Gavin Dick, NLA Local Authority Policy Officer on the significant challenges that face local councils over the next five years.
Councils face a simple choice in working with the private rented sector: treat it as a constructive partner or look on it as an adversary – and risk alienation in the extreme.
While the replacement of Eric Pickles as Secretary of State will have been welcomed by many in local government finance, there is to be no return of a magic money tree. Whatever happens during this parliament, it is inevitable that the envelope of spending by local authorities is going to be reduced even further by 2020. Councils will need to engage with third parties to deliver services with greater efficiency than has been typical in recent years.
The Local Government Association (LGA) has been vocal in its criticism of cuts, stating that there should be no further reductions in the funding from central government. Some council leaders have also called for the cap on Council Tax rises to be removed. Currently a council has to call a local referendum to increase council tax above the threshold set by government.
So councils will have to generate income, or reduce services, which could be concerning for private landlords. In many areas, the private rented sector has been identified as an easy target to increase revenue in recent years through borough-wide licensing schemes. This short-sighted policy is ultimately a tax on tenants living in the private rented sector as, just like any other industry, the increased costs incurred by suppliers get passed down to the consumer. In this case, the cost of council revenue generation is most likely to be recouped through higher rents and eventually footed by those living locally.
Will there be a Westminster Bailout?
Not likely. The Conservative Party manifesto pushed for greater home-ownership and the increase in building new homes has to be at the forefront of this effort. The Party is also committed to the roll-out of Universal Credit and further reform to welfare with an overall reduction in the welfare cap. Furthermore, the manifesto also includes proposals to extend right-to-buy to tenants of social housing. Even with the one–for-one replacement of the housing stock lost, we’ll see the continuation of large social housing waiting lists, forcing further reliance on councils to engage with the private rented sector. Subsequently, councils will need to embrace the private rented sector, abandoning any pre-conceived opinions and make efforts to understand how it operates in 2015, rather than relying on out-dated stereotypes and hearsay.
Councils will need to avoid being railroaded by overbearing politicians who wish to tell the private rented sector who to house, what to charge and how to run their businesses by introducing licensing schemes which (arguably) prioritise fundraising over problem solving.
Increasing unwillingness for landlords to home housing benefit recipients
The National Landlords Association has been conducting polling for several years, on landlords’ willingness to take different tenant types, and what’s apparent is a steady decline in the willingness to take those who rely on Local Housing Allowance (LHA).
Add to this the recently released statistics from the Ministry of Justice (MoJ) showing the increase in repossession claims by social landlords granted by the courts and it becomes clear that councils will increasingly have to look to the private rented sector to house a wide variety of households. Despite this, many local authorities seem to be blind to the fact that that the private rented sector has a choice over its tenants and can refuse a person as well as a council. Pushing through polices such as borough wide licensing on huge swathes of the private rented sector will not encourage landlords to engage with the council, ultimately to the detriment of all involved.
What does the future hold?
The next five years will see a dramatic change in the way that the housing sector functions. Right-to-buy will alter the social housing sector; it will not be the end of the social sector, but it could force it to focus more intently on housing those in the greatest need. Councils will need the private rented sector and should not foster disaffection amongst a group that they will rely on to meet housing need,. For the time being, unfortunately too many councils find themselves doing just that.