Agenda for Scrutiny panel on the private rented sector on Friday, 9th January, 2015, 1.45pm
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Agenda and draft minutes
Venue: Council Chamber, Hove Town Hall. View directions
Councillor Chaun Wilson declared that she works for a housing association and there were no other declarations of Interest. There were no declarations of Party Whip.
The Chair introduced the second meeting of this scrutiny panel.
Minutes of the previous meeting
Minutes of the meeting to follow.
The minutes of the previous meeting are to follow, as the prior meeting was held that morning.
The witnesses will include:
· Gary Waller & Mike Stimpson of the Southern Landlords Association
· Tim Nicholls, Head of Regulatory Services, BHCC
· Andy Winter, Chief Exective, Brighton Housing Trust
· Paul Bonett, Managing Director, Bonetts Estate Agents
· Julie Frith, Partner, Mishon Mackay
Gary Waller (GW) and Mike Stimpson (MS) of the Southern Landlords Association
8.1 GW began his presentation by explaining that the Southern Landlords Association (SLA) have 1,000 members (600 of them in Brighton & Hove) with 100s of properties and 1,000s of tenants. GW had been a landlord for over 30 years with properties primarily in the Elm Grove/Lewes Road corridor housing 32 students and young people. Managing that number of properties was increasingly time consuming.
8.2 The licensing of Houses in Multiple Occupation (HMOs) have had a significant impact on him and cost £25,000 e.g. to fit locks, fire doors and extend smoke alarms at a cost of £5k per property. Now all his properties were licensed. However this did make it more difficult to turn such properties back into family homes.
8.3 Article 4 has stopped conversions in that area for student accommodation, although that had been where landlords had got the maximum yield. This had probably led to such developments happening in other areas of the city. There was now a sales premium on licensed properties which put an extra £30,000-40,000 on their price when buying.
8.4 He thought there were increasing pressures on landlords such as increasing numbers of young tenants and a higher turnover of tenants with the majority moving on after two years. This was because it is an expensive city and there were not the jobs to match housing costs. It was also harder because of the registration, increased paperwork and maintaining bad debts. The Mortgage Market Review (MMR) in April had let to tighter lending criteria, making it harder to extend ones portfolio. However the property market moved in cycles, so it would be likely to become easier at another time. The requirements of licensing e.g. layout and room size, has made it harder to find a suitable property. There were also political risks such as would politicians introduce rent controls?
8.5 There was a shortage in the market of single units which was making it relatively expensive for single people to live in the city. Some were Band A rated for council tax which made it more expensive too.
8.6 Issues that the SLA wished to discuss included Planning and whether the target to house an additional 18,000 was realistic? They were concerned about the willingness of the Planning service to work with landlords to see how to address these needs. There were a lot of properties which could be converted to give people enough space to live in. However in their experience the Planning department seemed aloof and not keen to work with landlords and other departments in the council.
8.7 Improving the quality of accommodation came at a cost, so installing new technology such as circuit breakers also brought increased maintenance costs, all of which will lead to higher rent levels. Landlords sometimes experienced more difficulties in collecting rent from poorer tenants and sometimes there are additional issues such as drug use. In such cases the landlords do often become involved and need to help these more vulnerable tenants. The SLA also wondered whether the use of Article 4 would be widened across the city?
8.8 The SLA also wondered what benefits the landlords got in return for spending the money on licensing? They also had limited power to resolve issues relating to Anti-Social behaviour of tenants, other than go round and read the riot act to the tenants. They would like something back from the council in terms of more noise patrol services or increased rubbish collections.
8.9 Student new builds did provide the best returns for landlords such as the Co-op building on London Road and Circus Street. This was because it was possible to maximise the number of beds and not supply as many services. However they were not sure how much this kind of accommodation benefited the city and was expensive for students. It would be used to house new students rather than freeing up accommodation for families. Such homes would not be turned back into four bedroom family houses.
8.10 The SLA felt that there was not a need for greater regulation but the council needed to enforce the powers they already had.
Q: Were landlords selling up or increasing their portfolios?
8.11GW told the panel that it seemed that people were holding onto their portfolios due to Capital Gains Tax and the other options available to invest the money. Like in 2008 landlords were tending to hang on as it was a low interest market, as properties still provided a good return on the investment.
Q: Work between the Private Sector Team and the Planning Service has found that there are increasing levels of people living in poverty and 12% of people in the city’s private rented sector are in fuel poverty. What responsibility do you feel as landlords to these people?
8.12 GW explained that young people on the minimum wage found it difficult to get good jobs that paid above that level. The city had a significant tourist trade which was a low paying industry. He had spent all his working life commuting to London but Brighton & Hove was an expensive place to live. He had installed double glazing and loft insulation to reduce fuel poverty and the licensing regulations had required 270m of loft insulation. Most of his young tenants were on minimum wage and zero hours contracts which meant there were large areas of poverty.
8.13 MS told the panel that he had been a landlord for 50 years and had found it much easier to let to those who were economically well-off. He was very concerned about the Planning department and whether some of their policies were outdated e.g. relating to self-containment and non self-containment. When he dealt with Adur, Petersfield and Worthing they did not seem to have the same restrictive policies and so it was possible to consider supplying 100 units. In his experience the Planning Service had a culture of its own, would refuse projects it did not like and not compromise on developments. Their drive to get the highest quality would mean that developments became unaffordable which was not the same as with other local authorities. In their experience the Planning Department did not participate in joint work unlike our Housing Department.
8.14 Landlords provided accommodation to the homeless and the economically poor. If one was homeless for three months then secured accommodation, the landlord may find that there were up to six extra people that they had taken on as well. He felt that the Planning Department could do even more to help those who provide a significant share of housing in the city.
8.15 MS wondered whether student blocks, such as those on London Road, were affordable at rents of £145-200 per week? All developers could supply accommodation at that level, so why don’t these developers have to provide affordable housing? If private sector landlords were going to provide housing for the homeless then they needed to be able to provide what they know was needed rather than what the Planning Department thought was needed.
Q: Could you give some examples of projects which have not been given planning permission?
8.16 MS had purchased a redundant church off Elm Grove for which he had been applying for planning permission of the past 25 years. For 9 years there had been a campaign, aided by councillors to object to the project, and so the property was still empty after 25 years. This had involved a strong appeal. Brighton Housing Trust (BHT) had talked to the council about this scheme as nominations would have been given to BHT for eight single units and a family unit.
8.17 Another scheme involved a one bedroom unit without a bathroom where permission was sought to turn it into a three bedroom maisonette. This case had been refused and went to appeal. An affordable unit had been lost in Kemptown near the hospital due to concerns about whether the Velux window would look odd.
8.18 There was land in Portslade where planners after 20 years had decided that some residential use could happen there. But because of the insistence on a certain % for open space, even though it was opposite Natal Park, He was concerned that open space was a compulsory component regardless of where it was needed.
Tim Nicholls (TN), Head of Regulatory Services, BHCC
8.19 TN explained that his staff were responsible for investigating noise and nuisance and provided the panel with performance data in this area. The service did not look at the geography of domestic noise, just for licensed premises such as pubs and clubs (because it could be used as an evidence base for licensing policy). The service could provide a map of domestic properties and he thought that of the 3,000 noise complaints the majority would be in city centre wards and Hanover, rather than outer areas such as Rottingdean.
8.20 The number of noise complaints had peaked at 3,300 and were now reducing but this was alongside a reduction in the noise nuisance service. This was a gateway service and so it was felt that there were a reducing number of customers who did not tend to complain as much any more, as the service reduced. When looking at issues relating to noise offers were not collecting data relating to tenure. Figures showed there were 5,000 complaints about pollution and nuisance including drains, refuse and air quality.
8.21 A number of the Local Area Teams (LATs) were very concerned about noise such as Hanover, Hollingdean and Bevendean. Whereas the Patcham LAT was more concerned about flooding and St James and Rottingdean LATs had become experts in air quality. Compared to the central Brighton & Hove LATs, such West Hill, who were concerned with licensing issues.
8.22 He believed that there was not so much the need for new regulation, but to enforce the existing powers and ensure that we have sufficient resources to do this. Their service had been reduced and the 2015/16 budget will reduce it by 11% and a large percentage of the resources were taken from the noise patrol. The Antisocial Behaviour, Crime and Policing Act 2014 provides opportunities for EHOs to work with police on ASB to provide more joined up working at a lower cost. However he did wonder whether a problem shared was a problem halved?
8.23 TN considered that private rented sector licensing provided a choice to move the regulatory burden from the general fund to the landlord sector.
Q: In relation to domestic figures, how was it known that only 9 complaints had been made in student housing?
8.24 TN explained that it was due to the vagaries of how the data was recorded. Out of the 3,000 noise complaints, the majority of them related to music and parties and a reducing number. Customer surveys had found a high level of satisfaction with the noise patrol, in relation to factors such as politeness, but would always ask for more staff who worked later.
Around 100 noise abatement notices and 100 night time noise offence warning notices were served each year, of which a few would result in fixed penalties and 10 cases ended up in prosecution for noise. These figures had remained reasonably static for the last 10 years.
Q: If the figures were not completely accurate but suggest that the majority of noise complaints come from single homes, does this mean there is a myth about noisy students? There seemed to be misunderstandings around the ASB Act and whether it could be the solution to these issues?
8.25 TN agreed that there was a myth around students. From the front end nuisance work he was involved with, students had never struck him as a key source of such problems. In the city certain challenges were provided by organisations such as BIMM (Brighton Music College) but they had developed a good professional relationship with them and were able to help this organisation operate in a congested city centre.
8.26 TN did not yet feel an expert on the Antisocial Behaviour, Crime and Policing Act 2014. He recommended undertaking a joint service with police which would mean coherent enforcement and avoid duplication. This would reduce costs and improve services. Closure powers (as used in Licensing Act) were no longer limited to licensed premises but could not be used in domestic homes.
Q: This data seems to provide a partial snapshot of complaints, does it capture a noise complaint if it is dealt with by the university?
8.27 When doing the Friday or Saturday night shift of the noise patrol, the complainant would be visited. The response of the service may be to do nothing or serve a warning notice. At that point the officers would not know the nature of the occupants causing the noise. Only if the casework progresses then the tenure, university and other factors would be investigated. If the case was known to involve a student then their university would be contacted and the welfare officers informed. This has been found to be an effective way of dealing with problems.
Q: There seems to be linkages with Public Health, Adult Social Care and Housing. Do you think your data set could be changed in the future to record characteristics, such as tenure, to help these links?
8.28 TN confirmed that it would be easy to add a question about tenure in the noise investigation process and then the Public Health intelligence team could analyse that data.
Andy Winters (AW), Chief Executive of Brighton Housing Trust
8.29 AW thought that there was not a single private rented sector but three different kinds of landlords:
a. Professional landlords: They regarded this role as a long term business and look to establish a long term relationship with their tenants of 5, 10 or 15 years. Their key concern was stability rather than rent increases.
b. Accidental landlords: They may take on this role if not able to sell a property and so take on the responsibility of becoming a landlord. It is borne out of having surplus property and often they do not understand what it entails. They are prone to making mistakes and will see their return on a month-by-month basis and not see the need to reinvest in the property.
c. Quick buck landlords: They thrive on rapid turnover of tenancies and use this as an opportunity to increase rents. They were not interested in investing in their properties and gave landlords a bad name.
8.30 The focus tended to be on the quick buck landlords, which was unfair on the majority of landlords who were the ones that AW wanted to focus on. A one size fits all approach would not be appropriate for the sector, for example standard licensing might achieve some things but could come at a large cost. For this reason, there was a danger of overregulation.
8.31 He believed that the council needed to seek the co-operation of landlords and find out what were their aims and objectives to develop shared objectives. Where landlords resisted this co-operation then enforcement was needed, either gentle or muscular (such as prosecution) depending upon the issue. The education of landlords was a key element in this. His advice centre helped people deal with the issues caused by ‘quick buck’ landlords who on rare occasions may need to be taken to court.
Q: Has the ratio of different kinds of landlords changed in the city?
8.32 AW thought that the numbers of both ‘accidental’ and ‘quick buck’ landlords had changed, with the latter being the biggest cause for concern.
Q: How do we reach the ‘quick buck’ landlord?
8.33 AW explained that they had an adversarial relationship with them, for example if their tenants came to the advice service with issues such as repair needs and revenge evictions. There was a need for joint intelligence to identify these landlords. He thought that Shelter had a register of rogue landlords. Brighton Housing Trust (BHT) had prosecuted such a landlord in Hastings. There were some quality marks such as if the landlord was a member of the Southern Landlords Association (SLA). Joining such an organisation demonstrated that the landlord was of the mindset to want to share best practice and make a success of their business.
Q: With increasing numbers of vulnerable and poorer people entering the sector, are they being driven to seek housing from the poorer quality landlord?
8.34 AW said that BHT was still encouraging tenants to use good landlords. However if tenants were referred from BHT to landlords they could be perceived as having wider problems, such as those with drugs. They did still approach some landlords and ask for help, but this was based on Service Level Agreements. Usually their starting point was to ask tenants what they thought would make a good tenancy, such as producing a deposit, to make professional landlords more likely to take them on as tenants. The interests of tenants and landlords were usually the same, long tenancies, co-operation and avoiding anti-social behaviour.
Q: In your experience, do landlords tend to want to avoid the adversarial approach? Would they rather seek eviction than access support?
8.35 AW thought that the majority of landlords don’t want conflict and if a tenancy was to break down it was felt to be a joint failure. Good landlords in all sectors want to avoid an eviction, partly because it was associated with high costs.
Q: Living in the private rented sector costs an average of £840 per calendar month (pcm), but given the welfare reforms and fuel poverty there appears to be a ‘perfect storm’ happening in the private rented sector. What could be an effective structure to resolve this?
8.36 AW believed in rent caps, although where the level sits was debateable. But when rents were at £840pcm it was a landlords’ market. Most landlords were trying to get a reasonable return, but caps require national legislation as these rents were becoming completely unaffordable due to factors such as heating costs. Electricity was very expensive and proving to be a breaking point for households and people were becoming completely priced out of the market.
8.37 Key workers were increasingly living in Worthing and Eastbourne and bearing the travel costs because they could not afford the rents in this city. Increasingly people over 30 were being forced to live in shared accommodation as they could not afford to buy their homes. The private rented sector was becoming less and less of an option for many people in Brighton & Hove.
Q: An example of a country which has rent caps and economic growth had not been halted was Germany. So what local and national actions could be taken in this area?
8.38 AW thought that locally the local authority could intervene in the market to increase supply. There was a need to look at which Registered Social Landlords (RSLs) they were partnering with to see what was passing for social housing, for example was shared housing or accommodation or outright sale? He believed that the council should work with more community based organised organisations to deliver social housing. For example, Richardson Yard where 36 units were being brought back into use with no capital subsidy in partnership with a private developer and BHT.
8.39 He wondered why officers in Sussex based local authorities did not seem as interested in seeking out schemes, compared to London based authorities. Increasing the supply by means such as these schemes would be a way of intervening in the market. BHCC had a number of prestige sites to develop and it tended to work with big developers on these, rather than with community organisations.
8.40 GW and MS explained that they typically charged £390 per room compared to £700 in London and £320 in Worthing. As a county we had enough housing but everybody still wants to live in the South East. It was based purely on supply and demand. Some of their properties were still living with rent caps from the 1915. There was not enough accommodation in South East England so there was a need to both fix supply and build 000s of more units. However there was a lot of NIMBYism or the alternative was to try and spread out these developments across the country.
Q: Given the population movements, so we need a regional perspective to understand a regional housing market?
8.41 AW thought we needed the perspective of a wider region that included areas such as Lancing and Worthing. For example to look at the people commuting from Eastbourne back into Brighton & Hove. 73% of people buying homes in the city now have a current address in London, so there was the need to understand a much larger area. If we are to build several hundred homes, then let’s build the right housing. With access you can control who build the properties, such as social community based housing with whom one can have land lease arrangements that bypass the Right to Buy (RTB). For example to build a two bedroom house would cost £40,000 minus the land costs and then BHCC could have the nomination rights.
8.42 MS told the panel that he had produced a paper on his rent levels for the Housing Strategy. Out of 450 tenants there were only 5 one bedroom rental units which were at the Local Housing Allowance (LHA) level and no studio units. He tended to obtain his tenants by recommendation and the majority of rents had not gone up in the last five years. Shared accommodation was also where one could not meet LHA levels, with a £82-85 per week charge this still needed a top up from the tenant of £4-6 per week. There were set ups where the landlord still pay the council tax charges, central heating, water rates and cleaning services.
8.43 If a landlord was to buy in Brighton & Hove now they could not make a profit. So increasingly landlords were buying up properties in Newhaven, Worthing and Shoreham. Although Hasting property prices were good there was felt to be a poorer quality of tenants.
8.44 The expectations of the unemployed (who tended to expect self-contained accommodation) could differ from the employed who were not bothered about this. He was concerned about offering contained accommodation to employed people in case they fell out of employment.
Paul Bonett (PB), Managing Director, Bonett’s
8.45 PB explained that a lot of landlords do not use lettings agents as a standard in Brighton & Hove. There seemed to be a shocking disparity in terms of the services that lettings agents offer. The most important factor was who is the client and some of the lettings agents do not charge the landlords a fee. In those cases one could be sure that tenants would be facing exorbitant changes such as high admin charges, extra charges for contracts and changes to tenants plus a surcharge for repairs. Landlords sometimes do not see an invoice for work carried out at a property and get an invoice from the agent rather than the tradesperson, with a commission added on top. Another example of varied terms is the agents who charge the six month AST commission fee up front to landlords and then the agents have little incentive to provide any service once they have got their fee.
8.46 When the agent is earning money from the tenant they want a high turnover with tenants giving them notice after four months. The agent then prevents any communication between the tenant and landlord about why the tenant has moved out. Whereas the majority of tenants want security of tenure for between 1-5 years and the landlords want reliability and steadiness.
8.47 There were increasing numbers of very different landlords in the city, such as those offering party house accommodation that encouraged the worst behaving people to come into the city who have no incentive to be good neighbours for a short break. Neighbours hoped to encourage estate agents not to sell properties onto party house operators. Another issue is naïve landlords were least likely to know the impact of not paying commission to the agents. Then tenants and their neighbours were the people most likely to suffer as the person who owns the building is not effectively a ‘client’ as they are paying little or nothing for a ‘service’. When this market needed was increased regulation, transparency and standardisation.
Q: In the last 10 years have you noticed that there are increasing numbers of vulnerable people entering the private rented sector and how do you deal with them?
8.48 PB said that he was not an expert in this field and only once last year had dealt with a landlord providing housing for vulnerable people and they had ended up being rehoused by the landlord in another property.
Q: Cllr Randall summed this up by saying that one needed a licence to clip a poodle but not set up a lettings agency. What are your thoughts?
8.49 PB explained that anyone can set up an agency and a lot of them were franchises. One should become a member of the Association of Rental Lettings Agents (ARLA) which offered a bonded scheme/code of practice, and this should be expected to be the norm for any agency. But without belonging to such a scheme, one can get the people who did not give a damn.
Q: What do you think of the model of tenants rating their landlords? Could this be done in partnership with estate agents and the council?
8.50 PB thought this could be a very good idea, with lettings agents being set a minimum standard and checked annually and externally checked. They should need to get references from landlords and tenants.
Q: What could the council do to help this to happen?
8.51 PB thought that regulation might be needed, for example that anyone who sets up as a lettings agent in the city should join the Brighton & Hove Estate Agents Association as well as ARLA. This could help prevent someone from being a poor lettings agent and get away with it. Action could be taken if a complaint was made to the council. There was not transparency over a complaints procedure. There was concern that tenants at the lower level of affordability could have a fear of revenge evictions. There may be a national organisation/website which supposedly lists bad tenants.
8.52 There were lettings agencies which specialised in central areas of the city, for example in the Lewes Road where there is a focus on student lets. There was a need for a more holistic approach between university agents, landlords and tenants – which were often dealing with poor quality stock.
Q: What changes have you seen to the private rented sector in the last 10-15 years?
8.53 PB thought there were a lot more Buy to Let (BLT) landlords with one or two properties and some had become more professional. Good estate agents and lettings agencies will educate less experienced landlords, for example showing how improving conditions to make homes habitable will lead to better tenants. In the last five years, especially the last three, there had been a significant increase in foreign students and labour market changes. Up to 50% of tenants are from overseas, so the tenant demographic was now very different.
Q: The programme on television about the super rich which aired last night asserted that there had been no trickle down effect, with the poorest now subsidising the richest. 40% of housing was being bought by outsiders. Tony Mernagh says that housing is a reflection of where the economy is. There was a need for a good private rented sector and good relations between the stakeholders, so what could be done to improve relations between them?
8.54 PB told the panel of the need to hear the tenants’ voice. Hear the ordinary voice of tenants. On the whole the tenants Bonnett’s deal with were happy. In the last year the only tenant who left their accommodation did because he could no longer afford his home after losing his job. If you get it right, then one could have a good long term relationship with your tenants. But what was needed for lettings agents was:
Q: What is the average number of prospective tenants viewing each property?
8.55 PB said that on average 10-15 people would contact them within the hour about each one bedroom property that came on the market. Their organisation would not deal with homes in poor condition. However even homes in poorer condition would be taken by those in desperate need.
8.56 GW explained that he employed a labourer who has moved from working on one bedroom units to student units and had found that these properties were usually let within one day. He felt that there was a shortage of properties in the city, but it was roughly in balance unlike London.
Q: Was there a need to view the private sector in a different way, to see it as a permanent way of housing rather than transient?
8.57 PB said that in central Berlin one could rent a unit for five to ten years. While our system may have gone too far to alter to this level of stability, there should be a change from Assured Shorthold Tenancies. One should be able to offer tenancies of three years or more, which had break clauses. The first time a one bedroom flat was being rented out for between £600-£650 per month, but then it would rise up by 30% in the following two years to £800.
8.58 GW believed that it was interest rates which had the maximum impact. A lot of landlords were mortgaged to the hilt and if the tenancy defaulted on their rent it could cause significant problems.
8.59 MS said that the city was ... view the full minutes text for item 8.
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