Media briefing on the Housing situation in UK.

This brief is intended for those in the media that comment from time to time on particular aspects of the Housing market – sector.    All too often, a small part of the overall context is focused upon ( such as a tenant can be ‘turfed out onto the street with only 2 months notice ) and unless a degree of knowledge of the big picture, a media commentator is unlikely to be able to delve into the wider issues. Below is a summary explanation, devoid of statistics for ease of understanding.  I am prepared to be quoted or interviewed or take part in such with any other panellist if required.

Relevant in the forthcoming Renters Reform Bill, is the question to ask, ‘What about Tenants who ask for a Section 21 Notice’ ( see para 8 below )

This brief synopsis is prepared to assist those in the media when discussion on Housing arise.  Such coverage, for example around abolishing Section 21 so-called ‘No-fault’ evictions only look at a small number of the jig-saw pieces and doesn’t help understand the wider picture. Hence I’ve prepared this summary. I am a Private Sector Housing Consultant, trading as www.PossessionFriend.uk  and will draw on much experience predominantly from a private landlords perspective, which is needed for balance in most of the debates that attract media attention.

 

1. Private landlords, – who are they. There is a perception of landlords being wealthy, multi-property owning middle-class.  50% of landlords own just ONE property that they rent.  These properties often come into ownership through family bereavement and due to pension and contemporary fiscal pressures, a family will often retain that property  for its equity to increase as a Pension supplement ( with the decline in such ) and also assistance with living expenses, some single-property landlords relying heavily upon the income from One rental property to sustain their family finances.  Indeed, many landlords are minimum wage earners that were exceptionally impacted during the Covid ‘Rent-Holiday’ the government kindly handed out to tenants at landlords’ expense, for some of whom it meant financial ruin at expense of Govt funding tenants at landlords’ cost.

 

2. Long ‘Cold war’ against Landlords. The tenant support groups have long campaigned for the abolition of Section 21, such that the government started introducing piecemeal legislation to hinder and frustrate the legal process for landlords to recover property.   Lets not forget the history of dire housing shortages in the 1980, that led to the 1988 Housing Act that introduced AST’s and Sec 21.  Slowly, the PRS started to grow.   In the Thatcher era, however, the supply of Council rental accommodation started to fall due to Right to Buy.  The principle was argued to hold merit for those that could buy what essentially was tax-payers funded property at a discount, because they had lived in them ( usually rent-free, due to housing benefit paying the rent for decades )  The concept was that Council would use the funds from selling Council Housing to build new homes.  However when a Council home was sold for a fraction of its value, this nowhere near represented the cost of a replacement property.

 

3. Council Homes built in last decade. Statistics are appalling and currently there are less than a handful of Councils building any new properties. The reason for this is that the profit on building and letting out new-build houses means the yield is quite low.  Councils don’t want the ‘hassle’ of the maintenance and management issues and instead invest Council Tax-payers money in Business properties.  Like the Croydon council, ( and others ) that have gone effectively bankrupt.

 

4. Shortage of Accommodation. Govt figures for the ‘projected’ need for new units of Housing has been 300,000 per year.  This figure or any govt numbers of required units of accommodation has never been built in the last three decades and gradually the deficit has been increasing.  Also a feature of modern relationship is that Households are  increasingly separating from dual, to single occupancy effectively doubling the requirement numbers.  A significant factor in demand has been immigration ( lets not upset the Wokes by distinguishing between Legal and illegal ) the numbers of which have been exploding exponentially.
    
   In a move to increase regulation and limit personal choice, in October 2018 the government introduced a limit to the minimum room size in shared houses.  This caused a reduction of smaller rooms from the available rented sector by 200,000.   This affected those who could least afford to rent, as the smaller rooms in a shared house were usually cheaper, the bedrooms were only used as sleeping accommodation, with shared living rooms, bathroom and kitchen facilities.

 

5. Emergency Accommodation. This topic aptly connects with Councils not building more properties, as the demand upon Local authorities for accommodation by tenants who are in priority need ( in receipt of Housing – State benefit ) has long out-stripped supply, leading to unsuitable accommodation for families who have to be located in short-term budget hotels. This accommodation is supposed to be used for only a maximum of 6 weeks, however, every council is breaching those time guidelines due to the shortage of longer term suitable accommodation.    
   This hotel accommodation for families consists of a bedroom and ensuite bathroom,  no living or kitchen facilities.   The cost of this type of unsuitable accommodation is somewhere around £4,000 a month, depending on which part of the country.    That is usually three to four times the cost of a monthly Housing rent.
    
   Of course Councils will try to refer such tenants, who may have been evicted from a previous rental property, onto the PRS.  Such tenants will not likely pass a suitable reference test  (  Would you want to rent out your 6 figure property to a tenant who’s just been evicted from another property ? )  
         
   Some of these Council referrals will succeed in finding another rental property and the reasons can be any of the below.

 

1. Councils will approach landlords who they know are willing to rent to tenants in receipt of benefit ( not all tenants in receipt of benefit are in the category being described, of course ) The council will be economical with the truth about the tenants background.  For example Council may be aware that the prospective tenants were evicted due to their ASB behaviour, or for causing damage to the last rented property. But because these prospective tenants have been in Emergency accommodation longer that the guidelines, and at exorbitant cost to the Council, there is incentive for the Council to find a landlord that will accept them.   This often results in Councils withholding detrimental antecedents about this ‘tenant’ from a prospective landlord.   Its simply what’s colloquially known as ‘passing the buck’  and usually a different landlord that suffers each time and the problem is shared around the PRS.    There are longer term consequences to this, as ‘once burned’ a landlord will understandably be reluctant to accept another referral from the Council.  Little impact on Councils,  as there is a large pool of landlords to off-load future problems.

 

2. Another way tenants will find a subsequent property is by deceit. A common tactic will be to use their Middle name as their first name, thwarting a reference check. To bye-pass previous address checks,  tenants will say they’ve been living with their parents.  Some of the better reference checks will detect some ( not all ) of these scams, depending on level of complexity.

 

3. Other occasions, the landlord is trusting, not perhaps as ‘street-wise’ to Tenant deceit and falls victim to a Rogue tenant.

Strange how the word Rogue is reserved only for landlords ? That a Rogue landlord database was established by government but no such database for Tenants. Of course its not in ( Central or local ) government interest for landlords to access a list of ‘rogue’ tenants, as these would become the liability of Councils to accommodate, instead of being interspersed and recirculated amongst the PRS.

When the Levelling-up department talks about redressing the balance for tenants, landlords have long felt that balance has been out of kilter, in tenants favour. The eviction process is slow, expensive and ineffective. Reclaiming unpaid rent is only a ‘theoretical’ possibility.

Less than 10% of civil debt is recovered and Debt Respite ( scheme Breathing Space ) orders have further frustrated creditors position. The Statutory Debt Repayment Plan regulations planned for 2024 is only set to improve debtors position, further disadvantaging creditors. Government finances will benefit through the circulation and multiple tax payments, however creditors will ultimately pick up at least 80% of the debt.

 

6. Tenants in receipt of benefit Tenant groups will point to discrimination law to combat the avoidance of renting to those in receipt of benefit.  However there was a turning point in the reluctance of landlords to accept such tenants which was the introduction of Universal Credit.  Prior to U.C,  the Council paid Housing benefit  [ HB ] usually, and certainly upon request, permanently to Landlords.  When UC was introduced,  the design of this new system was anti-landlord in a number of ways.  All PRS rent is payable in advance.  UC only pays in arrears so there is always at least a month that rent due is unpaid.  Especially at the start of a claim, there is added delay for new claimants and its not unusual for landlords to go 2 to 3 months before an initial payment.  Knowing this as a landlord operating a business, not a charity, would you take this tenant knowing there’ll be no rent for up to the first 3 months, or select a tenant not subject to UC designed bureaucracy. ?
    
   Also,  UC is only payable to the claimant and there are strict and onerous rules for when it can be claimed by a landlord, and then only paid direct for a short period, after proof that at least 2 months rental arrears have accrued.   That’s right, a tenant has to owe 2 months rent, it takes 6 weeks pre-covid 10 weeks since, to get authority from DWP for direct payment, which only last for 3 months before reverting automatically back to the tenant ( usually by now more than the initial 2 months in arrears )
    
   Additionally, communication channels with DWP are notoriously slow, difficult and unhelpful, causing a huge backlog of complaints ( which no doubt slows the machinery even further ! )   For tenant groups to say landlords discriminate against tenants on grounds of being in receipt of benefit is disingenuous.   It would be more accurate to say they were discriminating against UC,  itself, as the situation hardly existed prior under housing benefit.
   The government designed all this into UC and must have known the resultant implications for tenants struggling to rent property. However, the paramount concern for government was to pay as little benefit out, as possible.

 

7. Dichotomy of Landlords accepting tenants on benefit, or not. At times government and tenant support groups will illustrate the amount of Tax-payers housing benefit paid out to Private landlords and point to the sheer transfer of payments  to private landlords.    This of course is linked to the shortage of housing that’s been referred to above.   On other occasions, private landlords are criticised for not accepting more tenants in receipt of benefit.  Cake, and eat it comes to mind.

 

8. Tenants, Eviction and Council ‘games’ I read an article in the Times from Shelter that implied Section 21 notices were being served on houses that were in disrepair.   The retaliatory Eviction protection gives strong recourse to tenants for the few instances where that might happen.
    
   Yes, it does happen,  there are  a small number of landlords, that Landlord groups will openly condemn, together with the majority of landlords against the few bad landlords that bring the  sector into disrepute and damage our customers.    I say a small number of bad landlords, as 83% of tenants according to latest Housing Survey are satisfied with their private rental.                       
   I’d challenge other groups, or businesses to match that figure, and certainly the satisfaction rate with politicians is nowhere near that figure, so think on.    There are already a plethora of measures Local authorities can take on housing standards. From Improvement Notices, Civil Penalties, Prohibition orders, prosecution, rent repayment Orders, Licensing requirements Planning control and building regulations. Even prevented from operating their business under a banning order.
    
   Onto the ‘games’.   I’ve already covered the pressure on Local Authorities – Councils to minimise their meagre resources, including being less than economical with the truth.   Local government responsibility for housing excludes where a tenant has made themselves intentionally homeless. Failure to pay rent is such an intention. 
   However many families who are evicted for rent arrears have children and the Council almost never refuse to accommodate as they would be obligated to take the child into care.  Aside from the impact on the young person, through no fault of theirs, the astronomical cost of accommodating and caring for a child, dwarfs even Emergency accommodation.  It is therefore far cheaper for councils to just fund the monthly market rent.    An example of regulation not matching pragmatism.
    
   Families in receipt of long term benefit, of which its becoming a generational phenomenon, are well aware of this and many other ‘hacks’  around the system.    Its not uncommon for a tenant be in arrears or otherwise have breached their tenancy, but openly request the landlord serve them a Section 21 ( No fault ) notice so the tenant can approach the council and claim not to be intentionally homeless.    When a Possession notice is issued, a Local Authority has to consider that tenant as threatened with Homelessness and commence steps to seek to rehouse them.   A number of authorities have been sanctioned by the Housing Ombudsman for ( Gatekeeping ) telling tenants to wait until there’s a court order,  which will result in court costs being awarded against them, and a CCJ  when they can least do with that  having to seek new rental accommodation.  Some even advise tenants to disobey the court order and remain in the property for another 6 to 8 weeks whilst a Bailiff application  and appointment for physical eviction takes place.    The council will then usually rehouse that person – family a day before the bailiff arrives,  to reduce the cost of housing to the council.   Then there is the perverse ‘game’ where a tenant asks for the landlord to Serve a Section 21 notice, as they want to present to the Council for either Council or Housing Association accommodation, as the rent is slightly less than market rate.

 

9. Eviction processes. Section 21,  ( ‘No fault’ ) and Section 8 Rent Arrears ( usually ) or other tenancy breach.    Section 21 cannot be served in the first 6 months of a tenancy, or before the end of a fixed term, if tenancy lasts for longer (  which is why most tenancies issued are for a fixed term of 6 months.)  A shorter period or no fixed term could be issued, but No Section 21 allowed until after 6 months of tenancy starting.   A notice then requires 2 months before a landlord can apply to the court for possession. A hearing in court will usually take at least 3 months ( longer if contested ) and a Possession Order granted in 28 days ( another month ) If tenant doesn’t leave – advised by Council to remain, a Bailiff application takes another two months.   Doing the math, can’t serve for 6 months, 2 months notice, 3 months to court hearing, a month before Possession date and 2 months for a bailiff, =  1 Year and 2 months  (  14 months )  If everything goes smoothly.    For tenant groups to quote that a tenant can be ‘turfed out of their home with only 2 months notice’  is plainly Incorrect and selectively – purposefully misleading.
    
   Section 8 Notice for Rent Arrears.  The notice can be served after a tenant is in arrears by Two months or more worth of rent.  The notice period is 14 days, 3 months for a court hearing.   So a court hearing isn’t going to take place until at least 6 months after a tenant is first in rent arrears.  There is only one potential defence to a claim for possession under rent arrears, and that is to offset the rent by a % for disrepair, and add inconvenience, loss of amenity claim to bring the rent down to below 2 months thereby negating a mandatory possession order.    If a tenant had a claim for disrepair alone, there is no legal aid funding provision and only option would be to seek a No-win No-fee solicitor.  However, when a Disrepair is linked to a Possession defence, the costs of legal representation cover everything.
    
   This introduces significant delay to the possession and disrepair counterclaim hearing which will likely be up to 12 months after the initial claim.  Legal advice to tenants already in rent arrears is to stop paying rent so that should they win a case and the amount claimed match the rent, they will have saved the money from being previously paid out to landlord in rent.  A successful disrepair claim will also cost defence – tenants legal fees of circa £ 5 – 6 k.                              
   Almost half of the Disrepair counterclaim defences are unsuccessful and the 5K legal fees are paid for by the tax-payer in legal Aid, and further losses suffered by landlord who has no practical prospects of reclaiming the money from a tenant on benefit, as the rules around the amount of state benefit deductible for immediately prior housing rent debt is minimal and I’ve seen a projected timescales for repayment of 300 years is not unusual.
    
   Reasons for issuing a Section 21 notice. Surveys have shown landlords issue Sec 21 for rent arrears ( to avoid the above scenario ) and for Damage to property or ASB.  The victims of ASB, who suffer, are other tenants or neighbours and removing a mandatory eviction ground will complicate and elongate the suffering of others. Current methods for dealing with ASB are the shared responsibility of the Police and local Councils under the Crime and Disorder Act 1998. Due to resource constraints, local authorities evade these responsibilities and create Licensing schemes, supposedly to improve the standard of properties ( yet many are not inspected ) at a licensing fee that such as any other business cost, gets passed onto the customer ( tenant in rent increases ) and some of the licensing conditions attempt to make a landlord responsible for the behaviour of their tenants in preventing ASB !   Government authorise such schemes oblivious to the evasion of local government responsibility.
    
   The notion that a landlord would serve Section 21 notice for no fault on the tenant.  The process is legally complex, expensive and time consuming.  Why would a landlord go through that plus a likely void period to evict a tenant for no reason.  Tenant groups will suggest that eviction is to allow a rent increase.
    
   Well that bubble has been well and truly burst.  Firstly there is a procedure to increase rent of existing tenants, and  a study by the iNews paper  [ 16-7-23 ] revealed that of 30 rent appeal cases before the Tribunal, 1 case reduced the rent, 10 cases made no increase, 11 cases increased the rent to either somewhere between the current rent and the increased figure sought by the landlords increase.   Whilst another 8  were actually  Increased by the tribunal to  ABOVE the rental increase on the notice appealed by tenants.
    
   This goes some considerable way to countering tenant extremist groups alleging landlords are profiting during the current financial climate, and also to negate the calls for rent controls,  which even the opposition party agree is not a recommended option.  In any event, the First Tier Tribunal have always been the rent ‘control’ mechanism, its just that tenants don’t always like their decisions and think their paying fair rent when market rent – costs have increased.
    
   In my experience, the vast majority of landlords who come to me for help with regaining lawful possession from a difficult tenant have persevered trying to mediate with the tenant for many months incurring further losses before resorting to legal action.  Also I notice that the level of rent payable is usually well below current market rate.  In other words, the tenant is getting a good deal but still abusing the landlords agreed contract.

 

10. Availability of rental Accommodation. For reasons of the War against landlords and the punitive Tax measures meted out on the private landlords distinctly from other businesses, Landlords have started to slowly withdraw from the PRS.  With the advent of the Renters Reform Bill and the loss of Section 21, many landlords have seen this as a ‘step too far.’ Bearing in mind Sec 21 was mooted a few years ago, the landlord exodus has been progressing and perhaps with the financial situation, increased mortgage rates ( not tax deductible ) and increased costs of materials and utilities its cumulative impact is starting to be felt.   Its only set to get worse with no viable reprieve.  Even measures to ‘end the war’ will take considerable time to rebuild the damage.
     
    Speaking with individual letting agents and even media reports that agencies once with windows full of available property for rent, now have a total of no more than two dozen properties across their company available to rent.  Letting agents tell of huge waiting lists and prospective tenants calling in, sometimes weekly asking after any available property for rent.  Letting agents no longer show individual clients an available property for rent, but now hold ‘Open viewings’  where up to a dozen tenants arrive in the time slot.  Each sees the other ‘eye’ing up the property with several wanting to rent it. 
    Of course a house can only be rented once, tenants know this and due to shortage,  are out-bidding each other, above the market rent, to secure the tenancy.  So forget the Rent control discussion, the situation has got much worse than that.    I am also seeing tenants remaining in rental properties longer than used to be the norm, likely because there aren’t properties available to rent for them to move to.

 

11. Build to Rent. A term used to describe a specific type of residential property development. Which are purpose built. Rather than selling to individual home owners, BTR properties are typically owned by institutional investors or property management companies.   The government are big supporters of BTR and a cynical view would be that big institutions are party donors. The type of properties that BTR would focus upon, are those that provide included facilities such as gyms, fitness centres etc where premium rents can be commanded.   For the same reason that Councils haven’t built housing, BTR isn’t going to provide basic housing at LHA rate, because if the Local Authority can’t make it pay, how can a private company with a higher yield requirement than a council acting altruistically.  Business and altruism are oxymoron.

     
    So, on what planet do Tenants need ‘levelling up’ !