Understand the Pressures on the Private Rental Sector

Landlord Expert
By Landlord Expert May 6, 2014 16:07
Ed Miliband proposed a set of reforms to the private rental sector yesterday that promises to have wide reaching implications. While changes to the private rental sector are needed, Miliband has failed to understand the negative impact his proposals will have and will inevitably cause rents to increase and agency standards to decline.
Fixed three year tenancies 
Labour wants to provide tenants with more certainty by providing longer term tenancies for tenants.  While tenants can give notice at any time after the initial six months, a landlord has to be either selling or moving back in to break the tenancy.  Finders Keepers believes this would risk more contentious relationships and costs would rise as three year tenancies would need to be deeded.
Labour has provided a clause whereby tenancies could be broken if there was a "breach of tenancy" by the tenant but the current system for evicting anti-social tenants is complicated, incredibly expensive and takes months. Few landlords would be reassured by this supposed protection.
Rent capping 
Finders Keepers has consistently based rent increases on the Retail Price Index and the Consumer Price Index.  Finders Keepers includes this as part of the contract so that tenants can budget accordingly and that there are no egregious rent increases. However, the issue with forcing all rents to be linked to some sort of index or average is that there is no database of actual rents in the United Kingdom and the Valuation Office Agency's statistics are not a reliable benchmark. Creating a database of actual rents would be costly, time consuming and would be difficult to maintain accurately.  
While free market economies around the world have gradually abolished rent caps, the Labour Party is proposing a reintroduction. This runs contrary to the needs of the private rental sector which needs constant improvement and reinvestment in the rental stock. A rent cap would discourage private landlords from reinvestment thus downgrading the quality of housing available to tenants.
Banning letting agent application fees 
The industry has faced 40 years of complaints that the services standards in the PRS are too low. Abolishing fees will either mean that services fall even lower or that these costs are covered by the landlord who simply increases the rent to compensate for the increased expenditure.
Recent legislation requires agents to be upfront about any fees that will be charged to tenant applicants.  The fees cover agency costs that would be difficult to pass onto landlords directly and cover tenancy agreement wordings, referencing and the registering of tenants' deposits with a government approved deposit scheme.  Recent introduced legislation also requires agents to confirm tenants' immigration status.
Dan Channer, managing director of Finders Keepers comments, "As ever, the true problem is not the fees or tenancy duration but the lack of supply for tenants 'forced into' the private rental sector.  Labour's proposals will do little to encourage people to invest in property and boost the rental supply.  Instead, Labour has failed to address the real problems in the sector while trying to create new ones."
Landlord Expert
By Landlord Expert May 6, 2014 16:07


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