Sunderland Private Rented Sector Reforms - Why Fix What Isn’t Broken?

In the last few months, a number of politicians in Westminster have decided to pay particularly close attention to the Private Rented Sector

One of the recent suggestions, unveiled by Ed Milliband as a key Labour Party manifesto pledge, is rent controls

Under the current legislation, tenants are already in a position to challenge rent increases that are deemed unreasonable and they have the advantage of giving a months notice to the landlord (when the tenancy is a rolling Periodic Tenancy) should they wish to end the tenancy for any reason (including 'excessive' rent increases)

Anyone who rented property in the 1970's and 1980's will know the difficulties of tenancy agreements from that era which allowed the tenant the right to stay in the property for life. In some cases, tenancies could be transferred to children, rents could not be increased and tenants could not be removed

In a damning report, the Institute of Economic Affairs says that Labour are going for completely the wrong solutions and accuses them of flawed thinking. Instead, the IEA says that solution would be to instead look at a radical liberalisation of the planning system to allow the private rented sector to grow

But do rents in Sunderland really need capping? Have Sunderland landlords really been exploiting their tenants with unjustifiable rent increases?

In Sunderland, there are 13,077 privately rented properties (making up 28% of all rented accommodation in Sunderland) and the average rent of a Sunderland property is currently £591pcm 

The average rent in 2008 was £524pcm, so if Sunderland landlords had raised the rents in line with inflation (which sounds fair enough), as total inflation has been around 19% since 2008, the average rent in Sunderland should today be £625pcm

Given the average rent in Sunderland is around 5% lower than this at £591pcm, it suggests that rent caps are wholly unnecessary in the City as market forces alone have kept rent increases to below inflationary levels

Restricting rent rises in the future could put more properties back on the market for sale as it would destroy the confidence in the private rented sector 

In turn, this would reduce property prices

With less property available to rent, and a lack of interest from potential investors (due to poor yields) this policy would end up creating a shortage of affordable housing

The vast increase in private renting in Sunderland over the last ten years, with 12% of property being privately rented in 2001 compared to 28% in 2011, was enabled due to the changes to the law of tenancy agreement made in the 1988 Housing Act which resulted in benefits to both landlords and tenants 

The law has made it easier to rent out a property and at the same time, the Assured Shorthold Tenancy gives the tenants a right to quiet enjoyment of the property for a period of time

The total rent paid by Sunderland tenants is an awful lot of money, £92,742,084 a year in fact, but lets not forget that under the current system rents are free to move up, but they are just as free to move down

The IEA’s report also says that rent controls in Britain between 1915 and 1989 were associated with the collapse of the private rental sector, from close to 9/10ths of the housing stock at the start of the 20th century to close to 1/10th by the late 1980's

It's telling that Swedish economist Assar Lindbeck once wrote: "Rent control appears to be the most efficient technique presently known to destroy a city – except for bombing"

And he's a socialist!

In addition to the plans to introduce rent controls, politicians do seem to have turned their attention to the Private Rented Sector in other ways and as a result further far-reaching policies are grabbing the headlines and may well gather political momentum 

Such policies include limiting landlords powers to undertake 'Revenge Evictions' following an official complaint about the condition of a property, an idea the Residential Landlords Association has branded 'a charter for antisocial tenants'

This isn't an election pledge - it's actually being debated in a Private Members Bill on November 28th 

A similarly ill-conceived idea being mooted would be to insist on longer, 3 year tenancies - the fact that many current Buy to Let mortgages would not allow anything longer than a 12 month Fixed Term seems to have been somewhat overlooked! 

Furthermore, evidence from a similar scheme in Ireland shows it has actually resulted in less certainty for tenants, given many landlords have sought to change tenants after the allowed 6 month 'probation period', rather than being committed to a 3 year tenancy if the 6 month point is passed

I'm pleased to say I've recently had a 'straight-talking but constructive' initial meeting with our local Labour MP, Julie Elliott who has agreed to share my concerns with the Shadow Housing Minister - I'll keep you posted... 

If you would like to discuss anything further about the private rented sector in Sunderland or wish me to pass on your comments on this matter to our local MP then please pop in and see me, send me an email or call me directly on 0191 567 8577