Earlier this summer the Government released its ‘fairer private rented sector white paper’ setting out its plans to reform the framework for those who rent in England. Ministers said the white paper marks a ‘generational shift’ that ‘will redress the balance between landlords and 4.4 million private rented households’.
By Paul Winstanley, Director – Head of Living Strategic Advisory, JLL
Of course, there has been a significant amount of upheaval in Whitehall since its publication and we await clarification of our next prime minister and housing minister in early September. The ministerial turnover is undoubtedly inconvenient, but one would suspect that the proposals in this bill are now advanced enough that they are unlikely to be scrapped.
The white paper is a key milestone in recognising we need a multi-tenure approach to housing and that home ownership on its own as a ‘one-size-fits-all’ political strategy is not going to work. I would argue, however, that for a growing proportion of the rental market, the ‘generational shift’ the Government seeks has already happened and is available to a growing number of renters every day. For renters who have embraced Build to Rent schemes across the UK, not only has the balance between traditional landlords and tenants already been redressed but it has been fundamentally transformed. Investors are the new landlords and customers/occupiers/residents (whichever term one prefers) are the new tenants.
For anyone who has been involved in driving Build to Rent development over the last decade since the Coalition Government commissioned Sir Adrian Montague’s Private rented homes: review of the barriers to institutional investment, (published in August 2012), the current Government’s announcement feels an unequivocal endorsement of the large-scale/institutional investor backed sector a great number of us have so carefully, collectively and collaboratively contributed to and created. So many of the proposals for change are things our industry has chosen to adopt as standard:
- Certainty of tenure from long term investors – check.
- No fault evictions – check.
- Signposted and justifiable rental increases with market levels in mind – check.
- Quality homes built with durable materials – check.
- Expedient routine and proactive maintenance – check.
- Access to redress – check.
- Public review scrutiny – check.
- No tenant discrimination – check.
- Pet friendly – check.
The list goes on.
Way back when, across so many varied and passionate stakeholders across industry and within JLL, we set out with a multi-disciplinary focus to develop a vision, plan, design, deliver, manage and fund a better way to rent across the UK. We set out to change the way rental sector owners engaged with renters and those who rent became customers and were no longer viewed as tenants. This distinction may feel pedantic – but in hindsight it was (and remains) a crucial distinction. In essence, we now have proof that optimising returns starts and ends with the people who reside in a property – and this has been the most fundamental market driver from day one.
Of course, standards within the private rented market more widely do need improving and we are heartened to see the spirit of the steps set out to address this in the white paper.
The Government’s proposals are, of course, not perfect and it is critical that our industry continues to collaborate openly and actively with the relevant Ministries to ensure that the detail of the reforms which will affect the whole of the rental market does not create unintended and unwanted consequences.
For example, I question the benefit of not allowing residential tenancies to be linked to CPI on a short-term basis (say for leases of three years and under). This is a clear case of ‘be careful what you wish for’ as in recent years, CPI levels have been significantly under market rental growth, which is likely to continue with the underlying housing supply/demand imbalance in the longer, if not the shorter, term.
Add to that the psychological benefits of being able to know well in advance what rents will be in next year and simultaneously avoiding a potentially stressful market rent review process, particularly were rents to rise quite quickly, and this headline proposal clearly needs much more careful thought.
In addition, I would also like to see more detail on how the Government intend to police the wider sector through their wider planned court reform, and more information as to what the ‘landlord portal’ will look like. It sounds good… in theory.
Overall, though, I believe as an industry we should embrace many of the proposed rental reforms as we have proven that many of the Government’s proposals do make a tangible difference to rental customers. The industry should be proud to have already provided renters with a product which is ahead of its time, and those who rent in the individual residential investment market will hopefully notice the experiential difference over time of more certainty. And by offering an improved renter experience, based on the experience of the Build to Rent market to date, I am hopeful that investment returns will improve over the long-term for all owners – large-scale or individual unit investors.