the future of the private rented sector: reform and regulation
DESCRIPTION
This presentation was delivered at Future of London's event The Future of the Private Rented Sector: Regulation and Reform. This presentation was delivered on 29 November 2012, in partnership with PwC. It includes slides from speakers Andrew Heywood (independent housing consultant), Ian Doolittle (Partner, Trowers and Hamlins), and Chris Norris (Head of Policy, Research, and Public Affairs, National Landlords Association).TRANSCRIPT
The Future of the PrivateRented Sector
Regulation and Reform EventNovember 2012
Agenda
08.00 Arrivals – breakfast served
08.25 Welcome – Jo Wilson, Director, Future of London
08.30 Chair’s introduction – Richard Parker, PWC
08.40 Speaker panel:
Andrew Heywood, Independent housing consultant
PwC
Ian Doolittle, Partner, Trowers and Hamlins
Chris Norris, Head of Policy, Research and Public Affairs, National Landlords Association
09.15 Questions to panel and discussion
09.55 Chair’s summing up
10.00 Coffee and networking
10.15 Close.
Slide 2November 2012The Future of the Private Rented Sector
The Future of the Private RentedSector:
Regulation and ReformRegulation and Reform
Future of London
29 November 2012
Andrew Heywood
Housing, Mortgage markets, Regulation, Governance, Europe
• Housing: finance, policy, low-cost homeownership.• Mortgage markets: trends, opportunities, threats.• Regulation: policy, practice, lenders, housing providers.• Governance: effective decision making, strategy, audit.• Europe: housing and mortgage markets, regulation.• Europe: housing and mortgage markets, regulation.
Andrew Heywood is an independent consultant specialising in the above areas and an associateof leading consultants Campbell Tickell. A visiting fellow of the Smith Institute, Andrew haswritten and spoken extensively on housing and lending issues. He is Editor of the journal HousingFinance International (www.housingfinance.org. Andrew was formerly Deputy Head of Policy atthe Council of Mortgage Lenders. He has been at the centre of housing, housing finance andmortgage market developments for many years and has unrivalled contacts amongst policymakers, housing providers and lenders.
Andrew Heywood Consulting: [email protected] , 01440730218/07929512057
Regulation and reform
• The relationship between regulation and thePrivate Rented Sector (PRS) has always beenuneasy.
• There is always a balance to be struck betweenprotecting tenants and promoting investment byprotecting tenants and promoting investment bylandlords, institutions and lenders.
• Landlords, like many small business people areput off by “red tape” and the costs of regulation.
• Investors/lenders tend to want control over theirinvestment.
Regulation and Reform
1918 1939 1981 2003 2009/10
2010/11
Owneroccupiers
23% 32% 57.2% 70.9% 67.4% 66%occupiers
Socialrenters
1% 10% 31.7% 18.3% 17.0% 17.5%
Privaterenting
76% 58% 11.1% 11.0% 15.6% 16.5%
Regulation and Reform
• The PRS shrank dramatically during most ofthe twentieth century reaching its nadiraround 1988.
• This was partly due to the rise in home• This was partly due to the rise in homeownership and social renting.
• It was also due to over-regulation.
• By 1988, the Rent Acts had achieved highlevels of security of tenure and rent control.
Regulation and Reform
• The Housing Act 1988 finally reversed thetrajectory of regulation.
• It allowed landlords to charge market rents.
• It also brought in the Assured Shorthold• It also brought in the Assured ShortholdTenancy (AST) which allowed landlords to gaincontrol of their properties on giving noticeand made tenanted property more attractiveto mortgage lenders.
Regulation and Reform
• 1996 saw the introduction of the CML/ARLABuy-to-let initiative.
• Buy-to-let mortgages became widely available• Buy-to-let mortgages became widely availableon competitive terms.
Regulation and Reform
• Source: CML
Regulation and Reform
• Buy-to-let lenders require borrowers to letproperties under an AST so that they can gaincontrol of their security if the borrowerdefaults.defaults.
• Some (but not all) investors have analogousbut not identical concerns.
Regulation and Reform
• For over twenty years successive governmentsleft the PRS largely unregulated
• In 2008 Dr. Julie Rugg published the Rugg ReviewThe Private Rented Sector: its contribution andpotential.potential.
• Rugg came out against further major regulatoryinitiatives and gave the PRS, including smallerlandlords a reasonably clean bill of health.
• The English Housing Survey consistently putstenant satisfaction with landlords higher in thePRS than in in social rented sector.
Regulation and Reform
So what has changed?• The perception that home ownership is falling and the
PRS will be the main beneficiary has become quitegeneral.
• This carries a perception that the PRS must be able toprovide longer-term homes, homes for families and
• This carries a perception that the PRS must be able toprovide longer-term homes, homes for families andcater for a broader age range.
• As buy-to-let lending has fallen since 2007 there hasbeen increased desire to attract institutional/corporateinvestment into the PRS
• Currently (November 2012) the CLG Committee isundertaking an inquiry into the PRS.
Regulation and Reform
• Only 7.7% of PRS tenants are 65 or overcompared to 29.5% of social renters.
• 50% of PRS tenants are 34 or under comparedto 20% of social renters.to 20% of social renters.
• 45.3% of PRS tenants are married or co-habiting compared to 33.4% of social renters.
• 39.5% of PRS tenants have been in theirproperties for less than a year compared to8.4% of social renters.
Regulation and Reform
The PRS is by no means totally unregulated:
• Tenancy deposits regulated under Housing Act2004.
• Houses in Multiple Occupation licensed under• Houses in Multiple Occupation licensed underthe 2004 Act also.
• The Act also gives local authority discretionarylicensing powers and additional licensingpowers.
Regulation and Reform
PRS regulation:
• Tenants have been protected as “consumers”under the Unfair Terms in Consumer ContractRegulations (UTCCRs) since a court case inRegulations (UTCCRs) since a court case in2004. (This is overseen by the OFT)
• The Mortgage Repossessions (TenantProtection) Act 2010 protects “unauthorisedtenants” when borrower landlords arerepossessed.
Regulation and Reform
PRS regulation:
• The FSA (soon to be Bank of England) hasresponsibility for prudential regulation of buy-to-let lending.to-let lending.
• Though consumer (FSA) mortgage regulationdoes not currently extend to buy-to-letlending this is likely to change under aforthcoming EU mortgages directive.
Regulation and Reform
Some big questions:• Is there a groundswell of demand for further
regulation from tenants or landlords?• How would lenders and institutional investors
react to further regulation?- particularly inreact to further regulation?- particularly inrelation to rents and security of tenure?
• Does the social rented sector experience suggestthat further regulation is the answer?
• Would further regulation deter landlords frominvesting/remaining in the sector? (HMOexperience?)
Private Rented Sector: regulation and reformThe law – help or hindrance?Ian Doolittle
November 2012
———— Pioneering ———— Bahrain ———— Construction ———— Public sector ———— Energy ———— Real estate ———— London ———— Tax ———— IT ———— Dubai ———— Manchester
Connecting ———— Knowledge ———— Pragmatic ———— Malaysia ———— Exeter ———— Thought leadership ———— Housing ———— Agile ———— Creative ———— Connecting ———— Private equity
— Local government ———— Manchester ———— Environment ———— Focused ———— Islamic finance ———— Projects ———— Abu Dhabi ———— Corporate finance ———— Passionate ————
—— Employment ———— Regulation ———— Procurement ———— Expertise ———— Specialist ———— Planning ———— Investment ———— Committed ———— Delivery ———— IT ————
——— IP ———— Corporate ———— Infrastructure ———— Cairo ———— Development ———— Private wealth ———— Oman ———— Governance ———— Birmingham ———— Corporate finance
—— Dynamic ———— Pensions ———— Dispute resolution ———— Insight ———— Banking and finance ———— Arbitration ———— Diverse ———— Regeneration ———— Care ———— Communication
Current position
●Assured tenancy ‘regulation’
●Rents – s.13 HA 1988
●Tenure – Schedule 2 HA 1988
●The assured shorthold tenancy contract – s.21 HA 1988
● Licensing and other controls
Pressure for reform?
●Rugg – “directions of travel”
●Coalition Government – no enthusiasm for change
●Montague – stability is key
● Labour – in Government and Opposition
● cf Shelter / Crisis
Professional views/reports on regulation
● Law Commission
● LGA
●CIH
●GLA – on-going
● LSE and CCHPR
The effect of regulation?
10%
Ch
an
ge
inS
ect
or
Ge
rma
ny
En
gla
nd
Reduced regulation No radical change Increased regulation
Sw
ed
en
Country
0%
-10%
Ch
an
ge
inS
ect
or
Ge
rma
ny
Fra
nce
Ne
the
rla
nds
Sp
ain
No
rwa
y
En
gla
nd
Ire
lan
d
Sw
itze
rla
nd
Sw
ed
en
De
nm
ark
Fin
lan
d
Source: “The Private Rented Sector in the New Century – a comparative approach” CCHPR (Sep 2012)
Housing associations as PRS landlords
●RPs and market rents
●Charitable status – investment
●Subsidiary/JV structures
●Properties – development and/or acquisition?
Conclusion – a lawyer’s view
●The wider picture – renting/owner-occupation
●Law reform – a blunt instrument
●Regulatory reform – real/imagined concerns
●Reassure RPs?
Contact
Ian DoolittlePartner
d +44 (0)20 7423 8415e [email protected]
Trowers & Hamlins LLP has taken all reasonable precautions to ensure that information contained in this document is accurate, but stresses that the content is not intended to belegally comprehensive. Trowers & Hamlins LLP recommends that no action be taken on matters covered in this document without taking full legal advice.
© Copyright Trowers & Hamlins LLP – November 2012 – All Rights Reserved. This document remains the property of Trowers & Hamlins LLP. No part of this document may bereproduced in any format without the express written consent of Trowers & Hamlins LLP.
National Landlords Association
Regulation of the PRS in England
www.landlords.org.uk
Regulation of the PRS in England
Chris Norris
Head of Policy, Public Affairs & research
29 November 2012
The PRS Today
PRS Specific Legislation:
- Protection from Eviction Act 1977
Private Rented Sector:
- 3.63 million households
www.landlords.org.uk
- Landlord & Tenant Act 1985
- Housing Act 1988
- Housing Act 1996
- Housing Act 2004
- 17.5 per cent of housing
- Avg. 1.24 million PRS householdsmoving every year
- 68% of new households formed inthe PRS (275,000 households)
Resulting in...
www.landlords.org.uk
With a little more detail...
www.landlords.org.uk
Regulation in Practice
The Basics: The Challenges:
www.landlords.org.uk
- Flexible tenure
- Balance of security
- Responsibility to provide decent &safe accommodation
- Licensing of ‘higher-risk’properties
- Requirement to protect deposits
- Requirement to defer to Courts
- Criminals
- Ignorance
- High demand & low supply
- Low expectations
- Low engagement
- Barriers to enforcement
- ‘Them & Us’ mentality
A landlord’s view
www.landlords.org.uk