Written evidence submitted by Mr Martin O’Hearne [RRS 111]

Personal Background and Landlord Experience

My wife and I have been Private Residential Sector Landlords since 1997 and over the years, we have built up a sizeable residential property portfolio in the city of Leeds so we are what is referred to as “Portfolio Landlords”.  We manage all of our properties and run the property portfolio full time, we do not employ a letting agent, so we deal with every aspect of the letting process.

Our properties comprise of houses and flats, and our rentals comprise of anything from young single people, families, benefits claimants, large families and anything in between. Many of our tenants have been our tenants for over 15 years. We consider that we run a good, honest and professional business and that provides an essential service.

In the 25 years that we have been landlords, we have seen and dealt with just about every scenario you can possibly imagine, and over those years, many barriers have been placed in our way; from tenants, the local authority, the courts and national government, so we believe that our experience matters and that our voice must be heard.

I have answered as fully and as honestly the questions that the Select Committee have raised, but if any further clarification is required, I can be contacted by using the information at the foot of this report.

Martin O’Hearne

Private Sector Landlord - Leeds

1). 

Will the Government’s White Paper proposals result in a fairer private rented sector (PRS)?

This is indeed an open-ended question, not least because fairness is quite subjective. I think it is impossible to balance the fairness of a landlord and the fairness of a tenant, both sides will always see some degree of inequality, but that is the case in all walks of life. The Governments attempt to introduce what they perceive as a fairer PRS will inevitably create inequity for one side or the other, on this occasion, it will be the Landlord who will consider the heavy hand of Government to be unfair.

As a small example of what I mean; under the new rules, would you think it fair that a tenant could effectively give notice very soon after they move in to a new tenancy, especially after the landlord will have paid out substantial monies on such things as; marketing, property inventory, tenant background checks, letting agent fees etc?.

How would you feel if you were to spend the best part of £1,000 only to see it completely wasted because the tenant was allowed to immediately walk away and there is no provision for the landlord to claim

that money back?  That doesn’t seem at all fair and I think most people would agree, but that is exactly what is being proposed in this Bill.

And another “fairness” but less obvious question that must be addressed is whether it is fair to offer renters less choice and more expensive rents?  It is my view, and the view of many of my contempary that this proposed Bill will result in a significant reduction in supply to the PRS (this is already happening) as there will be far fewer properties available for private renters as landlords continue to quit the sector.

2). What do the proposals in the White Paper and other recent reforms indicate about the

role the Government envisages the PRS playing in providing housing nationally?

With this Bill and with reforms going back ten years, it is now very clear that the Government do not see the PRS as playing a significant part in providing housing. The vast majority of landlords believe that the Government does not take the PRS seriously and many landlords believe that the Government are out to destroy the sector, which if true, is incredible when you consider that there are 11 million tenants who rely solely on the PRS for housing.

It seems to me, and to the majority of landlords that this and previous Governments bizarrely believe that the ever increasing cost of doing business in the PRS will not end up in higher rents. Despite what the Government may wish to believe, the PRS is no different from any other business in that costs need to be met by the end user, tenants!

3). Have the Government’s announcements already led to any changes in behaviour in the PRS?

There is now strong and clear evidence that Private Landlords are quitting the PRS in large numbers, in fact the evidence is so overwhelming that it would be criminal of the Select Committee to ignore it.

A recent report by Propertymark* reveals shows the rate at which the private rented market is shrinking.   It shows the number of properties available to rent through letting agents in the month of March halved between 2019 and 2022. During the same four-year period, 94% of landlords who removed their property from the rental market did so to sell it and over half of rental properties sold in March 2022 did not return to the private rented market, and that continues to be the case.

In addition to this, according to new data released by Rightmove * the lack of supply in the PRS has resulted in private rents in the UK hitting record highs; Outside of London, the average rental property is now listed for £1,126 a month. That's 12% higher than the same time last year, and 19% higher than before the pandemic. Inside London, the average rental property is listed for £2,257, which is up 15.8% on this time last year.

The story of the rental market continues and will continue to be one of high tenant demand but with insufficient homes to meet that demand, tragically, this can be seen in full evidence in Ireland, where the lack of supply of PRS housing has resulted in enormous demand, if ever there was a case in point.

4). Do the proposals for reforming tenancies, including the abolition of Section 21, strike the right balance between protecting tenants from unfair eviction and allowing landlords to take possession of their properties in reasonable circumstances.

In a Bill that is supposed to be about fairness and balance, the prosed reform of Tenancies appears to me to be wholly unfair.  What the Government is proposing is that a tenant can enter into an Assured Tenancy and that the tenant can quit that tenancy at any time they wish, but the landlord cannot quit the tenant unless it is to sell the property, that is not a level playing field and most definitely not fair.

Without Section 21, all Assured Shorthold tenancies will by default be Assured tenancies.

These tenancies have indefinite security of tenure so long as they are not breached. 

So, a landlord will only be able to gain possession where there is a breach of tenancy, and even then, the only mandatory grounds that are currently routinely engaged are where there are over two months’ rent arrears and often more. As yet, the Government has not indicated what level of arrears would be mandatory in the new Renters Reform Bill, but many landlords fear that it will be in excess of two months.

A landlord faced with a tenant who is causing deliberate damage to the property or carrying out anti-social behaviour within the property or to their neighbourhood will, without Section 21 notices being an option, have to rely upon Section 8 Discretionary Grounds for possession. This could mean that should the breach continue, it would result in financial losses to the landlord for significant periods of time, with endless court hearings to determine the outcome.

Because where discretionary grounds are relied upon, Courts often insist on a full trial in order to

Interrogate the fairness and scale of evicting the tenant in all the circumstances, thus racking up Court time and unnecessary legal costs for all parties. Unless the Court system for possessions (and of course the current huge backlogs) is not fixed, it will spell disaster for PRS landlords.

Despite Shelter and Generation Rent labelling Section 21 as “No Fault”, the truth is that there is no hard factual data that proves this to be the case.  Because there does not need to be a Ground (reason) record on the form Section 21, the Courts cannot possibly record the reason for the “fault”.

The only evidence that Shelter and Generation Rent have is anecdotal, which is taken from tenants without clarification from landlords, so not surprisingly, their anecdotal evidence favours their anti-landlord agenda. 

My own evidence, which is also anecdotal (so therefore just as valid as the evidence provided by Shelter and Generation Rent), is that where Landlords use Section 21, the vast majority do so for a very good and valid reason (mostly rent arrears) as they know it gives them guaranteed possession.

In many ways, the existence of the Section 21 notice makes the current PRS workable. It gives tenants security of tenure for the fixed term of a tenancy, and allows sufficient notice to be given to cover circumstances in which their occupation of the property, for whatever reason, is not workable.

It also gives landlords the regulatory security needed to take the risk of renting to persons they may only have limited information about. Without Section 21, the risk to landlords will greatly increase, so the pool of tenants a landlord would be willing to take a risk on, will greatly diminish, this will have a huge impact on certain tenant groups as landlords consider them to be too high a risk.

Landlords trust Section 21, landlords do not trust the Courts so they do not confidently use Section 8.  By categorising the Section 21 Notice with the emotive term “No Fault” Eviction – Shelter and Generation Rent have won over the political classes to their cause, irrespective of the real reasons why Section 21 is used.

4). How easily will tenants be able to challenge unfair rent increases under the proposals?

That is a very difficult question to answer; it really depends on what is determined as “unfair” and how that bar is set.  Most landlords do not increase rent on an annual basis but do so only when the property is re-let and this is usually in line with the market rents.

5). Does the PRS need its own ombudsman? If so, what powers should it have?

I do not believe that the PRS needs its own Ombudsman as all that this would achieve is yet another level of bureaucracy and cost, which will of course be borne by tenants through higher rents. The majority evictions are due to rent arrears, so the relationship has usually broken down completely by this time, and therefore, no level of mediation would bring it back on track.  What the PRS needs is the Court system to do its job, without added delays and without prejudice.

6). Will the proposals result in more disputes ending up in the courts? If so, will the proposals for speeding up the courts service suffice?  

I cannot see how there will not have to be increased court processes to obtain possession of a property, so yes, the proposals will result in more disputes ending up in court.  Tenants are not simply going to quit a tenancy because a landlord says that they are selling the property!  Tenants will understandably want to test this ground and they will be encouraged to do so by the Local Authority.  Currently, Local Authorities advise Tenants not to leave a tenancy when served with Section 21 until the bailiffs have arrived, so under the new regime I see no reason why would this change if anything, it will get worse.

The Renters Reform Bill proposes is that Section 21 can only be served where a Landlord is selling the property (or they wish to move back into it, or a very close relative wishes to occupy it).

This ground will be used by Landlords to evict problem tenants that fall outside the mandatory grounds of Section 8, even if the landlord is not selling. Landlords will very easily be able to provide evidence that they are “selling”, by way of a free listing on Facebook (because it’s not compulsory to sell through an Estate Agent), or on Gumtree or one of the many other free listing sites.

And once they have secured the eviction (because selling the property is a mandatory ground, and therefore the Courts will be obliged to grant possession), if challenged in the future, they will simply say “I couldn’t get the asking price so I had to delist the property and put it back on the rental market”

It is so obvious how this loophole can be instigated and how impossible it will be for the Government to prevent it, that you have to think that who ever came up with this proposal doesn’t have a clue how the real world works – entrepreneurs are entrepreneurs because they are enterprising!

7). What impact, if any, will the reforms have on the supply of students homes in the general PRS?

If ever proof was needed that the people who have drafted this Bill do not have an understanding of the PRS, then this has to be it, and it is utter madness and worrying that this has been overlooked.

The Bill proposes that all Assured Shorthold tenancies will by default be Assured tenancies, which means that these tenancies have indefinite security of tenure so long as they are not breached. 

Therefor a Student Accommodation Landlord will not be able to terminate a tenancy at the end of the University Term in readiness for the next Cohort in the way they presently do.  This Bill drives a Coach and Horses through the very business model of Student Lettings and it is alarming that the authors have overlooked this.  Indeed, this same proposal will also have a huge impact on the HMO or Short Term Sector as well.

8). What impact, if any, will the reforms have on the supply of homes in the PRS?

Recent Government reforms to the PRS, along with wide spread Local Authority Selective Licensing schemes have hugely increased the cost of doing business for landlords, so landlords are already quitting.

But there is now more than sufficient evidence showing that Landlords are quitting the PRS in large numbers. In 2020, more than 130,000 landlords sold their buy to let properties with a further 201,000 selling up in 2021 and 2022 is likely to be much higher and unfortunately for PRS tenants, the next generation of landlords is not coming through to take up the slack.

This Bill will hurt the very people it is intended to protect. Many landlords will be unwilling to offer a tenancy unless the applicant has perfect references and most landlords will insist on a Guarantor to support the application. Landlords declining tenants they may otherwise have considered will lead to unprecedented stress in the Social Housing Sector because vulnerable tenants will no longer be housed in the PRS.

And as more and more landlords quit the sector (and that is now not in dispute), a reduced supply of rental properties will drive up rents, which we are now seeing play out.

In its continued attack on the PRS and in the writing of this Bill, what the Government has glaringly overlooked is that the vast majority of Landlords do not have to be Landlords, but a very large majority of tenants do have to be tenants. Unless the Government legislates otherwise, Landlords are free to quit, and they are doing, if anyone thinks that this Bill will reduce, or even stop what is now and exodus of Landlords from the PRS, then they really do not know what they are doing.

9).  What should be included in the new decent homes standard and how easily could it be enforced?

I have many opinions about the decent home standard, too many to write here.  But I believe, as with many things that Governments do, that they over complicate things.  For me, it would be a better idea to have a system similar to the MOT Certification that the Automotive industry has.  This could be bi-annual and would be reasonably easy to implement.  A Star System of ratings, much like hotels are categorised could determine standards. 

The problem with Governments is that they over think things, they make things difficult and more complicated, and in the end they break what is not broken.  I would be happy to talk further about my ideas for “Property MOT’s” if you would like to hear my views.

10).  How enforceable are the proposals to make it illegal for landlords to have blanket bans on

letting to people on benefits or with children? What other groups, if any, should be protected from

blanket bans?

Firstly, it is unfair to refer to this as a “Blanket Ban”, it is simply not true that all landlords ban, en-mass certain types of tenant, this is a myth banded around by the likes of Shelter.

Many landlords accept benefits tenants and most landlords, myself included accept families with children, with or without benefits.  But in answer to your question, it will be very difficult to enforce. 

As I have already mentioned earlier, the proposed removal of Section 21 will make it much more difficult for some categories of tenants to secure a tenancy as Landlords retreat into increased risk assessment to protect their assets.  This will have a major impact on the type of tenant a landlord is willing to take a risk on, so you can see exactly where this will lead.

Landlords, who have had a bad experience of renting to Benefits Tenants very rarely, want to repeat that experience and that is the main reason they “discriminate against them”!  It seems that the landlord gets the blame for the tenants behaviour, but in a world where nobody takes responsibility for their actions, it’s not difficult to understand why this group is being chosen for special protection.

Presently, there is nothing preventing Landlords from setting their own rental criteria for applicants, and this will be based according to the landlords risk levels, pretty much the same way as Banks and Building Societies set their lending criteria based on their own credit and risk levels.

Within that rental criteria there will be a standard “affordability check”, and it is the affordability check, along with the credit background that will determine the tenant(s) a landlord is willing to take.

The Government cannot legislate for the lending criteria set by Banks and Building Societies to determine their borrower assessments so the Government cannot legislate the rental criteria set by a landlord, if a Landlord wishes to decline an application based on the outcome of their assessments, then it is hard to see how this part of the Bill could be unenforceable.

Whilst on the subject of Benefits Tenants, I rent to quite a number of Benefits Tenants and have done for many years. The assumption that landlords are being discriminatory for the sake of it is wrong. From my many years of experience letting to Benefits Tenants, they are without doubt more hands on management, they are generally poor at managing their finances and usually not very good at looking after the property, often resulting in huge costs to the landlord when they quit the tenancy. Over the years, I have lost a huge amount of money from all sorts of bad tenants who come from all walks of life, but the highest category of losses definitely goes to the “Benefits Tenant” category, and whilst some may not want to hear that, it’s a fact.

11). Overall, what additional pressures will the proposals place on local councils, and how many of these will require new burdens funding?

There already is huge pressure on both the Government and Local Authorities with regards to housing, and the Renters Reform Bill will simply add fuel to the fire. You cannot ignore the increase in population through migration, where are these people going to be housed and who is going to house them? and migration is just one part of the overall need for housing. The responsibility will come down to Local Authorities, but where are the houses and who exactly is providing the much needed accommodation? 

Through it’s continued attack on the PRS, the Government have created a crisis in housing that was completely unnecessary.  Landlords like me are already experiencing the problems that the lack of PRS supply is causing by way of sheer number of applications for the properties we have available and this is wholly down to the lack of supply, and it will get worse.

My Personal Comments (if you are interested).

PRS Landlords have been and continued to be the subject of extreme legislation changes as the UK Government tries to improve the sector. However, without a middle ground, these changes are proving detrimental to those they are supposed to be trying to project and are forcing out the very people who provide the housing they need.

The proposed Renters Reform Bill is not the middle ground that Landlords like me welcome and there is now sufficient evidence to show that the PRS is in crisis, with Landlords quitting in large numbers. Increases in the cost of living and increasing interest rates will be even more reason for landlords to quit the sector.

Although the banning of “no fault” evictions might prove popular with pro-tenant organisations, its impact is likely to derail residential investment property as an investment class, leading to less housing stock to rent.  If lenders (the life blood of the PRS) no longer feel secure lending to private residential landlords who have no quick, guaranteed and effective means of regaining control of their properties, then understandably they will not offer funding and will quite the sector and investment will dry up.

In 2020, more than 130,000 landlords sold their buy to let properties with a further 201,000 selling up in 2021 and the next generation of landlords is not coming through to take up the slack

With it’s heavy handed regulation and it’s continued embrace of Shelter and Generation Rents view on what the PRS should look like, the Government is now reaping what it has sowed and tenants are paying a very heavy price.  

The 1986 Housing Act and the Introduction of Assured Shorthold Tenancies along with Section 21, created the PRS as we know it today, and along the way it helped the UK economy with the mobility it desperately needed, it was a masterpiece of legislation. 

The proposed Renters Reform Bill will overturn all of that and will put the PRS firmly into retreat; in its current format, it is a dreadful piece of legislation.

Let us hope that common sense prevails, and that common ground is found.