PHA submission to the Communities and Local Government Committee inquiry into the Private Rented Sector

Memorandum from the Pro Housing Alliance

1.0 Executive Summary

1.1. Housing is a determinant of health, with the exported costs of poor housing are met by the NHS and others. Cold, damp and overcrowded housing makes tackling health inequalities harder

1.2. Amateur landlords who too often are ignorant of the law typify the PRS. In some cases landlords are either wilfully neglectful or plain criminal.

1.3. The PRS contains some of the worst housing conditions with more than one-third non-decent.

1.4. High rent levels and lack of security mean that vulnerable tenants too often have to endure poor conditions and do not complain to local housing authorities (LHAs) for fear threats from the landlord and retaliatory eviction

1.5. LHAs too often rely on complaints before intervening and using their enforcement powers.  More vulnerable tenants are unlikely to complain, so this is an ineffective approach to regulation

1.6. Letting agents are inadequately regulated and causing problems for tenants and owners

1.7. HMO licensing has been allowed to become too bureaucratic and its lack of connection with Part 1 of the 2004 Act is a weakness.

1.8. Use of the PRS for LHAs meeting their homelessness duty needs careful monitoring as the supplementary guidance is weak

 

2.0 Introduction and the Pro Housing Alliance

2.1 The Pro Housing Alliance (PHA) is an alliance of organizations and individuals who recognize the fundamental contribution of housing to public health and that poor housing exacerbates health inequalities.  Member organisations include Care & Repair (England) Camden Federation of Private Tenants, Zacchaeus 2000, Team Homes, Home Improvement Trust; Housing Justice, the Chartered Institute of Environmental Health (CIEH), and C2O Future Planners. The PHA works to encourage others to join it in efforts to bring about a greater recognition of the role of housing in society as a determinant of health and well-being and as a vital element of infrastructure to service the growth of the national and local economies; it seeks to develop the components of a credible and just national housing policy[1].

2.2 It is the view of the PHA that poor housing leads to poor health and exacerbates health inequality (inequity).  The BRE estimates that poor housing costs the NHS in England £600million a year which represents just 40% of the total exported costs to society[2].

 

3.0 Quality of the Private rented sector

3.1  The private rented sector (PRS) is highly segmented, and contains high quality expensive accommodation and also some of the most unsafe and unhealthy conditions. The PRS has grown substantially in recent year to more than 3.6 million dwellings however according to the English Housing Survey (EHS)[3]: –

  • Over 37% of PRS housing is non-decent[4] with the highest incidence of non-decency of all tenures (1.386 million dwellings).
  • Some 858,000 homes are non-decent because of the presence of a Category 1 hazard under the Housing Health and Safety Rating System (HHSRS).
  • That said Category 2 hazards in the higher bands could still pose a significantly greater risk to health and safety than the average for the stock. PRS homes are more likely to have damp and mould problems (440,000 out of 1.4 million in the whole stock) even though relatively few would be assessed as a Category 1 hazard.
  • In 2010, 638,000 dwellings in the PRS were in the lowest two energy-efficiency rating bands (F & G) and 608,000 non-decent dwellings in the PRS failed the thermal comfort criterion.
  • Some 29% of all overcrowded households are in the PRS according to the English Housing Survey, and overcrowding is an increasing problem In 2010 some 187,000 households in the PRS were overcrowded compared to 75,000 in 2001-02

3.2  The PRS is made up of many landlords who are both inexperienced and unprofessional, and who own a small number of properties. The number has increased as the result of buy-to-let and slack lending criteria. Within the sector: –

  • 89% of all landlords were private individuals who were responsible for 71% of all private rented dwellings.
  • 78% of all landlords owned a single dwelling.
  • Only 8% considered themselves to be full-time landlords and very few landlords are members of a landlord association or relevant professional body.
  • Only one-third of all landlords and agents had heard of the HHSRS[5].

3.3  Amateur landlords typify the PRS. It is easier to let a property to humans than it is to run boarding kennels. Housing is seen as a personal asset plus the value in the market (and rent charged) does not reflect condition. The owner seeks too often to maximize income and minimise expenditure on maintenance and management costs.

3.4  Measures to ensure all involved in renting out properties are competent before they start would contribute to improving quality.  There have always been arguments for licensing the whole PRS but HMO licensing as in the 2004 Act (considered later) can be cumbersome.

3.5  A system of accreditation might be a better approach.  Any accreditation scheme must involving compulsory training. This reflects the recommendations of the Law Commission[6].  This entails national provision of landlord accreditation schemes, available in every local authority area and set on a statutory footing.  Individual or consortia of LHAs could provide schemes, but this need not be the only route so long as any accreditation scheme meets national criteria and is endorsed by CLG or other agency such as UK Accreditation Service or the Office of Fair Trade[7].  There is a good argument for accreditation being a pre-requisite for use of the accommodation to meet the homelessness duty (see below) or for the payment of housing benefit.

3.6  A further step to ensure that the sector is an acceptable standard would be to amend section 8 of the Landlord and Tenant Act 1985. Implied into every letting at low rent is that the dwelling should be fit for human habitation[8]. The Law Commission said this should be implied into all tenancies of dwellings for less than seven years. The principle should be updated further so that it should be implied into all such tenancies that no Category 1 hazard exists at the start of the tenancy and should be kept that way throughout the tenancy. In addition such changes could include a requirement for landlords and letting agents letting such a tenancy (perhaps with a more realistic rent limit), be a member of an accreditation scheme.

 

4.0 Rent levels

4.1  Rent levels reflect the housing market, and the overvalued housing stock. The housing market suffers from a lack of ethical foundation in the model of the free market followed by UK governments since the 1980s. It is not just supply side or just demand side solutions needed, but a balance. The balance does depend on the state of supply. It is reasonable to focus primarily on supply, when the chronic undersupply of genuinely affordable and healthy housing is one of the main structural problems.

4.2  As the result of an imbalance in supply and demand, the cost of private renting has increased consistently since 2009, hence the increase in housing benefit.  Historically it has been easier for all income groups to find housing opportunities that match their widely divergent incomes. The problem now is that the profile of housing costs is truncated towards the lower end while disparities in income have increased. So access to suitable housing for lower income groups depends increasingly on benefits. This dependence has serious inherent problems.  The solution is for private and social rental growth to be controlled at less than earnings inflation.

4.3 According to the EHS[9] the average PRS weekly rent in England as a whole (excluding service charges) was around twice that of those living in the social housing at £160.  Lower quartile weekly rents in the private rented sector vary by district from £700 to £231 and are much higher in London than any other UK region. By October 2013 over 159,000 London households will face a reduction in the Local Housing Allowance received and 10,000 households will be forced to relocate.

4.4  A survey of London private sector landlords showed that 60% of landlords would not reduce rents for households with lower Local Housing Allowance. This is likely to push the most vulnerable households into the clutches of the more unscrupulous landlords.

4.5  The RICS has assessed the average rental increase in the year to July 2012) was 4.3% with regional variations. In the last year (to July 2012) average rents grew by 6.9% in the North West, by 5.9% in London and by 4.9% in the West Midlands. Further growth of between 2% and 4% is predicted, with 7.8% growth in London. As recent research for the PHA found[10] welfare reforms are already having a detrimental effect on the health and wellbeing of private tenants who claim Housing Benefit, whether in work or not. Yet tenants have little opportunity to improve their situation. They choose to remain living in cold and unsafe housing fearing complaints may lead to eviction or higher rents.

4.6  Feelings of insecurity are heightened which, combined with coping with a small budget, contribute to increased levels of stress and anxiety. Debt damages relationships with families and friends. Tenants lack confidence to find work and for those with a job, it is difficult to concentrate at work.

4.7 Rents should therefore be limited or capped unless a good case can be made for an increase for example to invest in maintenance or improvement.  The Housing Benefit bill has increased so much is because of market rents and increased gap between income and housing costs. A substantial proportion of those in receipt of Housing Benefit are in work – so the taxpayer is subsidising low pay from employers and high rents for landlords.

 

5.0 Regulation of landlords

5.1  The existence of so many bad or poor quality landlords in the sector partly as the result of ineffective regulation by LHAs is unfair to the more responsible landlords but also makes it less attractive for institutional investors.

5.2. Local authorities have not used their powers or met their duties as well as they might; too often acting only on complaint from tenants. Despite the duty under s.3 of the 2004 Act the removal of the CLG’s capital for private sector renewal and lack of funds to be able to gather the necessary information, there are few LHAs with coherent strategies for the PRS. Indeed the most common way of dealing with hazards found is “informally” although it is not clear what this is, and in the case of Category 1 hazards would be a breach of the statutory duty[11]. LHAs and the regulation of private landlords was covered in detail by a report for Alison Seabeck MP and Karen Buck MP published in 2011[12]. Abolition of the Audit Commission is only going to lead to weaker regulation of the PRS.

5.3 It is clear that the Enforcement Guidance[13] (and ODPM Circular 5/2003[14]) should be updated and revised to reflect the changes and lessons since the 2004 Act came into force.

5.4  Even with a low level of intervention however, between September and November 2012 LHAs using the Housing Health Cost Calculator estimated housing interventions saved the NHS and society as a whole more than £1million.[15]

 

6.0 Regulation of letting agents, including agents’ fees and charges

6.1 The RICS has highlighted the potential for rogue lettings agents to cash in on the rental boom due to a combination of consumers’ low expectations and a total lack of effective regulation.

6.2 Anyone can set up a lettings agency without appropriate qualifications, knowledge or understanding of the rental process. It is not compulsory for agents to conform to any code of conduct or register with a government-approved redress system. This allows letting agents to take advantage of, and charge both potential tenants and landlords, as Shelter has shown. Letting agencies charge fees to access keys often for better quality properties. This has the effect of forcing lower income households to seek accommodation from poor quality landlords with poor quality property, also making moving more difficult and expensive[16].

6.3 It is apparent from lack of awareness from tenants of what they should expect from their agent is compounded by a lack of effective regulation. The SAFE Agent is a scheme to protect tenants and landlords who are paying money to a letting agent for rent or a deposit but it would appear not to be well known

 

7.0 Houses in Multiple Occupation (HMOs)

7.1  HMO licensing in the Housing Act 2004 is a more bureaucratic approach than many campaigners for its introduction envisaged. For example, licensing cannot be used to deal with hazards under the HHSRS (other than incidentally).  It would be more sensible for it be a pre-requisite for the grant of a licence that no Category 1 hazards exist in the HMO. It was envisaged that licensing could be merely an administrative exercise. In practice it seems few local authorities grant a new licence without a visit. A purely administrative approach should have been more like the proposed registration in the Rugg Review[17].  It was, and remains unclear whether licensing was intended to address management issues or the physical conditions.

7.2  The licensing regime and prescribed standard is also inconsistent with the principles of better regulation.

7.3  The infrequency with which Interim Management Orders are used indicates that licence applications are rarely refused.  This means either all applicants are “fit and proper” or else LHAs are taking too relaxed an approach, but also focussing on “easy” cases[18]

 

8.0 Tenancy agreements and length and security of tenure

8.1  One of the problems with the sector is the lack of security for occupiers. It is too easy for landlords to gain possession with no cause at two months’ notice, plus impose unlimited rent increases. This makes it impossible to establish a home within the dwelling. In part this is a consequence of the buy to let market, and the mortgagee requiring lettings on short terms so vacant possession can be gained should the mortgagor default.  It would be better for both landlords and tenants to have a longer minimum period of a tenancy, 3 to 5 years now that the PRS is becoming such an important part of housing provision (this could be linked to annual rent increases in line with the increase in average earnings.

8.2  It is the experience of many LHA officers that when tenants complain about conditions, there is a threat of or actual retaliatory eviction – a problem identified previously by Shelter and Citizens Advice. This means that tenants are often putting up with unhealthy and poor conditions[19]. It is the view of the PHA that where there is a breach of the repairing obligation[20] no rent should be payable by the tenant – this could be as the result of an application to the County Court. Given the difficulties of accessing public funding for an action for breach of the repairing obligation, it would be fairer for tenants to have the rent liability reduced until the landlord has met their legal obligation.

8.3  Additionally where the local authority takes action under Part 1 of the Housing Act 2004 because of the existence of a Category 1 hazard, then it should be the case that no order for possession should be granted (which would contribute to reducing retaliatory eviction) and again no rent should be payable until that hazard that poses a risk to health and safety is remedied.  In the case of action other than a hazard awareness notice that would be on revocation of the Notice or Order made by the LHA.  As the tenants should be given a copy of the notice or order, that could also act as certifying no rent is payable until that time.

8.4  As a comparison, in France an unfurnished property contract has a minimum duration of three years (if the proprietor is an individual), or six years (if the proprietor is a company or society).  The general rule that the tenant cannot withhold the rent does not apply in the exceptional circumstances where the mairie, in collaboration with the préfecture, determine that the dwelling is “insalubrious” and a danger to the health of its occupants.

 

9.0 Local authorities, their homelessness duty and the PRS

9.1  Local authorities can now discharge their homelessness duty by direct referral to the PRS[21]. No property should be used until it has had an HHSRS inspection by a competent surveyor trained at least to the standard provided by the government prior to the 2004 Act coming into force. They should then certify the absence of any serious threats to health and safety before use. LHAs should incorporate this into their policies[22].

9.2  The supplementary guidance refers to the duty on LHAs to keep the housing conditions in their area under review[23] but does not require an HHSRS inspection of the property. It also refers to action under the “Household Health and Safety Ratings System”, but the Housing Health and Safety Rating System is the means of determining whether or not a Category 1 or Category 2 Hazard exists. The HHSRS itself is not enforced, but the first step in determining whether a duty or a power to intervene exists.  This basic error perhaps demonstrates some carelessness (or lack of understanding) in the guidance.

9.3  Authorities should “ensure that the property has been visited by either a local authority officer or someone acting on their behalf to determine its suitability before an applicant moves in” according to this guidance.  It does not refer to the HHSRS or provisions in Part 1 but an inspection by a competent person (whether from the LHA or not) should be undertaken. It is unacceptable to place people in homes that present a serious risk to health and safety. Could it leave LHAs vulnerable to legal action should they place people in conditions that cause ill health or injury?

 


[2] Roys, M., Davidson, M., Nicol, S., Ormandy, D. and Ambrose, P. (2010) The real cost of poor housing. Bracknell: IHS BRE Press

[3] CLG, 2012, English Housing Survey: Headline Report 2010-2011

[4] CLG, 2006, A Decent Home: Definition and guidance for implementation – https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/7812/138355.pdf

[5] CLG, 2011, Private Landlords Survey 2010

[6] Cm 7456 Encouraging Responsible Renting

[7] e.g. landlord associations as the National Landlords Association already has an accreditation scheme

[8] The standard of fitness remains that existing prior to the changes in the Local Government and Housing Act 1989 and the rent levels are £80 per annum in London and £52 per annum elsewhere

[9] CLG, 2012, English Housing Survey: Headline Report 2010-2011

[10] PHA, 2012, Poor homes, poor health- to heat or to eat? Private sector tenant choices in 2012 See http://www.prohousingalliance.com/wp-content/uploads/2012/11/GLHS-report-final4-11-12W2007NoLogo.pdf

[11] s.5 Housing Act 2004

[12] http://sabattersby.co.uk/documents/HHSRS_Are%20tenants%20protected.pdf

[13] ODPM, 2006, “Housing Health and Safety Rating System – Enforcement Guidance” made under s.9 Housing Act 2004

[14] ODPM, 2003 ODPM Circular 05/2003 of 17 June 2003 “Housing Renewal”, London: HMSO

[15] http://www.rhenvironmental.co.uk/news/article/1?category=housing

[16] PHA, research 2012 at 3

[17] Rugg J., & Rhodes D., 2008, The Private rented Sector: its contribution and potential, Centre for Housing Policy, University of York

[18]  Illustrated by the RPT hearing involving Nottingham City  (Case Reference BIR/OOFV/HMVI/2012/0002)

[19] PHA Research 2012 at 3

[20] Section 11 of Landlord and Tenant Act 1985

[21] Housing Act 1996 as amended by Localism Act 2011 and SI 2012 No 2601

[22] para 14 Supplementary Guidance on the homelessness changes in the Localism

Act 2011 and on the Homelessness (Suitability of Accommodation) (England) Order 2012, CLG, November 2012 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/9323/121026_Stat_guidancewith_front_page_and_ISBN_to_convert_to_pdf.pdf

[23] Housing Act 2004, Section 3