Uncharted Territory

January 8, 2009

If I Ruled the UK

Filed under: Economics, Housing market — Tim Joslin @ 5:01 pm

They say you should read the sort of thing you write.  So I thought I’d have a look round some blogs this lunchtime.  I didn’t get any further than Renter Girl, who occasionally appears in print in the Guardian.  In a post, If I Ruled the World, she considers what could be done to improve the private rental market for tenants.  This happens to be an issue I’ve been thinking about for quite some time.  It absolutely amazes me that people aren’t in the streets about this, and that the Labour Government has done absolutely nothing for tenants.  I’m not quite as ambitious as RG, so if I ruled the UK this is what I’d do, in response to some of her points:

“1 Landlords are obliged to submit to the same credit checks and investigations as their tenants. They should also provide references from former tenants, testifying to their suitability, efficiency and professionalism.”

Absolutely spot on.  This got my attention.  The second part is most important.  At present you have no way of knowing what the problems with a property or a landlord are.

I’d go further.  Credit checks on tenants need to be reasonable (and probably specified by law, given the sort of people the property market seems to attract).  I had one agent (and those involved in the Cambridge rental market will know who they are) who, after I’d spent days looking at dross and eventually found somewhere I was happy to live, demanded (on behalf of the landlord, ha, ha) 6 months rent in advance – free credit in other words.  I’d just sold a flat to do a business degree FFS.  I haggled it down to 3, when they happened to mention the fee to renew the contract after 6 months.  I was out the door, all that flat-hunting time totally wasted.

There is a public interest in seeing people housed (since at the end of the day the state has to deal with the problem), so tenants shouldn’t have to do a lot beyond putting up a deposit and a month’s rent in advance and avoiding getting themselves on a non-payers blacklist (to be established for the purpose).  After all, if they can’t pay the rent they soon won’t have a home and will be being hunted by credit collection agencies.

“2 For tenancy deposit protection to apply to landlords, who will pay an amount equal to that paid by their tenant into an account, withheld if they are naughty.”

Makes sense, but who decides they are naughty?  I’d go further.

First, withholding a deposit should be treated as theft, which it is.  The new arrangements for a third-party holding deposits should make this problem a thing of the past, though.   I have to say it’s rather pathetic that all the Labour government has been able to do for tenants is provide some protection against landlords stealing significant sums of their money.

The fundamental problem, though, is that everyone involved is working for the landlord.  In the event of a dispute the agent nearly always sides with the landlord.

Legislation needs to specify the principle that the managing agent is responsible for the property, in a similar way perhaps as a Board is required to take decisions in the best interests of a company (which is a legal entity in itself), not themselves or the employees.

To make this work, there needs to be an appeal procedure for the tenant to complain about and/or switch managing agent (who, obviously, doesn’t have to be the same as the letting agent).

Accordingly, a portion of the rent – say the 10% notionally for maintenance on which I understand landlords get tax relief – should be paid into a fund (like the “sinking fund” some freeholders maintain for leaseholders) and used to make repairs/improvements to the property.  Either landlord or tenant could propose such improvements, with the managing agent having the casting vote in the event of a dispute over priorities etc.  I’ve lost count of the number of “improvements” I’ve asked for and not got: that old chestnut, secure postal delivery; better thermal insulation (guess who pays the heating bills?); security improvements and any number of odd jobs I’ve done myself – such as replacing the 50p plastic loo seat that’s always put in new conversions when it broke.  To be fair, my landlord has fixed a number of problems, too, but these tend to be the ones that don’t cost a lot.

“4 For landlords to pay the council tax. They paid the old style rates. Why was it changed?”

I expect they’d just put the rent up to compensate.  However, as a temporary resident in Cambridge, I am disenfranchised – the Residents’ Associations aren’t begging me to join, and the Council doesn’t seem to take me that seriously, other than as a source of revenue – so get less value from my Council Tax than permanent residents.  For example, the Council allowed the rental property to be created, but provided no (legal) parking space (so, only using a car occasionally, I ended up with 2 tickets before I realised I had to park in another street where the Residents’ Association had succeeded in providing amply for themselves) – and when I complained that my street is all metered and the local residents’ permits don’t work, the Council listened, to be fair, but didn’t take my problem seriously (the money from meters on my street is needed, apparently, to subsidise park and ride buses, so that people who live outside Cambridge can come into town cheaply – um, why is this my problem? – and why are we allowing some people to drive into town and park in order to discourage others to do so? But I digress – that £60 fine really gave me the hump!).

I’d also argue that private tenants get less value per £ of tax collected from council services than owner-occupiers of property.  I don’t drive often (except using the occasional Streetcar – the point of renting is to be live where I want to be); don’t have kids that need educating; and don’t even trouble the police (though when I’ve run into them in the street I have asked them once or twice to try to stop people cycling flat out on the pavements – without lights).  Maybe there should be a special (lower) Council Tax rate for private tenants.

I think, though, the answer is to reform the Council Tax, which is truly awful.  It should be much more progressive (i.e. the rates for small rented properties should be negligible and the rates for 5 bedroom detacheds much higher, in order to be fairer, and, among other things, encourage people to trade-down when the kids have flown the nest), of course, but the main way to achieve fairness is to make it far less significant.  Councils (like in the US) should have other local sources of revenue: a local incomes tax; local sales tax; congestion charges; hotel room occupancy taxes (a brilliant tax, as most of these people don’t get a vote! – if I have to pay it in New York, why shouldn’t tourists pay it when they come here?, after all they use our roads, leave rubbish, report their stolen cameras to the police…), and so on.

“5 It is presumed that tenants are able to stay for as long as they pay rent, and that two months notice must be given. However, tenants can give one months notice. Oh, stop whining and snivelling, landlords!”

Yes, wipe you’re snotty faces, as Putin would say!

It’s absolutely outrageous that tenants no longer have any security of tenure.  This should be restored immediately.  The Assured Shorthold Tenancy should automatically roll over after 6 months to a contract with one month tenant notice, 2 months (or more) for the landlord, but the landlord should only be able to evict a tenant:

  • if they’ve caused a nuisance, and the tenant must have a right of appeal.  This would be a return to the status quo ante, i.e. the situation before the Major Gov’t brought in the present arrangements which it has to be said, have successfully promoted a private rental market, arguably too successfully, in that there’s a lot of evidence that first-time buyers have been priced out over the last few years; or
  • to take vacant possession (the major Major innovation that led to the growth of the BTL market), in which case the tenant should be compensated for the inconvenience.

“Renegotiation” of the contract (and the associated fees that are often levied) every 6 months (or year) should be OUT.  People don’t organise their lives in 6 month chunks.  I know someone who bought a property just after renewing an Assured Shorthold (um, so she’d have somewhere to live, of course), and was then told she was liable for the rent if the landlord couldn’t find another tenant (not very likely in Cambridge, fortunately).   This is just ridiculous.  It’s reasonable for the landlord to expect you to stay for the first 6 months, but after that you have to be able to choose when you leave.

2 months is far too little notice to have your life disrupted – I gather it’s 6 in France.  And the tenant should be allowed to move as soon as they find somewhere else within the landlord’s notice period, and compensated for the costs incurred (i.e. a couple of months’ rent waived).

But vacant possession must mean that.  It shouldn’t mean a landlord can simply get rid of a tenant they don’t like or to try to find a higher-paying tenant.  Of course, the landlord might try to abuse this and lie about the reason for eviction.  My suggestion is that if a landlord takes vacant possession, without a valid reason, then as well as paying compensation to the evicted tenant, they should be barred from letting the property again for 6 months. This should put them off.

“6 For tenants to be allowed, within reason *, decoration rights. It used to be the case that on taking up a tenancy, new residents would be granted one weeks rent free to cover the cost of paint (more on production of reasonable receipts.) No more magnolia, no more greige. Hooray!
* Fuchsia gloss on the walls is not reasonable.”

Like insecurity of tenure, this is another obstacle to renting long-term.  It’s not necessary, as evidenced elsewhere e.g. France, where (I saw on TV), the first thing new tenants do is decorate.

I would have thought it was in the interest of landlords as well as tenants for long-term renting to become a viable option in the UK like it is in practically every other country in the Western world.

It’s also in the national interest to sort out the private rental market as the social housing arrangements can’t cope (and too much social housing is bad for the economy in various ways), as more and more priced-out young people will emigrate to Australia.  Fewer and fewer have been able to buy as house prices have risen over the noughties, and since the start of the credit crisis property is now even less affordable (don’t confuse price with affordability), largely because high LTV mortgages have vanished and first-timers now have to raise hefty deposits, not to mention the unemployment risk factor.  Social housing schemes can’t keep up.

“7 For there to be an effective fair rent forum, with tenants encouraged to use it. Landlords are legally prevented from giving notice if the rent is deemed too high, and legally and physically restrained from bleating about it.”

Another key issue.  Landlords must be prevented from hiking the rent once a tenant has spent a fortune moving into a property, or (see point 5) in order to get someone out.

My suggestion is that rent increases are linked to an index of the rents achieved locally by new rentals of comparable property (well, those council bureaucrats need something to do!).  The new rentals are where you find out what the market thinks property (or anything else) is really worth. This way, landlords won’t be able to complain that they are losing out because of a sitting tenant.

“8 For all landlords to nominate a caretaker and contractors on duty 24/7. Overseas owners must have a local representative. These representatives or caretakers must respond to urgent repairs within one day, or less in cases of water or gas leaks and the potential explosions, obviously.”

Yeap.  In my experience most landlords use professional managing agents and they should be required to have one (who should be registered, i.e. liable to be struck off if they don’t do their job, by the way).  As now, managing agents provide different levels of service.  The minimum should be the arbitration and deposit and sinking fund holding role (see point 2) plus 24 hour cover for the landlord.  The drama round here this week was a neighbour getting locked out.  The landlord had apparently given all the spare keys to the agent who only works 9-5!

“10 In the event of forfeiture in the above instance, or bankruptcy, or sale, for it to be presumed that the tenant is a ‘sitting’ tenant, and for notice only to be given to them, well never.”

Of course, but see point 5.  This all needs to be debated, but I’m taking the line that a private rental market is a good thing.  And there was probably some merit in the argument that landlords need to be able to take possession.  But the over-riding principle has to be to allow them to do so without pushing costs onto tenants and whilst minimising the disruption caused to evictees.

“11 Landlords who do not control their tenant’s anti-social or illegal behaviour will be entertained at length in their own home by a crack team of Ethel Merman impersonators who shall perform an avant-garde opera based on the life and works of Celine Dion. Loudly.”

Yeap.  Someone asked me to look at a tenancy agreement recently.  There were all kinds of clauses about not causing a nuisance e.g. by making a lot of noise.  I said to just sign it, and that the problem would be not that the landlord enforced these terms (some of which were on the Alice in Wonderland side of the realistic), but that they didn’t (for other people).  How right I was.

As I said, it’s amazing that Labour has done nothing about the private rental market.  I find it absolutely incredible that social housing tenants have rights that I can only dream about.  Why should my rights depend on the sort of organisation my landlord happens to be?  You’d think there’d be some kind of European law against such unequal treatment of citizens.

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1 Comment »

  1. […] Filed under: Economics, Housing market — Tim Joslin @ 4:23 pm Following on from my last post, there’s a great piece by Renter Girl in today’s Guradian Society section.  It’s […]

    Pingback by Renting References « Uncharted Territory — January 14, 2009 @ 4:23 pm


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