Housing

Does private renting suffer from “regulatory overload”?

On Thursday the Residential Landlords Association (RLA) released a brief story in which it:

warned that the sector faces “gross regulatory overload” that serves only to drive up rents at a time when tenants can least afford it.

The RLA is conducting an exercise on the costs of regulation and has identified “over 100 individual pieces of legislation and regulation containing around 400 individual measures affecting the sector”. The following examples were offered:

Amongst the measures is legislation going back to the 1730s, such as the 1730 Landlord and Tenant Act, allowing landlords to require tenants to pay double the yearly value where they stay on after expiry of a fixed term lease; and the Distress for Rent Act 1737, regarding provision for landlords where tenants desert premises, and obliging tenants remaining in premises after they give notice to quit to pay double rent.

Somebody has clearly been doing some digging.

Richard Jones, the RLA’s Secretary, made the following comments on these findings:

Whilst the RLA will consider carefully the list of regulations and those which should rightly remain to protect landlords and tenants alike, already over-stretched local authorities cannot be expected to police all these, and more, regulations, as called for by some. You can pass as many laws as you want but the key issue is actually enforcing them.

With a supply crisis in the private rented sector we must do more to make investing in it attractive for potential new landlords. Faced with such regulation, it is little wonder that many simply do not feel up to it.

We would urge the Government to seriously look at those regulations that could be scrapped altogether without harming tenants’ or landlords’ interests. A good start would be to promote the virtues of self-regulated accreditation schemes, such as that run successfully by the RLA in Leeds. This would then enable local councils to better use finite resources to root out those landlords who provide a criminal service.

We might describe this as quite an idiosyncratic perspective. The more frequently encountered perspective is that the private rented sector needs greater regulation.

Why the difference? It isn’t simply that representatives of the landlord interest have a preference for maximising their discretion; they are, therefore, always inclined to argue for a reduction in regulation. There is an element of truth in this, but it wouldn’t be plausible to stop there. It is helpful to disentangle existing from effective legislation. And when we do the idiosyncratic nature of the RLA story becomes more apparent.

The starting point of this analysis – that there is a lot of legislation pertaining to landlord and tenant and it is spread all over the place – is undoubtedly correct. The RLA didn’t really need to go to the trouble of auditing this legislation. It is only a few years since the Law Commission went through the same exercise as part of its suite of projects on rental housing.

One of the outputs of those projects was a set of recommendations about simplification and codification of the law so that it was easier to comprehend and apply. It is a pity those recommendations were parked by the government of the day, although they are perhaps not dead and buried. If they’d been implemented then there would be less to exercise the RLA now.

The point is not that all this legislation exists. The point is that most people – including landlords and tenants – have no idea that it exists and no idea what it says. One law or other is regularly broken through inadvertence. And no one has the faintest idea that it’s happened.

Similarly, there is ample evidence that enforcement of these various provisions is, at best, intermittent, as I’ve discussed before. And the RLA statement recognises this point. And the likelihood of enforcement is probably declining as a consequence of austerity.

Plenty of law exists, but it is rather hard to argue that most of it is effective. It is even harder to argue, therefore, that it would have a significant impact upon the level of rent set by existing landlords. And the idea that the provisions of the Distress for Rent Act 1737 and such like discourage large numbers of people from even becoming private landlords seems rather extraordinary.

It also seems like a slightly unfortunate time to be championing the cause of self-regulation, given high profile events in the financial sector.

Yet, private renting is different. And with its reference to placing greater emphasis on self-regulation and accreditation the RLA statement is surely right. The key to increasing quality in the sector is not stronger retrospective enforcement but stronger peer group effects, shaping broad understandings of acceptable behaviour among landlords.

But the idea that the sector, as it operates in practice, is currently suffering from regulatory overload seems barely credible.

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