Reforming the private rented sector is a bit like spinning plates on the end of sticks. Make sure you get each one right and you will balance the interests of landlords and tenants, tax breaks and tax dodges and new investment and under- and over-regulation. But concentrate too much on one plate and the rest will come crashing down around your ears.
Many of the next steps proposed by John Healey yesterday, including regulation of letting agents and a requirement for written tenancy agreements for all tenancies, are welcome ones. But some of his plates seem to be wobbling too.
Take the concept of ‘light-touch regulation and effective redress’ that was at the heart of the Rugg review and the government’s response to it in May 2009. It carried unfortunate echoes of the light-touch regulation of the banks that proved so successful in 2007 but it was logical and intended to reassure good landlords that they would not be caught in unnecessary red tape designed to catch bad ones.
Light touch is not mentioned in the plans published by Communities and Local Government yesterday but it’s more than just a question of terminology. Rugg had proposed a minimal license to let under which landlords would have to state their name, date of birth and business address. The national register proposed by the government appears to go further by requiring the addresses of the properties they rent out, the condition of those properties and their track record on fixing faults. The National Landlords Association says the plans are unworkable and ‘the likely consequence…would be to penalise the law-abiding while at the same time drive the worst landlords under the radar’.
Or take tax incentives for institutional investment. The Treasury has long been suspicious that calls for tax breaks were really tax dodges - possibly after the unhappy experience of the business expansion scheme in the 1980s. Rugg came out against fiscal incentives and planning changes to encourage build to let lobbied for by the British Property Federation (BPF).
But the industry has long complained that all it wants is tax transparency and a level playing field with other forms of investment. The result of the stand-off has been, well, not much. Real estate investment trusts (REITs) were meant to be the answer but only two of those launched since their introduction in January 2007 have any residential component and there are none that invest solely in residential property.
The BPF’s other main complaint is that the stamp duty rules on bulk purchase of property discriminate against institutional investment. It thought it had convinced the government to act in last year’s Budget but the changes were dropped at the last minute.
But a Treasury consultation paper on investment in the private rented sector also published yesterday puts both REIT reform and bulk stamp duty back on the agenda. According to the BPF, that means that ‘the man on the street could soon be investing in a piece of large-scale rented housing developments funded by institutions and listed property firms’.
Or take retaliatory evictions. Neither Rugg not the government consultation paper proposed to do anything about the current situation where a tenant who tries to enforce their rights can be evicted in retaliation and have no recourse against their landlord - although Rugg did envisage a more effective sanctions regime against that kind of landlord. That seems perverse.
As for the ‘effective redress for tenants’, there is no mention of the ideas floated by Rugg and Rhodes of a housing justice network funded by landlord licensing fees or a single property tribunal that would be easier for tenants to access or a specialised housing court.
What there will be instead is a new housing hotline for tenants to get advice and a tripadvisor-style website for them to post their views on their accommodation on new landlord. How well they will work remains to be seen - but at least they can happen now. Anything that needs primary legislation will have to wait until after the general election and for a possible regulation-sceptic Conservative government.
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