An industry veteran and an authority on buy-to-let has recalled what happened the last time there were rent controls.
In this piece especially written for Eye, Malcolm Harrison, who was ARLA’s official spokesperson for many years, calls for the industry bodies to unite to drive forward the whole of the private rented sector.
Not so long ago the Private Rented Sector declined to less than 7%, a decline driven by rent controls and rent assessment committees. Corporate and private landlords became a fast vanishing breed with nothing to take their place.
Then de-regulation of the rental market was kick-started in time to pick up the pieces from the housing crash and the starter homes fiasco of the early nineties, when thousands of young people were left with negative equity in unsaleable properties.
Coupled to de-regulation, the advent of buy-to-let made new and improved housing stock available where housing associations and local authorities could not.
This also led to private sector leasing. Private sector landlords have invested in housing to enable local authorities from Midlothian to Brighton to fulfil their statutory housing obligations.
The framework for this is buy-to-let for long term tenancies, with the interests of landlord, tenant and local authority protected.
This revival in the private rented sector – now to some 16% – came in the nick of time and it has saved successive governments from an even worse housing crisis than the one being experienced today.
Not only did the private rental sector once again help to meet the demand for the basic necessities of housing, it also offered choice, perhaps for the first time.
Well before the crash, a growing number of young people were choosing to rent rather than buy, preferring the flexibility that renting could offer for the short, the medium and, even the long term.
At the same time, it was the private sector that called for the introduction of obvious safeguards ranging from gas safety to deposit protection. Indeed, deposit protection was first implemented properly by the private sector following government reluctance to fund a pilot scheme.
The sector also called for tax reliefs for large scale corporate investment in rented housing and long term tenancies of up to seven years written specifically for families. These were ignored – and all the while house building declined.
The champion of much of this was ARLA, behaving as the professional body for the rental sector as a whole, not just for letting agents.
It was listened to by landlords and tenants, government and local government and even pressure groups like Citizens Advice and Shelter as the Association shouted the requirements and benefits of the private rented sector from the rooftops.
The financing of the sector was backed by the mortgage lenders who today significantly fail to fight their own corner, being too embarrassed by the shortcomings of other parts of the financial sector. So, even while housing starts stagnate, mortgage lending falls.
Now the big question is: Have the professional bodies become too big or too bureaucratic or too self-interested to continue driving the private rented sector – and by that I mean the whole of the sector – forward?
Instead pressure groups, representing only the very small minority of tenants who actually find themselves with a problem, dictate the agenda to any ignorant politician, wet-behind-the ears special advisor or supine bureaucrat.
Whatever the result of the election, the professional bodies for renting and mortgage finance must get back into the habit of loudly promoting their experience and expertise and to do this before whatever government wrecks the private sector.
Government wrecked it before and will do so again, adding still further to the housing crisis.
It is time for a coalition of the professionals to have a Rose Garden moment and come together to save the private rented sector from proposals from all parts of the political spectrum that are unbelievable and well as unworkable.
Comments (16)
This is a classic piece on how market forces will (always have!!!) set the playing field for any industry. Why or why do politicians think they can reinvent the wheel or manipulate the market to their advantage. Labour policy is doomed to fail but the fall out during the process is left for the market to sort out and cover the costs. The public will be on the receiving end, which for some will be devastating financially and emotionally.
Forcing 3 year tenancies on the market is a bad idea, but I’m not against them being more freely offered. Perhaps by negotiation the landlord and tenant have the option of either a one, two or three year AST.
This gives the flexibility to those tenants in London, for example, who may need to relocate on a few months notice. But could also suit those families who want the long term stability.
Forcing 3 year tenancies on people is in the whole, simply not required nor an important for many tenants.
But landlords and tenants already have this option. Fact is, the vast majority of the time our landlords and tenants are opting for one year at a time. And of those that are willing to sign up for longer, it’s usually the landlords, rather than the tenants.
Yes I know, what i’m saying is that perhaps the 2 or 3 year option should be more freely offered, i’d even go as far as saying that they can be advertised on property details stating how a “2 or 3 year tenancy is available for this property”. Of course it won’t be offered if a landlord is not looking for a long term tenancy. Anything has to be better then making people have a 3 year tenancy when the demand for it is not there. Also there are some areas of the country where 6 month tenancies are the norm, for example in huge parts of Southend and the surrounding areas of Essex nearly all AST’s are six months, there has to be a happy medium if these socialists get in!
Oh sorry, I understand what you mean now. Advertising properties as available for longer, specific times is a good idea, and I would think could easily catch on. In fact, nothing to stop us doing that right now (even though most of the tenants we meet are reluctant to commit to more than a year). I shall put that forward as an option to my landlords when their properties come on to the market. Nice one 🙂
(I remember many years ago when 6 months was the norm for us, and what a job we had trying to persuade landlords and tenants to commit to longer for the first tenancy. Nowadays, if we offer an initial tenancy of less than a year, the property is almost impossible to let!)
“Nowadays, if we offer an initial tenancy of less than a year, the property is almost impossible to let”…Indeed.
If done correctly it could really appeal to many tenants, and could be a real USP for landlords, especially if it is what they ACTUALLY want. Also us agents can help the process by not charging the full 2 or 3 year fee up front and instead collect the fee annually or monthly if you do so already!
It would work well on a regional basis dependent on demand in that area. If you had a 3 bed house next to a school or a 4 bed house next to a university then why not ask the landlord if you can advertise it as a 3 year AST? Or for a one bed flat in the City you can offer a flexible one year AST but for god sakes let’s not tie people down to something that no one actually wants.
All agreed. On the fee front, we always already take fees monthly. It’s the best way, in my opinion.
Excellent piece. It’s amazing how “we” seem destined to repeat the same mistakes of the past again and again. The PRS appears to be no exception to this rule.
Well said. Sadly Labour has written their manifesto and unless they ‘do a coalition deal’ these policies are set in stone – if the deal is with the SNP, we have a problem. Our only hope is for them not to form a Government.
Well, we can always rely on the fact that parties rarely follow up on their Manifesto pledges if elected!
Very good piece and wholeheartedly agree.
I also recall a time when tenant’s security of tenure was so great that nobody would consider renting out their property as there was no certainty of getting it back. Three year tenancies would damage the balance of demand and supply, which could make it very hard for tenants when they start looking for a home to rent at the end of a three year term. Not a well thought through proposal and very damaging for this sector.
Well said Mr Harrison! Just when will ARLA stand up to ‘Generation Rent’ and represent the sector to our politicians who clearly only believe what GR tell them.
IMO standing up to Generation rent and other tenants groups is the wrong approach. they are not discontent for no reason, there is no-one on their side save for NALS there is no one at all looking after tenants interests. Other than Generation Rent and now tenants voice no-one helping or educating tenants.
Quite rightly Agents take good care of their clients, a role that necessarily requires them dealing with tenants concerns and complaint. Standing up to Generation Rent will only escalate the issues that do exist and perpetuate the distain for our industry.
Government is being lobbied by some influential causes but causes who find it easy to manipulate figures and statistics to suit their agenda. they present them to a media that as well as not being fully up to speed on numbers is all too keen to reinforce a false stereotype of Agents they have created.
As an example CLG identified just 1000 cases of S21 retaliatory evictions by the time Shelter got hold of the figures 1000 became 11,000 and that was the subject of a prime time ITV show. The BBC Watchdog programme misrepresented Nigel Haver’s company let as typical of a wronged AST tenant. The media aren’t concerned with detail that undermines their journalism so I would suggest instead of standing up to organisation representing tenants, the professional bodies who do well to be seen to correct some of the misinformation that fuels the myth of widespread wrongdoing by agents. Politicians don’t listen to people but they do watch and believe what they see on the telly.
I don’t normally post here any more but I have to agree with this piece wholeheartedly. As an Industry we are currently sleep walking towards disaster. Some of the articles I have read written by Lettings agents on this subject are frankly Naive and ill informed. This threat has been well sign posted, it’s a potential Tsunami that could sweep the sector into history once again. Sadly it’s probably too late to do anything meaningful about it if Labour gets into power, so do what you can to ensure they don’t, then lend your support to educating the polititans about the realities of our sector
Hello Simon, I am fairly confident that won’t happen, you simply won’t educate a politician so the trick seems to be making sure they are getting the correct advice and at present that is the bit that is not happening.
For fairly much all of that history recounted by Mr Harrison I have been selling the tech that now powers the industry, that required/s a solid knowledge of issues that even some senior ARLA executives steer clear of.
Despite all their talk and posturing I have yet to meet a single politician with even a finger tip grasp of what is required to prevent an escalation of social unrest fuelled by folk needing somewhere to live and work.
Yesterday I identified how an estimated £1.25 billion pounds tax revenue is simply being ignored each year. I have previously identified a means to add another 100,000 tenancies into the sector and shown how universal credits should be used to accommodate temporary and zero hours employees who hover between benefits and wages.
Politicians and civil servant departments with no practical experience of property other than as individual landlords or tenants should not be influencing policy any more than I should be a heart and lung surgeon because I have some experience breathing and have a pulse.
It is great to get it off our chests but until there is serious social unrest nothing will change and homes will be used as political trump cards to score frankly meaningless points off the opposing party.
Only when Housing, private and social becomes apolitical will progress even start to be made.