The Mayor’s London Rental Standard puts landlords and tenants in the driving seat
May 7, 2013
There has been considerable comment on the phenomenal growth in private renting. Yet this isn’t news to Londoners. Ten years ago, when the housing market was more buoyant and banks were falling over each other to issue 100% mortgages, private renting doubled. Today a quarter of all Londoners are private renters.
It is not just the overall number that has changed. London’s private renters now include over 200,000 families with children, the average age of renters is rising, and the level of mobility in to, out of and within the sector is declining rapidly. What we are witnessing is a fundamental shift in demographics in a tenure that was once dominated by young, single, mobile people.
One thing that hasn’t changed is Londoners’ overwhelming desire to own their own home. The Mayor’s recent reductions in red tape and a £100m boost for more innovative models of home ownership will help tens of thousands of them to do so – and a cut in stamp duty wouldn’t go amiss either. Ultimately, housing costs in London must be reduced so that the next generation can realise their dream of home ownership.
But we have to recognise that a large and growing Private Rented Sector (PRS) is here to stay and the vital role that private renting plays in London’s economy and housing market must be acknowledged. That is why, last December, we published the first ever blueprint for private renting in the capital. It takes a long hard look at the sector, with the aim of building on its success to date and recognising its potential for the future.
The blueprint attempts to answer some very important questions about the role of private renting in London’s economy and society. How can we harness a buoyant PRS to increase the supply of new homes? What is needed to promote high standards and professionalism? How should the sector respond to the fact that more renters want greater security – especially families who represent a 20% growth in the sector?
We don’t have all the answers, which is why we are in the middle of a public consultation about our proposals. But it is right for the Mayor to set out his vision for how a future PRS should look. Central to this vision is our belief that only by moving towards a stronger system of self regulation for landlords and agents can we protect investment in the sector, while at the same time improve standards. The alternative – more red tape, regulation and rent controls – is unthinkable given the disastrous impact it would have for investment.
Key to the Mayor’s proposals is the new London Rental Standard, with twelve core standards that should underpin London’s successful accreditation schemes – and an aim to accredit over 80,000 more landlords and agents by 2016. Covering everything from deposit protection, to transparency about letting agent fees, to repair response times, the London Rental Standard could underpin a massive marketing campaign about the benefits of accreditation.
Our proposals won’t require more legislation. Local authorities have existing powers to stamp out the very worst landlords who blight the reputation of the sector, including those who rent out so-called ‘beds in sheds’. But we do want to see more choice for tenants, and more consistency across the various accreditation schemes that operate across the capital. For example, one of our proposals is to launch a pilot scheme for landlords who want to offer longer tenancies. This can be done within the existing Assured Shorthold Tenancy (AST) framework but first we need landlords to come forward and volunteer to take part.
The other big issue is housing supply. We want a successful PRS to help us unlock some of the 170,000 homes that have planning consent but which are not being built. We need to build more homes to buy and to rent.
Most of the growth in the PRS has come from existing housing stock bought by ‘Buy-to-Let’ investors. This often means converting older houses where reception rooms become bedrooms and bathrooms are shared. In future, more of this growth must come from purpose-designed ‘build-to-let’, where house builders use new private rental homes to accelerate delivery. That is why the Mayor is launching a design competition for a new generation of purpose built private rental blocks, and he is working with pension funds and other investors to promote more investment into the sector.
The Greater London Authority, alongside the government, launched a new £200m fund to promote ‘Build-to-Rent’, and we anticipate that there will be a great deal of demand for this in London.
The success of all of these proposals ultimately depends on the industry itself. Landlords, letting agents and managing agents need to take the new London Rental Standard and implement it. Investors, developers and housing providers must work with us to provide the new homes that the capital so desperately needs. Tenants must be offered more choice and a more consistent level of service.
It is clear that top-down regulation will only serve to deter investors at a time when more, not less, investment is needed. Instead, the Mayor’s proposals aim to work towards an improved PRS by putting Londoners and landlords in the driving seat.