A UK parliamentary inquiry into private renting might, just might, be an opportunity to get desperately needed reforms to the private rented sector in England which encourage supply of homes for renting and also optimal security for those renting them.
These two aims are usually seen as antithetical. It is assumed that private landlords want laws allowing them to eject tenants at the drop of a hat so that they have absolute flexibility in setting new rents or disposing of their properties at will. Meanwhile tenants are assumed to need security in terms of being able to treat their rented property as a home, to all intents and purposes their own.
The economic assumption has been that the more security tenants get, the less supply will be offered to the market.
Certainly private renting became residualised in the last decades of the 20th century while, home ownership became the ideal and social housing merely a safety net for the vulnerable. Conservative initiatives in the 1980s to create new forms of more flexible tenancies, particularly the assured shorthold tenancy, may have had some effect in increasing private renting but it looks as if tougher economic conditions are now driving an accelerating increase. Private renting started to grow in the late 1990s reaching 9% of tenures in 2001. According to the latest census this had risen to 15% by 2011. Meanwhile the number holding mortgaged property had fallen from 39% to 33%, a situation dubbed “generation rent”.
The concern is that the supply of decent private homes will not meet the growing demand (indeed, is not meeting it now if you take the word “decent” seriously), a demand driven by immigration as well as rising house prices and the mortgage drought. Some of the supply is being produced by people who can’t sell their home so rent them out. Some has come on tap thanks to the buy-for-let sector (with rented housing perhaps seen as more lucrative than declining pensions); this, almost by definition, finds properties from other sectors rather than generating new supply itself.
If private renting is to be the “new normal”, there needs to be a new legal infrastructure to square the circle of supply and security, and this, presumably, is what the Communities and Local Government Committee will be looking at and seeking to achieve.
Fortunately the answer may be staring committee members in the face – and has been since 2006 when the Law Commission produced it’s final Renting Homes report (available here with its materials).
The suggestion is that the law is too complex with its layers of common law distinctions (between tenants and licensees for example) interwoven with legislative provisions and regulation creating various forms of tenancy depending in part whether one is in the private or HMO (housing in multiple occupation), local authority or housing association sector. Neither tenants nor landlords are clear about their rights and obligations as a result. What is needed is simplification and integration.
Importantly what is also needed is an economic incentive to draw investment into the rented sector and increase supply – likely to also improve quality of accommodation more effectively than bureaucratic controls – particularly given cuts in local authorities. The good would not instantly drive out the bad but would provide competition that would make them raise their game (and perhaps cut their rents).
Great harm has been done through the long standing over-promotion of home-ownership and marginalization of renting – not only to those who have taken on substantial financial burdens which they cannot afford but also to those who are demonised by their exclusion from the presumed privileges of ownership
The Commission rejected a licensing scheme that would be yet another layer of probably unworkable regulation. It favoured instead “enhanced self-regulation” involving landlords, agents, local authorities and tenants. There would be accreditation schemes, a single code of practice for letting and management and regulation of accommodation agencies. In effect this would aim at “responsiblising” the private rented sector rather than demonising it.
In its report, Renting Homes, the Law Commission proposed requiring landlords to provide written model contracts or tenancy agreements that are fair, transparent and easily understood by the parties to those contracts. They could be adapted to individual circumstances but would contain the legal rights and requirements as set out by Parliament.
Other proposals include a requirement to use a tenancy deposit scheme.
The Commission rejected the pre-1988 regime of statutory tenancy security, but there would be flexibility, rejecting the assumption behind the creation of shorthold tenancies that private landlords only wanted to offer short lets. Many are forced into doing this by the fear of otherwise locking themselves into particular rent levels while the market may be changing.
With a more dynamic market and easier entry for new-build private homes, more diverse tenancies could be available. Those wanting security could seek out landlords willing to offer it; those who don’t need it, such as the young and mobile, would find their ideal letting.
If this sounds like a somewhat free market answer to a sector where only waves of legislation have seemed to been the answer in the past, well it is. But it is an answer that would not impose rigid paradigms based on the twin bogeys of the rogue landlord and the bad tenant that have generated legislation in the past.
The inquiry, by looking at such ideas, could provide a productive contrast with the continued promotion of home ownership by the government whose solution to the current housing crisis seems to rest in a relaxation of planning laws and hopes for another housing bubble.
Great harm has been done through the long standing over-promotion of home-ownership and marginalization of renting – not only to those who have taken on substantial financial burdens which they cannot afford but also to those who are demonised by their exclusion from the presumed privileges of ownership. the necessary social re-integration of renting while avoiding the simplistic solution of imposing long-term security in the private rented sector. As history has shown, such solutions tend to dry up supply, promote avoidance strategies by landlords (often colluded with by occupiers who are desperate for housing) and divert resources from housing into the policing of statutory boundaries.
The Law Commission proposals, although ignored by the Westminster government (both Labour and Coalition), are now actively being considered in Wales where they are seen as a crucial foundation to a modern and successful rented sector.
Communities and Local Government Committee Terms of reference:
Quality of accommodation
Regulating letting agents
Regulating houses in multiple occupation
Tenancy agreements and security of tenure
Use of private rented sector to discharge local authority homelessness duties.
Evidence to the first meeting, including from Prof Martin Partington, former Law Commissioner:
Written evidence on the private rented sector (PDF 321 KB)
Law commission materials:
Renting Homes: The Final Report [PDF, 1.42mb]
Renting Homes: Draft Bill [PDF, 0.68mb]