Future of the housing market: private rented sector

The future of the housing market: the private rented sector
(Westminster Social Policy Forum - 10 December 2013)




A hand-drawn poster at the recent "Made Possible By Squatting" art exhibition in Dock Street, London E1. Poster is anti-copyright, photo copyright Matt Salusbury

THE TITLE of the gig was actually "The future of the housing market: Help to Buy, property supply and the private rented sector", with the private rented sector (PRS in the latest jargon) tacked on the end. Westminster Social Policy Forum gigs, at an address in Whitehall, and their reports will cost you between £20 and £90 each.

There were developers aplenty, the representatives of private tenants were very thin on the ground. (Yes, there was someone big from Capita, formerly with government and now with Capita via the revolving door.)

Trowers and Hamlins in the Westminster Village
The organisers had Tower Hamlets Council down as the rather charmingly Medieval-sounding "Trowers and Hamlins", and elsewhere as "Towers and Hamlets". I didn't realise the "Westminster Village" mentality extended to not being able to name other boroughs in inner London!

I was there as the "reporting press", which means I got in for free. The press are supposed to be neutral in these matters, but I'm afraid I came over as rather losing it with my questions/comments.

This wasn't a spur of the moment thing, I actually went with the intention of doing a rant, having been to some forums already where they could go on and on about the private rented sector without mentioning the elephants in the room – the rents are too high, private tenants effectively how no rights at all in the current market conditions, they face retaliationary evictions as well.

And – my rant continued – the letting agent sector has gone rogue, and hasn't this sudden housing shortage go a teeny weeny bit to do with selling of the social housing stock via the Right to Buy for council house tenants over the past forty-odd years. (Recently suspended in Scotland for new council house tenants, with Scottish local councils allowed to suspend it for new tenants, which some have already done, so it is possible. Not that it's even on the agenda here.)

I was expecting a pretty poor debate or none at all, which basically what happened. There were loads of people from central government (Dept. for Local Govt and Communities, DWP, etc. as well as the Scottish Govt.) The England and Wales Govt. people seemed to echo what I've heard local councillors in my own borough of Haringey say a lot recently – the private rented sector is all fine and hunky dory, and indeed there should be more of it. (More and more local authorities are becoming commercial property developers in joint ventures rather than continuing to build council houses.)

We need to talk about money
The private rented sector being fab is now official policy, I was somewhat shocked to find out. No mention is made of the level of the rents, of course. It seems to be a very British discussion in which nobody wants to talk about money or actually name figures for rents that people have to pay.

The government people didn't want to discuss how high the rents were in the private rented sector at all, and were content to announce some forthcoming initiatives to protect private tenants from "rogue landlords," seemingly unaware or unbothered by the fact that the whole private rented sector, in London at least, has gone rogue. It's not the actions of a few bad apples anymore, it's an all-pervasive malaise across the market.

The developers and landlord representatives seemed to have a more honest take on the situation. Chris Norris of the National Landlord's Association, in response to the bit of my rant about Londoners going into debt to pay arbitrary letting agents fees every time they moved, said "the government have missed a trick" with its recent – very limited – regulations on letting agents to be brought into force in April. (The Scottish Government has banned letting agent fees, Katherine Sacks Jones of housing charity Crisis reminded us.)

One consultant who advises developers (private sector and social), said he's been on Shelter's "How long will it take you to save for a deposit on a house?" web tool, impersonating a 20-year-old hoping to by "a two-bed in Streatham", only to be told that his imaginary younger self would be able to put a deposit on a house when they were 44. This was Jerry Gilber, a partner with Ark Housing Consultancy speaking. Like a lot of the developers and landlords present, he seemed to have a much more realistic take on the unsustainability of the housing market than a government locked in to "free market is best" ideology.

Jerry said "the supply of affordable rented housing has dropped, the government has got to accept it needs some kind of subsidy – even in form of free land." He also warned that with the end of quantitative easing (printing money) on the horizon, for currently rather comfortable mortgage payers, "half a point on the interest rate is an increase on 10 per cent on what you have to pay back."

Step in and do affordable housing - homeowners
And did I really hear Paula Higgins, chief executive of the Homeowners Alliance (an organisation that sounds like it would represent small "c" conservative curtain-twitchers anxious about the effect of Romanians moving in next door on their property prices) call for the public sector to step in and do affordable housing? Yes I did.

Generally depressing though the event was, there were some interesting developments, some positive. Mark Pawsey MP, who's on the Local Govt Select Committee, confirmed to me that his Committee had in a report recommended offering longer tenancies and limiting rent increases (See here - Chapter 5). Not something you hear about on the news, and evidence that even if government are wedded to the invisible hand of the unrestricted free market, some parliamentarians are at least talking about putting some kind a brake on market forces.

Kick the doors off
And Lord Best, a housing association chair, said he'd been on one of the "dawn raids" by Newham Council, who are very big on licensing of all private rented accommodation in their borough. He described how the Newham licensing people are accompanied by police, UKBA, and HMRC officials as well, because so many landlords are "not paying tax" (about a third, according to Exaro).

While Newham so far have "not got a warrant to kick the doors off" dodgy private rented accommodation, Lord Best says they're working on it, they had two cases in court at the time of writing, seeking to get the power to go back and kick off two doors in particular. As the guy from Hawaii 5-0 would say, "Book 'em, Danno!"

In a less arse-kicking corner of the private rented sector, Andrew Baddeley-Chappell, head of policy and governance (mortgages) at the Nationwide, confirmed to me that the mortgage lender had become the first one (and as far as I'm aware still the only one) to end that traditional restriction on buy-to-let-mortgages, the condition that tenancies could only be for six months, or at the very most a year.

Nationwide buy-to-let mortgages can be for three years now. Andrew said the biggest risk they face by putting the tenancy up to three years is not the landlord getting burnt, but the tenant getting burnt. Increasingly, tenants are forced to put up to a year's rent (or even more) upfront to beat other offers and get the flat, and if they do that and the landlord does a runner, the tenant is screwed, and so is the mortgage lender.

It's a London thing
Kate Faulkener of Designs of Property had a lot of interesting data on the property market. First of all, the absolutely desperate market conditions private tenants face in the capital seem to be a London thing. Outside London – particularly in cities in the Midlands and up North – there is an acute shortage of accommodation, but that's because the landlords can't make any money out of it. Some have been putting up "provincial" rents so that these are edging up to the level they were in 2008, when landlords had to slash them, but they can't put them up anymore. Rents are 2.2 per cent below what they were in 2012 in Belfast.

What would be needed before out of London landlords could raise rents to beyond break-even point would be for wages to go up (not down, as they are at the moment).

Kate also said that in the UK, "40 per cent of our wealth in property" and "over 60 per cent of houses up to June were bought with cash."

Hardshrinking families
It seems also that the old chestnut beloved of politicians of all stripes, "hardworking families", are shrinking. The average household is getting smaller, but houses for smaller "hardworking families" (and cat-owning singletons doing as little work as they can get away with, like myself, and also older "downsizers") aren’t getting built. Everyone's desperate to sell you a two-bed property, it seems. As Richard Fagg of developers Bouygues, says, "land prices mean you can't build bungalows, you have to go for density."

Planning policy (Peter Taylor of developers DLA Piper pointed out that in a big development, planning law mean you'd have to build a few bungalows among all the two-beds that fewer people want.

Kate Faulkener warned that those older "downsizers" will be entering the market in big numbers soon, and can elbow aside the first-time buyers with a chain buy offering cash, and lots of it, for that little property they want to downsize into. "People trading down will be half the market soon," she predicts. And she warns downsizers are likely to distort the market, so that the sort of properties they like – "the three beds will become as desirable, and therefore as expensive, as the four and five beds."

Meanwhile, all this Help to Buy stuff to encourage buyers – including first time buyers – to buy houses will hit another snag no one's thought of. Kate notes that now that have hefty student loans to pay off, "the young already have one big debt, they don't want to get another one in the form of a mortgage."

Other interesting data that came out were: the proportion of rented accommodation as part of total housing stock is now moving up to 16-18 per cent, largely driven by the buy-to-let mortgage market. Rachel Fisher of the National Housing Association said that every five minutes, someone turns to the government for Housing Benefit, and Chris Norris of the National Landlords Association said of his corner of the sector (landlords with typically ten or fewer properties), "on average one in three tenants have Housing Benefit."

ONE THOUSAND SEVEN HUNDRED POUNDS!
Mark Pawsey MP noted there was "an issue at the lower end of the market" where people "are unable to pay private rental" and held up an example of best practice in the private rented sector the - £125m deal for the Stratford Halo development, build under the government-subsidised Build to Let scheme. Details of the deal include "mutually agreed rent increases over time."

Oh dear, would that be the same Stratford Halo development that had an impromptu housewarming party by private tenant activists protesting at its government subsidy for building but at a distinctly subsidy-free flavoured rent of £1,700 a month for a two-bed flat?

Just as the Homeowners Association lady called on the public sector to do social housing, so Chris Norris of the National Landlords Association sounded positively Socialist compared to the government's free market fundamentalism. Chris said there is a "debate about whether the private rented sector quality of product is high enough," with lots of money "going into provision but not into investment and upkeep." And "enforcement isn't up to par… We need to regulate tenure, we need to regulate prices." He also questioned whether the usual two-month notice tenure "is fit for purpose – for families" and concluded that with "such an inbalance between supply and demand, the market isn't functioning for consumers."

Expectations incredibly low
Katherine Sacks Jones, head of policy and campaigns at Crisis, quoted the English Housing Survey as indicating that "a third of people had been there [in their private tenancies] for less than a year. She added that "one in four homelessness acceptances [Councils giving people emergency accommodation]" are "due to the ending of short-term tenancy" (the landlord evicting them for whatever reason, under current housing law they don't really need one.) "The private rented sector is a cause of homelessness," she concluded. A big Crisis survey on people's experiences of the private rented sector is due out in mid-February. An initial finding is that in the private rented sector, "people's expectations are incredibly low."

Hackney Council is launching a "Council-run lettings agency" that's starting soon, with the aim of taking the management (or lack of it) off the small landlords, and to "try an increase supply in Hackney," announced Councillor Karen Alcock, Hackney Council's cabinet member for property and housing policy.

She also said that the incentives the Council used to offer landlords to make their properties available to rent for people on their housing waiting list (often temporarily) "aren't attractive enough" to landlords anymore, because
"landlords can flip their tenancies every six months… increase rent by hundreds of pounds."

Bigger and Better
Mark Hitchen of the "Expanding the Private Rented Sector" bit of the Department of Local Government and Communities outlined vision for a bright future driven by free market ideology. He was, indeed, distinctly keener on the invisible hand of the market than the landlords and homeowners associations and developers. It was, he said, the Government's "ambition" to make private renting a positive form of housing, to make "private rented" Bigger and Better by "raising standards, tackling rogue landlords", against whom tenants will be protected through a forthcoming Tenant Package. There will be more from Local Govt. & Communities next year (2014) on "longer tenancies," Mark expects this will be driven by "market forces". Oh dear!

Housing Benefits cap "will fail, quite spectacularly" in Haringey, says housing official

The benefits cap will be a disaster, predicts the deputy head of community housing in Haringey, one of the four London boroughs that will implement the cap early as part of a 'pilot' involving the London boroughs of Bromley, Croydon, Enfield and Haringey that will start on 15 April.

"I will be putting money on it that it was fail, quite spectacularly" when it is rolled out by other councils across the country from September, said Phil Harris, deputy director of Community Housing Services for the London Borough of Haringey. He was speaking to an audience of landlords at Haringey Council's 19 February Landlords Forum.

Harris's analysis focused on impact of the ceiling on Housing Benefit. Deductions to Housing Benefit will be the first step in bringing in the Universal Credit system to replace the many different existing types of welfare benefits.

"Most people will end up being capped… nothing in London's going to be affordable" for people on benefits to rent," said Harris.

Under the Housing Benefit cap, part of the phasing-in of Universal Credits, households will get one payment that's supposed to cover most of the 23 separate current types of welfare benefit. This one payment will include money that was previously covered in a separate payment by Housing Benefit.

The problem is that the new payment doesn't make any allowance for differences in tenure – the same maximum amount will be paid to cover the rents of council tenants, social housing tenants and private tenants, despite the considerable difference in rents between these sectors. There's no differentiation in the ceiling on benefit to account for regional variation – it doesn't take account of the fact that London rents are insanely high. Nor does the cap differentiate for family size – Harris says it's effectively a '"family tax."

Harris says there's a been a lot of talk recently along the lines of families on benefits being able to make up any shortfalls caused in their income by the cap on housing benefit by giving up luxuries like their Sky TV subscription.

But his department have estimated that in the ward of Tottenham – not particularly expensive by the standards of Haringey and actually a little bit less exorbitant than most of London – a family of two children living on benefits will have a shortfall of £293 a month, and a family with three children will have a shortfall of £578 a month. Clearly, this sort of knock-out blow to family incomes isn't the sort of thing that can be made up by little sacrifices like no more Sky TV.

Although the Department of Work and Pensions describe the Haringey experiment as a "trial", Harris says his council make a point of calling it not a trial but a "pilot." (A trial would also include an equal number of boroughs in statistically similar areas where the benefit cap was not applied, with monitoring of relevant data from those boroughs too. What's happening in Haringey, Bromley, Croydon and Enfield is not a proper trial. The DWP will go ahead and impose the cap eventually across England, Wales and Scotland, probably regardless of the outcomes in the four boroughs.) "We say 'pilot,' it does irritate," explains Harris.

Haringey didn't ask to be part of the trial/pilot of the benefit cap – it was imposed on the four borough's chief executives in a December conference call, by an "instruction" from central government.

Harris told landlords that as a result of the Housing Benefit cap, in Haringey in the first financial year of the cap's operation there will be "a £5.2 million loss" in money that's not going to the tenants, and is therefore not going to the landlords either. That's £2½ million in rent for properties in the private sector in the borough, £1.9 million in rent for temporary accommodation, and £1 million in "lost" rent for social housing in Haringey.

£1.8 million has been allocated by central government to Haringey to "tide them over" during the transition to the cap. There are some exemptions to the cap – pensioners, those on working tax credits, those on Disability Living Allowance and the PIP that's about to replace it, although the criteria for the new PIP will be tighter, and many now no DLA will suddenly find themselves outside it.

There was a lot of data-gathering in the run up to the cap, it took the DWP six weeks to check the data on 23 benefits databases in December, and when the data was shared with Haringey there were "some mistakes in it… the data from the DWP is not that accurate so far." Harris warned that "IT, staff, processes are not ready, lots of mistakes will be made."

See here for the likely impact of Universal Credits on the self-employed on a low income, People in this category face having to provide monthly accounts to the DWP.

There is a "We Demand Secure, Affordable, Local, Decent Homes For All" event for Haringey residents on Saturday March 16 at Wood Green Library, Wood Green High Rd, London N22, 2pm-4pm, with information stalls, know-your-rights sessions and discussions about what can be done. All Haringey tenants, mortgage-payers and homeless people welcome. Includes refreshments and a small toddlers' play area. Info: info@haringeyresidents.org.uk 0208 215 9651 haringeyhousingaction.org.uk

Private tenants protest letting agents' "scam"

Private tenants protested outside Drivers & Norris (D & N) letting agents in Islington's Holloway Road yesterday (Saturday 14 July). The action was in support of two prospective tenants who paid a total of £300 in fees for reference checks which has not been refunded, despite no services being delivered to them by D & N, and no tenancy agreement having been signed. The "D & N Three" asking for the money back - Phil Tsappas, Kyri Tsappas and a friend who is supporting them - are still homeless.

As Phil put it to me, there was "no deal, no contract signed" for a tenancy via D& N. Kyri told me that he and his fellow "applicants applied to secure a tenancy... Drivers & Norris failed to provide service."

The action was called by the newly-formed Haringey Private Tenants' Action Group (HPTAG) – the two-bedroom flat that the three people had applied for that is let by D & N is in Haringey.

The Drivers & Norris Three walked into D & N's Holloway Road office shortly after 11am, asking for the fees to be refunded, and to speak to the lettings manager, Sean Corrigan, although they were told his was out. It appeared at one point that lettings staff had phoned Corrigan and that he was on his way, but this turned out not to be the case. Meanwhile, HPTAG people assembled in the street outside, with banners and a megaphone.

Inside Drivers & Norris with the protesters (and a sales manager)

Phil Tsappas told me that their guarantor had been charged £60, and that he and Kyri had been charged £120 each for each reference check, making a total of £300 for all of them. The guarantor had failed the reference check. One of the D&N letting team told the D&N Three that the issue of the £300 fee was "not our fault, we didn't conduct it" (the reference check.) Phil told me the check had been carried out on D&N's behalf by FCC Paragon, who he says seem to do reference checks for most of the letting agents in Haringey. The Three then went to another letting agent – Winkworth, who also use FCC Paragon and, according to Phil, quoted them £150 each for a reference check.

D & N staff declined to give me their names and told me they had no comment to make.

Phil says he's done some research and the cost charged to a letting agent by FCC Paragon for each reference check is "£17-£19, we think."

A Police Community Support Officer arrived shortly afterwards and asked those protesters inside the D & N office to leave, as it was "private property" and that the D & N "guys feel like they're being harassed". Two police constables and Islington Division's CCTV van also showed up soon afterwards, with the police remaining in the D & N office for the duration of the protest.

The D & N Three left the office to join the protest outside. PC 577 at one point came to the door to tell them one of them could come into to talk to a sales manager from the lettings team. The D & N three declined – one of them told me that this was the same D & N employee who told him on the phone that he should consider himself lucky D & N hadn't kept their whole £800 holding deposit.

The Drivers and Norris Three


Despite the pouring rain, most of the 800 leaflets the protesters had brought along were handed out to mostly sympathetic passers-by, including one of the very few customers going into the D & N office on what's normally its busiest day of the week.

Jacky Peacock, director of Brent Private Tenants' Rights Group – on of very few such organisations in the UK - explained to a concerned-looking PC NI 577 that there are currently "no regulations" in place on what letting agents can charge prospective tenants. Jacky told me tenants can only go to the the Property Services Ombudsman if the letting agency is a member of one of the industry's associations. What about local trading standards officers? "Low on their list of priorities" according to Jacky.

Shoppers in busy Holloway Road were addressed by demonstrators by megaphone, who called for "affordable homes secure tenancy and end to rip-off fees!" One protester using a megaphone told the small crowd that "Drivers & Norris are having a laugh!"

In "discussion" with Drivers & Norris sales staff

One protester told me that letting agents offer "incentives that are designed to fail" - for every flat a letting agent has on books, five groups of applicants will look at it, "they take one [group of tenants], how many holding deposits do they keep?"

The D & N Three plan to return to demonstrate outside Driver some time end of next week, and until they get their money back.

Haringey Private Tenants' Action Group's next meeting is a on Saturday 21st July, 2012 11am, Cafe Life, North London Community House, 22 Moorefield Road, London N17 6QN, near Bruce Grove Station. All welcome. Email: haringeyprivatetenants@gmail.com

The police (and a PCSO) arrive

Links:

More photos from the event by NUJ freelance professional photographer Peter Marshall (please ask him for permission to reproduce!)

Haringey Solidarity Group's housing page

Recent Guardian "Comment is Free" piece "Landlords and letting agencies watch out – your tenants are angry and mobilising" by "Rentergirl" blogger

Photos: Matt Salusbury