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Housing policy: resetting the private rental sector

In previous Nethouseprices columns, we have discussed the centrality of housing to the current government's policy platform. It's fair to say that helping more people to become homeowners is the ultimate ambition, but there are several well-documented obstacles to surmount. House prices in the UK, for example, remain prohibitively expensive for many aspiring homeowners and there is relatively little that policymakers can do about this. There is also a chronic shortage of new homes, a factor that drives prices up even further and, even with the most aggressive programme of housebuilding, will take years to correct. 

In summary, making Britain a nation of property owners once more is very much a work in progress. Consequently, the Ministry of Housing, Communities and Local Government (MHCLG) has recognised the necessity to improve conditions for those who are currently obliged - or wish - to rent their homes. During the past year or so, there have been various measures announced which are designed to reset the private rental sector, many of which are contained in the Tenant Fees Bill which is presently undergoing parliamentary scrutiny. In this short feature, we set out the main terms of the legislation and summarise the public and industry reaction.

Tenant Fees Bill

The core provisions of the Bill are as follows:

- Letting agency fees levied on tenants will no longer be permissible. Agents will only be allowed charge the "contracting party" or landlord for their services. This clause is intended to prevent double-charging, increase competition and help tenants budget for the total cost of renting a property.

- A first-time breach of this provision will attract a fine of £5000, with any further offence in the next five years resulting in criminal prosecution or a fine of £30,000.

- Trading Standards will be responsible for the enforcement of the ban and the recovery of any fees that have been unlawfully charged. 

- Local authorities will be permitted to retain the proceeds from these funds for use in future enforcement activity.

- The repossession procedure set out in s21 of the Housing Act 1988 will not be available to landlords until any fees that were unlawfully charged have been repaid.

- Outside of rent and deposits, landlords and their agents will be permitted only to charge tenants fees in relation to: 
i) Utilities, communications and council tax bills arising from a tenant's occupation of a rental property.
ii) Changing of a tenancy or early termination, at the tenant's request. The amount that can be charged for changing a tenancy will be capped at £50 unless the landlord can reasonably demonstrate that the associated cost was higher than this sum.
iii) Costs resulting from a default like, for example, replacing a lost house key.

- Security deposits and holding deposits will be capped at six weeks' and one week's rent, respectively. This and the previous set of measures are designed to make the process of renting a home more affordable and to help tenants avoid unexpected expenses. 

- A lead enforcement agency will be established for the entire lettings sector.

Talking about the proposed legislation, the new Secretary of State for Housing, Communities and Local Government, James Brokenshire, said that the government is resolved to fix the country's broken housing market and that ensuring that tenants get a fair deal is an essential part of that promise. 

The Tenant Fees Bill, which will apply only in England, is currently passing before Parliament and is expected to become law in 2019. We will report any major developments but you can monitor the Bill's progress here: https://services.parliament.uk/Bills/2017-19/tenantfees.html.

Reaction

Reputable and ethical landlords and agents, who represent the vast majority of participants in the sector, and the public at large, acknowledge that certain sharp practices that have been permitted in the past need to be ended if rented housing is going to work for those who need it and become the attractive alternative to homeownership that it is in so many other countries. Certainly, most of us recognise that such activities as charging landlords and tenants for the same services is unacceptable and that some fees levied on tenants are arbitrary, opaque and unfair. To this extent, government intervention has been broadly welcomed by the industry, charities and media commentators.

As ever, though, there are concerns about the detail of the policy. In the space available, we can't enumerate and evaluate them all but a couple of examples will suffice to illustrate the point:

Mr David Cox, Chief Executive of ARLA Propertymark, has said that, while he and his organisation are happy with parts of the Bill, they have grave worries about the impact of the new law on agents' businesses and the potential loss of jobs in the sector. In fact, the government's impact assessment suggests that, at least initially, some agencies will incur new costs and some branches will close. See: https://www.gov.uk/government/publications/tenant-fees-bill-impact-assessment. He added that he didn't think tenants would necessarily benefit from the changes.

David Smith, of the Residential Landlords Association, is quoted in the industry press as saying that he has number of reservations around the time it will take for the rules to be enshrined in law and to be fully implemented. Mr Smith said that existing regulations relating to the transparency of lettings fees have been - at best - a limited success and, if they had been enforced more vigorously, this latest law might not have been necessary. And finally, he added that landlords rather than agents are being asked to pick up the tab for the ban on letting fees and might need to raise rents to absorb the added costs. By extension, tenants might save money on upfront costs, but will be worse off overall. In other words, the policy might hinder rather than help the very people it is intended to protect.

We will keep you updated with the debate in the coming months.

Next at Nethouseprices: Aberdeen - why has the city some of the worst performing house prices in the UK? And coming soon: the Premier League sold property prices.

In previous Nethouseprices columns, we have discussed the centrality of housing to the current government's policy platform. It's fair to say that helping more people to become homeowners is the ultimate ambition, but there are several well-documented obstacles to surmount. House prices in the UK, for example, remain prohibitively expensive for many aspiring homeowners and there is relatively little that policymakers can do about this. There is also a chronic shortage of new homes, a factor that drives prices up even further and, even with the most aggressive programme of housebuilding, will take years to correct. 

In summary, making Britain a nation of property owners once more is very much a work in progress. Consequently, the Ministry of Housing, Communities and Local Government (MHCLG) has recognised the necessity to improve conditions for those who are currently obliged - or wish - to rent their homes. During the past year or so, there have been various measures announced which are designed to reset the private rental sector, many of which are contained in the Tenant Fees Bill which is presently undergoing parliamentary scrutiny. In this short feature, we set out the main terms of the legislation and summarise the public and industry reaction.

Tenant Fees Bill

The core provisions of the Bill are as follows:

- Letting agency fees levied on tenants will no longer be permissible. Agents will only be allowed charge the "contracting party" or landlord for their services. This clause is intended to prevent double-charging, increase competition and help tenants budget for the total cost of renting a property.

- A first-time breach of this provision will attract a fine of £5000, with any further offence in the next five years resulting in criminal prosecution or a fine of £30,000.

- Trading Standards will be responsible for the enforcement of the ban and the recovery of any fees that have been unlawfully charged. 

- Local authorities will be permitted to retain the proceeds from these funds for use in future enforcement activity.

- The repossession procedure set out in s21 of the Housing Act 1988 will not be available to landlords until any fees that were unlawfully charged have been repaid.

- Outside of rent and deposits, landlords and their agents will be permitted only to charge tenants fees in relation to: 
i) Utilities, communications and council tax bills arising from a tenant's occupation of a rental property.
ii) Changing of a tenancy or early termination, at the tenant's request. The amount that can be charged for changing a tenancy will be capped at £50 unless the landlord can reasonably demonstrate that the associated cost was higher than this sum.
iii) Costs resulting from a default like, for example, replacing a lost house key.

- Security deposits and holding deposits will be capped at six weeks' and one week's rent, respectively. This and the previous set of measures are designed to make the process of renting a home more affordable and to help tenants avoid unexpected expenses. 

- A lead enforcement agency will be established for the entire lettings sector.

Talking about the proposed legislation, the new Secretary of State for Housing, Communities and Local Government, James Brokenshire, said that the government is resolved to fix the country's broken housing market and that ensuring that tenants get a fair deal is an essential part of that promise. 

The Tenant Fees Bill, which will apply only in England, is currently passing before Parliament and is expected to become law in 2019. We will report any major developments but you can monitor the Bill's progress here: https://services.parliament.uk/Bills/2017-19/tenantfees.html.

Reaction

Reputable and ethical landlords and agents, who represent the vast majority of participants in the sector, and the public at large, acknowledge that certain sharp practices that have been permitted in the past need to be ended if rented housing is going to work for those who need it and become the attractive alternative to homeownership that it is in so many other countries. Certainly, most of us recognise that such activities as charging landlords and tenants for the same services is unacceptable and that some fees levied on tenants are arbitrary, opaque and unfair. To this extent, government intervention has been broadly welcomed by the industry, charities and media commentators.

As ever, though, there are concerns about the detail of the policy. In the space available, we can't enumerate and evaluate them all but a couple of examples will suffice to illustrate the point:

Mr David Cox, Chief Executive of ARLA Propertymark, has said that, while he and his organisation are happy with parts of the Bill, they have grave worries about the impact of the new law on agents' businesses and the potential loss of jobs in the sector. In fact, the government's impact assessment suggests that, at least initially, some agencies will incur new costs and some branches will close. See: https://www.gov.uk/government/publications/tenant-fees-bill-impact-assessment. He added that he didn't think tenants would necessarily benefit from the changes.

David Smith, of the Residential Landlords Association, is quoted in the industry press as saying that he has number of reservations around the time it will take for the rules to be enshrined in law and to be fully implemented. Mr Smith said that existing regulations relating to the transparency of lettings fees have been - at best - a limited success and, if they had been enforced more vigorously, this latest law might not have been necessary. And finally, he added that landlords rather than agents are being asked to pick up the tab for the ban on letting fees and might need to raise rents to absorb the added costs. By extension, tenants might save money on upfront costs, but will be worse off overall. In other words, the policy might hinder rather than help the very people it is intended to protect.

We will keep you updated with the debate in the coming months.

Next at Nethouseprices: Aberdeen - why has the city some of the worst performing house prices in the UK? And coming soon: the Premier League sold property prices.

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Source: Nethouseprices 10.5.18

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