The Rent Trap

8 January 2017

The Rent Trap

DJN for the NHerts and Stevenage Green Party, Jan 2017

About 20% of all UK housing is rented. 

The rent trap is a money trap. The private rented sector has a role in meeting housing needs, but private landlords aren’t even required to register with the council. This means the council doesn’t know who they are and rent increases, security and standards of housing aren’t regulated.

 

At the start: move-in fees

Private renters have to pay a security deposit (usually 1.5 or 2 months’ rent), their first month’s rent in advance, an administration fee (about £50 per tenant), a “referencing” fee of about £75 per tenant, a “check-in” fee of about £72 and a tenancy agreement fee of about £300. If there are any guarantors involved there’s also a “guarantor referencing” fee, which can be £100 per guarantor, and the “agreement of guarantee” which is about £75. This can give a move-in total for a single renter of well over £2000. Agency fees are illegal in Scotland.

 

Rent costs

North Herts 2013 rents are given on the Council website (1), but a quick survey of average rents over North Herts yields likely 2016 figures, showing the increases in rent.

 

Type of property

Herts CC*

2017 rents**

1-bed property

£546

£709

2-bed property

£778

£918

3-bed property

£904

£1,212

4-bed property

£1,690

£1,497

       

 

*Herts CC refers to the county council website - average 2013 rent.

**Sample of property up for rent on-line as of Dec 2016, (averages of 10 property types each for Baldock, Hitchin, Letchworth,  Royston, NHerts villages, Stevenage).

 

Compare these rents with council-fixed social housing rents that follow the retail price index - £341/month for a 2-bedroom property in the UK in 2013 (2).

 

The 2014 median gross salary in the UK is about £27,500 per annum (pa) (3), translating into take-home pay of about £21,867 pa or £1,822 per calendar month (pcm). North Herts is close to this. A single person with a median salary renting a 1-bed property has to find up to £2,400 to move in, and then spends about a quarter to a third of their income on rent. In London this can be up to 70% of income, or more, with the average being 47% of income on rent.

 

What it means

The rent never goes down (like a mortgage), and you never actually buy anything with your money (like a property). People in rented accommodation who are saving the deposit for a house estimate that it will take them over a decade. Added to the financial squeeze is the fact that landlords can ask renters to leave through no fault of the renters’ own. If the landlord wants to sell the property, or perceives a tenant as troublesome, they can serve the tenant with a 2-month notice to leave (4). It’s estimated that the end of a private tenancy causes about 35% of homelessness, and trying to take a landlord to court costs about £2000 in legal fees in the first instance – so it’s rare. The number of short-term 6-month tenancies is increasing, and so is the number of retaliatory evictions, where tenants are evicted after complaining about something to their landlord. The effect on people and families with ties to the area (such as jobs or schools) is devastating as they scrabble for the money and time to find another home. The charity Shelter has recently proposed a 5-year tenancy but landlords have described this as “unfair”.

 

The rent trap means people are stuck paying a large proportion of their wages in rent, with the knock-on effect that they can’t afford “extras” like pensions or savings. They are often in insecure homes with low levels of privacy. Another knock-on effect of uncontrolled rents is that councils pay a large amount of Housing Benefit to landlords. This was estimated to be £9.5 billion of public money in 2014.  Rents are controlled in several countries such as France, Germany and most of the EU, and they used to be controlled in Britain too (5,6).

 

History

After the 2nd World War there was a huge building programme to replace bombed-out housing by both Conservative and Labour councils, until in the early 1970s council houses comprised a third of all housing stock. “Fair rents” were set by assessing the local marketplace and the number of privately available homes. However, fair rents were abolished by the 1988 Housing Act.

 

“Right-to-buy” and sale of council houses under the Heath and Thatcher governments greatly reduced the UK council housing stock; although it’s estimated that 4/10 of those houses so sold, were then re-let to provide private rental income. These days “buy-to-let” mortgages allow people to buy based on predicted rental income. Houses are often bought and converted to highly lucrative bedsits or shared houses. There’s no register of landlords, but a look at tax records reveals that 2.5 million people declare income from rents. Landlord associations and societies exist to discuss tenants’ details, lobby, fight legal battles, and provide advice and support. The Landlord Associations mean that landlords can fight for their interests politically and it’s also estimated that 1 in 4 MPs are landlords (5,6).

 

Green Party View

Too many homes have become safety deposit boxes, holiday homes, or rarely occupied town homes for non-resident foreign nationals.

 

Affordable, secure and comfortable housing is a basic human right. UK housing is inadequate and inequitable because of inequalities in access to resources (particularly land), the inability of the free market to meet housing needs, and the lack of investment in public housing. Government policy has encouraged the treatment of housing as a form of speculative investment, rather than a basic requirement for individual and social well-being. The Green Party aims to ensure everyone has appropriate housing, and to break the stranglehold that a small number of large developers have over housing provision.

 

Our methods include the construction of new homes and conversion of existing buildings to homes, in line with energy and water efficiency and reduction of impact on other species and the natural environment. We would introduce rent controls and more secure tenancy agreements, abolishing national and local tax breaks for buy-to-let landlords and banning the purchase of residential property by people who are neither British citizens nor resident in this country. Immediate savings would be made in Housing Benefit and other monies are planned to come from various taxes, like a land tax. Other methods include charges on second and long-term empty homes, aiming for house price stability rather than allowing Finance to push up prices, and the encouragement of social or co-operative housing.

 

Our vision is that National Government must ensure that adequate and good quality council housing stock is retained and provided by every local authority. Private rented housing needs to be subject to fair rent and secure tenancy rules. There are several other aspects to improving the situation for our renters but these are the main points. For further information see the Green Party Housing Policy (7).

 

References

1. http://www.north-herts.gov.uk/home/housing/private-sector-housing/renting-privately.

2. http://england.shelter.org.uk/campaigns_/why_we_campaign/housing_facts_and_figures/subsection?section=the_cost_of_housing#hf_2

3. https://www.ons.gov.uk/help/localstatistics

4. http://www.legislation.gov.uk/ukpga/1988/50/contents

5. Jeraj S (26 Sept 2016) The Rent Trap evening talk at David’s Bookshop, Letchworth.

6. Walker R and Jeraj S (2016) The Rent Trap ISBN 978 0 7453 3646 6: Pluto Press, London N6 5AA.

7. https://policy.greenparty.org.uk/ho.html