At the Tory Party Conference back in October, Communities Secretary Sajid Javid announced that the Autumn Budget would “bring forward new incentives for landlords” to offer tenancies longer than 12 months.
It seems, however, that the Chancellor was not giving Javid’s conference speech his fullest attention.
At last week’s Autumn Budget the Chancellor announced that Government would only be consulting on barriers to longer tenancies in the private rented sector, and how landlords can be encouraged to offer them to tenants.
The Exchequer Secretary to the Treasury, Andrew Jones MP, described the work in the Budget debate:
“We will work to understand the barriers to landlords offering longer, more secure tenancies, and then remove those barriers.”
Despite this extra delay in hearing the Government’s actual policy plan, the shift of focus from just incentives to removing all barriers could be a positive step.
Last year the Government’s Social Mobility Commission recommended that positive tax incentives should be introduced to encourage landlords to offer tenants longer tenancies. Previous research undertaken by the Cambridge Centre for Housing & Planning Research found that landlords would be far more willing to offer longer tenancies if there were tax based incentives to do so.
Such incentives could take the form of a flat 5 or 10% allowance for having a longer-term tenancy, applied in the same way that the wear and tear allowance was before the changes in April 2016. Or even some slight reprieve from the financially ruinous restrictions on mortgage interest relief.
Of course, the NLA is still arguing the case that the best thing for the PRS would be the complete reversal of George Osborne’s mortgage interest relief restrictions, as is shown in our newly commissioned research.
Barriers to Success
The NLA recently undertook a focus group research project to study landlords’ perceptions of longer tenancies. Although some landlords were open to the concept, highlighting security of income as a potential benefit, most respondents had strong concerns. The main concern raised was the ability to remove rogue tenants.
With over a third (35%) of landlords suffering from rental arrears in the past 12 months, a landlord needs to be confident in their ability to regain possession of the property if something goes wrong.
This doesn’t just mean rent arrears but could also be the landlord’s need to sell the property, which is likely to increase over the next few years as the impacts tax changes begin to take hold.
It could even be because of anti-social behaviour. A growing number of local authorities are introducing selective licensing schemes, many of which oblige landlords to end the tenancy in the case of persistent anti-social behaviour. The anti-social behaviour ground (Ground 14) in the Section 8 process could leave the landlord in danger of losing their licence as it is only discretionary ground, so repossession is not guaranteed.
The Centre for Social Justice has previously recommended introducing a similar procedure for Section 8 repossessions as apply for Section 21 repossessions, where there is a clear breach of contract that can be evidenced by the landlord.
Even with improvements to the Section 8 possession process, more will need to be done to ensure the time taken and costs incurred are reduced for landlords. Previous NLA research has shown that even through the more reliable Section 21 process the average cost for a landlord repossessing a property is £6,750. This is in part due to councils advising tenants to stay in the property until the bailiffs turn up – a practice that is at odds with Government guidance.
In essence, if the Government wants more landlords to offer longer tenancies to those tenants who want them, landlords need to be secure in the knowledge they will not be penalised for doing so.
Confidence is Key
We hope that when the Government consults on the issue it takes into account these barriers. The NLA will support the maximum amount of tax or other financial incentives possible, but these alone will not achieve much. We will therefore also be pushing for greater reforms to give landlords the confidence to offer longer tenancies:
- Establishment of a specialist housing court to reduce delays and costs and improve efficiencies. The NLA welcomed Communities Secretary Sajid Javid’s announcement at the Conservative Party Conference that his department will be consulting with the Ministry of Justice on this issue.
- Section 8 repossession grounds should be reformed to ensure that landlords can be better assured of their ability to regain possession in circumstances such as rent arrears. There is also currently no ground under Section 8 to seek repossession to sell the property, or for a landlord to move into it themselves unless they had previously lived there, which restricts many landlords from offering longer tenancies.
- Review third party restrictions such as mortgage or lease conditions that limit the length of tenancies landlords are able to offer so that all landlords have the option available to them.