MPs have called for a review of recent tax changes on the buy-to-let market and said changes need to be made to make buy-to-let more financially attractive to smaller landlords.
In its report, published today (February 9) the Levelling Up, Housing and Communities select committee provided a number of recommendations in response to the government’s proposals on reforming the private rented sector.
The committee noted that the high cost of renting, caused by the housing crisis, is the most serious challenge facing renters currently.
As a result of this, it said it shared some of the concerns landlords have previously raised about the impact the proposed Renters' Reform Bill will have on the size of the rental market.
Landlords have argued that some of the measures in the bill, and greater regulation of the sector, will lead to small landlords being driven out of the market.
The committee therefore recommended that the government take steps to address these concerns and ensure it remains an attractive sector for smaller landlords.
Student accommodation
Elsewhere in its report, the committee welcomed the proposal to abolish no fault evictions and fixed-term tenancies. It said both of these measures would “undoubtedly give tenants greater security of tenure”.
However it recommended that fixed-term contracts be retained in the student private rented sector.
Currently it is proposed that this part of the sector will be included in the tenancy reforms but the committee concluded that abolishing fixed-term contracts for students would make renting to them much less attractive to private landlords as the student market mirrors the academic year and benefits greatly from 12-month fixed tenancies.
The committee also supported the government's proposal to amend existing legislation so that landlords who wish to sell their property or move themselves or close family members into it still can in the absence of no-fault evictions.
Under the government's current proposal this would be not possible within the first six months of the tenancy, but the committee has said this could be too easily exploited by bad landlords and become a backdoor to “no fault” evictions.
It therefore recommended that the government increase the period where a landlord cannot avail of this grounds for eviction from six months to one year from the start of tenancy.
Decent homes standard
The committee also welcomed the government’s proposal of a legally binding decent homes standard which would help local authorities enforce housing standards in the private rented sector.
It did however recommend that the government should come up with financing solutions to help landlords improve energy efficiency standards in homes with EPC ratings below D as these properties are most likely to suffer from damp and mould.
It also noted that a decent homes standard will not help to raise standards unless local authorities are able to vigorously enforce it.
“The precarious position of local government finances, the shortage of qualified housing and environmental health officers, and the lack of reliable data are all obstacles to effective enforcement,” the report concluded.
It said as the government is unlikely to make significant extra funding available for housing enforcement the success of the regime will depend on whether it can become self-financing which will rest on local authorities ability to collect financial penalties imposed on landlords who breach standards.
As such it recommended the government take action to ensure courts make sure offenders pay costs to local authorities that reflect the actual cost of enforcement action when local authorities choose to prosecute.
Enforcement
The committee has again called for the establishment of a specialist housing court to deal with possession claims.
The report noted the court system is already struggling to process housing cases quickly enough and said: “It is not clear whether the government fully appreciates the extent to which an unreformed courts system could undermine its tenancy reforms.”
The government has previously rejected the idea of establishing such a court.
Elsewhere, the committee recommended that the government introduce a single ombudsman scheme for the whole of the private rented sector.
Currently landlords do not need to be members of such a scheme but letting agents must belong to one of two government schemes. Under the government’s current proposal landlords will have to join a separate scheme, something the committee said will cause confusion and perverse incentives.
Underlying issue
The committee noted that the Renters' Reform Bill does not include any proposals to deal with the underlying cause of the affordability crisis in the private rented sector.
It said the crisis was due to “the decades-long failure of successive governments to build enough homes.”
“The affordability crisis in the private rented sector, the source of many of the other problems in the sector, can only be properly solved by a significant increase in house building, particularly affordable housing,” the report stated.
The committee therefore called on the government to recommit to delivering “the affordable homes the country needs, particularly the 90,000 social rent homes we have previously concluded are needed every year.”
At the end of last year, the Department for Levelling Up, Housing and Communities rolled back on its commitment to build 300,000 new homes every year by 2025.
A statement released by Levelling up secretary, Michael Gove said at the time that the target, previously mandatory, will remain but rather as “a starting point” with new flexibilities to reflect local circumstances.
The proposals outlined by the committee have been welcomed by the National Residential Landlords Association.
Chris Norris, policy director at the NRLA said: “As the committee rightly notes, the biggest challenge faced by many renters is that there are not enough homes to rent. All the protections in the world will mean nothing for tenants if the homes are not there in the first place. That’s why the government should accept the committee and the NRLA’s call for a full review of the impact of recent tax changes in the sector.”
Earlier this week, the government appointed its sixth housing minister in the space of one year following Rishi Sunak’s cabinet reshuffle.
Redditch MP Rachel Maclean has joined the department and will work alongside parliamentary under secretary of state for housing and homelessness, Felicity Buchan who holds responsibility for the private rental sector.
FTAdviser contacted Buchan's office and asked for an update on when the Renters' Reform Bill is expected to go before parliament.
A government spokesperson said:"This government is absolutely committed to delivering a fairer deal for renters and welcome the work of the committee in this area.
“We will bring forward a Renters' Reform Bill in this parliament, abolishing ‘no fault evictions’ so that all tenants – including university students – have greater security in their homes and are empowered to challenge poor conditions and unreasonable rent rises.
“We are investing a significant amount of funding to improve waiting times in the civil courts, opening extra courtrooms and recruiting more judges, and will continue to engage with stakeholders across the private rented sector.”
jane.matthews@ft.com
