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Government interference is harming the private rented sector in the UK

The private rented sector (PRS) plays a vital role in the UK’s housing market, having doubled in numbers of households in the last 20 years but continued Government ‘interference’ is causing problems, according to a new report.

It has resulted in landlords leaving the market, a leakage of stock into sale compounding issues that are emerging, and decreasing stability and standards for tenants, says the latest sector policy statement from the Royal Institution of Chartered Surveyors (RICS)

RICS supports and is currently working with Lord Best and his Regulation of Property Agents (ROPA) working group, however, it says more must be done in the immediate to bring transparency and standards to the PRS.

With tenants within the PRS paying the largest proportion of their household income to their tenure, those within the PRS would expect to have higher standards. However according to the 2017/18 English Housing Survey, the highest proportion of properties that failed to meet the Decent Homes Standard were within the PRS and had the highest proportion of homes with a category one hazard.

Though the proportion of homes failing to meet the Decent Homes Standard has decreased since 2008, the rate of decrease has stalled in recent years and the report points out that homes in the PRS are also the most to be an older buildings, least likely to have one working smoke alarm, and least likely to have central heating.

‘We believe that the way to raise standards in the PRS is to ensure that all individual lettings, estate and property management practitioners and firms are consistently regulated and subject to a single, consolidated residential property code, by new regulator with powers to delegate regulatory functions to selected designated professional bodies, as advised by the recently released ROPA report,’ says the report.

‘A regulated PRS would enhance the landlord-tenant relationship, as well as build institutional investor confidence in a growth sector that offers housing solutions to increasing numbers of households. As a sector leading body, RICS already create and regulate professional standards in property and of our professionals who work within the industry,’ it adds.

To assist this regulation, RICS, in collaboration with the industry, is currently developing an updated PRS Code of Practice, to be released in autumn 2019. This is produced in consultation, as part of a commitment to professionalising the sector, improving transparency and consumer service, as well as ensuring that any new guidance is within the public interest working for both industry and consumers.

The report calls for an extension of standards within the industry eventually extended to private landlords, ensuring tenants can expect minimum standards within their tenancy, whether it is handled by a professional or private landlord.

It recommends that the Government adopts and supports ROPA recommendations for agents and landlords, with minimum standards, accreditation of practitioners, and compulsory continuous professional development.
It also says that the Government should adopt an industry approved Code of Practice as a placeholder to bring standards to the industry in the immediate while waiting for a new regulator and standards to be established through ROPA.

RICS wants to see the Government draw up plans for an extension of regulation to cover all private landlords with a clear timeline of implementation.

It also looks at length of tenancies. Under the current legislation, assured shorthold tenancies (AST) can be offered for up to seven years with a deed, although technically there is no maximum term length. Anything over seven years must be registered with the Land registry but despite the lack of maximum length, the most common tenancy length is 12 months.

Despite longer tenancies being mutually beneficial, key reasons for the continued norm for short term tenancies is a lack of understanding of longer tenancies, and their benefits including stability in residence and rent payment levels, the report suggests.

Landlords tend to prefer a long term stable tenant and to not uplift rent, rather than to have a continually changing tenancy with the opportunity to raise rents. This notion is supported by the government’s 2018 landlord survey which found around 70% of landlords kept the same rent when negotiating new tenancies with existing tenants.

In the most recent Government survey of English private landlord’s, 40% of landlord’s and agents were willing to offer longer tenancies and a further 38% are willing with the inclusion of a break clause.

The desire to keep existing tenants and not have continuing turnover is further strengthened by the changes in June 2019 when the Tenant Fees Act came into force, which increases a landlord’s or agents costs to replace tenants.

Not all tenants favour longer term tenancies. There are many factors that may impact the duration a tenant would want to stay in a property, for example, those with visa commitments, those renting with roommates or in house share situations, and those working in secondment or seasonal jobs, it points out.

RICS says that it would be better for potential tenancy term limits to be advertised with rental adverts to offer tenants choice based lettings. However, it adds that there needs to be clear notice periods to end tenancies that are applied equally to both tenants and landlords through clearly set out break clauses and any break clause or notice period to leave a property must be treated the same for both landlords and tenants, in the interests of balance.

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