Tax off for good behaviour

Over the weekend the CIH and the Resolution Foundation released a useful briefing called More than a roof. The focus is largely on the way in which financial incentives could be used to improve standards in the private rented sector.

The briefing provides a brief overview of the rapid growth of the private rented sector over the last few years. It then provides a decent summary of the key problems facing the sector, particularly the bottom end of the market where unscrupulous landlords lurk.

When the briefing moves on to policy it reviews what is currently being doing about standards under four headings – statutory obligations, licensing schemes, accreditation schemes, encouraging competition – before going on to look at what more could be done. Here there is an argument that modest and targeted increases in regulation are justified – in particular there is seen to be a strong case for creating greater transparency and uniformity in the standards that form the basis for licensing/accreditation schemes, more effective enforcement targeted at the worst landlords, and the greater regulation of letting agents.

However, despite noting the growth of direct regulatory intervention – notably in the devolved administrations and some London boroughs – the general tone of the report is rather sceptical. Greater regulatory intervention is not seen as the key to solving the problem.

So it turns to the ways in which conditional and unconditional financial incentives might be used to encourage landlords to raise standards of both properties and management. This discussion focuses on changing things like allowable expenses and who can claim them, who is entitled to rollover relief on capital gains tax, and offsetting a wider range of expenses associated with increasing energy efficiency. The report makes the important point that some of the financial incentives that local authorities are currently using to incentivise landlords – such as direct payment of rent for housing benefit-dependent tenants in exchange for joining an accreditation scheme – will become difficult, if not impossible, when (if?) Universal Credit arrives.

These are all useful options to have on the table. But the report rather sidesteps the issue that most of the options it discusses raise some of the same issues of monitoring, verification and enforcement that afflict more conventional regulation. Equally, by focusing on financial incentives the report is rooted in the belief that the way that we are going to improve standards in the private rented sector is by focusing on landlords’ wallets, rather than, for example, seeking to change the culture of landlordism more directly. Compliance with higher standards is a route to getting your hands on more cash, rather than a good thing in itself.

Of course, it would be hopelessly naïve to assume that simply exhorting people to be nicer and more professional, in itself, constitutes much of a strategy. Financial incentives are undoubtedly powerful. But, on the other hand, we know that engineering a more positive and professional culture would in the long term be beneficial precisely because it reduces some of the costs of monitoring and verification.

Perhaps the most intriguing passage it the report is the following statement:

As the PRS grows and its role in the housing market changes, a number of challenges are emerging, each of which is discussed in more detail below. These include:

  • variable property conditions
  • variable standards of housing management
  • concerns over affordability and some households’ ability to access the sector
  • a growing demand from some tenants for greater levels of security than is currently on offer.

This passage is intriguing not for the challenges it identifies. Anyone familiar with the sector would come up with a similar list. It is intriguing for the statement “a number of challenges are emerging”. When I first read this I was rather phased.

These issues hasn’t just emerged. We’ve known about them for a good long while. And we could flesh the list out with more specific issues – such as the problems with letting agents or retaliatory eviction – and that would still be the case. The reviews of law and policy the mid- to late-2000s highlighted very similar issues (as discussed a while ago here).

Indeed, we could argue that many of the proposals being floated in the CIH/RS report – or very similar ideas – have been including in the list of recommendations produced by any number of previous reports or reviews stretching back a decade, if not two. It’s deja vu all over again.

That is what is intriguing. I’m assuming the authors of this report are aware of the history of this particular debate. So packaging these issues as ‘emerging’ is a discursive tactic. That got me wondering whether, if you are looking to influence a policy agenda, it is better to package the issue as new or as well-established and deeply engrained.

Clearly one new element of the picture is the scale of the private rented sector. Ten years ago the sector was not substantial enough to loom very large on the political radar. Now what is going on in the sector is headline news and hard to avoid. But that is a slightly different point.

I guess one argument would be that if you want to get today’s politicians to take the issue seriously then perhaps there is an advantage to suggesting that this is a new set of issues that we can do something about. Rather than giving the impression that we’ve known about the problems for years and they’ve not gone away. The fact that the problems have not gone away because previous generations of policy makers have declined to act or act fast enough, rather than because there are no ideas as to how to deal with them, is a subtlety that may elude politicians deeply embroiled in pre-election manoeuvres.

The downside of that would seem to be that we are fated to keep reinventing the wheel, with policy entrepreneurs reintroducing similar policy ideas into the politics stream when the opportunity presents itself. But thinking doesn’t then necessarily advance as far or as fast as it might.

I’ll have to think about that a bit more.

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