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The Chartered Institute of Housing is the independent voice for housing and the home of professional standards

A chance to boost standards in the private rented sector

13/01/2015


New figures from Savills have revealed that private landlords have made £177 billion from rising house prices in five years, prompting calls for closer scrutiny of the tax breaks they currently enjoy. CIH deputy chief executive Gavin Smart says the government has an opportunity to look at how those tax breaks can be used to raise standards in the private rented sector at the same time.

Gavin SmartThe Financial Times featured some fascinating analysis from property firm Savills over the weekend, which revealed that the value of the UK’s private rented housing stock jumped by 57% during 2009 to 2014. That’s by far the biggest increase in any tenure – the value of owner-occupied homes without a mortgage and social rented homes both rose by 20 per cent, while for owner-occupied properties with a mortgage the rise was five per cent.

As the FT says, this jump in value is driven by both an increasing number of private rented homes and rising house prices.  Newly-rented stock has grown in value by £242 billion in the five years to 2014, while the value of existing stock has increased by £177 billion.

Many private renters will understandably be infuriated by these figures.  People who live in private rented homes spend on average 40 per cent of their income on housing costs – a bigger proportion than either home-owners or social renters – and in return some have to put up with extremely poor standards. As we reported in last year’s UK Housing Review, the English Housing Survey shows that a third of private rented homes would have failed the government’s Decent Homes Standard in 2012, compared to only around one in seven social rented homes, while almost one in five don’t have central heating.

The FT reports that Charlie Elphicke, Conservative MP for Dover, said there was a strong case for ministers to call a halt to relief on mortgage interest, for example, and look at other perks such as wear and tear allocations.  If the government is going to take a look at these tax breaks, we think it should examine targeting them more effectively.  Private landlords currently receive around £7 billion of tax allowances a year, including for repairs and maintenance, but there is no incentive to carry out work above the minimum standard – and that standard is not being enforced effectively.

Our report with the Resolution Foundation last year argued that if private landlords are going to get tax breaks, they should be targeted at landlords who sign up for a new national accreditation scheme to raise standards.  Targeted incentives would encourage landlords to improve the maintenance and management of their properties, offering a ‘something for something’ deal.  But we also warned that more effective regulation is needed to tackle the most unscrupulous landlords.

We think this would be an effective way of improving standards – but of course if we want to tackle the cost of private rented housing (and the cost of other tenures too), we need to drastically increase the number of new homes we are building.  An increasing number of tenants are having to rely on housing benefit to help pay the rent.  Figures from the Department for Work and Pensions show that £9.3 billion went to private landlords in housing benefit in 2013-14 – more than a third of the total spent on housing benefit that year and up from £3.4 billion in 1998.

Lucian Cook, director of residential research at Savills, said his firm’s data shows that the private rented market is “fundamentally unsupplied” – and of course this applies to other tenures too.  As Clive Betts, chair of the Communities and Local Government Commons select committee, says at the end of the FT article: “In the end you can take away tax breaks and other aspects of housing finance but you will never combat the problem of rising rents and rising prices without building more homes.”

 


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