Property news from PWR Letting Agents Nottingham and Mansfield
Private Rented Sector Consultation - Thursday, June 4, 2009
The Government has published its response to the Rugg Review into the private rented sector.
This document aims to set out proposals to create a higher quality sector with a more professional approach from all those involved. Areas covered in the document include the regulatory framework and supporting the market to deliver increased supply and professional management.
The need for a joined up approach
RICS believe that the Government's response covers all the ground that should be tackled and we now need swift action to put in place the measures identified. We urge the Government to join this work up with other initiatives on residential property currently being carried out across several departments. Only by joining up will the Government achieve the much needed clear, consistent and decent offering to consumers across the residential market. This must be done in a way that implements Philip Hampton's principle of joining up and using the existing regulatory landscape wherever possible rather than the creation of new, possibly overlapping, bodies.
Encouraging growth in the private rented sector
Growth in the private rented sector must be encouraged to provide a choice of homes and as an alternative to owning a home. It is essential to have a range of housing options so people can live in the appropriate property for their income and situation in life. A strong private rented sector provides a flexible approach to housing that allows people to move easily to take up job opportunities. A well developed professional rented sector is essential for the creation of a vibrant and sustainable housing market.
Key areas of relevance for RICS
Regulation of letting agents and management agents
From an RICS point of view the key section of the consultation covers the regulation of letting and management agents. The document recognises that it is possible to set up a lettings or management agency with no qualifications and that there is no need to conform to conduct requirements or provide mandatory safeguards for the consumer. This is contrasted with the regulatory framework in place for estate agents.
To address this, the Government have accepted the recommendation of the Carsberg Review that there should be full mandatory regulation of private sector letting agents and managing agents. They are of the view that this regulation should be compulsory and carried out by an independent body.
Although the report concentrates on regulation of agents in the private rented sector, it proposes that the regulatory regime covers managing agents in other sectors. This would particularly apply to managing agents in the owner occupied sector.
Initial RICS view
Effective standards must be put in place to ensure letting and managing agents are required to act in a professional manner. To be effective, regulation should be risk and principles based, requiring letting agents to provide certain information, rather than telling them how to operate. Any regulation must be effectively joined up with regulation of estate agents selling homes to ensure minimum standards across the whole industry.
Landlord registration
Under the proposals set out in the document all landlords will be required to sign up to a compulsory national register run by an independent organisation. Landlords or their agents would register annually for a small fee and each landlord would be given a unique registration number. Landlords would not have to meet any pre-set criteria to register and only minimal information, such as name, address and addresses of the rental properties would be required.
Initial RICS view
Tenants need to be able to know that their landlord is meeting basic standards before they agree to rent a property. Registration of landlords will help people find out if their landlord has been keeping up with basic repairs and is protecting tenant deposits. Without effective enforcement it is possible that only respectable landlords with a good track record will sign up to a registration scheme while the worst landlords will find a way of avoiding it. This will help prevent the most vulnerable tenants in the lowest quality properties from rogue landlords.
Supporting the market to deliver increased supply
The need to increase the supply of available homes in the UK is recognised in the consultation document and it reiterates the Government’s commitment to the private sector’s role in achieving this. In particular, it highlights the need to create the right environment for institutional investment in new supply specifically built for rent. As an example of what is being done, the document highlights the Homes and Communities Agency’s (HCA) Private rented housing investment fund. It does not mention specific changes that would encourage the creation of a build to let sector, for instance changes to stamp duty or Real Estate Investment Trusts.
Initial RICS view
In recent years the rental market has been dominated by individual buy to let landlords handling a small number of properties. As well as encouraging a more professional approach among these landlords the rented sector would benefit from greater levels of investment from large landlords and financial institutions. Measures such as changes to stamp duty rules and investment vehicles including Real Estate Investment Trusts will help encourage this type of investment. The creation of a dedicated build to let approach to rented housing should increase the number of houses being built and provide a greater choice of homes.
