The Private Rented Sector and Some Key Issues for Government

I was quoted extensively at the Guardian Housing Network blog last week and I think it is worth highlighting the key points I made.

Why the PRS is in the News

1. The private rented sector (PRS) is increasingly in the news and will remain so, partly because of its growing size and partly because of rising rent levels, which after a quiet decade have begun to soar, especially in economically advantaged areas like London.

2. This has led to some calls for rent control, but we think this would be too hard to enforce in the real world competitive marketplace and likely to lead to tenants offering other payments to secure their desired property.

3. Rising rents, like growing house prices, are simply a consequence of a lack of housing and a bulging population. In this matter, the PRS is indivisible from the rest of the housing market and the solution is the same: we simply need more homes. And to get more homes we need to ease planning restrictions.

Buy to Let Lenders Have an Impact on Length of Tenancy Agreements

4. Despite popular perceptions, our findings and those of other studies, including a recent one from the National Landlords Association, are that the majority of landlords actually want to hold on to good tenants for a long time – sometimes even if it means they have to accept less than market rent.

5. However, if there is a mortgage on the property, landlords will usually be restricted to offering tenancy agreements with fixed terms of no more than a year, because terms and conditions in their buy-to-let mortgage. Our work with some of the lenders has challenged the logic of this and I’m sure we will see longer-term assured shorthold tenancies become the norm in the future.

Why Many Landlords Fight Shy of LHA Lets

6. Compared to “non-LHA lets”, letting a property to tenants who are dependent on Local Housing Allowance (LHA) is seen as a huge extra hassle for landlords for a whole host of reasons.

– In a private, non LHA let, a landlord is paid rent in advance and usually there will also be a deposit which can be claimed against in the event of damage (providing the landlord did a thorough inventory at start and end of the tenancy.) There is usually no deposit on LHA lets and local authority bonds  – where available – can be hard to claim against.

– Tenants on LHA have to complete a lot of paperwork to set up their claim and the Housing Benefit department can often be slow to process these and start payments. LHA awards can also stop without warning simply because the tenant’s eligibility for support has changed. Delays in set up and changes in eligibility threaten the tenant’s ability to pay the rent.

– Under buy-to-let mortgage conditions some lenders still don’t allow a landlord to let to “non working” people. Insurance can also cost more too.

– LHA payments are now limited by caps and also to the 30th percentile of local market rents, setting a limit to what landlords can charge.

– Constant tinkering with the system of LHA / Housing Benefit over the years has confused landlords. Many are no longer sure how it works, and therefore avoid lets to LHA dependent tenants altogether.

Only when these some of these differences and problems are removed will significant numbers of landlords become willing to let to tenants who are dependent on LHA.

Government, Licensing, Accreditation and Landlords – the Regulatory Battleground

7. There is more that councils could do to improve the way they work with private landlords while still driving out the small rogue element. In particular, they need to sharpen up the marketing of the products and solutions they have for the LHA end of the private landlord market, stop internal wasteful competition between local authorities and housing associations and think more like private landlords  – whose main enemies are cost, time, risk and “hassle”.

8. In the short term, national and local government resources should be shifted away from universal landlord accreditation and licensing and onto uncovering the worst landlords – those who abuse tenants and let unfit properties.

– But this must be combined with much harsher penalties for “have a go” amateur landlords who do not carry out their landlord responsibilities, either through ignorance or laziness. Accidental landlords must learn that letting property is a serious business and they must take their responsibilities seriously.

9. In the medium term, accreditation may be inevitable. When it comes, the focus should be on offering simple, easy to join schemes of real value to private landlords, and thus their tenant customers -with any surplus directed to unmasking rogue landlords, not lost to administration.

Houses in Multi Occupation (HMOs)

10. There is a demand for HMOs, which simply reflects the general excess level of housing demand. Instead of clamping down on HMOs via blunt planning policies, policy should be focussed on dealing with unacceptable behaviours from tenants in the HMOs with co-operation of the owners of the properties.  If there is a problem with how HMOs are managed or antisocial issues around them, then the law should be used to deal with it.


11. The tax system around buy to let does not offer sufficient incentives to landlords to improve properties.

Build to Let

12. Succesive governments have been very keen to get institutuional investment into private letting and, at LettingFocus we see a new role for the housing associations here. However, incentives and subsidies for “big build to let” should not give them an unfair advantage over small scale private landlords. Also, a fair amount of surplus profit generated must to be ploughed back into low cost affordable housing.

ABOUT LETTINGFOCUS AND WHAT WE DO is the home of Private Rented Sector Consultancy and advice.

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We are advisors to a range of organisations including banks, building societies, local authorities, social housing providers, institutional investors and insurers. We help them develop and improve their services and products for private landlords.

We also write for property websites, speak at property events (send an email to [email protected] to find out about our next event) and we are regularly quoted by the media.

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We also help landlords and property investors by showing how to make money in the private rented sector using ways which are fair to tenants and which involve minimal risk to the investor.


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