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Growing pains - Regulating our expanding private rented sector

Growing pains - Regulating our expanding private rented sector
3 min read

As the private rented sector continues to grow, we must adopt a strategic approach to improving standards, says Kevin Hollinrake MP.

Although private buy-to-let investors face a combination of higher stamp duty costs, less income tax relief, and greater mortgage regulation, the private rented sector (PRS) is likely to continue to expand significantly. The 4.5 million PRS properties currently make up 20% of all households and Knight Frank estimated earlier this year that this would rise to 24% of all households by 2022.

Quite right then that the Government wants to make the sector more professional, affordable and stable, which in return will make it less likely to add to the cyclical pressures in the market that can lead to housing market bubbles and busts. In addition to changes to tax and lending rules, new regulations for the sector have included ‘Right to Rent’ immigration status checks, a new requirement for smoke and carbon monoxide detectors, electrical safety checks and it is currently consulting on banning all fees and charges to tenants by landlords and letting agents.

All regulations carry a cost, of course, but it is unclear how much of these extra burdens will be passed on to the tenants and how much will be absorbed by the landlords and agents. My best guess, and the limited evidence that we have seen from a tenant fee ban in Scotland, is that some will feed through in the form of higher rents.

In my view, we can accelerate our progress to a more professional private rented sector, not through piecemeal approaches to regulation and the tax system, but through a more strategic approach. This opens an opportunity to tackle unfair practice but also improve rental standards for tenants.

The standard of private rented sector accommodation is a key issue for many tenants. Although the vast majority of landlords do an excellent job in providing 4 million good quality homes for tenants in the UK, there are an additional 1 million homes considered sub-standard. Institutional investment in PRS is seen as one way to solve the problem but not everyone wants to live in a 2 bedroom flat in Central Manchester and small landlords will continue to deliver a significant proportion and a much more diverse provision of rented homes. 

To tackle this issue, the Welsh Assembly has introduced heavy-handed new legislation for agents and landlord. In England local councils have, since 2004, been allowed to implement selective licensing schemes, whereby all private landlords in areas with low housing demand or substantial anti-social behaviour have to obtain a licence, including Newham, Leeds, Bristol, Blackpool, Sunderland, and Hartlepool.

Proponents of this approach argue that it drives up standards and highlights rogue landlords, but critics say that these licensing schemes are expensive, ineffective and provide no significant benefits to tenants or the wider community. They also assert that the degree of inconsistency between the different schemes does significantly more harm than good.

In England, all estate agents and letting agents are required to join an independent redress scheme. The current approved redress schemes are The Property Ombudsman Limited, Ombudsman Services, and Property Redress Scheme. A simple requirement for landlords to also join these schemes and, for instance, to include a National Rental Standard could be an effective, light-touch way to tackle and police unfair charges while improving property rental standards.

Kevin Hollinrake MP, Thirsk & Malton was elected to Parliament in 2015 having worked in the property sector for over 30 years. He co-founded the lettings and estate agency business Hunters in 1992 which now has 206 branches nationwide. 

This article first appeared in the Conservative conference edition of the House Magazine. Kevin Hollinrake MP is responding to an article from Nationwide which you can be found here.

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