The NLA fear London landlords will be in for a major shake-up whoever is elected.
In his newly launched Housing Manifesto, Conservative Mayoral candidate Zac Goldsmith outlines his plans to “move away from the amateur buy-to-let model” and “make way for a more professional approach”. You can read his Housing Manifesto here.
The future’s now.
Zac’s vision for the PRS of the future is made clear – large institutional landlords and the expansion of the build-to-rent sector. His plain for this “more professional approach” includes:
- Guaranteeing that a significant proportion of homes built on public sector land are offered for rent and not for sale
- Amending the London Plan so it is clear the build-to-rent proposals should be considered favourably in planning decisions
- Creating a new viability assessment specifically for the build-to-rent sector
- Working with local authorities and setting up a ‘Local Authority Housing Fund’ which will directly invest in large scale build-to-rent developments.
Overall, this isn’t too much of a surprise. Zac’s Tory colleagues in the Treasury and DCLG have made clear their preference for larger build-to-rent developments becoming the norm.
Just last week, Housing Minister Brandon Lewis gave evidence to the Lords Economic Affairs Select Committee and stated that his department wanted to create a more professional PRS – that is institutionally led.
And as we all know by now, George Osborne isn’t the biggest fan of buy-to-let landlords…to put it politely.
What is this, Amateur Hour?
With his plans for the future of London’s PRS established, Goldsmith also lays out what he wants to do to tackle the ever-increasing “amateur” buy-to-let landlord market.
First and foremost he will seek new powers to regulate lettings agents, making the London Rental Standard scheme mandatory: “lettings agents should only be able to rent out homes which meet the standard.”
This would mean the devolution of powers for central Government. But just how far would the Government go given that in four years a Labour Mayor could be in charge? The aim of improving standards in the PRS is admirable, but as we have already shown, standards in the PRS have been improving for the last decade anyway.
By arbitrarily squeezing supply, at the same time Osborne is squeezing landlords’ ability to actually invest in their properties, you’re just asking for a crisis. It’s quite clear who the real amateur is in this scenario.
On top of making it mandatory for all letting agents, Zac wants to “strengthen” the Standard to that all landlords must offer three to five year tenancies, with any yearly rent increases agreed upon and set out in the contract.
While not going as far as full on rent control – as landlords will be able to ask whatever rent they want initially – Zac certainly wants to regulate rents. He is doing this under the guise of providing certainty for tenants, which is a noble cause.
However, good landlords also need certainty – the certainty that the rent they charge can actually cover their costs. Limiting landlords’ abilities to react to rising costs (such as another attack from Mr Osborne) will result in landlords leaving the sector because it is unaffordable, or ensuring their rents go up by a healthy percentage year-on-year to budget for the worst.
Either of these consequences will certainly be bad for tenants.
Letting agents under fire
Zac also turns his regulatory gaze onto letting agents – specifically, their fees.
High tenant fees charged by some letting agents are apparently “opaque and unpredictable”. So, he plans to ensure all fees which are charged upfront, and for specific services like credit checks, are “cost reflective”.
He doesn’t delve as far into the practicabilities of letting as Labour’s Sadiq Khan in relation to scrapping tenant fees altogether. But we’re sure the devil will be in the detail. Transparency in letting agent fees is good for the landlord just as much as the tenant, as long as costs for service aren’t just shifted to the landlord.
In contrast to Sadiq’s plan to create a London-wide Letting Agency, Zac plans to go the opposite route – circumvent the need for letting agents altogether by backing apps that allow tenants and landlord to connect, provide background checks, references, rating schemes and payment facilities. He cites the apps Cozy.co and Zumper available in the US, and if they can provide the services “at a fraction of the cost of traditional lettings agencies” as he claims then that’s good for landlords (but potentially very bad for letting agents!).
The good, the bad, the ugly.
In good news, Zac doesn’t go as far Sadiq in calling for rent controls and he doesn’t even mention landlord licensing.
Not so good though is his clear preference for the build-to-rent sector and large institutional developers, coupled with a clear disregard for the smaller, “amateur” landlords.
We said the NLA feared that London landlords will be in for a shake-up whoever wins, and this manifesto makes it quite clear we’re in for an ugly shock no matter the result.
CAVEAT: Although the NLA is unashamedly pro-landlord, it remains politically neutral. You can view our previous appraisal of Sadiq Khan’s manifesto here.