As private renting has a growing role in housing Londoners, how the sector is regulated becomes of increased importance. The second event in our Future of the Private Rented series, run in parternship with PwC, explored historical and current regulation in PRS and asked what appropriate regulatory tools moving forward could be. Speaking at the event were Andrew Heywood (independent housing consultant), Ian Doolittle (Partner at Trowers and Hamlins) and Chris Norris (Head of Policy, Research and Public Affairs at the National Landlords Association).
While regulation is generally viewed as positive from a tenant protection standpoint, other key actors see regulation in the PRS with more trepidation. The majority of landlords own fewer than 10 properties, and so approach their involvement with PRS as small business people. From this view, the costs and bureaucracy of regulation dissuade entry into the PRS as landlords. At the same time, investors and lenders want control over their investment in PRS and so may perceive regulation as a threat.
Until 1988, the tenure share of PRS steadily declined, due in part to rising shares of owner occupation and social renting. This decline was also a reaction to high levels of regulation (particularly from the Rent Acts) that, while achieving high levels of tenure security and rent control, had the indirect impact of discouraging landlord and investor engagement with PRS. The subsequent Housing Act 1988 and further initiatives enabled landlords to charge market rent, and increased the accessibility of buy-to-let mortgaging; as government has left PRS relatively unregulated, this has coincided with growth in the PRS over the past two decades.
In recent years, there have been minor regulatory tools introduced into PRS: for example tenancy deposits under the Housing Act 2004, and the Mortgage Repossession (Protection of Tenants) Bill that was tied to Crisis’ ‘A private matter?’ campaign. At a small scale, regulatory tools are being explored – LB Newham, for example, will be implementing its mandatory landlord licensing scheme borough wide on 1 January 2013 following a pilot programme. Generally speaking, however, voices against further regulation have dominated the PRS dialogue. The 2008 Rugg Review led this conversation, in giving PRS in its currently regulatory framework a clean bill of health, while the Mayor of London’s third Housing Covenant advocates for ‘self-regulation’ in the sector.
The role of regulation in the private rented sector needs to continue to be explored as new facets of PRS emerge. With PRS increasingly looked towards as a longer-term housing option, the sector will need to cater to a wider range of tenants. The role of impending benefit cuts, coupled with direct payment of benefits to tenants, raises different issues on cost of arrears, and in investment in lower-rent PRS housing more generally. As well, the decline in buy-to-let lending has left space for a bigger role for institutional or corporate investment in PRS, and these regulatory implications need to be examined.
Presentations for the three speakers can be accessed below.
A write-up from our first event in the Future of the Private Rented Sector series that focused on the sector’s policy landscape is available here.