Private rents: High cost, low security

By Melanie Smallman

David Lammy and Will Straw wrote an interesting piece on LabourList yesterday about the current housing benefit debate. They argued that Labour needs an alternative approach that looks after those who lose out from the benefit cuts, that does everything possible to reduce the number of people who are unemployed and introduces a rent cap in large cities to drive down rents and builds more homes.

I found it difficult to argue with most of the points they make. But I also think that they missed a vital issue that is at the heart of the problems for most benefit claimants living in the private rented sector – that the high rents and poor housing in the private sector comes coupled with a lack of security, which brings massive social costs.

As a councillor, my advice surgeries were filled with people experiencing terrible housing problems. But few were as desperate and hopeless as those families renting in the private sector. Most were living in sub-standard accommodation, afraid to ask for simple repairs for fear that their landlord would throw them out, or worse, raise the rent. And many were put-off taking on work in case the casual jobs on offer fell through, putting them at the start of a lengthy new claim for housing benefit that could push them into rent arrears and the road to eviction. Families spend years, if not decades like this, living in limbo, waiting for a chance of a ‘real home’ in the social rented sector – real homes that might never be offered to them. They can’t plan for their futures, their children can’t settle in school, and they can’t become part of their communities or play an active role in society like the rest of us. At the root of this problem is the lack of security offered by the assured shorthold tenancies that are the only option for private landlords.

The answer for Labour has traditionally been to call for more social housing to be built to help these families. Although this is undoubtedly the best long-term solution, the scale of the challenge is so huge that this can’t be the only solution. There are 4.5 million people on council waiting lists, but we have built only 176,000 new homes in the last 4 years. And we have many of the houses we need – it’s just that the insecure assured-shorthold tenancies by which they’re rented mean that they can’t provide anything but temporary housing. With 13% of the country’s housing stock being rented on such tenancies, and the number predicted to grow by 40% in the next 10 years, it is crucial that we give some thought to how we can bring the private rented sector back into proper use, with at least medium term tenancies.

It is easy to believe that private landlords are mini-Rachmans, only interested in making as much money as possible and therefore not game for providing homes on medium or long-term tenancies. But having spoken to many professional landlords in my quest to solve the housing shortage in my own London borough, I know that the two biggest risks to profit that landlords face are vacant periods and capital gains tax when a property is sold. Secure, rent-controlled tenancies (of the sort offered by social landlords) can smooth out the rental income – the lower monthly rents being offset by fewer rent-free periods. And while they won’t be the cup of tea for those out to make a fast buck from their property, they could be appealing to those serious landlords who are in it for the long game – whether these are the ‘professional’ landlords with many properties or the ‘amateurs’ buying a property as a pension investment. Coupling secure tenancies with an incentive like a reduction in capital gains tax for those landlords who have rented their property out at an acceptable rent on a long-term basis, has the potential to bring thousands of homes back into use – at a faster rate and lower cost than it would take to build the equivalent properties.

We undoubtedly need an alternative approach to housing benefit reform. But we need one that doesn’t just focus on the financial cost, but also the social cost that is created by the scandalous limbo in which so many benefit claimants in the private rented sector are forced to live. The market won’t sort that out – but new types of tenancies might.