Policy Statement: Private Rented Sector in England

The private rented sector (PRS) plays a vital role in our housing market, having doubled in numbers of households in the last 20 years.

The number of households in the sector rose by 25% between 2010-11 and 2017-18, from 3.6 million to 4.5 million households. It is now the second largest tenure in England and is home to a fifth of all households.

Continued government interference in the PRS has caused disruption: with landlords leaving the market; with the leakage of stock into sale compounding issues that are emerging and decreasing stability; and standards for tenants.

Our recommendations:

Government to adopt and support ROPA recommendations for agents and landlords, with minimum standards, accreditation of practitioners, and compulsory continuous professional development.
Government should adopt an industry approved Code of Practice as a placeholder to bring standards to the industry in the immediate while waiting for a new regulator and standards to be established through ROPA.
Government should detail plans for the extension of regulation to cover all private landlords with a clear timeline of implementation.
Government should update the How to Let and How to Rent guides that include the benefits to both landlords and tenants of longer tenancies;
Government to require tenancy term limits to be advertised with rental adverts to offer tenants choice-based lettings.
Government to use best practice from Scotland to change the valid grounds for repossession within Schedule 2 of the Housing Act 1988.
Government to make streamlining and simplifying the court processes for landlord’s wanting to repossess their properties under Schedule 2 a priority.
Government must not impose rent caps on the market.
Government must build across all tenures to the actual need of areas, recognising that affordability is a supply issue.
Local Authorities must include build to rent into their strategic planning, especially in areas of high rental need.
Government needs to look NPPF requirements and how they can better accommodate build to rent.
Government must produce clearer guidance about affordable housing and the benefits of affordable rent not just homes to buy, giving clarity on the contribution of build to rent to the wider affordable housing market.

Standards within the Private Rented Sector

RICS supports and is currently working with Lord Best and his Regulation of Property Agents (ROPA) working group; however more must be done in the immediate to bring transparency and standards to the PRS industry.

With tenants within the PRS paying the largest proportion of their household income to their tenure, those within the PRS would expect to have higher standards. However according to the 2017/18 English Housing Survey, the highest proportion of dwellings that failed to meet the Decent Homes Standard were within the PRS and had the highest proportion of homes with a category 1 hazard. Though the proportion of homes failing to meet the Decent Homes Standard has decreased since 2008, the rate of decrease has stalled in recent years.

Dwellings within the PRS tenure are also the most likely tenure to be an older dwelling, least likely to have one working smoke alarm, and least likely to have central heating.

We believe that the way to raise standards in the PRS is to ensure that all individual lettings, estate and property management practitioners and firms are consistently regulated and subject to a single, consolidated residential property code, by new regulator with powers to delegate regulatory functions to selected designated professional bodies, as advised by the recently released ROPA report.

A regulated PRS would enhance the landlord-tenant relationship, as well as build institutional investor confidence in a growth sector that offers housing solutions to increasing numbers of households. As a sector leading body, RICS already create and regulate professional standards in property and of our professionals who work within the industry.

To assist this regulation, we in collaboration with industry are currently developing an updated PRS Code of Practice, to be released in autumn 2019. This is produced in consultation, as part of our commitment to professionalising the sector, improving transparency and consumer service, as well as ensuring that any new guidance is within the public interest working for both industry and consumers.

We would like to see an extension of standards within the industry eventually extended to private landlords, ensuring tenants can expect minimum standards within their tenancy, whether it is handled by a professional or private landlord. Minimum standards within the social sector apply universally – we believe those within PRS should as well.

Recommendations:

Government to adopt and support ROPA recommendations for agents and landlords, with minimum standards, accreditation of practitioners, and compulsory continuous professional development.
Government should adopt an industry approved Code of Practice as a placeholder to bring standards to the industry in the immediate while waiting for a new regulator and standards to be established through ROPA.
Government to detail plans for extension of regulation to cover all private landlords with a clear timeline of implementation.

Indefinite Tenancies/Long Term Tenancies

Under the current legislation, assured shorthold tenancies (AST) can be offered for up to seven years with a deed, although technically there is no maximum term length. Anything over seven years must be registered with the Land registry; despite the lack of maximum length, the most common tenancy length is 12 months.

Despite longer tenancies being mutually beneficial, key reasons for the continued norm for short term tenancies is a lack of understanding of longer tenancies, and their benefits including stability in residence and rent payment levels.

Landlords tend to prefer a long-term stable tenant and to not uplift rent, rather than to have a continually changing tenancy with the opportunity to raise rents. This notion is supported by the government’s 2018 landlord survey which found around 70% of landlords kept the same rent when negotiating new tenancies with existing tenants.

In the most recent government survey of English private landlord’s, 40% of landlord’s and agents were willing to offer longer tenancies and a further 38% are willing with the inclusion of a break clause.

The desire to keep existing tenants and not have continuing turnover is further strengthened by the changes in June 2019 when the Tenant Fees Act came into force, which increases a landlord’s or agents costs to replace tenants.

Not all tenants favour longer-term tenancies. There are many factors that may impact the duration a tenant would want to stay in a property, for example, those with visa commitments, those renting with roommates or in-house share situations, and those working in secondment or seasonal jobs. It would be better for potential tenancy term limits to be advertised with rental adverts to offer tenants choice-based lettings.

Longer tenancies can bring the changes to the industry aspired to by the changes announced by government to remove s21 including making it harder to evict. However, there needs to be clear notice periods to end tenancies that are applied equally to both tenants and landlords through clearly set out break clauses.

Any break clause or notice period to leave a property must be treated the same for both landlords and tenants, in the interests of balance.

Recommendations:

Government to produce How to Let and How to Rent guides that include the benefits to both landlords and tenants of longer tenancies.
Government to require tenancy term limits to be advertised with rental adverts to offer tenants choice-based lettings.

Kindly shared by Royal Institution of Chartered Surveyors (RICS)