'Changes could make life easier for millions renting in private sector.'
Policy and practice officer Priya Thethi takes a look at changes to the private sector announced at the Conservative party conference and what they could mean for millions of tenants.
In a big week for housing it would have been easy to miss some changes which could have a big effect on the millions of people renting privately. So what are they and what effect will they have?
1) The compulsory regulation of letting agents
Currently: Since 2014, lettings agents have been required to join one of three government-approved Ombudsman, or redress schemes. The purpose of these schemes is to provide a free, independent service for dealing with complaints made by tenants and landlords. The rules with which lettings agents need to comply vary from scheme to scheme, but they are underpinned by the government's private rented sector code of practice.
The changes: Regulation would go a step further than the requirement that lettings agents join a redress scheme, by bringing disparate laws and regulations together into one universal code of practice for letting agents. It's something we have repeatedly called for. There would be a statutory set of minimum standards and training requirements, and one, centralised regulator with enforcement powers. We don't yet know what the standards, or the regulating body, will be, or when they will be enforced. However, estate agents are already covered by similar legislation, so it's likely that the system for lettings agents will be similar.
What this means for the sector: Calls for increased consumer protection in the lettings market have bee growing since around 2012, including from CIH: in 2014, we called for the extension of the regulation which already covers estate agents to lettings agents, and the abolition of lettings agents’ fees. These calls were echoed by the Communities and Local Government Select Committee following an inquiry. However, the coalition government, and the subsequent Conservative government, did not support wholesale regulation of lettings and managing agents, arguing that it would impose a new burden on local authorities. The acceptance of both of these recommendations – the abolition of fees in last year’s autumn statement, and the regulation of lettings agents at this year’s party conference – therefore signals a big change in the government’s attitude towards regulating the private rented sector, and a big win for the bodies which have been calling for the changes.
2) Landlords required to join a redress scheme
Currently: There is a patchwork of laws and requirements governing private landlords, some of which are specific to local authorities. There is also the possibility for landlords to self-regulate, which involves voluntarily signing up to an organisation that promotes best practice, such as the National Landlords Association. However, the Law Commission estimates that only 2.2% of landlords belong to a professional body like this.
The changes: Landlords will now be required to be part of an Ombudsman, or redress scheme, which is already the requirement for lettings agents. Like with lettings agents redress schemes, this change will give tenants access to a means of dispute resolution over issues like repairs and maintenance. Again, the bodies which will be offering the government-approved address schemes have yet to be announced. Once they are, landlords will have the choice to sign up directly, or via a lettings agent.
What this means for the sector: This isn’t statutory regulation with a legal basis. However, regulation of this kind needs resources for local authorities to enforce it, which are currently stretched to their limit. By combining compulsory membership of a redress scheme, run by a professional body, with self-financing self-regulation, the government will have gone a significant way towards improving standards in the private rented sector in a way which can truly be achieved. It’s also important to note that this form of regulation doesn't necessarily involve a set of common, statutory minimum standards, but we think this would be a valuable addition in order to avoid a "race to the bottom" in terms of which redress schemes are cheapest to offer, and are subsequently chosen by landlords. We'll also need to see how the government intends to ensure that landlords do join a redress scheme. Finally, having a route of complaint doesn’t necessarily protect tenants from “revenge evictions”; despite these being made illegal in 2015, research shows that more than half of local councils haven’t used these powers – again, due to lack of enforcement resources, as well as lack of tenant awareness. However, in principle, this is a strong overall approach to quality, especially when combined with the tougher penalties for rogue landlords announced in the Housing and Planning Act 2016.
3) New incentives for landlords to offer tenancies of at least 12 months
Currently: There is currently no statutory minimum tenancy length. However, the coalition government developed a model tenancy agreement for use when landlords and tenants are seeking to enter into a longer-term tenancy. Its use is discretionary, and the Department of Communities and Local Government has indicated that they would not want to impose a statutory minimum tenancy length.
The changes: Longer tenancies would still not be enforced by law; instead, landlords would be incentivised to offer tenancies of at least one year in length. The detail on what form these incentives might take will be released in the upcoming Autumn budget.
What this means for the sector: Almost one-third of all statutory homelessness cases in 2016 were attributed to the loss of an assured shorthold tenancy. Similarly, the number of “accelerated possession” claims by private landlords using section 21s almost doubled between 2009 and 2016. Security in the private rented sector is therefore a significant concern, especially with regards to tenancy length, since “no-fault” Section 21 eviction notices can’t be served within a tenancy’s fixed term. However, as with the regulation of lettings agents, the government had previously shown unwillingness to take measures to increase security in the private rented sector. This, then, signals a sea change in attitudes, and another success for the CIH - we have been calling for the use of incentives to increase quality and security in the PRS since 2014. The measures announced don’t go quite as far as we’d like, especially given that 50% of tenancies in the PRS are already longer than 12 months. However, the direction of travel indicates that the government has recognised the problem, and future reform now feels like a real possibility.
Taken together these measures represent a really positive step forward to improving the experience of the many millions of people living in the private rented sector.
Priya Thethi is a policy and practice officer at the Chartered Institute of Housing.