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articles > What Should the Government be Doing About the Private Rental Sector?

Article > What should the Government be doing about the private rental sector?


 

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If any private residential landlords were hanging on for a Conservative-led government to radically overhaul housing policy and ignite a bonfire of red tape, they will have realised by now that they’re going to be disappointed. Several months into this new government have shown that whilst a coalition government is a novelty, it isn’t necessarily radical or fast-moving. Economic matters, and a zeal for cuts and austerity, have dominated the headlines.

The coalition government’s housing policy has become slightly more clear in recent weeks. In the emergency budget two key announcements were made of specific relevance. The first was the increase to Capital Gains Tax But more significant were the changes to Housing Benefit and Local Housing Allowance which will have a massive impact even on landlords who don’t let to social tenants.

It’s a mixed picture for private landlords, but the man to watch isn’t the Housing Minister Grant Shapps. We’re more interested in the Chancellor of the Exchequer George Osborne. It’s the economy. We’ll be glued to the Chancellor’s spending review in October, there may be trouble ahead.

Housing Benefit
Whilst there can be no doubt that the Housing Benefit bill can’t keep rising as it has in recent years, but it’s interesting that the proposed changes will not save a great deal of money (9% saving in 2015-2016 on current levels). But even this small decrease will have a massive effect on landlords. In particular, it’s a crude approach to a complex problem. By applying the same measure nationwide we think that the changes will acutely affect the number of private lets to benefits claimants in London and the South East.

James Davis, CEO of Upad, is himself a landlord with several properties in London with tenants claiming housing benefit. He’s going to stop taking social tenants. “I’m a businessman,” he says, “and I let to tenants on housing benefit because it makes good business sense. But the changes to Housing Benefit and Local Housing Allowance have made me reassess that decision. It doesn’t make sense for me to let perfectly good properties to tenants on what is a lower than commercial rent. I’ll be seeking tenants who are funding their own rents in future. It would be business madness to do otherwise.”

With an influx of Housing Benefit landlords coming into the private rentals market, it’s likely that there will be an impact on rent levels. Other policy announcements made since the general election will also have a serious impact on private landlords. The rent threshold for which properties must be held under an Assured Short term Tenancy will be raised on the 1st October 2010 from £25,000 to £100,000. That means that all tenants will automatically be granted all the rights AST affords them and deposits will also need to be held in a deposit protection scheme. There is also some confusion on whether this legislation it retrospective and applicable to existing tenants. It’s a move that has been bitterly opposed by landlords.

And don’t forget that Prime Minister Cameron has also indicated that he expects the private rental sector to take the strain for social housing. A few weeks back he said that he thought council housing shouldn’t be for life and that that tenure should end when council tenants could afford their own homes. This hasn’t been announced as official policy but is an interesting indicator of how the PM is thinking.

 

And what about HMOs?
Housing Minister Grant Schapps announced recently that every local authority will have the right set their own rules and regulations on registering and permitting Home of Multiple Occupancy. We think this is the worst of every world. There will be regulation, but it will be different from borough to borough. Think about it. If you have multiple properties in a city, they could be in different boroughs, even if they’re only streets away from each other. You’ll have to get to grips with different HMO rules for different local authorities. That sounds like red tape squared to us.

 

What IS the government’s housing policy?
This patchwork of announcements and changes does raise a question: what is the coalition government’s housing policy? Despite every party at the general election saying housing was a vital issue, it would seem that this government doesn’t have a coherent approach. It is interesting to note that housing doesn’t feature in the coalition agreement that underpins the Conservative and Liberal Democrat government. But there are clues of a general philosophy and it shouldn’t be surprising that the government will be looking to the private sector when it comes to housing matters. In this new age of austerity, there won’t be billions to spend on new social housing projects. Investment will come from entrepreneurs and companies who want to cash in. A typical Thatcherite approach and a great opportunity for those who want to grasp it.

Give private landlords some encouragement
So why doesn’t the government doing more to help private landlords and make it easier for them to fulfil the housing gap? And that’s where we come back to Capital Gains Tax. That increase will affect the very same private investors that the government will have to rely on.

We’d like to see some small incentives to help private landlords and have some suggestions. Maybe you have more. But first up, why aren’t property entrepreneurs treated more like businesses rather than investors? Taxing landlords like companies and subjecting them to tax as firms, rather than as speculators would go some way to encouraging and stimulating the sector. Sweeten the pill of Housing Benefit reform by revisiting the popular suggestion that guarantees rent by paying it directly to landlords rather than tenants. Encourage bank lending: it’s still tricky for good landlords to get buy-to-let finance. And speed up the processes that rogue tenants manipulate to avoid eviction. Court hearings and orders should be available in days not weeks or months once due process has been followed to serve notice to tenants in arrears.

 

 

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