It seems we may well have been provided with a glimpse into the future of the Private Rental Sector (PRS) for both landlords and letting agents with the measures that have been recently passed by the Welsh Assembly as part of its Housing Wales Bill.
As you will know, one of the powers the Assembly has in Wales is over housing and, given the fact Labour is the biggest party and leads the Government there it has the ability to bring in policies - something it is unable to do in England. Therefore, in Wales, regulation of letting agents and landlords will now go ahead via a two-stage process. All agents and landlords will need to be registered and if they want to manage properties, they will also need to be licensed.
If the landlord is registered but not licensed they will not be able to manage their properties and instead will have to use an agent. Letting agents will also need to be part of a recognised body. The whole scheme will be run by Cardiff City Council which will have the enforcement powers to deal with unlicensed and unregistered landlords and agents who are breaking the rules.
The new rules do not end there however with all landlords and agents needing to be deemed fit and proper', meaning they need to complete training and pass specific tests. Those landlords and/or agents who break the rules can have their licenses revoked and, if this is the case, then tenants will be able to withhold their rents.
As with most new regulation, opportunities will arise and threats will be posed. Clearly, if you are a licensed letting agent in Wales then you might expect this to increase business levels - as I suspect a significant number of landlords will not want to become licensed. Indeed, it has been suggested by the Welsh Government that close to 30,000 landlords who currently manage their own properties will instead be looking to use the services of licensed letting agents. Again, a strong opportunity and a service I suspect will particularly appeal to amateur landlords and those buying investment property for the first time. That said, it will mean more work for both landlords and specifically agents and may have to be covered by larger management fees.
This type of legislation must also run the (sometimes) fine line between providing protection and not stifling the market. Protection appears to be focused almost completely on tenants, with landlords being afforded little cover from bad tenants. There may be some prospective landlords who will look at this, and the extensive red tape soon to be in place in Wales, and decide not to purchase property there. Instead, they might opt to invest in homes across the border and we might also find that existing Welsh landlords decide now is the time to leave the PRS rather than continuing to work under this new regime. This could have a significant impact on the number of homes available to private tenants in Wales.
To my mind there is nothing wrong with seeking to rid the sector of it's less reputable agents and landlords; however what we do not want to do is impact negatively on all those good ones. Greater numbers of professional agents operating at higher standards is clearly desirable but let's not put too many obstacles in the way of sector entry. The importance of the Private Rental Sector in UK housing should not be underestimated - take large numbers of properties out of commission and we will be left with a housing problem far worse than the one we have today.
The sector has to be seen to be a viable investment for both landlords and agents. In other words, they must have a certain amount of freedom to make profit whilst having to do right by the tenant in terms of the quality of the property, its upkeep, and the fees that are charged. As stated above, it would also bolster the confidence of the landlord if they felt there were measures in place for them to deal with poor tenants.
One thing is for sure, these changes will provide an interesting template for the rest of the country, particularly if the Labour Party wins next year's election. My hope is that they do not swamp the sector in off-putting red tape which will ultimately hinder its ability to offer tenants the properties they desire to live in.
*Rob Clifford is Chief Executive of CENTURY 21 UK
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