Why it matters: Regulating private rents

Teresa Pearce MP

The word ‘home’ means more than just a roof over your head; it means security, a place of safety, a sense of belonging. But for a large percentage of people now living in insecure private rented accommodation their home provides none of those things.

I see in my postbag a growing number of families whose physical and mental health is being severely affected by living in overcrowded, damp, insecure accommodation for which they are paying an extortionate rent. With a reported 3.8 million households in the private rented sector across England, including one million families with children, the picture is very bleak. All this considered it is clear Labour must make regulation of the private rented sector a priority in 2015. Stable homes make stable communities and that is surely in the interest of all of society.

We are currently facing the biggest housing crisis in a generation and the government’s housing and economic policies are making it worse. House-building is down, homelessness and rough-sleeping are rising, and the mortgage market is so tough that most people are locked out of home-ownership indefinitely. Rents are escalating and the lack of adequate supplies of social housing and affordable homes mean that many people have no choice but to rent.

The conservative argument that increased supply will result in reduced rents does not stand up to scrutiny if you look at what’s happened in London in the past decade. The private rented sector in London has grown by 75 per cent in 10 years, yet rents are rapidly rising and rose by 9 per cent in 2012 alone. So increased supply alone is not an answer. We need to establish a statutory system of private rented sector regulation to provide families and other renters with stability and security.

In my own constituency almost one-fifth of all families are living in private rented accommodation. The lack of regulation means vulnerable tenants in sub-standard living conditions are exploited by rogue landlords who undermine reputable landlords. Without a system of checks and balances landlords can get away with this. The assured shorthold tenancy (AST) gives tenants just six months protection from eviction except under limited circumstances. After this time, landlords can evict renters or raise the rent by any amount at two months’ notice. Renters have no long-term certainty and I have cases of primary school children at their fourth school before the age of 10 due to multiple evictions in a short lifetime.

It is essential that we have a strong private rented sector where people have decent, stables homes at affordable prices. The introduction of a national, compulsory register of non-resident landlords, and the granting of greater powers to local authorities to root out and strike off rogue landlords, would be a big step welcomed by legitimate, honest landlords. In areas blighted by rogue landlords, we would make it easier for more rigorous schemes to be set-up by local authorities. Instituting a system that recognises landlords must conform to certain standards or face penalties would not only improve the quality of private rented properties, but also give private renters the protection they are currently denied.

Letting agencies are in desperate need of regulation, and this is supported by tenants, landlords and letting agents’ organisations. At present, letting agencies can charge excessive rip-off fees of hundreds of pounds for administration costs, in addition to deposits and advanced rent. The result is further pressure on renters already struggling to balance rising rents with living costs. According to a report by Shelter, one in four people who have dealt with a letting agency in the last three years said they had to borrow money to pay for fees, while one in six reportedly cut down on food or heating to meet the cost. The instability of the private rented sector means renters face these charges on a frequent basis and the more frequent the turnover the more money the letting agent makes. It’s time for the industry to face regulation as an informal best practice code clearly has not worked.

Fees should be transparent and letting agents should have to publish their fees upfront, along with a simple explanation of what they cover, ahead of any agreements with tenants. This would give tenants the opportunity to make comparisons and decide on the most cost-effective deal. The extent and level of activities that can be charged for should also be regulated to ensure consistency and to prevent renters having to pay disproportionate amounts for basic services, such as swapping, renewing or editing contracts.

We can learn from countries where the private rental sectors are regulated by a variety of regimes offering longer term tenancies and greater certainty on rents. While no single length of tenancy is right the possibility of giving families a right to longer-term tenancies should be explored.

Private landlords have, for too long, been able to take the money without accepting the responsibility whilst the rest of us pick up the costs of unstable communities, marriage breakdowns and children with no secure home life. Given the private rented sector is likely to keep expanding we need to create an industry that protects the vulnerable and ensures renters are not at the mercy of unscrupulous landlords who are concerned primarily with lining their own pockets.

2 Comments:

  1. George Talbot

    A great opening paragraph, Teresa!
    As a Labour MP on the Treasury Committee, I wonder if you could help Anthony with the observation in his piece that house prices over the last 50 years or so have been pumped up by lax credit control by government. Didn’t Edward Heath end government’s control over credit creation by banks with Competition and Credit Control?
    I recall Heath feared banks would become uncompetitive when capital controls were ended. And with free capital and credit, finance has become very competitive! But government has reconciled free markets that set high rents and low wages with housing and other benefits.
    By supporting private self interest with social benefits, governments create dangerous, costly dependencies. To escape these and create secure homes in safe places and gainful employment for all requires fewer free markets.
    Free capital is perhaps the most pernicious and has been adopted although in Full Employment in a Free Society, Beveridge quoted from a 1943 White Paper: “it is widely held that control of capital movements, both inward and outward, should be a permanent feature of the post-war system.”; p. 237 and Cmd. 6437, paras. 32-3. Note that the principle of comparative advantage that justifies free trade with low wage nations assumes capital stays home. And Keynes’s Clearing Union includes capital controls.
    Then governments could set exchange rates to balance current accounts and develop moral policies to achieve stable prices and full employment. And it could demand capital creates jobs across each nation thereby making good use of existing houses and workers.
    Also hard would be limiting credit and saving. But when more is saved than can be spent on new investments, the surplus is often borrowed and spent to maintain demand despite mounting debts. Note, if all governments try to eliminate budget deficits due to excess saving by cutting spending, they may crash the global economy!
    A stable home life has been undermined by acceptance of free love in the 1960s and the deregulation of marriage.

    Reply
  2. Anthony Sperryn

    May I respectfully refer the writer to my piece for the Fabian Society, “Reforming the housing market: a landlord’s view”, published on 31 July 2012.
    As a former senior manager for PwC, she might uinderstand some of the financial aspects of my piece.
    It is not surprising that the housing situation in London is so bad. Uncontrolled immigration, London being the major source of jobs (informal or otherwise) in the UK, heavy purchases of housing by non-residents, lack of new-build.
    In fact, as far as the quality of what is on offer is concerned, the local authorities have quite a lot of powers (but a shortage of resources to enforce) and a major problem is that maintenance of converted properties is very costly.
    That is not to say that many of the points Ms Pearce makes are not valid.

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