Promises and lies

With the manifestos all now published, I thought it might be interesting to look at what is being said about housing by the three main parties. I might do the others later, if I have time.

Conservatives

The highlight of housing policy seems to be a huge extension in the Right to Buy, to take in housing association properties. It’s on p.52 of their manifesto, here.

We will extend the Right to Buy to tenants in Housing Associations to enable more people to buy a home of their own. It is unfair that they should miss out on a right enjoyed by tenants in local authority homes. We will fund the replacement of properties sold under the extended Right to Buy by requiring local authorities to manage their housing assets more efficiently, with the most expensive properties sold off and replaced as they fall vacant.

It is fair to say that this hasn’t exactly attracted universal praise. I’ll leave it to others to flesh out some of the socio/political objections (of which there are many), but I’d like to look at some of the legal implications. The immediate reaction of housing associations was to threaten litigation (see, e.g. here), relying on A1/P1, ECHR (peaceful enjoyment of possessions). But that strikes me as a weak argument. For one, it looks as if the housing association would receive the full market price for the property. As I read this policy, if you had a house worth, say, £100,000, then the applicant would pay (say) £70,000 and the remaining £30,000 would come from this new fund taken from local authority sales. Now, if the Housing Association gets full market value, then I’d have thought an A1/P1 challenge would be hopeless in light of James v UK App.8793/79 (leasehold enfranchisement under the Leasehold Reform Act 1967 is compatible with A1/P1 as the final price is a fair one).

I’m also not entirely sure that housing associations can have human rights. After all, they are public authorities themselves (Weaver v L&Q [2009] EWCA Civ 587) and public authorities do not have human rights. I can see a way around this problem (HAs are actually only hybrid authorities, so can have human rights for some purposes), but still…It’s the implications for local authorities that also trouble me. With the end of the housing revenue subsidy system, local authorities are, in effect, self-funding for housing purposes now. Many are heavily in debt (owing to the final settlement payments that were needed to “buy out” of the subsidy system) and have business plans to take them to solvency based on, inter alia, receipts from RTB sales. If they are now required to give away large amounts of money in order to fund RTB sales from HAs, that will cause problems for their financing models. In any event, how many “expensive properties” actually fall vacant in any year? And what does “fall vacant” mean? Is the ending of a fixed-term “flexible” tenancy enough? If so, and if you’re an authority that doesn’t want to lose its stock, shouldn’t you grant proper secure tenancies? That would hugely delay the time when any property fell vacant.

Labour

The Labour Manifesto does not have one “big idea” like the RTB reforms, but, rather, seems to focus on the wider problems in the rented sector. So, at p.46, we find the following:

For the 11 million people who rent privately, we will legislate to make three-year tenancies the norm, with a ceiling on excessive rent rises. A ban on unfair letting agent fees will save renters over £600. We will drive standards up by creating a national register of private landlords

The national register of private landlords should be uncontroversial (but it won’t be, because far too many landlords object to anything which prevents them doing whatever they want with other peoples homes). Wales has a very similar scheme (Pt.1, Housing (Wales) Act 2014) which would (I imagine) be used as the basis for any English model. The Welsh one isn’t in force yet, but the scheme itself looks good. A central register of landlords and agents, with a “fit and proper person” test, compulsory training and CPD and, importantly, eye-watering fines for non-compliance.

Likewise, a ban on letting agent fees is to be welcomed (I know it doesn’t say all fees – just unfair ones). The idea that people who are looking for accommodation should not have to pay to facilitate that search is not new – it is pretty well established by the Accommodation Agencies Act 1953 (albeit that Act hasn’t kept pace with modern trends). The agents work for the landlord and it is the landlord who should pay their fees.

The really interesting bit, however, is three-year tenancies and rent dampening reforms (and it is only rent dampening). We learned last night that the proposal is for rent to increase by CPI each year. There have been some (wrong-headed) suggestions that (a) this is “rent control/caps” and/or (b) it will be subject to a human rights challenge relying on A1/P1. Both are plainly nonsense. As to (a), if (as is inevitably the case) the initial rental level is very high, all this does is slow the increase for a period of time. At the end of the three year period, the landlord could set a new (higher) baseline rent which would be uprated by CPI in the coming three years. (B) is even more unsustainable. The ECHR jurisprudence is clear – the rent would have to be far below the market rent before there would be a violation of A1/P1, see our earlier examples, here). The criticism here should be that the policy is far too timid, not that it is an unjustified interference with private rights.

The three-year bit could be interesting. Most renters will, I suspect, welcome the higher security. But there will have to be provisions for break-clauses. Not everyone will want three years (students who rent privately only in their 2nd and 3rd years of their degrees, for example). The crucial bit will be how the exceptions work. A landlord break is likely to undermine the scheme, for example. Of course, the easiest way of providing greater security would just be to abolish s.21, Housing Act 1988.

Lib Dems

I find it hard to care what the Lib Dems have to say. The recent pronouncements from Mr Clegg make it clear that the rump of the party which looks likely to survive the coming election will back the Tory party. And we know from the tuition fee saga that they haven’t met a principle that they’re not prepared to sell. But their housing policy is actually much closer to Labour (p.100, here):

  • Improve protections against rogue landlords and encourage a new multi-year tenancy with an agreed inflation-linked annual rent increase built in.
  • Enable Local Authorities to operate licensing schemes for rental properties in areas where they believe it is needed.
  • Establish a voluntary register of rented property where either the landlord or the tenant can register the property, to improve enforcement and tax transparency.
  • Ban letting agent fees to tenants if the transparency requirements we introduced are not successful in bringing fees down to an affordable level by the end of 2016.
  • Extend the use of Rent Repayment Orders to allow tenants to have their rent refunded when a property is found to contain serious risks to health, and withhold rent from landlords who have not carried out court-ordered improvements within a reasonable period of time.
  • Introduce a new Help to Rent scheme to provide government-backed tenancy deposit loans for all first-time renters under 30.
  • Conduct a full review of the help single people get under homelessness legislation

The first, second and fourth look like variants of the Labour policy. I don’t care about a voluntary register since it won’t have any effect in law. The reform of RROs could be interesting, as could a review of homelessness and single persons (‘tho the forthcoming Supreme Court/Priority Need cases could improve matters as well). But the one that amuses me is “Help to Rent”. That would require another reform to the Tenancy Deposit provisions of the HA 2004, otherwise it might well be that the prescribed information will have to be given to the government, as the ultimate source of the funds.

About J

J is a barrister in London. He loves service charges and all things leasehold law related. He also likes beating rogue landlords and mortgage companies.
Posted in Housing law - All.

29 Comments

  1. Pingback: 3 Main Parties Housing Promises Dissected By Nearly Legal - House prices and the economy - House Price Crash forum

  2. Actually (and one may think ludicrously) the current version of Labour’s 3 year term proposal has a tenant and landlord break clause at 6 months. Thus providing an incentive for early termination where market rents are rising.

    • I had read that, but couldn’t find a source for it. But, as you say, a particualarly stupid idea which will undermine the entire point of the policy.

    • If that is the case then Labour’s proposal is very similar to the policy put forward by the RLA in their Manifesto issued last autumn, except that they proposed a “five year” tenancy with the option of LL or T terminating at 6 months; in effect exactly the same as a standard 6 month AST

  3. The other issue re the HA RTB is that it is not clear how ‘fully’ the HAs would be compensated for discounted sale. It has not been stated to be market value, for example.

    In addition, the HAs have debt leveraged on the long term rental income of the properties. So even if receiving ‘full’ sale value, results in a loss and potential financial difficulties for the HA.

    So I wouldn’t write off A1 P1 entirely…

  4. What I’ve read suggests it would be full market value. But, as ever, the devil is in the detail. Less concerned by debt/security issues if they get full market price. If isn’t full market, then I can see it being a factor (as one of a list) which might be used to mount an attack. But there is a very generous margin of appreciation under A1/P1 once fair compensation is provided.

    What I didn’t mention, mainly because I didn’t want to make this just about how silly the proposal is, was the fairly major changes you’d need to make to charity law to provide for this sort of forced sale. Cameron has said today that he’d legislate for this policy in the first 100 days. That, if true, is likely to lead to some very bad law and lots of work for lawyers. If he does get a chance to enact this policy, this needs proper pre-legislative consultation

    • ‘Full value’ is what I have seen, but of course HAs’ internal valuation of the properties is less than full market value (existing use value as social housing (EUV-SH), a much lower value than open market value). So it all depends which ‘full value’.

      (Also found that the average HA debt per property was £18,372 in 2012 and has no doubt risen since).

  5. It only has to be “reasonably related to its value” (James, [54]). As I say, I’d be surprised if there is an A1/P1 challenge here.

    • First time buyer definitions are usually thin on the ground for these schemes. The recent HTB ISA proposal was the first time I had seen it defined as a person who had NEVER owned a house. I have never owned a house but my wife had mortgages in the early and late nineties and was repossessed on both, well before I met her. So excluded as a couple nearly two decades later. Other schemes it is always hard to find the small print

    • That, sadly, is true. It’s the problem of the over/under-inclusive rule. Not a lot that can be done about that I’m afraid.

  6. Labour 3 year scheme…hmm… what is to stop private landlords seeking 10% more than current rent level from the outset? Nothing as far as I can see hence the way PRS landlords mitigate this would be to charge a higher rent in the first place so that suggests average PRS rent levels will increase.

    Then when the Labour version of the Overall Benefit Cap, or more correctly overall HOUSING benefit cap (OHBC) kicks in and private landlords flee the market what will prevent this from all collapsing? Nothing!

    Tory RTB for HAs – no mention of charity law above which many HAs are holding onto in addition to the points mentioned above.

    So both main parties housing policies seem very knee jerk and playing to the gallery, the oh we must have something to say to either buy votes (Tory RTB) or to appease the renters (Labour). As usual the back of a fag packet nature will produce practical as well as legal issues and both parties OHBC policy (in both manifestos) will scupper both these feigned concern for the housing crisis (crises more accurate). Oh and then there is the recent interference on tenancy allocation by Pickles which flies in the face of the 350 or so different housing variables and housing markets we have in 350 LAs (as usual politicians think the Evening Standard generic London housing view pertains to the rest of the UK never mind all of London) but nothing knew there!

    The OBHC is however the fly in the ointment for any such housing policy, legally fraught or not, as its adoption will see the end of the social housing model before the end of the parliament given that social landlords cannot afford to house any household even at social rent in the lowest rent area if they have 3 children or more and the financial risk of fully occupying the ubiquitous and soon-to-be-OHBC toxic 3 bed property.

    The social landlord is beggared if they fully occupy by the much larger financial risk of the OHBC than the unaffordable bedroom tax if they under occupy the toxic 3 bed property.

    • On the labour scheme, the only thing stopping LLs charging an extra 10% at the start of the tenancy is the market… (so not much).

      Charity law on the Tory RTB also depends wholly on what value the HA would get on the sale (charities can sell, but under obligation to obtain best value).

      As I think J made clear, there is nothing in any of this that really deals with the housing crisis. And yes, an extended benefit cap would be a disaster for social housing.

    • Is that right? If I took a fixed term AST (with no landlord break, otherwise this won’t work) at a rent of, say, market rent plus 10%, what would stop me then applying to the FTT to have the rent assessed back down? The reason people don’t do this now is because the landlord will just evict you, but if that right doesn’t arise…

    • So Labour might need to introduce some disregards into the valuation basis. Perhaps scarcity could be disregarded :-)

    • But the wider point – namely that this doesn’t solve the supply issue – is obviously right. I didn’t put that in the post because it’s obvious (as comments here rightly show!)

  7. This could have been an interesting post if you hadn’t decided to make it political.

    Shame.

    • Exactly. All three have flaws. The Tory policy is nuts. The Labour ones are probably far too timid and easy for people to get around. And the Lib Dem ones are either (i) quite Labour-ish; (ii) voluntary, so who cares; or, (iii) interesting (I’d quite welcome a reform of priority need law, for example). If your objection is that I have no respect for Mr Clegg, well, I can hardly claim to be unique amongst the voting population in that regard…

    • Is there any way to comment on the manifestos of political parties that *isn’t* political?

  8. Pingback: Opinion: The housing election - don't vote Labour? » Housing » 24dash.com

  9. Unsurprisingly the RLA has said that the Labour proposals will choke off supply and lead to poorer quality housing. Unfortunately they also quote the last Labour government’s view that there were dangers in introducing rent control.

    • But, to adapt a well-known phrase, they would say that, wouldn’t they? Rent Act controls probably don’t work (although I don’t say they are never without merit – I might, for example, wish to see RA-style rent controls but with a more limited security of tenure) and, in any event, are not on the agenda. This is only a rent-dampening model. If landlords leave the market, that isn’t necessaily an entirely a bad thing as it might increase the supply of housing to buy.

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