Liz Davies considers the ways in which landlords have benefited from the credit crisis and explores how tenants could be given increased security through five-year tenancies.
Landlords, like bankers and pay-day loan companies, have done well from the credit crisis and this government’s austerity attacks on the poor.
Since 2006 the number of households living in private rented accommodation has almost doubled, from 2.4 million to 4m.
As many people now rent privately as live in social housing.
The causes are obvious – soaring house prices and banks’ unwillingness to lend mean that fewer people are buying their own homes, while the number of social – council and housing association – homes has declined and 1.8m households wait on council waiting lists.
The problem with private rented housing is that a tenant’s rights are governed almost exclusively by the contract she or he signs, the tenancy agreement.
Since rent controls and security of tenure were abolished in January 1989, there is hardly any statutory regulation of the private rented sector.
Security of tenure protects tenants, since they are rarely in a position to exercise a free choice over the details of the tenancy, whereas there are plenty of other opportunities for a landlord.
The English Housing Survey for 2011, published this month, records that properties that are privately rented are more likely than social housing or owner-occupied homes to be in substantial disrepair.
Private renting tenants pay a higher proportion of their income in housing costs than social tenants or owner-occupiers do – 41 per cent of their income is spent on housing costs on average.
Rents are already high. The average private monthly rent in England is £575. In London it is £1,150.
And they are increasing more rapidly than house prices.
Housing benefit rarely covers the whole amount of rents charged privately. Housing benefit is calculated according to the lowest third of local market rents.
Private tenants were subject to the “bedroom tax” before it hit social tenants. The disparity between housing benefit rates, and the amounts actually charged by private landlords in London, has led to London councils trying to send homeless families out of the capital, to areas where private rents are cheaper.
It also adds to the power imbalance between landlord and tenant. Often a landlord will tolerate receiving a lower amount from housing benefit until he or she wants the tenant to leave, at which point the shortfall will suddenly be claimed.
Private rented tenants are more likely to move frequently. Thirty-five per cent of them have been in their home for less than a year.
Partly this reflects a choice to remain flexible, but it also reflects lack of security of tenure and the impact of rent increases.
Shelter and the Children’s Society have published research showing that children who frequently move home have lower levels of academic achievement and generally lower well-being.
Landlords can get away with high rents and bad housing conditions because tenants have no security of tenure beyond the first six months of a tenancy.
Unless the landlord and tenant have agreed a longer period, at the end of six months, the landlord can either increase the rent or require the tenant to leave if the property can be let to a different tenant at a higher rent.
Similarly, if a tenant dares to complain about bad housing conditions, he or she will just be required to leave. Local councils have statutory powers to regulate and prosecute bad landlords, but rarely intervene of their own initiative.
In these circumstances, contracts won’t protect a tenant’s rights. What is desperately needed is statutory security of tenure, so that a tenant can’t be evicted if he or she complains of bad housing conditions and so that rents cannot just be arbitrarily raised.
Both the government and the Labour Party are responding to calls to tackle bad landlord practice.
Minister for Housing Mark Prist has announced funding so that local authorities can “tackle rogue landlords,” using their existing enforcement powers.
The House of Commons communities and local government committee has called for better regulation, enforcement by councils and controls on lettings agents.
The Labour Party’s policy review document Private Rented Housing: Improving Standards for All contains more detailed proposals to beef up the enforcement of housing standards available to local authorities.
It recognises that lack of security is a problem. “Many tenants are reluctant to complain because their landlords could either raise their rent or simply evict them.”
Sadly, but unsurprisingly given new Labour’s belief in the market, the policy document ducks out of recommending that there should be any increased security of tenure beyond the initial six months.
Islington North MP and Star columnist Jeremy Corbyn has tried to tackle the issue.
In a Ten Minute Rule Bill on Regulation of the Private Rented Sector introduced into Parliament earlier this year, he called for five-year tenancies with a break clause so that the tenant can leave earlier, but the landlord cannot evict earlier.
The Bill also called for a public register of all landlords, a requirement for decent homes standards to apply to all rented accommodation and full vetting of private landlords.
The Bill would have provided the enforcement of all environmental standards, including energy efficiency standards, prevented “retaliatory evictions” where the landlord tries to evict because the tenant complains about lack of repairs, non-discrimination, so that landlords and lettings agents cannot refuse to let to anyone on housing benefit, and rent regulation set by local rent tribunals.
As I understand it, Ten Minute Rule Bills are introduced in order to set the agenda – they don’t result in actual legislation. Jeremy plans to reintroduce that Bill, or a similar one, in the next Parliament.
His proposals for a minimum period of security for five years, coupled with rent control, would start to drive down housing costs. Tenants would be able to enforce their rights. Landlords would still receive a return.
And the housing benefit bill would decrease, because housing benefit is subsidising private landlords.
Responsible private landlords have little to lose from giving their tenants five-year security. They have security in knowing that rent will be paid for five years.
This article was first published in the Morning Star. Liz Davies writes here in a personal capacity.