Private Rented Sector: Looking Back and Moving Forward
December 3, 2014
As 2014 is drawing to a close this PRSupdate article will focus on what has been happening over the past 12 months in housing and the Private Rented Sector, as well as a brief look ahead to 2015.
While the lack of housing stock is a current hot topic it has been encouraging to see statistics, released by the Government, which shows that house building has steadily been on the rise since the financial collapse of 2008.
The number of private dwelling construction starts for 2014 is set to exceed the 2013 levels by at nearly 25,000 units (106,750 in 2014 compared to 81,980 in 2013).
Around the UK, developers are starting to bring a number of large residential and mixed-use schemes ‘out of the ground’, with London continuing to be a focal point for large-scale residential investment. One of biggest schemes to be announced was Wood Wharf in London’s Canary Wharf, which is set to provide more than 3,000 homes. With many more developments and schemes still seeking planning permission we can expect to see the Private Rented Sector continue to grow during 2015.
As all the political parties gear up for the general election next May, there has been an increased political focus on the Private Rented Sector. While there has been a continued drive to attract large scale investment, and thus improve the UK’s housing stock, the main political focus has been on the level of industry regulation and whether it should be increased.
Labour has tried to win over renters by calling for, and attempting to push through, stronger controls for the Private Rented Sector. Most recently they attempted to amend the Consumer Rights Bill to make it illegal for letting agents to charge fees.
But the Coalition Government has been opposing all of Labour’s proposals as they feel the sector should not be burdened by more red tape and can continue to rely on self-regulation to stamp out bad practice.
Some of the events that have affected the Private Rented Sector in someway during 2014, have included:
- A coalition of various industry bodies (including RICS, ARLA, BPF, CIH, etc.) launching a Private Rented Sector Code in October. The intention of the document is to promote best practice for letting and management agents.
- The Government making it a legal requirement for all letting agents and property managers (operating in England) to have signed up to one of the approved redress schemes. Failure to do so will result in a fine of up to £5,000.
- The Government has tabled amendments to the Consumer Rights Bill. The first would make it a legal requirement for letting agents to publish a full tariff of their fees – both on their websites and prominently in their offices. The second would make it a legal requirement for letting and management agents to display whether they offer Client Money Protection.
- The Mayor, Boris Johnson, launched his own accreditation scheme – ‘The London Rental Standard’ (LRS). The aim of the LRS is to be recognised as a mark of quality to be sought after by London’s landlords and tenants. Becoming a member of the LRS is not required and it has no power to tackle the rogue elements, which has caused some to question its usefulness.
At Young London, we feel that the industry would be better served by focusing on educating renters about current legislation – and how they can make use of it – while also providing local authorities with the tools to enforce the law. This would go much further in helping to stamp out the minority of rogue agents rather than further legislation.
Economics And Investment
The continued economic growth of 2014 has had a positive impact on the housing sector. Capital values have continued to climb and are reaching record highs in certain areas of the country, specifically London and the South East. Rental levels have also continued to grow, but at a more stable rate.
To combat the growing concern that property in the Capital was being sold exclusively to foreign investors London’s biggest developers signed up to the Mayor’s concordat and promised that domestic buyers would have an equal opportunity to buy property. This has not done much to curb foreign investment in London (which is at an all-time high) as the Capital continues to be perceived as a safe investment.
There was also a shake up of mortgages following the Mortgage Market Review (MMR). The MMR set out a number of reforms that would help ensure the mortgage market would be able to continue to recover in the wake of the credit crunch. My colleague David goes into greater detail about the changes and their affect on the market in an article on our PRSupdate blog (http://bit.ly/MMRArticle).
I have no doubt that 2015 will be a big year for the Private Rented Sector and I have rounded up a few key issues to keep an eye on.
At some point in 2015 (as of yet unknown) the Government will roll out the ‘right to rent immigration checks’ that formed part of the Immigration Act 2014. This piece of legislation puts the onus on landlords to check the eligibility of their prospective tenant to be in the country. Failure to comply will result in a hefty fine for each tenant found to be renting illegally.
The Bank of England base rate has been at the historic low of 0.5% since March 2009, but it seems like this is set to change. If interest rates do rise this will impact the housing market. But, as this rise has been on the cards for a while, we believe that it should not have a negative impact as there has been plenty of time to prepare.
For foreign investors, April 2015 will need to marked in the calendar. This is when new Capital Gains Tax (CGT) rules for overseas sellers come into force. Currently the disposal of UK property by a non-resident individual is not normally subject to UK CGT but this will change with the new rules.
In all, 2015 should be a good year for our industry. Our projections continue to indicate that demand for high-quality Private Rented Sector accommodation will far outstrip the current supply. But, there will be continued scrutiny of the sector and the possibility of increased regulation and red tape, especially after the election.