Labour is today announcing what may be amongst the most far-reaching reforms of the lettings sector ever seen - if the party wins the general election in 2015.
Ed Miliband is making the announcement at the launch of his party's European election campaign.
He will promise to introduce a ceiling on rent increases and will ban letting agents from demanding fees from tenants that can be as much as £500.
"Generation rent is a generation that has been ignored for too long. Nine million people are living in rented homes today, over a million families and over two million children. That is why a Labour government will take action to deliver a fairer deal for them, too" Miliband will say today.
The policy will have three main planks:
1. There will be three-year tenancy agreements beginning with a six-month probationary period allowing landlords to evict a tenant if they are in breach of their contract. This would then be followed by a two-and-a half-year term in which tenants would be able, as they are now, to terminate contracts after the first six months with one month's notice.
2. There will be a ban on what Miliband will today call "excessive rental increases". Labour says it will be guided by the Royal Institute of Chartered Surveyors, which is examining options for a new rent benchmark. This could be linked to average rent rises or inflation or a combination of the two.
3. Labour will ban letting agents from charging tenants fees for low level services, such as simply signing a tenancy agreement. They will instead have to ask landlords for fees.
"One of the biggest causes of the cost of living crisis in our country is the price of renting or buying a home. People simply can't afford it, they're priced out, saving for a deposit year after year, decade after decade, or having to look for somewhere to live further and further away from where they go to work or where the kids have always gone to school" Miliband will say.
These proposals will be a major talking point within the lettings industry; Liberal Democrat proposals for the PRS are expected to be outlined over the summer.
In the meantime, the Conservative party has already responded to Miliband's proposals, saying they are akin to those in state-controlled Venezuela.
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Comments
Introduce a set fee structure across the board Agents need to charge fees as they are charged themselves. We purchase a car knowing we pay an admin fee don't we...
Why are landlords always deemed to be ripping off tenants. Ed Millipede (sic) should understand that there are thousands of private landlords out there providing good quality accommodation at a reasonable price. Tenants should be reminded of who pays the bills when the heating breaks down, the roof leaks etc. With the introduction of 'right to buy' for local authority tenants the number of council houses available to rent plummeted and it was only the expansion of the PRS that averted a housing catastrophe. Most landlords make little or no profit from their rental income taking into account the costs of maintenance, insurance, mortgage interest, income tax etc. Consequently if rent controls make it even less viable to own a rental property many will sell up and take their capital gain, assuming there is any. Then where will tenants obtain accommodation particularly with the new strict rules relating to mortgage applications preventing many from being able to buy. Politicians can never see further than the next election. The proposed changes are a vote catcher which will ultimately damage the rental market at a time when more properties are required to satisfy demand, not less.
Additionally many of my landlords only let for a couple of years, for example when they are contracted to work abroad for a period of time with the proposed three year tenancy many will not risk letting and just leave their properties empty so depriving the rental market of more properties.
@londoner - More properties to buy for people who now can't get a mortgage!
It really is about time that the PRS was regulated. Housing is a basic human need and the relationship between landlords/letting agents and tenants has been asymmetrical for far too long. If, as a result of regulation, some BTL or accidental landlords sell up and leabe the sector, then so what It just means there will be more properties available to buy
If you half cook something it will give you a stomach ache afterwards!!
More of the same from Labour - it happened last time and has taken 5 years to see turn around.
Mortgage companies may pull deals from BTL landlords forcing sale
Accidental landlords will take fright and leave the market.
Investor landlords may see leaving the market as a better prospect and look to invest elsewhere + try to beat the surge of properties coming onto the market.
Tenants would have whip hand as proposals give them the 1 month notice and only the landlord will be restricted.
MMR has created increased restrictions on mortgages and as reported today we have had 2 months of reduced lending.
All of the above will put more tenants out of their homes in a market that is already under-supplied, hence the rising prices.
Rent control to date has some grim statistics to accompany them and nothing good for the market as a whole - tenants, landlords or agents.
Fooling yourself that no charges to tenants for reasonable administration is good - get real and see tenants will pay via increased rent.
With over 100 pieces of legislation associated with property renting, better enforcement of existing legislation by properly funded Trading Standards depts would be able to effectively penalise the bad without stiffing the good landlords and agents. Implement on-the -spot fines like traffic offences for landlords/agents found to be failing to keep up with current legislation and using the funding to pay salaries with incentive pay would drive all concerned into compliance.
I could go on but most will have lost the will to live reading this!!!;)
Milibands comment: 'One of the biggest causes of the cost of living crisis in our country is the price of renting or buying a home' No mention of mortgage application fees which are far more expensive than most tenant fees!
The last time we had rent controls many private landlords sold up so I hope it is better thought out this time. Longer tenancies would be welcomed by most landlords but my experience is that tenants do not generally want to commit themselves for such periods. Also many mortgage companies do not give permission for longer than one year lets so this will have to change. Not worried about fees as we will all be on a level playing field but if charges are passed on to landlords then rents will rise in the long run.
@Simon
You can do a 3 year AST, so why do we need a new agreement that gives less rights to the landlord Thats right, we don't! During ym time as a letting agent I have dealt with thousands of tenants and tenancies and I have never met a tenant that wants to sign an AST with longer than an 18 month fixed term, because they want the fleixibility. Although I am sure plenty would sign this new agremeent that gave them flexibility but left the landlord at huge risk, I cannot see why a landlord would want to offer it when the AST system is so good!
As for annual rent reviews based on areas, if you have any experience of the current LHA systems areas you will know that does not drill down into the areas anywhere near enough to give accurate prices, unless you are one of those landlords with properties in less desirable areas that benefits from the above market rent you can receive from LHA tenants because of the wide area the LHA calculations cover
To Country Agent: There is no argument in favour of a three year tenancy since NO GOOD LANDLORD will give notice to a GOOD TENANT without GOOD REASON.
Simon..... Why are you reading Letting agent today if you despise them so much
In my experience most tenants do not want 3 year tenancies as it ties them in to the property. I can also see BTL mortgage lenders not being too happy if the landlord defaults and they can't get the tenants out. Also if letting agents are not allowed to charge the tenants fees they will have to pass them on to the landlords which will result in them asking for higher rents. The tenants will pay in the end.
In the media today if a lot of the advertising revenue driven editorial is to be believed landlords are sat around with their heads in their hands weeping into their cups of tea at labours proposals on reform of the PRS, well er no !
Being one of those who self manage lets see the pros and cons .
Fees to tenants , I don't charge any other than a minimal credit check fee 20 and a small admin fee at the start of the tenancy 30 I can stand this as I have very little churn so won't miss that too much
Tenants will be a lot better off saving an average of a months rent in agency fees
Letting agents will be screaming as the old farming expression goes ' like a stuck pig ' as they will no longer be able to soak tenants .
Longer tenancies , brilliant any landlord who does not want tenants in for a long period is frankly barmy! About half of mine have been in longer than that anyway and landlords do not want voids where we are making nothing .
Tenants will be happier and have a better sense of security
Letting agents, here's that pig coming along again! Agents love churn it makes more money in fees from both tenants AND landlords who use them.
Rent control , I have always worked on the principle keeping the rents a little lower keeps people in reduces the voids and the turn around costs and overall maximises my profit
Tenants once again a measure of inflation plus ..... Annual rent reviews based on a specific area is no bad thing and enables tenants to plan ahead it would be a simple add on function of the valuation office in a similar way to LHA
Letting agents total reversal of above ,if they squeeze another hundred quid a month out of tenants then they get a greater proportion of the overall rent from the landlord using them ,so what if the tenants leave after six months it creates more churn fees from new tenants and the landlord has lost the extra money he thought he had gained because of this .
So for the millions of self managing landlords this is not a great worry , agents will say oh but rents will go up as all the fees will be passed onto the landlords using them , great ! Yet another competitive advantage I will have.
Free document download for self managing landlords privatelandlorddirectory.com
The usual for the supporters of socialism - 'if I cant have it no-one else can have it'
The readership herein have all 'had it' if Silliband gets in - read the commentary on the Guardian!
As ever, a politician trying to grab headlines with poorly and only half thought out proposals. However, if we look at some of the things they are suggesting, unfortunately there is some truth. Can we as an industry really justify tenant 'fees' of hundreds of pounds I appreciate they are part of companies cash flow, but we may have to learn to cut our cloth a little. How many people reading this have had a landlord tell them it is a long term rent, move a family into their new 'home' only to be asked by the landlord to give notice six months later. A whole family is disrupted due to a dishonest landlord (or sometimes agent).
I am an agent, I do not agree with very much that Labour suggest, but there is a need to control some of the excesses of our industry and to give tenants, if they want it, a little more security of tenure.
In summary, i would say longer term tenancies would be a good idea (better rent security for landlords, tenure for tenants), but the politicians must ensure that the changes are balanced so that both sides of the agreement are treated fairly.
Another shambolic idea by Labour which as always will harshly affect the very people they are trying to protect. However I'm guessing (hoping) the tenant will have a right to request a shorter tenancy. If so as a landlord I will only take these tenants and definitely never consider housing benefit applicants again.
And yes an AST can only be for a maximum of 3 years, anything over this is a deed
I can not believe what I am hearing !! 3 year tenancy, now that would just be another nightmare for Landlords. It's hard enough to get tenants out now that play the system now this is making it much more harder. "Labour" rent arrears is the biggest debt in the UK so why you would want to work against Landlords I don't no. The system is totally wrong it's all about the tenants and always against the Landlord and it's wrong. Thank you Labour for telling us that if you get in next year then you will only add to the trouble that Landlords are now going through !!! Am sure you have just lost many votes.
Asa- over 3 years yes it does need to be drawn up as a deed by a solicitor.
This three year tenancy will increase costs not lower it because with a three year tenancy a solicitor would have to draw up the tenancy. CAN ANYONE CONFIRM THIS PLEASE
Surely nobody would consider voting Labour after the last two diabolical Prime Ministers The present one is none too keen on listening to the hoi-polloi or Middle England either.
If that came in then I am selling up! There's no way I am committing to rent my properties two and a half years.
Change is the only constant
Well done Labour, you have just lost the vote of many many letting agents and landlords!