Written evidence submitted by the British Property Federation [PRS 069]

 

Introduction

  1. The British Property Federation is the voice of the large-scale property investment sector, which includes institutional and other large investors in the private rented sector, and nascent Build-to-Rent sector.

 

  1. We are grateful for the opportunity to comment on many aspects of how to raise standards in the sector and hope the development of Build-to-Rent will be one growing contributor to that. We have sought to answer the five questions the Committee raises below.

 

Do local authorities have the powers and capacity required to enforce standards in the private rented sector and deal with 'rogue landlords'?

  1.                                      Generally, we believe local authorities do have the powers to enforce standards in the PRS. There is certainly no shortage of legislation, and specific Housing Acts (e.g. 1985 and 2004) give various powers to Councils to deal with sub-standard accommodation (hazards to residents) and overcrowding.
  2.                                      Perhaps a weak aspect of housing law has been the proportionality, and therefore effectiveness of sanctions, and we welcome the additional powers in the 2016 Act, such as on fines, rent repayment orders and banning orders, and rogue landlord database, to try to ensure that the sanctions for breaking the law are more punitive, act as greater disincentive to law-breaking, and keep the worst offenders from operating in the sector.
  3.                                      The two primary concerns we would have over standards in the sector are identification of the landlord population, particularly those who are operating criminally, and the resources to tackle what is a growing PRS market, that has more than doubled in size since the millennium, with what appears often static or diminishing resource.
  4.                                      According to a FOI request, almost 6 in 10 councils failed to prosecute any landlords over a 12-month period (https://www.theguardian.com/society/2017/oct/28/rogue-landlords-enjoy-an-easy-ride-as-councils-fail-to-prosecute). Whilst prosecutions are simply one measure of effectiveness, the message that a lack of prosecutions send to both law-abiding and law-breaking landlords are unhelpful.

What are the main obstacles to effective intervention in the private rented sector?

  1. It is an extremely diverse market, with a huge number of suppliers. Simply knowing who is operating in the market is an obstacle, which is why we have supported a simple landlord register for many years (for our full thoughts on a landlord register see elsewhere in this response).
  2. A register would also help tackle another significant obstacle, which is communication. Not all bad practice is the result of deliberate law-breaking, but unawareness of the law and responsibilities it requires.
  3. A register would also help facilitate better data on enforcement activity, and which landlords are regularly and flagrantly breaking the law. The rogue landlords’ database being established by the Government and further refinements by the GLA and some of the boroughs in London are positive steps in that direction.
  4. At the risk of repetition, resource appears a significant obstacle, with inadequate staff numbers in many local authorities to properly enforce PRS standards. In such circumstances, it is essential that local authorities take a prioritised approach and again a register would help in that regard.

How effective are landlord licensing schemes in promoting higher quality accommodation?

  1. Local authorities have had the powers to introduce discretionary licensing schemes (selective and additional) for the past 12 years, since November 2005. During that period there has been considerable changes made to the legislation. First, such schemes required the approval of the Secretary of State, then that was changed in early 2010 to a general consent, which was the changed to the current regime in April 2015.

 

  1. Local authorities are at present required to obtain confirmation from the Secretary of State for any selective licensing scheme which would cover more than 20% of their geographical area or would affect more than 20% of privately rented homes in the local authority area. To coincide with this latest change in the legislation additional criteria for making a scheme are also now in force. A designation may be made to combat problems in an area experiencing poor property conditions, an influx of migration, a high level of deprivation or high levels of crime, this goes far beyond the original legislation, which was focused on areas of low housing demand.

 

  1. The Federation has long been a supporter of landlord registration, but less so of licensing. We think it is reasonable that local authorities should be able to identify landlords in their localities, and therefore strive to ensure they are meeting legal standards, using their existing enforcement powers.

 

  1. Registration comes in different forms, however, and we are not supporters of the 'set-up register and they will come approach'. Landlords who think they are above the law, will simply flout yet one more regulation and not register. We have therefore always favored a national register along the lines of that set out by the Rugg Review 2008, which suggested a simple, low cost registrar that would issue landlords with a registration number, that they would then need to use in all interactions with the state.

 

  1. Our support for landlord licensing is more qualified. In problem areas, the ability of local authorities to check on landlords' history, inspect their property and specify management standards, can be a useful tool in tackling illegal practices by landlords. It involves cost and bureaucracy, however, and should be used proportionately. In most local authorities, requiring all landlords to license would not be proportionate. We do not think it is therefore unreasonable that local authorities should have to apply to the Secretary of State, in what should be occasional circumstances.

 

  1. A further challenge for local authorities with licensing is getting the balance right between costs and what can be generated by license fees, and how much that then translates into in fees.

 

  1. It is important that licensing has an effective enforcement regime. If licensing is simply the bureaucracy, without better enforcement, it is merely a tax on the compliant.

 

  1. Proponents of licensing hold up the borough-wide scheme in Newham as an example of effective licensing. It is certainly commendable for several of its aspects, particularly the resource that has been focused on the scheme, enforcement, and resultant convictions. The scheme is partly funded by license fees, but also from broader council resources.

 

  1. In 12 years, however, there has been several schemes, both targeted at small areas, and council-wide, that have not been felt to be well deployed, or to have achieved their objectives:

 

 

 

 

Larger landlords

  1. As the representative body for larger landlords in the PRS, we have a specific concern that the 2004 Act, and how licensing is deployed, was written more with the smaller landlord in mind, rather than larger landlords who may own a block or more of flats in the one place. For example, the legislation requires individual applications for every unit, including floor plans. Common sense would suggest that owners of blocks should be able to submit one application, with a schedule for the block. However, most local authorities would not interpret the law in that way.

 

  1. Similarly, the cost of a license is often applied per unit, and even although such landlords can be identified as setting exceptionally good standards, they would be charged per unit, even although they may only have one unit inspected and therefore the cost of licensing to these landlords bears no resemblance to the fees generated from them.

 

  1. Perhaps the biggest frustration of our members with licensing, however, is that there seems little that has been done within the local authority community over 12 years now to make licensing as efficient and consistent as it could be for applicants, and effective at delivering results. A UK Apartment Association survey of 13 major investors and agents illustrates the variation in practice.

 

  1. Whilst some aspects are understandable, for example the variation in fees between local authorities, there are many aspects of licensing that could be far more standardised and following good practice; in terms of application process, how bulk applications are treated, how applications for co-regulation will be treated, management standards, applications on property built during the license period, expectations on inspections, and so on. There are no obvious reasons why local authorities should deliver such a varied licensing experience, and being able to call on a best practice may actually help them in instances where there are objections to schemes, or they have to apply to the Secretary of State.

 

  1. Some efforts are now in hand to deliver a more coordinated approach, with the GLA having established a Forum in London for London Boroughs to share best practice. We will watch with interest to see if it delivers the more standardised approach that landlords would find helpful.

Licensing and Purpose-Built Student Accommodation (PBSA)

  1. Schedule 14 of the 2004 Act provides an exemption from licensing for accommodation managed by educational establishments. Such exemption is conditional upon the educational establishment following a code of practice recognised under s233 of the Act. Three codes of practice are recognised under s233. Two codes focus on educational establishments, but the third focuses on PBSA run by private sector operators.

 

  1. The codes, are backed up with self-regulatory schemes that inspect compliance with them, and allow students to complain, and in serious cases have their complaints investigated via an independent tribunal, or in the case of the UUK code, by the Office of the Independent Adjudicator for Higher Education.

 

  1. However, despite delivering to virtually the same standards, university providers of PBSA that are following a code are exempt from licensing under the Act, but private providers are not. This means private providers face in effect double-regulation. They face significant additional costs and bureaucracy, as the license fees for a PBSA block can sometimes add up to £000s, which is a fraction of what it will cost to check that block is compliant with licensing. We think this is an anomaly and at the earliest opportunity Government should introduce the necessary primary legislation to affect an exemption for private providers, on similar terms to universities.

What approaches have local authorities taken to promote affordable private rented sector accommodation in their areas?

  1. In the Build-to-Rent sector several local authorities have used Discounted Market Rent (DMR) to satisfy planning obligations for affordable housing, and this policy has been codified into Supplementary Planning Guidance in London, and is in the process of being recognised as national government policy, via changes to the National Planning Policy Framework, at the same time being renamed Affordable PRS.

 

  1. The strengths of DMR are its ability to blend a number of rents within the same block, creating a truly mixed community, with no ‘poor doors’. It also allows the institutional investors in Build-to-Rent to manage unbroken blocks in a seamless manner.

 

  1. Local authorities are also starting to use local housing companies to deliver PRS accommodation, either owned in full, or in part via a joint-venture, by councils.

 

  1. Whilst undoubtedly a factor in the growth of such companies is Right-to-Buy policy, and councils not wanting to invest in assets that they will not retain, it is also sometimes a more strategic move by local authorities to deliver for a broader range of housing needs in their localities, which is to be welcomed.

 

  1. Local councils will generally have to notify the European Commission of the activity of such companies under EU competition law and it is important that any affordable PRS accommodation is only targeted at those in need of subsidy.

 

  1. Some local authorities also offer rent deposits schemes that assist tenants cover a deposit, and despite proposed caps on deposits in the Draft Tenant Fees Bill, such support will remain important for a part of the market struggling with raising a deposit.

How effective are complaint mechanisms for tenants in the private rented sector?

  1. There are variety of different complaints, dispute resolution and redress mechanisms within the sector.

 

 

 

 

  1. There is a concern that consumers are not aware of these complaint mechanisms, what they offer, and how to use them. Constant promotion of such schemes is therefore a necessity.

 

  1. Another aspect that is important is the feedback loop between those who handle complaints in the sector and those who regulate it. In the case of agents, for example, the Ombudsmen may be picking up a succession of complaints about a specific agent, which should ring alarm bells with their self-regulators, and be worthy of investigation. Having good communication between the bodies handling complaints and those regulating the sector is vital, and will become even more so if all agents are regulated.

 

  1. The ultimate complaints mechanism in the sector is the Courts, but that should be a last resort, and the more effective the various mechanisms above are, the better. We also support having dedicated housing courts.

 

November 2017