Proposals for a Better Private Rented Sector in Wales

Proposals for a Better Private Rented Sector in Wales A Response by the Chartered Institute of Housing Cymru August 2012 The Chartered Institute of Housing is the only professional organisation representing all those working in housing. Its purpose is to maximise the contribution that housing professionals make to the well being of communities. In Wales, we aim to provide a professional and impartial voice for housing across all sectors to emphasise the particular context of housing in Wales and to work with organisations to identify housing solutions. For further information on this response please contact Julie Nicholas, Policy & Public Affairs Manager at the above address or email julie.nicholas@cih.org

Introduction CIH welcomes the opportunity to respond to this consultation. CIH is the professional body for people working in housing and communities, with over 22,000 members across the UK and Asian Pacific. Our mission is to maximise the contribution that our members make to the well being of communities. Our response is informed by feedback from our members, our knowledge of the sector and our expertise from our policy and practice teams. CIH Cymru undertook three national consultations events under our Conversation 2012 programme, to gather views and feedback on housing issues from our Members in West, North and South Wales. Representatives from Local Authorities, Registered Social Landlords, the Private Rented Sector and other organisations attended these events and feedback from attendees, as well as other direct member responses, informed our response. Consultation discussion at these events was dominated by improving standards in the Private Rented Sector (PRS), implementing changes to Homelessness legislation, including discharge of duty through the PRS and the resource implications of implementing these proposals. Summary of Response CIH Cymru broadly welcomes the content and the aim of modernising and improving the PRS in Wales. We believe this is an exciting opportunity to ensure the sector is fit for purpose, encourage inclusive partnership working, improve outcomes for tenants and landlords, build knowledge and understanding about the sector, and grow a healthy Welsh PRS. In general CIH Cymru support an approach based on an appropriate balance of sanctions and incentives supported by appropriate resources. CIH Cymru submitted key evidence at the 2010/11 Communities and Culture Committee s inquiry into Making the most of the private rented sector, 1 and launched the final report at TAI 2011. We fully support the inclusion and strengthening of three of the report s key recommendations as proposals in this consultation document: Recommendation 4. that the Welsh Government continues to promote Landlord Accreditation Wales, working with publicly funded bodies and bodies representing the interests of both landlords and tenants to share and develop understanding and incentives for landlords to become accredited 1 Making the most of the Private Rented Sector in Wales; National Assembly for Wales Communities and Culture Committee: February 2011 http://www.assemblywales.org/bus-home/bus-guide-docs-pub/bus-business-documents/bus-businessdocuments-doc-laid.htm?act=dis&id=209371&ds=3/2011 [accessed 09.08.2012] 2

Recommendation 5. Welsh Government researches the potential effectiveness and feasibility of a mandatory licensing or registration scheme for all managers of private rented sector accommodation (including landlords) in Wales. Recommendation 6. We recommend that the Welsh Government takes appropriate legislative action to enable the introduction of statutory regulation of all letting agencies in Wales. We applaud Welsh Governments commitment to progress the 2008 Rugg Review 2 recommendations to address a sector where tenants feel themselves often to be vulnerable to poor property condition, bad management and insecurity of tenure 3 through advancing consumer protection, targeting the worst properties and providers, and expanding the policing task to manage the burden on Local Authorities. CIH Cymru supports the introduction of a national mandatory registration and licensing scheme to regulate landlords, lettings and management agencies in the PRS, recognising the following key issues: The provision of PRS in Wales is now equal to the level of Social Housing provision. If recent trends persist, the PRS will be larger than the social rented sector by 2013 and by the end of the decade; one in five households could be private renters in the UK. 4 40% of PRS housing are classed as unfit or defective standards in the UK 5 40% of PRS landlords own and/or manage a single property 6 Demand outstrips supply in the PRS; this is not a level playing field for tenants, so tenants are not able to act as ordinary consumers Welfare reform will likely result in a projected upward trend for HMO and shared housing in the PRS for young people. 7 CIH Cymru has received anecdotal evidence of high and unreasonable fees, charged by lettings and management agents in addition to rental charges and deposits. The PRS in Wales is not a homogenous sector; it is a sector of extremes 8 and our understanding of both the PRS stock and tenant profile could be greatly improved, particularly to assist with evidence based policy development within the new system stewardship 9 model for a whole housing system approach. 2 The private rented sector: its contribution and potential, Julie Rugg and David Rhodes CENTRE FOR HOUSING POLICY, UNIVERSITY OF YORK: 2008 3 ibid 4 Tenure Trends in the UK Housing System: Will the private rented sector continue to grow? Ben Pattison with Diane Diacon and Jim Vine, Building and Social Housing Foundation: 2010 5 UK Housing Review 2011/12; Pawson & Wilcox:2012 6 Ibid 7 Housing Options and Solutions for Young People in 2020, David Clapham, Peter Mackie, Scott Orford, Kelly Buckley and Ian Thomas with Iain Atherton and Ursula McAnulty JRF:2012 8 Homes for Wales: A White Paper for Better Lives and Communities, Welsh Government: 2012 9 ibid 3

Our other key points are: CIH Cymru would support the undertaking of a robust impact evaluation, to identify and estimate the level of resource requirements to successfully implement the proposals and also to identify any unintended consequences of the content. CIH Cymru is in a unique position to support many aspects of these proposals through our professional membership pathway, training programme and the continuous professional development opportunities that we offer. We are able to offer cross-tenure membership to housing professionals in Wales; demonstrate expertise in building and supporting links between public, private and third sector landlords and between providers, commissioners and planners. We have specific policy and practice expertise in the development and management of both social housing and the PRS. We would also make two additional points: Legislation, regulation and the introduction of sanctions for non-compliance, should be balanced by a commitment to increase partnership working and build capacity across the sector under the strategic lead of Welsh Government and Local Authorities. There is a need to develop the voice of the tenant in these proposals, and to significantly improve tenant involvement and inclusion in the PRS. 4

Consultation Questions and CIH responses. Q1 - Are these penalties appropriate? We support penalties that are high enough to act as an incentive to comply and agree that these penalties are therefore appropriate. Q2 - Are there any other suggestions? Regarding the Registered person : the criteria to determine registration of the landlord, where there is joint ownership, is not clear; we suggest further clarity on how this is to be decided. Penalties will not be an effective deterrent to non-compliance unless there is a clear resource commitment to undertake enforcement. There needs to be clarity as to how enforcement of the legislation will be achieved and by whom. Q3 Are we capturing the right people? Yes, CIH Cymru welcomes the establishment of a new scheme to regulate landlords, and lettings and management agencies in the PRS. However we would also encourage the passporting of individual professionals and LA and RSL managed social lettings agencies and properties offered for rent at non-market levels by RSL s in Wales. This is to avoid bureaucratic duplication, because these agencies already have to fulfil regulatory and statutory requirements. Q4 What do you think the fees should be? CIH Cymru are concerned that the level of fees suggested in the paper are too low to fund a quality registration service. We would suggest that the registration fee per landlord should begin at the figure stated ( 50) for single property landlords, but rise for those landlords with more than one property. Practice Example In the Republic of Ireland 10 the national PRS landlord registration scheme, set up under the Residential Tenancies Act 2004, is operated per tenancy and not per landlord and this may be a more appropriate approach. Currently set at a fee of 90 per tenancy which is doubled 10 www.prtb.ie 5

for a late-registration (i.e. registration date is more than a month after the tenancy commencement). We are concerned with the administrational consequence of an annual 20 charge, and suggest that this should be either dropped (and front loaded onto the initial registration fee) or raised to make collection viable. We suspect that an unintended consequence of such a low-level annual charge will be to create a high rate of non-compliance, leading to an unreasonable and costly administrational burden. Q5 - Should the fee be dependent on the size of a property owner s portfolio? Yes, see above. We would suggest that the registration fee per landlord should begin at the figure stated ( 50) for single property landlords only, but rise for those landlords with more than one property. A maximum charge should be identified for landlords with multiple properties. Alternatively a tenancy fee could be charged (see Republic of Ireland practice example above). Q6 Do you agree with an annual fee (which could be used to offset a larger registration/accredited training fee)? No. See above, we support a larger registration fee as this will reduce the administrational burden and be more cost-effective. CIH Cymru also have concerns that the suggested accredited training fees are too low to ensure the delivery of high quality, accredited training. Q7 Do you think this is appropriate for a Fit & Proper Person test for this scheme? Yes, we would refer you to the contents of Peter Black AM s Private Members Bill 11 and suggest a uniform approach to a fit and proper person test should be implemented across Wales for all accreditations within the housing sector. Q8 Is this a reasonable limit for a responsible person? Yes, however CIH Cymru would like to see a greater emphasis on a risk based approach where a person fails a responsible person test. We would suggest that in some cases it will be necessary to only accept the use of an accredited lettings and management agency for the management of a property owned by a landlord who has failed such a test, to ensure protection of the tenant(s), particularly where there is a vulnerability issue. 11 Consultation on the Proposed Mobile Homes (Wales) Bill Peter Black AM: May 2012 http://assemblywales.org/mobile_homes-e.pdf [accessed 09.08.02012] 6

Q9 Is this fine acceptable? Are there other penalties that could be applied? A fine is an adequate penalty. Q10 Are the proposed accredited training fees reasonable? CIH Cymru fully supports the requirement for accredited learning within the new process to help raise standards and build capacity in the sector. However, we have concerns that the fees for accredited training quoted in the consultation paper are not deliverable. Accreditation requires fees in addition to standard administration and tutor costs, including a fee to the accreditation body, an independent assessment, a verifier fee and external moderation. It is unlikely that this would be deliverable for less than 250 per learner per day, without a reduction to the quality of the training. We would also suggest that Welsh Government should identify mandatory learning objectives for this training to help develop a consistent national approach, such as understanding the new code of practice, an introduction to tenancy law and delivering a quality housing management service. Q11 Is this period acceptable as the length of time before a renewal of the licence becomes due? Yes. However we would recommend further CPD during this period. Q12 How would this work in practice? What are the implications? CIH Cymru is concerned about the lack of detail pertaining to enforcement costs for those agencies responsible for enforcement, and would seek further clarity on this process and its resourcing. We do, however fully support effective sanctions as deterrents for non-compliance and for risk management purposes. We support the use of the Residential Property Tribunal as an independent body for appeals, against the final sanction of the license status being removed. We would also recommend some guidance on the setting up, development and expectations of PRS landlord forums, if these are to be evidence of CPD for members. Q13 What other forms of CPD may be appropriate? 7

CIH Cymru supports the proposal for the continuous professional development of accredited landlords. We would like to see this proposal strengthened to a requirement to evidence the CPD which should be monitored, for example through evidencing at the license renewal stage every 3 years. A further incentive could be to reduce the cost of the accreditation in proportion to the cost of CPD and accredited training, although his would need to be evidenced by the applicant to a satisfactory level. Q14 How much CPD activities should be undertaken per year and what should it entail? The level of CPD activities should be linked to evidencing the learning objectives (please see our response to question 10). Q15 Should CPD be used as an alternative to refresher training? Or should refresher training and evidence of CPD be needed to maintain the licence? Yes, however for those who are required to attend the refresher course, we have concerns regarding the low charge estimate (please see our comments for question 10). We would seek clarity on whether there is to be Welsh Government Investment / subsidy to those bodies who wish to deliver the accredited training and refresher courses to help realise these low estimated charges to landlords, or seek evidence of how these costs have been calculated. It is the opinion of CIH Cymru that accredited training is not deliverable at the costs quoted. We also suggest that alongside learning objectives, an expectation of minimum learning hours should also be included, once the learning objectives have been identified. Q16 Should other establishments/landlords be exempt from the mandatory register and licensing requirements? We would suggest the addition of: Properties managed by a qualified member of a professional body; e.g. CIH, CIEH or RICS. Properties owned / managed by Accredited Supporting People Support Providers Q17 Does this go far enough? The requirement of registration within 3 months of commencement must be conditional on an adequate national publicity campaign. 8

Q18 Is this penalty appropriate? Yes. CIH Cymru believe it is important that those landlords and agents that are operating within the law will be reassured that the rogue or unprofessional landlords are being targeted and that their good practice is recognised. This will help to improve the image of the private rented sector in Wales and promote the PRS as a professional area in which to do business. Q19 Are there any other suggestions for penalties? CIH Cymru strongly recommends that agency premiums and additional agency charges are prohibited under the new legislation and the penalties for failure to register mirror penalties for charging unlawful premiums. We can see no reason why a landlord, as in any other business, cannot factor the associated costs of delivering their service into their business model, rather than making ad hoc and apparently arbitrary charges to the consumer for carrying out essential functions, such as credit checks or administration. Indeed, it is difficult to think of any other business that would charge the consumer to carry out administrative work ahead of providing a service. There is no argument that CIH can see to justify these costs, although some have suggested that if costs are not passed on to the tenant in the form of a premium they may instead be absorbed into the rental costs. However there is evidence that there are enormous variants in the amount that is charged as a premium before a tenancy is granted and this does not seem to be proportionate to rents charged. Q20 Is this too onerous? Would it be better to make it a duty for the information to be made available if requested under the Scheme? No, CIH Cymru considers evidence of good governance and lawful practice to be an appropriate condition of agency registration. Q21 Should the fee be dependent on number of offices or, alternatively, portfolio size? CIH Cymru suggest fee should be based on portfolio size and that the figure of 250 suggested is too low for a minimum charge, and should be raised to adequately resource the registration and enforcement of the new scheme. Registration could also help to better map agency services for strategic planning purposes locally, regionally and nationally. 9

Q22 Is this the right person/persons to undertake the suitability test? If not, who should undertake the test? Yes. We suggest a fit and proper test to mirror the landlord requirements, for the company director and office manager should also be included. Q23 Is this a reasonable period of time? Yes Q24 Should agents have a minimum recognised professional qualification? If so, what should that be? Yes, CIH Cymru recommends that membership should include a requirement for a proportion of the workforce to obtain a professional qualification, awarded through an accredited body. We would recommend the inclusion of CIH to the list of existing bodies. Q25 Do you agree that new letting/management agents should be licensed before commencing business? Yes, with the exception of those bodies passported through the process such as RSLs or qualified individuals who are members of professional bodies, e.g. RICS, CIH, CIEH with the justification for this given in question three. Q26 Is this a reasonable time period? Should it be renewed every three years as proposed for landlords? If so, why? Yes we support the 3 year renewal period. CIH Cymru feel this is a fair period of time, mirroring the proposals for landlords, and therefore simplifying the processes and is equitable, reducing the likelihood of compliance errors. Q27 Do you have any other comments on the proposals? Other comments on the WALLS Scheme: o We support the proposal for an on-line database that is publically accessible to encourage compliance and promote consumer rights and choice. o We would also suggest that the relationship between WALLS Welsh Government and the Local Authority should be clarified, particularly in reference to roles, resourcing and responsibilities. 10

o We would also suggest that consideration of the role and function of current accreditation agencies for the PRS sector should occur before the new process is finalised. o We would highlight the importance of a Wales-wide publicity scheme, as mentioned in the report to improve deliverability and to run alongside enforcement methods, to help avoid the issue of non-compliance experienced in Scotland. o We would propose the inclusion of CIH Cymru in the list of bodies to become approved training providers as we have a well established and successful history of independently accredited training and continuous professional development provision to housing professionals in Wales and the UK. o We would also recommend a linking of access to any empty property loans schemes for social lettings agencies. o Criminal convictions should be treated consistently when dealing with letting agents and landlords. 11