Landlords have evolved, but the rules protecting renters are stuck in the past
The private rented sector has fundamentally changed over the past decade; yet the rules governing how it functions are rooted in the late 1980s.
After the passing of the 1988 Housing Act the size of the private rented sector stayed roughly the same in London. However, since 2001 it has risen by 75 per cent with one in four Londoners now renting privately.
The people living in the sector has also changed, renting is no longer the preserve of the young and economically mobile who previously welcomed its characteristic short-termism. Homeownership is now an increasingly distant dream for Londoners on better incomes, combined with the hollowing out of social housing this has forced those on lower incomes to rely on the private rented sector as well, often with significant subsidy from the state in the form of housing benefit.
The result is that many – if not most – now live in the sector out of necessity, not choice. We see the evidence of this in the emergence of "Generation Rent" and that 20 per cent of the recent growth in privately renting households has been from families with children.
We have one of the weakest sets of rules and regulations of comparable countries to protect private sector tenants. Yet, we also have one of the worst housing crises. The case for reform is clear; the question is not should we reform, but how we should reform the sector.
This week the London Assembly Housing and Regeneration Committee published its report on London’s private rented sector. The report suggests how we mitigate the worst insecurities of the private rented sector – most notably affordability, security of tenure and poor landlord practices. On rents, the committee wants the Mayor to seek regulations so he can pilot a mechanism for bringing stability and predictability to rent increases. While the committee is open to suggestions of how rent increases can be made more predictable, our starting point is the "second generation" regulations of rents – such as those used in Germany and Switzerland – where rent increases are linked to inflation or interest rates.
We are not proposing caps on rents. The proposal has drawn the scorn of City AM editor Alistar Heath, who described the proposal as “stupid”, “economic illiteracy” and “antiquated, quasi-Victorian class hatred of landlords”. Aside from the lazy mudslinging, Heath clearly hasn’t read our proposal, as he seems to think we’re proposing rent caps.
He presents a false choice between New York style rent caps and – what we proposed – second generation rent stabilisation. The evidence from other western economies, most notably Germany and Switzerland, is that such regulations produce much larger, affordable and better functioning private rented sectors than we currently enjoy in London.
As Mr Heath admits in his article London is currently suffering from a dysfunctional housing market. To put it another way, London’s rental sector is experiencing market failure, a point highlighted by Shelter’s report on rip-off letting agent fees. Given the scale of market failure in London’s housing market and the profitability of the sector for landlords, it is unlikely that a mechanism to stabilise rent (not cap rents) would negatively impact on overall supply – it hasn’t in other countries. We need more houses and flats, but we also need rent stabilisation.
Given that the private rented sector is now a permanent destination for many Londoners, particularly families, it is clear that private renters need to feel stable in their home.
That is why the committee has called for the abolition of a landlord’s right to "no fault eviction".
There are a myriad of legal recourses for landlords to evict tenants if they have a genuine reason for doing so. What is not acceptable is a landlord exercising their right to evict a tenant for absolutely no reason. Throughout the committee’s investigation we heard many cases of tenants evicted from properties for asking for repairs or improvements to a property.
Picture the situation; you are a parent of children who have their GCSEs coming up in two months. The boiler has broken and you have asked for it to be repaired. The landlord then exercises his right to "no fault eviction" to get rid of you, knowing full well other tenants will be in the property soon enough. Is it right that our regulations allow this to happen?
Of course, this report is not all about bashing bad landlords. Most landlords are good landlords, who treat their tenants well and invest in their housing stock. That is why the report has encouraged support for landlords – the Assembly is championing low-cost loans and access to reduced cost services – that will make their stock better and make it cheaper for them to operate.
Bringing sense to rent rises will not result in a catastrophic loss of homes – landlords will not just walk away. Hard-pressed tenants are questioning how other western countries can have better regulated sectors than we do, while also having a much larger, more affordable and better functioning private rented sector.
We must do the same in London, this problem isn’t going away and every day we wait more and more Londoners are being poorly treated and having to put up with poor conditions. We’ve had enough talking, now its time for action.