Rogue landlords must be stopped. Here’s how.
Rogue landlords are back in the news again, with The Guardian and ITV uncovering what many of us already know: that landlords banned from operating in one county or borough simply move to let property elsewhere.
It’s not just tenants who are affected by rogue landlords like these. Our entire industry loses – not least the thousands of landlords doing a great job for the families who rent from them. Good news stories rarely make headlines, however; reputations stick, and all landlords are tarnished by association.
Earlier this year, Theresa May’s Government made moves to fix the problem with their new rogue landlord database. Six months later, no names have been entered into the database, which is surprising given the estimated 10,500 rogue landlords operating across the UK.
The Government must go further to protect landlords and tenants. Here’s how.
1. Change the fit and proper person rules
Under existing legislation, landlords that fail the fit and proper person test in one city or London borough can continue to let properties elsewhere. This leads to rogue landlords (legally) jumping from borough to borough. A second loophole allows rogue landlords to continue to let in areas in which they are banned, as long a third party manages those properties.
Tighter legislation would expose more rogue landlords and force them to clean up their act. Landlords with their tenants’ best interests at heart would also have an opportunity to purchase properties belonging to unfit or unwilling landlords, giving a new lease of life to the sector.
2. Simplify and collaborate
Many rogue traders are getting away scot-free due to unwieldy and complex legislation and a lack of government resources to enforce existing rules.
There are currently over 400 regulations affecting landlords in the private rented sector, many of which are obtuse and confusing. Most of these regulations have been tacked onto old legislation, which makes them difficult for landlords to understand or respond to. Even local authorities struggle to apply them consistently.
If enforcement legislation were simplified with a complete overhaul, rogue landlords would have fewer legal loopholes to hide behind and less legal resource would be needed to bring them to heel. Better still, law-abiding, pro-active landlords’ lives would be made easier, encouraging them to invest more in the private rented sector (PRS).
3. Rethink the buy-to-let tax regime
This is a crucial point. In an economy affected by under-supply where more people are renting, landlords provide a vital but under-appreciated service. Tax benefits that once made the job worthwhile have also been steadily chipped away, leading many landlords to question their position in the sector.
Before April 2017, landlords could deduct their mortgage interest payments from their taxable income, making significant savings by being taxed on profit, not turnover. Today, landlords can only claim tax relief on 75% of their interest and receive a 20% tax credit on the rest. Added to that, Philip Hammond’s Autumn 2018 budget revealed that landlords will no longer be able to claim the £40,000 lettings relief on their capital gains tax (CGT) bill when they sell a property.
To encourage best practice and to keep decent landlords in business, the government must ensure these individuals and companies are fairly and properly recompensed for their time and service. If good landlords throw in the towel, rogue landlords will be waiting in the wings – disastrous news for British society.
4. Encourage whistleblowers
The NHS sets a worrying precedent for industries that fail to self-regulate, where workers are bullied and harassed when they speak out about poor practice and abuse. In self-regulated industries, the “climate of fear” that afflicts the NHS doesn’t exist. The airline industry is a case-in-point. There, dedicated, specialist sector-regulation mandates in-depth analysis and constantly-improving standards in a continuous improvement cycle to make it one of the safest sectors in the world for employees and service-users.
Landlords should be empowered to expose rogue landlords to Government via an anonymous whistleblowers’ service. More landlords are likely to step forward if they know that something will be done about it, so that local authorities have a responsibility to report on their enforcement activities, too.
5. Scrap the ‘lockdown’ model
Finally, let’s ban the lockdown model – where landlords encourage local councils to rehome single homeless tenants in micro-units, paid for by the public purse.
Lockdown is a morally bankrupt idea that takes advantage of vulnerable people, forced into ‘studios’ as small as 10 m2 in size. Property standards and the reputation of all landlords suffer as a result.
Got another answer to the rogue landlord issue? Join the conversation on Twitter @HamiltonFraser
Get a landlord insurance quote
Get a quote online in under 4 minutes