An update on the housing market – January 2018

Happy New year to all of our readers. I trust you had a merry one and may I take this opportunity of wishing you all a happy, healthy and prosperous 2018.

Although the year is still young, I would like to draw your attention to three things in particular, that have either just happened, or just been reported in the press in 2018.

The first is the Governments initiative to crack down on Rogue Landlords and extend the HMO criteria to include many more properties in this category. The second is the cabinet reshuffle and finally, I will cover and comment on the latest debate held in parliament for the tenant fee ban.

Alok Sharma, Minister for Housing
“Enough is enough and so I’m putting these rogue landlords on notice – shape up or ship out of the rental business.”

The government estimate an extra 160,000 HMO properties are to be licensed under the new proposals, which are likely to go live in April this year. It was announced in the press at the beginning of January, that Housing minister Alok Sharma is to proceed with plans to significantly widen HMO licensing in the UK, and has also published the range of criminal offences that will soon trigger letting agents and landlords being automatically banned from the sector.
These new measures will introduce significant additional responsibilities for landlords, letting agents and property managers, and stiff penalties for those convicted of certain criminal offences.

The HMO measures, which apply to England and are to be introduced in April 2018 (assuming parliamentary approval), will see some 160,000 additional properties brought into licensing. The proposals frame these as those housing five or more people from two or more separate ‘family groups’. This significantly widens the range of property types included within HMO regulations, which used to only include properties with three or more storeys. Now, apartments and smaller houses will have to be licensed if they fit the new criteria.

Also, bedrooms offered by landlords and letting agents within HMOs will soon have to meet a new minimum size standard of 6.52 sq. m if inhabited by one person, 10.22 sq. m if lived in by two people and 4.64 sq. m for a child of ten years old and under.

The government has also published the list of criminal offences that can lead to landlords, letting agents and property managers being banned from the property rental sector. These will include serious offences such as theft, blackmail, handling stolen goods, harassment and stalking.

“Every tenant has a right to a safe, secure and decent home,” says Alok Sharma. “But far too many are being exploited by unscrupulous landlords who profit from providing overcrowded, squalid and sometimes dangerous homes. “Through a raft of new powers, we are giving councils the further tools they need to crack down these rogue landlords and kick them out of the business for good.”
Strong words and a strong initiative to hopefully improve our industry. So how is he being rewarded by the prime minister for this bold move?

You may well ask! There was more confusion within the government as the Prime Minister’s Cabinet reshuffle appears to add both Alok Sharma’s title and job to that of his boss the Communities Secretary. Housing has been put at the heart of the Department of Communities and Local Government (DCLG) after Sajid Javid was today given the title of Secretary of State for Housing, Communities and Local Government.

Until now Sajid has been simply the Communities Secretary but, it is believed, PM Theresa May wants to raise housing up the political agenda and be seen to be doing something about the ongoing supply crisis. This throws the role of Alok Sharma into confusion until today DCLG’s Minister of State for Housing and Planning!

Now that Sajid has decided to take the helm at housing then the switch will make him the 16th holder of the title in just over 20 years. The average term of each housing minister has been approximately 16 months, so Alok’s tenure of the title may have been just six months. The announcement is unlikely to go down well within our industry. Only a few weeks Viewber CEO and former Douglas and Gordon boss Ed Mead let steam off within his own blog about being “totally fed up with the short-term nature of our political system” and complaining that the latest “housing minister, seems almost invisible”.

So, as well as a question mark hanging over Alok Sharma’s head, we need to remember that the cabinet reshuffle also comes at a perilous time for Sajid Javid, who must now steer the tenant fees ban through parliament following a debate on the subject this afternoon in parliament (Jan 8th, 2016). Sadly, the evidence of a history of short-term politics within the Housing Ministry is there for all to see. In fact, this is the list of previous ministers since 1997 to date (15 so far)! Alok Sharma, Gavin Barwell, Brandon Lewis, Kris Hopkins, Mark Prisk, Grant Shapps, John Healey (LAB), Margaret Beckett, Caroline Flint, Yvette Cooper, Keith Hill, Jeff Rooker, Charlie Falconer, Nick Raynsford and Hilary Armstrong.

It is not rocket science to see that this is not a political party issue, rather a UK political issue, as it involves all governments since 1997 and indeed for at least the last fifty years. My personal view is that until we have a politician that puts his country before his party, this gross mismanagement will continue. I also believe it is rather ironic, that politicians spend their time devising laws, advised by lobbyists (who have their own personal agendas), to stop the public, business and industry doing what they do for a living! It is almost worth considering why there is only one monopolies and mergers committee! But that would be silly wouldn’t it?

Later the same day, MPs put the new housing minister Sajid Javid’s tenant fees ban legislation under scrutiny and again it was proven to be lacking on several fronts. It was stated that landlords are likely to increase their rents across the tenancy to pay the extra costs of running a tenancy (which is what happened in Scotland), something the new law can’t stop, and that is a substantial risk. The local council will impose unjustifiably high fines on agents and landlords to finance enforcement, in the absence of government support, it was claimed. The other key criticism made during the session was that the draft bill is likely to be self-defeating – lower fees will mean letting agents are less incentivised to help landlords run their properties professionally.

In reality, all of these facts have been pointed out to other ministers some months ago but sadly fell on deaf ears. However, the reason that they were expressed, monitored and this time acknowledged, was that on this occasion, they came from the policy end of the sector, not letting or estate agents. When reviewing any facts, comments or initiatives, as well as understanding where they came from, I was always taught to ask four questions. “Are they logical”. “Do they make sense?” and “Could they happen?” and if they could, “What would be the consequences of such action?” It appears that the government’s policy is different.

The two-hour long session was held by the parliamentary committee that oversees Sajid’s department, the Select Committee that oversees the newly renamed Department for Housing, Communities and Local Government.

Tenant Fee Ban

The debate was headed up by MP Clive Betts plus 11 other MPs and it quizzed three experts in the field about how effective the bill will be. These were Shelter’s Head of Policy Kate Webb, the University of York’s Centre for Housing Policy Dr Julie Rugg and Professor Ian Loveland from the City Law School.

Several debates raged during the hearing including whether the bill was legally watertight enough and whether councils will have the resources to police it (they won’t, the experts said). It was felt that there was a weakness in the role of the new housing tribunal with the high level of fines (agents and landlords face paying up to £30,000 if they are caught flouting the new law). There were also concerns as to whether the bill will drive the quality of rented properties down as landlords seek to save money. Shelter’s Kate Webb also claimed controversially that the poorer the tenant, the higher the fees letting agents charge them (which clearly doesn’t make commercial sense at all), while Ian Loveland picked numerous holes in the bill’s drafting, which he suggested was not robust enough to withstand legal challenges given the huge fines involved.

MPs also debated how letting agents should be fined – and whether it should be based on the additional fees levied on a single property illegally or whether the bill should look at their whole portfolio and then fine them accordingly.

Sadly, it was only when I pointed out to another minister who took my concerns to the Housing Minister that it was realised the government minister, had not taken into account the student sector of the lettings market when drafting the bill and should it have remained unchanged, it could have decimated the student market (and had a serious impact on the university education system in the UK). It potentially left over 150,000 student homes unoccupied, literally millions of students without accommodation or best-case scenario, in Newcastle alone, there could have been twenty to thirty thousand students in properties with no proper tenancy agreement or referencing. That was just Newcastle upon Tyne, there are thirty university towns in England. Chairmen, chairwomen and senior names and faces from our industry and charities, had failed to realise the consequences of their planed actions and it took a small company from the provinces to point it out to them. I find that very concerning. Don’t you?

The draft Tenants’ Fees Bill will now go to report stage before a third reading.

If you would like to discuss any of these subjects or have a question that we may be able to help you who the letting or management of your property. Please feel free to call me at my Durham Office on 0191 212 6870.