WE DO
LettingFocus.com is the home of Private Rented Sector Information and expertise and I’m David Lawrenson, a landlord and property investor myself for over 25 years and best known as the author of “Successful Property Letting” – the UK’s top selling commercially published property book for the last 3 years. 26,000 copies sold (to Feb 2011).
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