A senior lettings industry figure says fag packet planning by politicians risks turning the private rental sector into an issue just as controversial as UK membership of the EU.
In an outspoken attack on politicians of all parties, Lisa Simon - head of lettings at Carter Jonas - has told Letting Agent Today that reform of the PRS is now as populist a policy as holding a referendum or criticising UK membership of the European Union.
Talk of rent caps, short notice periods for tenants to give to landlords, and a six month trial period in standard three year tenancies are all worrying trends explains Simon.
Rent caps in places of high property values are one of the biggest fears that could drive the PRS into terminal decline. Yields become ever smaller as rents are constrained during periods of strong capital growth. Many owners would find it more beneficial to cash in and invest the money somewhere more sensible she warns.
Simon also claims that rent caps could accelerate an already-existing trend of landlords leaving the PRS, cashing in on recent capital appreciation.
When you talk to lawyers and owners of high end properties in London's prime quarters it becomes apparent that what interests buyers more is long term capital growth than short term low yield income. Buy to let is out, buy to reap substantial profit could well be coming in if it's not here already is how Simon sees it.
She says rent caps across the country are unrealistic because there are so many regional variations in property prices and therefore what seems like a fair return on investment. Are we to return to the days of the regional Rent Tribunals as the first avenue of escape for tenants served with notice to quit she asks.
She warns that longer tenancies are also a worry. She says: A tenant who seems heaven-sent on day one could be the tenant from hell by month seven but then it would be too late to serve notice so easily. Three year tenancies by default with a six month trial period will be seen as too risky to be realistic by many landlords. What is designed to protect tenants could actually reduce their chances of finding a home if availability shrinks.
On fees, Simon notes that politicians on the one hand expect agents to check the immigration status of tenants, but charge only the landlords. Someone has to fund the agent's time in processing all this as Civil Service substitutes because few landlords will want to undertake the task. If there are no fees for tenants, only for landlords, then rents will have to rise. But when rent is capped, how can the cost be applied she asks.
Simon concludes by saying there is too much fag packet planning and not enough real thought going into all this regardless of which political party happens to be having another bright idea today.
Everyone is agreed on the importance of the PRS, she says, and everyone agrees it could be fairer all round. But who is going to sit down and work it all out as a policy and not a series of knee-jerk responses to the latest comment article
Comments
The tax and benefit system in this country is one thing, but there is another.
The population increase during the last 50 years - more so in the last 20, is totally unacceptable. Our systems of schools, NHS and housing are being 'destroyed'. The main problem is the ease at which we accept too many immigrants from all sources. Politicians are scared stiff of even discussing the subject for fear of being branded racist. It is not racist, it is common sense that it must be drastically reduced and controlled by whatever means.
Ms Simons is absolutely right, a return to the old 'Rent Acts' approach will kill off the private rented sector certainly outside London.
Politians really do have a crass cheek, as they have relied on free market conditions to slowly grow the provision of a private rented sector - how many rented houses and flats has government subsidy provided for over this same period - very little.
And it is not just the use of existing housing stock, two property booms partly driven by buy to let investment has provided large quantities of new build housing stock provided by developers - how many new homes have been built with government subsidy over the same period - answer again very few indeed.
Any distortions in the private rented sector are quite frankly caused a crazy Housing Benefit System, and a crazy Taxation System allowing foreign buyers to inflate London Property prices, the government should concentrate on this distortions.
We all live on a small island, with very little land left to build on, but still the concentration of the country's wealth and employment crowd into London and the South East. We must expand the recourses of the country across the country, governments must act to build the infrastructure to make this happen asap.
Regional parts of the UK are sick and tired of the governments continued paranoid belief that it must protect London's Invisible Assets at all costs as City Trading apparently keeps this country afloat... and Russian buying Central London property is in some way useful....such transactions just provide profits for the Russian Buyers and a few selling agents get a quick hike in commissions for awhile.
In conclusion the government should be doing everything to support the private rented sector which in the regions is in danger of experiencing falling yields, as over supply creeps into the system. The current yields are also based on low interest rates, which once they rise will also drive down yields.
So Ed Miliband , why not see the future, bring in rent capping like the old days but also like the old days provide government subsidy to help support the rented sector, the two have always gone hand in hand.
But this time the subsidy could support good private sector landlords, rather than wasteful and sometimes corrupt Local Authorities providing council housing, or fat Housing Association salaries spending more time on political slants rather than housing management.
Yes - a housing subsidy paid to private landlords to support a badly needed private rented sector !
Politicians love nothing more than jumping on a bandwagon, even though they are usually completely ill-informed about the topic they pretend to be experts on. Of course reform of the PRS is a cynical ploy to get more votes theyre playing to the crowd, trying to be the voice of the people, when they havent really got a clue. They should leave it to the experts - or at the very least consult the experts - before coming out with outlandish policies that arent sustainable.
Lisa Simon says Are we to return to the days of the regional Rent Tribunals as the first avenue of escape for tenants served with notice to quit - tenants are not served with a Notice to Quit but a Notice Seeking Possession with an AST. No it's not being pedantic but factually correct, and I wish such prominent posters would just take that on board!;)
I do agree with her sentiments though.
Well said Ms Simon and well reported LAT! "Fag packet policies" describes perfectly the absolute nonsense that has been spouted of late.
Politicians have meddled with the PRS too many times in the past. The introduction of LHA being paid direct to Tenants a few years back encouraged a large percentage of Landlords to abandon Tenants claiming benefits - including my agency who, back then had 450 benefit Tenants - today only 30 and as they leave they are replaced by working tenants.
I keep wondering if politicians actually take advice from industry experts like Ms Simon before waking up in the morning and dreaming up some crackpot idea to gain headlines and votes.
My money would be on a committee of industry experts (NOT politicians) who thrash whatever needs fixing in the PRS (is there anything) then lobby parliament with their deliberations. At the moment we have politicians trying to make decisions in an industry they know nothing about.
The PRS has been messed about with too many times. As it grows past 9 million Tenants, more and more politicians see the opportunity of grabbing votes by sticking their misguided oars in.