'If longer fixed terms are going to be introduced, legislation is the best way forward'
What can the government do to improve security for private renters? CIH policy and practice officer David Pipe assesses its proposals to introduce longer tenancies.
The government has just finished consulting on plans to introduce longer tenancies for private renters.
In summary, its proposal is a three-year fixed term as standard. It would include a six-month ‘break clause’, where either party could end the tenancy for any reason. After that, tenants would still be able to end the tenancy if they wanted to move but landlords would only be able to end it in certain circumstances. And landlords would also have to set out at the beginning of the tenancy how often and how much rents could be increased by. Longer tenancies could be introduced either by legislation, which would make them mandatory in most cases, or by offering incentives for landlords to use them voluntarily.
38 per cent of private renters are families with children and, although the sector is often thought of as housing mainly younger people, the proportion of 55-64 year olds who live in the sector (10 per cent) has more than doubled since 2003/4. The proportion of 45-54 year olds (16 per cent) has more than trebled. While some tenants do value the flexibility that renting offers, there is clearly a growing group of tenants who need more security and who would benefit greatly from a longer tenancy.
Having discussed the plans with our members, we are therefore broadly supportive of what is being proposed.
However, we have used our response to raise a number of issues that the government still needs to think about. Here are four critical points that need further consideration:
1. Are longer fixed terms the best way to increase security? The Scottish Government has recently introduced reforms which go beyond those currently being proposed by eradicating fixed terms and ‘no fault’ evictions entirely. Instead landlords will only ever be able to end a tenancy by using one of 18 specific grounds for eviction. While longer fixed terms are undoubtedly a big improvement on the current system, 48 per cent of our members who took part in our survey on the consultation said that they would prefer to see the Scottish system introduced in England as well. This compares to 41 per cent who favoured longer fixed terms. Are indefinite tenancies something the government could seriously consider?
2. Legislation is the best way forward. If longer fixed terms are going to be introduced, we would very much encourage government to do this via legislation so that they become mandatory (except for a few specific exceptions). While a voluntary system would offer greater security for some, our concern is that not all prospective tenants are able to exert the same degree of leverage to ask for a longer tenancy. Some groups already find it difficult to find anyone who will let to them and so we are concerned that a voluntary system might only benefit those tenants who, for whatever reason, are seen as being more desirable by landlords/letting agents. The Sun reports today that the government is planning to opt for a voluntary system over fears legislation would scare off investment in property development. This would be very disappointing – and given that the consultation does a very decent job of balancing the needs of tenants and landlords, I think those fears would be unfounded.
3. Landlords still need to know that they can recover properties easily when there are problems. It’s important to recognise that landlords have a legitimate need to recover properties quickly in the event that there are problems, such as rent arrears. The present system of ‘no fault’ evictions usually allows them to do this but on the occasions when they do have to go to court the process is simply far too slow. Longer fixed terms will mean that landlords will need to rely on the courts more frequently if there are problems, and at present the system isn’t really fit for purpose. It is therefore absolutely essential that separate plans to establish a stand-alone housing court lead to a faster and more cost-efficient system for considering possession cases. Otherwise longer tenancies will mean much greater risks for landlords.
4. A longer fixed term doesn’t mean more security if you can’t afford the rent. Although most evictions are supposedly ‘no fault’ evictions, there is some evidence that when landlords end a tenancy it is most commonly because of rent arrears. Therefore if the government’s aim is to reduce the number of evictions, it is essential to also address the causes of these arrears. This means looking again at a number of welfare cuts that made renting increasingly unaffordable for many households. For example our recent research into the impact of cuts to local housing allowance rates shows this very clearly, with typical households who rely on housing benefit facing a shortfall of between £25 and £260 per month. If government does not reverse this and other cuts there is a real danger that, regardless of what tenancy regime is put in place, people still may not be able to keep up with their rent.
- For more information about the detail of the government’s proposals, read our response in full.