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Tough outlook for private rented sector – ARLA

"As demand rises, in particular due to a lack of social housing, there will also be mounting pressure on the sector to provide good quality rental properties," said Ian Potter, operations manager at ARLA. "There has been little commitment from the Government thus far on economic measures to help the wider industry meet property demand, but increasing demand should have a positive effect on the PRS, creating opportunities for new and existing investors and driving standards up.

"In a recent debate the Housing Minister displayed a lack of empathy with those living in the PRS when he argued that it consists of three million households – when it in fact consists of eight million people. Perhaps we should question why he seems to have depersonalised the PRS, as the Government continues to evade implementing measures to help the sector."
Should unemployment continue to rise, putting pressure on tenants’ financial stability, many will not be able to pay their rent – often because of deficiencies in the system with the Local Housing Allowance (LHA). While ARLA research has shown that the number of tenants struggling to meet rental payments dropped towards the end of 2009, other research shows it is still a problem that has a knock-on effect across the sector.
At the other end of the supply chain, landlords who default on their mortgage put their tenants at risk. The Government has already indicated a move to support tenants’ rights in this situation and may pass a Private Members Bill for reform in the first half of 2010.
"Mortgage defaulting is a problem that will not go away in a hurry, and we have long emphasised the importance of careful selection of both tenants and landlords to ARLA members, as well as the implementation of contracts and agreements," Potter said.
"The Government’s proposed changes to improve standards should go a long way in increasing the desirability of the PRS to tenants as a choice of tenure. However, when the Government implements these changes it needs to ensure that they are fair on all parties in the transaction; landlord, tenant, agent and lender."
On the licensing of agents Potter said: "The Government has still not made good its proposal to introduce a regulatory scheme for letting agents, or a national register of landlords. Yet with increasing numbers of new landlords and new properties coming onto the market, as investors take advantage of the downturn in property prices, it will be crucial to ensure best practice and high standards across the sector."
ARLA launched its own licensing scheme in May 2009, making it mandatory that any principle of a letting agency wishing to become a member of ARLA now has to apply to become an ARLA Licensed agent, and abide by ARLA’s rules and stipulations.
"Our scheme has been an overwhelming success, with support for ARLA membership up post-launch, showing just how keen ethical agents are to oust bad practice and promote high standards," Potter said.
On fuel poverty and energy efficiency, ARLA predicts that throughout 2010 standards will become an even greater issue, as homeowners and landlords alike are encouraged to make their homes energy efficient.

Yet without incentives like tax relief, it will be difficult for an already struggling sector to make the necessary improvements.
"The Pre-Budget Report was a missed opportunity for the Government to show its commitment to the PRS – the boiler scrappage scheme, for example, should include rental properties and be part of Landlords Energy Saving Allowance (LESA)."

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0 thoughts on “Tough outlook for private rented sector – ARLA

  1. Dan Perkins says:

    While your thoughts are noble we have not found the Win – Win for both the Owner and Renter. This is true in the industrial/commercial sector as well. The Owner looks at the property as a business that will yield a positive cash flow and will give careful consideration to investing improvements that will not capitalize. In the residential retrofit market the average home may require $12,000 in energy efficiency improvements and another $15,000 to $30,000 for renewables moving the home close to net zero energy.

    Questions that need to be answered;

    1.Owner equity for leverage is gone now and hard money can be 14% adding $50 a month to the rent and/or debt service. Where can the Owner get the financing?
    2.Will the Renter recognize the value in EE or will they think that energy is free now and squander the power needed to run the household?
    3.Will the Owner really care how much energy the Renter uses?
    4.Who will be required to maintain the solar system and other improvements for EE?
    5.Will the Owner be able to capture the EE investment when they sell?