Should policy be blamed for landlords leaving the market?

publication date: Nov 21, 2018
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author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

Will  continued campaigns against agents and landlords help tenants?

Despite all the changes that are being made to the PRS, including increasing rules to prevent  retaliatory eviction, agents having to publish their fees, then the banning of tenant fees (although this is still going through parliament, so yet to become law) and continued changes to property health and safety, agents and landlords are still being targeted for the work they do. 

One recent release by Generation Rent  claimed the clamp down on landlords is not affecting rents, however I think this is a naïve conclusion as the full impact of the tax rises has yet to take effect and the main reason rents slow is due to the interaction between wages and inflation. 

It also ignores a key issue that is being caused as a result of the tax rises: an increase in evictions in the PRS. Although this is currently being blamed on landlords, the ultimate responsibility for this rise is Government policy. All the feedback I am receiving is that landlords are exiting the market due to tax rises and pulling out of renting to those on Universal Credit due to the well documented rise in rent arrears, even if the landlord has been doing so for many years.

Currently Shelter's latest campaign is highlighting issues of letting agents not accepting tenants on benefits, however, the reality is agents let properties on behalf of landlords and have to adhere to rules set by mortgage lenders and insurance companies, some of which don't actually allow landlords or agents to let to those on benefits - rightly or wrongly.

I do though think it’s a shame they are only focusing on and only naming and shaming agents that they think are discriminating, but are not extending this to lenders and insurance companies. Rightly or wrongly, agents can't do much about it if a landlord or their financiers don't want them to let to people on benefits - targeting mortgage lenders and insurance companies and getting them to all agree to it, could actually make a real difference to tenants on benefits in the long term.

The reason for this is if you are an agent and do what Shelter want - advise landlords of their obligations - you also have to advise them that when you rent to tenants on benefits:

  1. Their lender and insurance company may not let them
  2. Arrears may be worse - non payment of rent being one of landlords’ biggest fears
  3. Rent is paid in arrears, not upfront
  4. The landlord runs the risk of having their rental income ‘taken away’ retrospectively if the tenant’s claim is found to be inaccurate

The only way to really help tenants on benefits in the PRS is to find a system that works well for  agents and landlords. Focusing on letting agents may generate press, but they don't own the let properties and so for me it is unlikely, sadly, to make a real difference to tenants.

The reality is, if we want private landlords to rent to those on benefits, we need to make sure the system works for both vulnerable tenants and landlords - and currently the reality is it doesn’t. And it’s not just failing the PRS, social housing has lost a fortune of tax payers’ money due to the switch to Universal Credit.

Personally some years ago, I made a conscious decision to let to those on benefits and although we had the odd hiccup, it was nothing we wouldn't have experienced with private tenants. One of the main reasons we were keen to do it was helping someone off the council's waiting list, but what made it possible was because Wokingham Borough Council's process of letting and the benefits system were really good at the time and we were able to let the property below the rental market average.  

Unfortunately the benefits system doesn't work now for many tenants or landlords. 

What would be great is to see tenant organisations really work together with landlord organisations and letting agents to call for a change in the system rather than targeting a few and not everyone involved who are not supporting tenants on benefits.

This is especially the case when this doesn't solve the core problem: Government policy on benefits.

John Stewart, RLA policy manager said: “The PRS is providing homes to a fifth of the population and nearly two million families with children - people that the social sector does not have the capacity to home. 
“However we are increasingly seeing landlords leaving the market as a result of government policies such as tax changes and the roll out of Universal Credit. 

“Indeed, our latest research shows almost two-thirds (61%) of private landlords with tenants on Universal Credit have seen them fall into rent arrears 

“As a result it is inevitable landlords are becoming more risk averse.

“We are campaigning for positive changes to help landlords to house tenants who are seen as ‘high risk’ due to their personal circumstances.

“We are asking mortgage lenders and insurance firms to change conditions preventing landlords from renting homes to benefit claimants and are working closely with Crisis on its ‘Home, no less will do’ campaign. This includes plans for a national rent deposit guarantee for projects to use in place of cash deposits and support for landlords willing to rent properties to the homeless.

“The government needs to recognise the vital role the PRS plays in the housing market and, along with councils and tenant groups, work positively with landlords and agents to develop solutions rather than simply painting them as villains.”

 


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