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Tuesday, July 09, 2013

Think tank propose a raft of changes to PRS

The left wing think tank The Strategic Society have criticised the growth of the Private Rented Sector. In their latest report they conclude the Private Rented Sector facilitates a transfer of wealth from the poorer group (tenants) to a richer group (landlords), and undermines social mobility.

Saying PRS has a harmful effect on equality and social mobility across all of society for the benefit of the 2% of the population who are landlords. 

The report comes lists a number of proposals as regards changes in tenants rights and responsibilities including -
  • the tightening of tenancy rights, 
  • lengthening of tenancy contract periods, 
  • the linking of rent increases to a CPI index, 
  • the right for tenants to decorate a property.
  • allow tenants a two month notice period to end a tenancy.
They conclude that whatever changes in regulations were to be made would scare few Private landlords away from the sector, who they describe as 'financially secure, are not struggling to make ends meet and are strongly attached to letting as an investment activity, so policymakers should feel confident to improve the position of private tenants in relation to their rights and responsibilities.'

They also make proposals to prevent landlords from capitalising on the new build property market -
  • Produce bi-yearly data on what proportion of new-build homes are being sold into the PRS; 
  • Prevent the purchase of new-build homes with buy-to-let mortgages for the foreseeable future; 
  • Implement a ‘three-year rule’, such that short-term tenancy agreements cannot be drawn up in relation to homes that are less than three years old; 
  • Implement a ‘buy-to-let lending cap’ on the proportion of mortgage lending by banks that can be distributed as buy-to-let mortgages for purchasing owner-occupied housing; 
  • Review the wider financial incentives and investment returns available to private landlords via the rental sector.

Their proposals to halt the impact of PRS are to 'take aggressive steps to broaden home- ownership'.

  • Build more homes – to bring down the cost of renting and home-ownership; 
  • Shared-ownership schemes – to allow tenants with smaller deposits and lower-incomes to get on to the ‘property ladder’;
  • ‘Shared equity for tenants’ – the government to give tenants the opportunity to gain partial ownership of the homes they rent, for example, preferential share rights for tenants of institutional ‘build-to-let’ developments; 
  • Regulate rental prices in the PRS – given that high rental and property prices are the result of market failure in UK housing supply – itself the result of political choices - there may be arguments for policymakers to review how private rent prices are determined in the PRS. 

Download the full report from The Strategic Society

Landlord insurance - discounted rates. 
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