Written statement to Parliament

Private rented sector

This speech was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Written ministerial statement by Lord Ahmad of Wimbledon on the private rented sector.

I would like to update the House on the actions that the coalition government has put in place to support a healthy and prosperous private rented sector. The private rented sector is an important part of the housing market providing flexibility and allowing people to move quickly, helping those who do not want to own a house or who are currently saving to buy in the future.

There are now 4.4 million households who rent in England. Rents in the private rented sector have risen less than inflation during this Parliament. Surveys suggest that 84% of private renters are satisfied with their accommodation, and the average tenancy length is 3.5 years.

This government has actively encouraged more institutional investment into the provision of new build rented homes, avoided excessive regulation and taken action to tackle the small minority of bad landlords.

Increasing housing investment

Supporting house building is part of this government’s long-term economic plan. The Build to Rent fund provides development finance to support the creation of a purpose-built private rented sector, backed by institutional investment.

We have already announced 14 contracts worth £230 million, delivering over 3,000 homes for private rent. Over this year as the contracts are finalised, the fund will deliver £1 billion of investment, meeting our 10,000 homes target.

The Private Rented Sector Housing Guarantee Scheme will facilitate investment of up to £3.5 billion in new private rented sector homes across the UK. PRS Operations Ltd (a subsidiary of Venn Partners LLP) was appointed to operate the scheme in December 2014 and has already started engaging with potential borrowers.

The Affordable Housing Guarantee Scheme utilises the government’s hard won fiscal credibility to deliver more affordable housing by making debt cheaper for affordable housing providers.

It aims to deliver up to 30,000 homes through guaranteeing up to £3.5 billion of debt. To date, 35 registered providers have been approved under the scheme. Combined they will borrow over £1.25 billion of guaranteed debt, supporting the delivery of over 11,000 additional affordable homes across the United Kingdom.

In March 2015, a £194 million bond issuance achieved an all-in price of 2.92% and brought the total value of bond issuances to £600 million since launching in May. This is the cheapest ever housing association bond, and the cheapest debt of any kind for 27 years. It is also the first bond in the sector to break the 3% barrier.

Through the Rent to Buy programme, the government is providing £400 million of low cost loans to housing associations to build new homes between 2015 and 2018. This programme will act as a springboard to home ownership for aspirational working households on lower incomes.

The Rent to Buy programme will enable us to deliver thousands of new, high quality homes to help those who need them at a far lower cost to the taxpayer. This fund will deliver 8,000 to 10,000 new homes, helping households to move from renting to owning, while giving very good value to taxpayers.

In addition to direct funding, the government’s Private Rented Sector Taskforce is continuing to accelerate the development of the private rented sector as an investment market and has helped to generate aspirations to invest over £10 billion of domestic and foreign investment in this tenure. The Taskforce is holding a conference to launch their Build to Rent guide for local authorities later this month.

Ensuring a professional industry

The coalition government has not jeopardised investment in the sector by increasing red tape and unnecessary regulation. Instead we want to drive up standards in the sector and improve the level of professionalism amongst landlords.

We have:

  • published “How to rent”, an accessible guide with clear advice for tenants on their rights and responsibilities with advice on what to do if something goes wrong

  • issued a model tenancy agreement which sets out a fair balance between the rights and responsibilities of the tenant and landlord and which can be used for longer tenancy arrangements, helping to reduce voids and letting agency fees

  • rejected calls for statist rent controls, which would destroy investment in new and existing rented properties, reduce supply and ultimately force up rents

  • introduced a new code of practice in September 2014 to improve the sector’s professionalism, so all landlords and agents understand what they should deliver

  • required all letting agents and property managers to belong to one of the 3 government approved redress schemes, this will offer a clear and simple route for landlords and tenants to pursue complaints about their agent and where complaints are upheld they could receive compensation

  • ensured full transparency on letting agents’ fees, shortly all letting agents will have to publicise, prominently in their offices and on their websites a full tariff of their fees, whether or not they are a member of a client money protection scheme and which redress scheme they have joined

Transparency will encourage competition on fee levels and enable choice on service provided not just cost. We have considered but ruled out a ban on fees, as this will simply increase rents for tenants.

We are today publishing a short guide Renting a safe home which will help tenants recognise potentially harmful hazards in the home, such as damp, mould and excess cold and what to do about them. This will help tenants avoid properties with potential health hazards.

Supporting leasehold properties

There is an estimated 4.1 million leasehold dwellings in England, 1.6 million of which are in the private rented sector. My department announced in August a number of areas that we are looking to address. A package of works is therefore being taken forward, which includes making it easier for tenants associations to be recognised and improving the provision of pre-purchase information to enable informed decisions to be made.

Ensuring high standards for park homes

We are committed to ensuring that the rights of park home residents are respected and the sites they live on are healthy and safe. Many have suffered over the years from unscrupulous site operators. We have already introduced important new measures under the Mobile Homes Act 2013 which have given residents important new rights to improve their lives and protect them from rogue site owners.

We have given local authorities powers for the first time, to issue compliance notices requiring a site owner to carry out any necessary work to the site to comply with their licence obligations. In an emergency, a local authority may also enter a site and do the works if it considers there is an imminent risk to the health and safety of residents. The local authority will in any of these cases be able to recover all its enforcement costs directly from the site owner.

To ensure the costs of carrying out their licensing functions did not fall unfairly on council taxpayers we gave local authorities powers to charge site owners an annual fee for administering and monitoring existing licences.

Each local authority must publish its policy on how it will set the fees, showing clearly this is reasonable and will do no more than recover the council’s costs. To ensure the system for charging fees was fully transparent, we published a guide for local authorities on setting site licensing fees, which provides options for setting fees and devising their fees policy. We also published a guide for site owners on the new enforcement regime introduced by the 2013 Act.

The new park homes site licensing regime gives local authorities more effective control of conditions on mobile home sites. In appropriate cases, it provides local authorities with the tools required to take enforcement action including the power to serve compliance notices in relation to breaches of site licence conditions, emergency action powers, and the ability to carry out works in default and recover expenses.

We have today issued enforcement guidance to local authorities on how to use their new powers to best effect.

We have given local authorities powers to refuse to grant a new application or transfer of a site licence. We have today issued guidance which sets out the matters an authority can take into account when considering an application including the funding and management arrangements in place for managing the site and complying with the licence.

Getting the right balance on regulation

We made a commitment to take forward a review of property conditions in the private rented sector. A discussion paper, Review of property conditions in the private rented sector, was subsequently published last year seeking views on what more can be done to improve property conditions in the private rented sector, and how best to tackle bad landlords without negatively impacting on the good ones.

The government’s response has been published today.

We are issuing updated guidance to local authority officers to help them identify and successfully prosecute rogue landlords and letting agents. We made available £6.7 million to a number of local authorities to help tackle the acute and complex problems they face in tackling rogue landlords in their area, which includes action on “Beds in Sheds”. So far nearly 40,000 properties have been inspected and over 3,000 landlords are now facing further action or prosecution for breaking the law.

We have laid secondary legislation to reform selective licencing schemes, giving councils more discretion to target action against by rogue landlords. At the same time, the new measures put tighter checks and balances on the introduction of blanket licensing, which increases costs on responsible landlords and drives up tenants’ rents.

We are protecting tenants against retaliatory eviction where they have a legitimate complaint and made the eviction process more straightforward in appropriate circumstances. Subject to the Deregulation Bill receiving Royal Assent, these provisions will come into effect in October 2015.

We are clarifying tenant deposit protection legislation in response to recent court cases. As a result where landlords took a deposit prior to the introduction of the tenancy deposit protection legislation on 6 April 2007 in respect of a tenancy which (a) rolled over into a statutory periodic tenancy on or after that date and (b) is still in existence when the Deregulation Bill shortly receives Royal Assent will have a period of 90 days from the date of Royal Assent to protect their tenant’s deposit or potentially face a fine.

We are laying legislation requiring landlords to install smoke alarms on every floor of their property, and test them at the start of every tenancy. Landlords would also need to install carbon monoxide alarms in high risk rooms – such as those where a solid fuel heating system is installed; affirmative resolution secondary legislation is being laid and subject to Parliamentary approval, the provisions will come into effect in October 2015; we have worded the secondary legislation to allow for rollover to the next Parliament if necessary.

We believe this is the right balance to ensure high standards, whilst avoid excessive red tape which would reduce supply and force up rents.

By working constructively with landlords and the property sector and supporting free enterprise, tenants will benefit from a better range of quality rented accommodation and competitive rents.

Copies of the documents associated with these announcements have been placed in the Library of the House.