The Government has released a new ‘Housing White Paper’. Whilst many of the provisions are about construction (specifically building more homes), there are several sections within the White Paper that identify upcoming policy for the private rented sector and these provide important insights to the direction of future legislation.
The paper acknowledges that the lack of homes built creates upward pressure on house prices (good for landlords), and upward pressure on rental values (again good for landlords). However, landlords are not responsible for house building, house prices or rent levels, all these are outside their direct control.
The idea that building more homes will reduce the price of housing and therefore reduce rent levels is actually mentioned in the White Paper. Whilst this will not excite landlords, in truth it will not excite the 64% of households who own their own home either. One can only presume that in reality it is more likely to be a lowering of the rate of growth than house prices actually falling. This is confirmed when you look at the target for the number of houses to be built and compare this to the people looking for a home.
Without significant public sector house building, more than is currently being talked about, in many areas of the country councils will continue to rely on private landlords in order to fulfil their homelessness functions. Any lower rent levels here will have a positive effect on the public purse in that it reduces the benefits bill.
Another thread in the White Paper, brought through from the budget Autumn statement, is the previously announced ban on fees charged by letting agents to tenants. Whilst in the 1980s it was the norm to charge 10-15 percent ‘commission’ of the rent for management, increasing competition on the high street has meant that there has been increasing pressure to keep headline commission rates low and seek to make enough money to pay the bills elsewhere. Welcome to the world of charging tenants for some of the costs involved in lettings.
The White Paper confirms the Government’s intention to consult and then ban agent fees (note their mind seems made up!) as soon as Parliamentary time allows. In practise, the consultation will take place during Spring 2017 and the legislation is likely to come into force probably in April 2018. In order to pay the bills and keep providing a service, this will require agents to raise revenue from other sources and/or cut costs.
The White Paper is also suggesting that new large scale build-to-let developments should use a three year tenancy. This is an interesting proposal as many tenants may prefer this security. It may also mean that some landlords and agents renting privately may also want some of those tenants seeking longer term stable rentals. Although private tenants currently stay an average of around 4 years in the property, this is rarely on anything other than a fixed term and then periodic or a series of fixed term agreements. To effect such a change in the private rented sector would require many mortgage lenders having to change their terms and conditions.
The Housing and Planning Act 2016 is still awaiting commencement orders bringing into force the sections that will affect private renting. Notable here is the ability to ban landlords and letting agents who are found persistently guilty of not following the law when operating in the private rented sector.
In the same vein, the Housing and Planning Act creates the ability for local authorities to have a list of rogue landlords. Banning orders to remove rogue landlords will be introduced.
Another part of the White Paper raises the possibility of introducing mandatory electrical safety check on rented properties for all landlords. These checks are already required on houses in multiple occupation (HMOs) every five years.
Mandatory licensing of HMOs currently applies for houses that have five or more people and three or more ‘qualifying’ storeys. The White Paper also includes a proposal to alter the rule about the number of storeys. This would mean that any house in multiple occupation that has five or more people would need to be licensed by the local authority for the area in which the property is located.
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