7 Jan 2014

Tenants’ rights when rents keep rising – the key questions

A Kent landlord has hit the headlines for his plan to evict tenants on housing benefits. As rents keep rising and demand for property grows, Channel 4 News looks at what rights, if any, tenants have.

As rents keep rising and demand for property grows, Channel 4 News looks at what rights, if any, tenants have. (G)

The UK’s biggest private landlord, Fergus Wilson, says his decision is a financial one: his tenants on housing benefits are failing to keep up with their rental payments, after a cut in welfare payments from the government.

Mr Wilson owns 1,000 properties in total, and for the 200 tenants who get welfare payments to help pay their rent, arrears are at 50 per cent.

He told Channel 4 News (see below) that the situation was “very, very sad”.

“Particularly, I feel sorry for battered wives, who have come to us because we are consigning them to go back to their husbands to be beaten up again. But the situation is, it cannot go on,” he added.

More evictions to come?

This Kent landlord is not alone in seeing welfare tenants as “risky”. Research from the National Landlords Association shows that landlords are becoming reluctant to take on tenants who claim benefits.

The figures speak for themselves: in 2010, 46 per cent of landlords surveyed were letting to tenants on housing benefits. In the third quarter of 2013, this figure had fallen to 22 per cent. However there are no figures relating specifically to evictions.

England’s nine million renters… can be asked to leave with just two months’ notice, and where their rent can be put up at any time at the whim of their landlord. Campbell Robb, Shelter

Where tenants claiming housing benefit used to be considered a safe bet for landlords, because rent would be automatically paid by the government, cuts to the welfare bill mean this is no longer the case.

“Landlords think it’s increasingly risky, as benefit levels haven’t kept up with rent levels,” NLA Chief Executive Officer Richard Lambert told Channel 4 News. “The prospect of universal credit makes them even more concerned… Many people reliant on benefits leave vulnerable, potentially chaotic lives, and may find it harder to manage their finances. The concern is that in the end, the rent will not get paid.”

‘People should get off their backsides and work’ – Fergus and Judith Wilson speak to Channel 4 News

Why do rents keep rising?

Housing benefit makes up a huge proportion of government spending – £24bn in total. But landlords are not responding to housing benefit cuts by putting rents down, presumably because there is enough demand to fill properties without them. Mr Lambert says: “It was widely assumed that rent rises were fuelled by housing benefit, and that if benefit rates were reduced, rents would fall back to meet them. That’s been shown to be a completely false assumption.”

The most recent figures from December show that rents are rising twice as fast as wages, driven by a shortage in properties. Average rents across England and Wales reached £753 a month in November, up 1.6 per cent from November 2012.

Rent control was abolished in 1989, and landlords are essentially free to charge whatever rent they see fit. Private sector renting tends to be higher than council or housing association properties, which prioritise families or more vulnerable tenants.

Rents will track house prices in the area, and are also related to the quality of the property. Government guidelines say any rent increase “must be fair and realistic (i.e. in line with average local rents)”.

But a severe housing shortage and an increase in the number of people renting, because they can’t afford to buy, have also helped fuel a rise in rents. “The growth of renting – up 69 per cent in the last 10 years – is not a reflection of changing lifestyle choices,” says housing charity, Shelter. “Some 55 per cent of renters want to own a home but think they will never be able to afford it.”

For advice on changes to housing benefits, Shelter has lots of helpful information and advice on how you may be affected here: england.shelter.org.uk/get_advice
Government advice for tenants who rent privately can also be found here: gov.uk/private-renting
For more information on the housing market more broadly, check out Home Truths, a report by the National Housing Federation here:

What if tenants can’t afford the rise?

According to research from the National Housing Federation (NHF), private rents are likely to increase by about 6 per cent a year, between 2015 and 2020, driven by interest rates and house prices rise: by 2020, rents could be 46 per cent higher than today.

So is there anything the humble tenant can do if this is out of reach? Tenants’ rights generally depend on whether a contract is periodic (rolling), or fixed-term for a set period.

Landlords think it’s increasingly risky, as benefit levels haven’t kept up with rent levels. The prospect of universal credit makes them even more concerned. Richard Lambert, NLA

For the former, a landlord “can’t normally increase the rent more than once a year” without a tenant’s agreement, according to government guidance. Under a fixed-term tenancy, the tenant can oppose a rent rise until the end of the term agreed.

A tenant has to be given a minimum of one month’s notice for any rise, and tenants can appeal an increase to a rent assessment committee. However properties are in such demand that landlords can prove something else will meet the increase.

Some landlords opt not to raise rents within a tenancy, waiting instead until one tenant leaves before putting the price up. But tenants are basically at the mercy of their landlord, and can be given two months’ notice to get out once a fixed-term contract is up.

Presumably the fate of the Kent tenants evicted by Mr Wilson is relocation, subject to whatever properties the local authority has available, and could include emergency B&B accommodation until a permanent property becomes available.

What’s the solution?

This has led to calls from Shelter for a stable rental contract: the charity is proposing five-year tenancies during which tenants could not be evicted without good reason and would not face rent rises above inflation.

Campbell Robb, chief executive of Shelter, told Channel 4 News: “England’s 9 million renters face the daunting prospect of trying to put down roots in a home which they can be asked to leave with just two months’ notice, and where their rent can be put up at any time at the whim of their landlord.

“Renters desperately need a better deal. Old-fashioned rent controls aren’t the answer, but there are other solutions to improve our broken market. We urgently need to give families the option of longer term tenancies, with predictable rent rises that mean they can plan for the future.”

In terms of rent rises, there is some hope, according to Mr Lambert, who says continued increases are unlikely. “With rents, there’s a balance between the price of housing and ability of people to pay for it,” he told Channel 4 News. “If people can’t afford the asking rent, then eventually it will reach a point where a flat won’t rent.”