PRS rental reform white paper - a deeper dive into government plans to reform the private rented sector

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“Reform” of the private rented sector (PRS) has been a long time coming, so long that it’s often seemed like every administration, no matter the political colour, has in the past been scared off by the size of the task. Over the years legislative tweaks have been made around the edges, new regulatory layers have been laid upon existing layers creating a veritable palimpsest of rules governing the sector. Will things be different with DLUHC secretary of state Michael Gove’s “New Deal'' for renters?

Referencing President Franklin D Roosevelt’s “New Deal” programme for rescuing the U.S. from the effects of the great depression in the 1920s/1930s, Mr Gove’s plan for the private rented sector in England is similarly not short on ambition. In his foreword to the paper Mr Gove states “No-one should be condemned to live in properties that are inadequately heated, unsafe or unhealthy. Yet more than 2.8 million of our fellow citizens are paying to live in homes that are not fit for the 21st century” and adds that too many renters live in damp and dangerous homes and that changing this situation is critical to the Government’s levelling up agenda and that the plan is to “reset the tenant-landlord relationship”.

In making the case for “fundamental” reform of private renting the (well footnoted) white paper references the bad public health outcomes that stem from poor housing in the PRS (as well as the consequential financial costs for the NHS) and, for good measure, throws in the fact that a whopping £3 billion proportion of the total “housing benefit” bill for taxpayers goes to landlords who rent out substandard properties. Further, it points to an economic case for reform in that rents in the PRS have reached such a level that renters who could be potential home owners cannot afford to consider buying a home because they pay so much in rent (renters spend on average 31% of household income on rent): “we must reduce financial insecurities that prevent renters from progressing on the path to homeownership.” Poor educational outcomes for children due to insecurity of tenure in the PRS also need to be tackled, in part, by reform of the sector. But the paper also points out that the current system we have doesn’t even work for good landlords or the communities in which they operate. Landlords don’t have access to the right information or support that will help them navigate the legal complexities of the system they need to comply with and communities suffer from undealt with anti-social behaviour from some tenants who are private renters.

So what does all this mean for local authorities, landlords and tenants? Well, the paper lays out a 12 point “plan of action” which includes embedding new or reinforcing existing tenants rights (for example, with regard to making complaints or challenging unreasonable rent increases), ensuring that local authority enforcement of housing and tenancy standards is more robust and consistent across the country and reforming the existing grounds for possession so that landlords have a more “effective means to gain possession of their properties when necessary” along with a focus on mediation between landlords and tenants such that court proceedings can be avoided wherever possible. Further, using blanket bans to refuse to rent to potential tenants with children or in receipt of benefits will become illegal and potential tenants will also have a right to request that a pet be allowed to be kept in a rental property. A one stop shop property portal will be built for use by landlords, tenants and local authorities where rental property information will be uploaded by landlords and accessed by potential tenants and by local authorities. The portal will also hold information on the rental rights and obligations of parties to a tenancy contract.

In addition, a single fixed term (periodic) tenancy will be brought in for use by all renters meaning the end of the current assured shorthold tenancy used in most tenancies

Other facts supporting the case for reform point to the diversity of the parties involved in the PRS: 4.4 million households, 2.3 million landlords, 333 local authorities and 19,000 letting agents - figures which underline how the sector appears to to be one that has spun out of control due to a lack of standardisation and consistency of behaviour - whether on the part of the regulators, the consumers or the investing service providers - and which thus needs fundamental reform by its very nature as things stand.

Whilst the benefits for tenants seem to be many and obvious, good landlords whilst praised, to a certain extent, in the white paper will have the most to do in terms of adapting to these changes in the ecosystem but the Government makes it clear that landlords will be expected to be more “proactive” with regard to how they manage their tenancies from now on. Local authorities for their part will, for obvious reasons (mostly involving resource issues), need to examine their current enforcement strategies to see if they will be able to cope with enforcing more robustly. The white paper states that Government will fully fund “new burden” costs incurred by authorities “where necessary” in dealing with the requirements that result from the reform and this committment will become more concrete after Government has carried out an impact assessment of the potential new burdens. For sure though, there are likely to be more selective licensing schemes proposed over the coming years and civil penalty fines imposed by councils will have their caps raised. Councils will also have to do more about ensuring that all properties subject to mandatory (HMO) licensing are so licensed and are not slipping under the radar. Will this mean the introduction, at some future point, of local authority enforcement league tables and all that a league table system entails?

When someone says of a plan that it is “our ambition to” it should be taken with at least some wariness (is that too cynical?). Often that phrase is put in the back pocket of the person saying it for future use if things don’t go according to plan and there are some pitfalls that could lie ahead. This is big legislation, clearly linked to wider Government strategy (levelling up) which has already been critiqued in some quarters as not being funded as well as was originally conceived or promised. The political and economic headwinds (domestic and global) are gusting strong and the legislative timetable, pre-election, is short. Maybe too short? A One stop shop property portal (on a national scale for the millions who will use it) will need time to build and bed down. Landlords are told that there will be 6 months notice before the new periodic tenancy system kicks in. The new Ombudsman’s office will need to be staffed and funded and investor landlords (not criminal landlords) will need to feel that things are on the right track and their investment is secure.

So, whilst the plans are ambitious and reform is much needed there is a lot of work required to make them work for all the stakeholders in the PRS or indeed, given the practical implications, to make them work at all. But, PRS reform was needed some time ago and …. well, there’s no time like the present and one thing is for sure - you can expect a slew of webinars over the coming months but “pudding” and “eating” remain operative words.

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