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Rugg Review outlines further challenges for policy makers

Thursday 13 September 2018

Ten years on from Julie Rugg’s first review into England’s private rented sector in 2008 her second comprehensive study The Evolving Private Rented Sector: Its Contribution and Potential was launched on 10 September 2018 with support from the Nationwide Foundation.

ARLA Propertymark attended the launch which included attendees from across the sector as well as Clive Betts MP, Chair of the House of Commons Housing, Communities and Local Government Select Committee, Lord Best and Civil Servants from the Ministry of Housing and Department for Work and Pensions.

The objective of the 189-page Review is to present neutral commentary on the private rented sector and to draw on robust evidence. Considering this, and in the context of the Government now saying the housing market is broken, the report represents a clear shift away from the flexibility of renting to the insecurity of renting.

From the Review research it is possible to estimate that 38 per cent of tenancies have some letting agent involvement. The Review says that letting agents have the potential to offer a higher level of professionalism in management practice, particularly where the landlord has alternative employment and so may not dedicate all their time to the business of letting, or where the landlord may be inexperienced in the business.

However, despite their value, levels of dissatisfaction with letting agents can be high and little is known about letting agents as an industry. Data from the Review suggests that letting agents are less likely to be dealing with property at the bottom of the market and much more likely to be dealing with households in employment.

Seven Stark Themes

  1. Growth in the private rented sector and fall in social housing, but there is no independent evidence on how the build to rent sector is working and impacting on rents for example.
  2. Supply side characteristics show that there are 2.3 million landlords and 10 per cent of the adult population have been landlords at some point.
  3. Marketisation and Financialisation - there is now a blurring of tenures. Part of the private rented sector is informal renting from family and friends which presents challenges to policy makers.
  4. Changing demographics as 20 per cent of private rented sector households have an infant or baby compared to 12 per cent in all other tenures.
  5. London dominates policy thinking and although 22 per cent of England’s entire private rented sector is in the capital it functions very differently to the market in the rest of the country. Overcrowding is more of an issue in a London where 56 per cent of renters pay a third of their income on rent compared to 33 per cent in the rest of the country.
  6. Property conditions - overall there has been an improvement, but the number of properties not meeting the decent homes standard remains the same. The West Midlands has the highest non-decent standard of dwellings. All the evidence shows that the longer tenants stay in a property the less decent it gets.
  7. Can the private rented sector deliver social housing? Currently, we are unable to know whether Local Housing Allowance is affecting supply.

Several Recommendations

  1. The Government must look at security vs insecurity – removing Section 21 is too simplistic. We must first look at how Assured Shorthold Tenancies work. For instance, notice periods overall are very short and the ability to pay rent over time must be considered alongside jobs, welfare and wage growth.
  2. Devise a strategy - there is very little coordination across Government and Whitehall should learn from Scotland where it took two years to come up with a strategy for the private rented sector.
  3. Deconstruct silos - the law is confused and contradictory. Abolish licensing and introduce a new system.
  4. Adopt a new approach to regulation with a property MOT, landlord register, and Houses in Multiple Occupation register with fees set nationally.
  5. Support the housing benefit market. Both the Ministry of Housing Communities and Local Government and the Department for Work and Pensions must review this collaboratively looking at housing benefit and pensions.

Report Review

Uniquely, and for the first time, the Review is accompanied by a report focussing on households in the bottom third of incomes across all tenures. These make up 38 per cent of the private rented sector. The Vulnerability amongst Low-Income Households in the Private Rented Sector in England analyses the problems associated with the private rented sector as they impact on tenants in the bottom third of incomes.

The report defines six types of household whose characteristics mean that they are more vulnerable to harm from those problems.

  1. Households with dependent children
  2. Registered disabled or can’t work
  3. Those aged 65 or over
  4. Recent overseas migrants as most rent first when settling in the UK
  5. Means tested benefits or tax credits
  6. Low income non-benefit recipients

The analysis shows that one third of the entire private rented sector is made up of households with one or more characteristics of vulnerability, experiencing one or more of three objectively measured problems which were: housing that fails to meet the Decent Homes Standard, living in a property that does not meet the Bedroom Standard for the household size, and being poverty after housing costs have been taken into account.

Commenting on the Review, David Cox, ARLA Propertymark Chief Executive, said:

This Review should act as a wake-up call to the Government to regulate the sector and introduce laws that support those who provide a good service to tenants. The Government must set clear benchmarks and do more to understand how agents operate and why landlords enter and exit the market. Furthermore, it is no longer possible to look at housing in isolation. A greater focus must be on the sectors configuration rather than its size. The challenge for policy makers is to now work across government departments to coordinate a response that considers welfare reforms, pensions, wages, tax and business.