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CHAPTER FOUR: THE PRIVATE RENTED SECTOR
Context
The private rented sector already plays a vital role within the housing market. We want to ensure that we set the right agenda to allow the sector to flourish and to play an even greater role in meeting local housing need, providing good quality accommodation in urban and rural communities.
As chart 8 shows, private renting plays a fuller role in the overall housing market in many other European states. Although the sector in Scotland has reduced in size over much of the last century, currently housing about 8% of Scottish households, it does make an important contribution to meeting housing need.
The flexibility of the sector is particularly important and means that it remains an attractive option for some, particularly younger people. As chart 9 illustrates, young professionals form the highest proportion of private renters - 16-34 year olds account for almost 55% of the sector - suggesting that the choice, location and flexibility offered by the sector remain important factors in deciding where to live for this group.
The sector also provides easy access housing for young and mobile people, including students and migrant workers, as well as accommodation linked to employment. In rural areas in particular, the sector may also be a traditional long-term housing option.
Source: 2001 - 2004 data drawn from national statistical offices and the OECD
Source: Scottish Household Survey 2003 and 2004
We want to ensure that in Scotland the private rented sector is contributing fully to meeting housing need. The changing demographics of the housing market mean that the sector needs to be sufficiently flexible to cater for changing demand from different types of tenants. 16 Our vision is of a modern, vibrant private rented sector, able to meet local housing need through the provision of good quality accommodation.
The Scottish Parliament has passed several pieces of legislation in recent years - National Landlord Registration Scheme, Repairing Standard, Right to Adapt for disabled tenants and new provisions for the licensing of Houses in Multiple Occupation - aimed at increasing standards and improving the reputation of the private rented sector as a good option for tenants.
We do not intend to undo the work of the previous two Parliaments, but we do want to make sure that we strike the right balance whereby our policies both safeguard the interests of tenants and recognise the potential of the sector, setting the right conditions to enable the private rented sector to contribute more fully to meeting local housing need.
Part of this is about ensuring that recent improvements in the sector continue. We want to ensure that tenants benefit from increased standards in both the physical condition and management of accommodation in the sector. This is particularly true for those tenants who may be more vulnerable to exploitation - tenants on benefits, particularly lone parents in receipt of benefits who are disproportionately represented in the Private Rented Sector, and migrant workers. 17
We know that the great majority of landlords already operate to good standards and we want to work closely with the sector to continue to encourage a more professional approach and improve the sector's reputation. That is why we recently announced that we will be encouraging landlords to follow best practice by providing start-up funding for a National Voluntary Landlord Accreditation Scheme, which we expect to launch in 2008. 18
This scheme will make sure that those who work hard to look after their properties and their tenants can promote themselves as good landlords. The scheme will be developed working in partnership with landlords' and letting agents' associations, as well as local authorities, to ensure that the scheme is industry-led and attracts as many landlords as possible.
We also want to enable the sector to play a much greater role in meeting local housing need and this means that we need to know much more about the sector. Landlord registration will give us some information but we want to foster much closer working between local authorities and the sector.
We need to understand local private rented markets better and how they can relieve wider housing pressures and we need to do more to include the private rented sector as a delivery partner in our approach to housing at a national and local level. We want to work with landlords and letting agents and with local authorities to ensure that, where we can, we set the right conditions to enable this to happen.
Increasing choice for homeless people
A more professional sector, coupled with increasing demand for private rented accommodation from a range of different types of tenants, should serve to encourage further growth in the sector over the next few years. The sector is particularly responsive to demand and the relatively high turnover in accommodation (compared to owner-occupation or social renting) provides a steady supply of properties. In some cases these may be properties that were previously empty and have been brought back into use by a private landlord. We need to do more to utilise this flexibility in the sector to help deliver local housing solutions.
Since devolution, local authorities have worked much more closely with private landlords. As part of their functions under the Housing (Scotland) Act 2001, local authorities are now engaging with the sector and taking a more strategic view of the private rented sector's role in meeting housing need locally. We want to see this strategic planning more comprehensively developed across Scotland, particularly through Local Housing Strategies.
Some local authorities are now using the sector to house people presenting as homeless, as a viable alternative to bed and breakfast and other forms of temporary accommodation. The private rented sector has much to offer its tenants in terms of flexibility, choice of location and, in most cases, good quality housing and we want to see more homeless households being offered the benefits of private rented accommodation, where that is appropriate.
This does not mean that all homeless households should be accommodated in the private rented sector. But it is sensible to explore this option for tenants who may be more suited to private rented accommodation and would benefit from the flexibility and choice provided by the sector.
Satisfaction levels with the private rented sector are particularly high among younger people, with 84% of 16-24 year olds and 96% of 25-34 year olds stating that they are very satisfied or satisfied with their private rented accommodation. 19 This suggests that mobility, choice and location are seen as important factors in choosing a private rented home.
We also know that younger people, particularly younger men, predominate in homeless presentations and finding solutions for these households is likely to be an increasing priority for local authorities as they work towards the 2012 homelessness target and are required to treat all homeless households equally. 20 It is important that homeless households are offered housing solutions that are appropriate and suitable to their needs and the private rented sector has a role to play in this, particularly for younger people.
In addition, changing demographics and the growth in single person households means that we need a different profile of housing stock to meet housing needs more broadly. The private rented sector is also well placed to provide this, with properties covering a range of sizes and types.
Greater use of the private rented sector to re-house homeless households would also help to remove pressure from social housing stock, which will allow social landlords to meet a wider range of housing need. We will consult shortly on amending the existing Homeless Person Interim Accommodation (Scotland) Regulations 2002 to allow local authorities more flexibility in discharging their homelessness duties, with a view to enabling wider use of the private rented sector where this will meet the needs of homeless households.
While there have been concerns with this approach in the past, primarily related to security of tenure and the poor reputation of a few landlords letting to tenants on benefits, we believe that the recent and ongoing improvement in the sector means that it now offers good options for many homeless people.
We want to encourage responsible landlords to work with their public sector partners to contribute more fully to providing local housing solutions. The consultation on the Regulations will consider the balance required to achieve greater flexibility, whilst at the same time safeguarding positive outcomes for homeless people. For instance, the consultation will consider appropriate security of tenure, cost to the individual and measures to prevent repeat homelessness.
Overcoming the concerns many private landlords have traditionally held about letting to tenants on housing benefit will also need to be considered as part of this approach. Local authorities have a key role to play in building effective relationships with landlords to better understand the local rented market.
Most local authorities have now developed close links with the sector, for example through Landlord Forums. This has had a significant impact, not just because local authorities now have a much greater awareness of the number and type of private rented properties in their area, but also because local authorities can now work with private landlords to help ensure they are providing the right types of housing to meet local demand, whether this comes from students, migrant workers, young professionals, people presenting as homeless or others. Building this trust and working in partnership with the sector should help to encourage private landlords to consider housing people nominated by the authority.
A number of authorities are going even further and pushing ahead with innovative approaches to working in partnership with landlords and letting agents. For example, the City of Edinburgh Council's Letwise service provides free training events and a magazine for landlords, as well as organising an "Edinburgh Landlord Day" to give landlords the opportunity to learn more about the practical and legal aspects of managing property and tenancies. 21
We believe this is the starting point for finding a successful way ahead and would encourage all local authorities to start considering what approaches are both suitable and feasible for their areas.
Question
10. What issues do you consider should be taken into account when considering the increased use of private sector lets to house low-income and homeless households?
Review of the private rented sector
We plan to carry out a review of the private rented sector. The main objective of the review will be to ensure that the private rented sector can deliver the right types of housing in the right places to help meet housing need and reduce the pressure on the social rented sector. To support the consultation on amending the Interim Accommodation Regulations, the review will look in particular at the role of the sector in housing low-income families and individuals on benefits, including those presenting as homeless.
We want to listen to landlords to understand better the concerns they may have about letting to tenants on benefits and work towards solutions to address these. The review will also consider, in this context, how to ensure sufficient security of tenure for homeless people to avoid the possibility of repeat homelessness.
More generally, and following a number of legislative and other changes in the sector since devolution, now is a good time to take stock of the impact of these changes. We have said that we want to ensure that we have the right balance of policies and legislative protection to allow the sector to flourish and play a full role in Scotland's housing market, by providing sufficient safeguards for tenants whilst, at the same time, avoiding excessive regulation which could put people off remaining as private landlords.
We have also said we need to understand much more about the sector. Therefore our review will include a comprehensive study of the sector. We want to hear from landlords and tenants about their experiences, concerns and aspirations for the sector and will be exploring these issues through tenants and landlords surveys. These surveys will examine the views and needs of a diverse range of tenants to understand whether different issues impact upon different groups of people, including migrant workers, tenants on benefits, students, single parents and long term renters, particularly in rural communities.
We will also look at the economics of the sector, including institutional investment, to consider the size and types of landlords currently renting property and their motivations for doing so. While many factors, such as interest rates and house prices, influence private landlords' decisions on whether to purchase or renovate properties for rent, we want to find out more about the impact of a variety of factors on landlords' decisions to rent property to particular types of tenant. We will use this evidence base to inform our future thinking about the sector.
We also want to look at ways of increasing engagement between local authorities and the sector to understand better local private rented markets and availability of property to let, build links with landlords and facilitate the provision of advice and support. We want to see much more strategic engagement with landlords in order to enable the sector to contribute more fully to meeting housing need.
Questions
11. How should we ensure an appropriate balance between safeguarding tenants' rights and encouraging the private rented sector to achieve its full potential in Scotland's overall housing market?
12. Do you think there is sufficient engagement between the public sector and private landlords? If not, what else should national and local government be doing?
Meeting housing need
The following sets out some broad areas we will be considering further.
Private Sector Leasing Schemes
There are a number of different types of Private SectorLeasing schemes in operation in Scotland and in England. These schemes generally encourage landlords to make their properties available to local authorities for a certain number of years by offering guaranteed rental income and putting in place either a managing agent or local authority staff to take responsibility for dealing with the management of the tenancy and resolving any problems.
The largest such scheme in Scotland is the Edinburgh Private Sector Leasing Scheme, run by Orchard and Shipman, which aims to provide 1500 properties across the city for homeless households. 22
Private sector leasing schemes can play a part in allowing local authorities more flexibility in responding to the needs of homeless households. However, there are some issues relating to the sustainability of the accommodation which we would want to explore further, particularly to ensure that the schemes do not act as a barrier to employment.
Question
13. What other options should we consider for increasing the supply of private rented housing for low income and homeless households?
Encouraging landlords to rent to tenants on housing benefit
There may also be potential in some areas for greater use of existing initiatives like Rent Deposit Guarantee Schemes ( RDGS) to help low-income tenants to access the private rented sector. 23
Under these schemes, the local authority, or the organisation contracted to run the scheme, essentially acts as guarantor for tenants who cannot afford to pay a deposit to a landlord. The scheme generally works closely with the landlord to ensure that the landlord follows good practice in managing the property and the tenancy and can help to resolve any disputes which arise between the tenant and the landlord during or at the end of the tenancy.
For young people, the Flatmates scheme run by Edinburgh Cyrenians in West Lothian helps those under 25 who face single room rent restrictions by creating and supporting sustainable flat share between single individuals who would not normally have been able to access suitable properties in the private rented sector. 24
The Cyrenians scheme builds on the RDGS model, offering an intensive assessment, reference gathering and matching phase prior to tenancy commencement, followed by a tailored package of support available when the tenancy commences.
Other issues which we will wish to discuss with stakeholders to consider their viability, include considering an accreditation scheme for tenants, which would give landlords more confidence in agreeing to rent property to tenants on benefits by showing that they understood their responsibilities and were reliable.
This may be particularly relevant as many landlords are concerned about the UK Government's plans for housing benefit to be paid directly to most tenants in the private rented sector when Local Housing Allowance ( LHA) is introduced across the UK from April 2008. However, more work will need to be done on any accreditation proposals to ensure that this approach would be sufficient to encourage large numbers of landlords to consider letting to tenants on housing benefit.
Question
14. How could more private landlords be encouraged to let to tenants on benefits and homeless households?
Bringing empty properties in disrepair back into use
Making best use of the existing housing stock, including empty stock, is an essential element of sustainable development. Available statistics give us an indication of the total number of empty dwellings in Scotland, across the social and private housing sectors. However, there can be a variety of reasons why a property may be empty, including whether the property is used as a second home, whether the property is derelict, awaiting demolition, awaiting conversion or improvement or whether the property is for sale or rent. We need to develop our analysis to understand better how we identify empty properties which may be appropriate for reuse.
We will explore opportunities to promote greater use of schemes which offer incentives to bring empty properties in disrepair back into use. These include use of Rural Empty Properties Grants, under which Government provides funding to contribute to the costs of renovating rural properties on condition that the property is rented out at affordable rents to local people who are employed, or have an offer of employment in the area. 25 We want to examine the scheme's effectiveness in helping meet wider housing need and to see whether there is scope to streamline grant appraisal procedures.
Similarly, a scheme along the lines of the existing RSL Lead Tenancy scheme could also offer potential for bringing empty properties into use in some areas where there is a lack of social rented properties. 26 The aim of the scheme would be to provide grants to contribute to the costs of the refurbishment of empty properties which are privately owned, but would then be leased to an RSL to accommodate homeless households.
We also want to examine how we can help local authorities enhance their strategic thinking and planning in relation to assessing the number of empty properties in their area and whether more action is required to address the issue of empty properties at a local level. Revised LHS guidance is due to be issued to assist local authorities with the production of their next LHS due in 2009 and will include specific advice about empty homes.
We are keen to hear about other proposals for joint working between landlords and the public sector to bring empty properties back into use. The Newcastle Private Renting Project provides advice and support to landlords in areas with high numbers of empty homes in order to persuade them to renovate and rent out their properties. Highland Council advertises a leasing scheme whereby private landlords can lease empty properties to the Council. The Council also buys empty properties from other public sector bodies. These properties are then made available to local people at affordable rents.
Argyll and Bute Council is examining ways in which second homes and other empty properties in a state of disrepair can be brought back into use as housing for rent. The Cairngorms National Park Authority has teamed up with the Scottish Rural Property and Business Association to promote wider use of Rural Empty Property Grants in the area. These are some examples and we are interested in finding out what other schemes or incentives might help us to recycle empty properties more effectively.
Question
15. What other schemes or incentives might help us to recycle empty properties more effectively?
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