Levelling Up Committee submits recommendations on PRS reform proposals – Mortgage Strategy
The Department for Levelling Up, Housing and Communities (DLUHC) has submitted its recommendations to the government on reforming the private rented sector (PRS).
This comes following the release of the government’s whitepaper, A Fairer Private Rented Sector, in June last year setting out its long-term vision for the sector.
The whitepaper set out various plans including a ban on Section 21 evictions and the creation of an ombudsman for private renters.
The government said it aimed to redress the balance between landlords and 4.4m tenants in the PRS.
Currently, letting agents are required to belong to one of two government-approved ombudsman schemes, but membership for landlords is voluntary.
The government plans to introduce an ombudsman for all PRS landlords, regardless of whether they use an agent, and says a single scheme will mean a streamlined service for tenants and landlords and avoid the confusion and perverse incentives resulting from multiple schemes.
DLUHC says it does not understand why the government is not proposing to replace the existing letting agent schemes with a single ombudsman covering all letting agents and landlords.
It recommends that the government introduce a single ombudsman for the whole of the private rented sector.
Propertymark head of policy and campaigns Timothy Douglas says it is “concerning” that the committee has recommended that the government introduce a single ombudsman for the whole of the private rented sector without considering its impact.
“Such a significant change needs thorough consideration of the implications on the system as a whole.”
Douglas adds: “Alongside letting agents, sales and managing agents are also currently legally required to belong to one of the existing redress schemes, therefore removing these schemes and replacing them with one for letting agents and landlords will have knock-on effects for the housing sector which the committee has failed to realise.”
“The report could have gone further to acknowledge the need for regulation for letting agents and a wider approach that incorporates the six government departments that interact with the private rented sector to create a long-term strategy for the future of renting. For us to find a long-term solution, we must look holistically at the scale of the challenge and be realistic about the level of reforms needed.”
“What is needed is a single-entry point for all housing-related complaints and for the UK government to extend the requirements for redress to landlords who are fully managing rented property only.”
The government’s whitepaper also set out a ban on Section 21 evictions and replace fixed-term tenancies with a system of open-ended (periodic) tenancies.
The DLUHC says that the abolition of fixed-term tenancies, combined with the repeal of section 21, “would undoubtedly give tenants greater security of tenure, and we, therefore, welcome the proposals”.
However, the committee highlights that the one exception is the general student PRS market.
Currently, the proposal is to include this part of the PRS in the tenancy reforms, but the committee concludes that abolishing fixed-term contracts here could make letting to students considerably less attractive to private landlords, as the student market mirrors the academic year and benefits greatly from 12-month fixed tenancies.
It says: “We agree with the evidence that not exempting the student PRS could push up rents or reduce the availability of student rental properties, at a time when the market in many university towns and cities is already very tight.”
The committee recommends the government to retain fixed-term contracts in the student PRS.
On the repeal of section 21, the DLUHC says it believes most private landlords are responsible and have no desire or financial incentive to evict tenants without good reason.
However, it also suggests that “the blight of unfair eviction and insecurity of tenure experienced by too many tenants can only be remedied by its repeal”.
The repeal of section 21 will leave landlords reliant on section 8 of the 1988 Act, which requires a court hearing, and the grounds for possession.
The government says it will amend the section 8 regime to compensate for the loss of section 21.
The DLUHC says that the proposed sales and occupation grounds “could be too easily exploited by bad landlords and become a backdoor to “no fault” evictions”.
In its response, the committee urges the government to consider increasing the proposed sales and occupation grounds from six months to one year and up the period following the use of either ground from three months to six months.
Propertymark’s Douglas says he is “pleased” to see the evidence-based proposals are being listened to.
He comments: “This includes retaining fixed-term contracts in the student private rented sector, introducing a specialist housing court, fast-tracking all possession claims in respect of rent arrears and antisocial behaviour and the need for more social house building to improve investor confidence, tackle affordability and increase supply.”
One of the biggest challenges facing private renters is the high cost of renting.
Many smaller landlords believe the white paper proposals will aggravate the problem by driving them out of the PRS.
The committee says it shares some of the concerns expressed about the reduction in the size of the PRS.
It suggests the government should review the impact of recent tax changes in the buy-to-let (BTL) market with a view to making changes that make it more financially attractive to smaller landlords.
Douglas says it is “encouraging” to see that the DLUHC shares the same concerns that the PRS is shrinking.
“The committee has joined us in recommending a review into the impact of recent tax changes in the BTL market to help inform the UK government of how we can make changes that will spur on investment and make it more financially attractive to smaller landlords.”