Be aware of the renting scandal

10 May 2012

The investing and nesting dreams of hordes of would-be homeowners are steadily being chipped away in the face of a nightmare mix of a shortage of homes, rocketing house prices and tightfisted lending.

According to the 2012 English Housing Survey from the Department of Communities and Local Government, the percentage of owner-occupiers has now dropped to 66%, its lowest level since 1988. As a result, the rental population is burgeoning and the percentage of people who privately rent their home is now at 16.5%, up from 10% a decade ago.

It is not that renters are turning against home ownership: it is the economic landscape that has turned against them. They face tighter lending by banks, high property prices, a shortage of starter homes and an upsurge in buy-to-let landlords snapping up the properties they might otherwise have bought.Find the best mortgage for you

To rub salt in their wounds, rental costs are also spiralling. Property search website published a report in March suggesting it is now cheaper to meet mortgage repayments than rent in 42 of the UK’s top 50 towns, with renting on average 16% more expensive than owning.

Renting, it found, is cheaper in towns such as Swansea, Cardiff and Plymouth, but buying works out better value in places such as Milton Keynes and London.

Halifax published similar research in January comparing the costs of buying a three-bedroom home in the UK with renting one, taking into account deposits and maintenance costs, and found buying is cheaper by £100 a month on average. This is a galling turnaround for renters, as three years ago the average cost of buying was 29% higher than the average rent.

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Lack of security

Adding to renters’ woes is the lack of security renting provides. Vidhya Alakeson, research and strategy director at the Resolution Foundation, an independent group researching the plight of low to middle income families, says the rental model needs to be reformed to give tenants more rights and security. He says: “There is little security when you know that the landlord can turf you out after six months.”

With the average age of a first-time buyer now 38, more families are also ending up in the rental market. Alakeson says: “Renting serves twentysomethings quite well as they tend to move around, but families require more security.”

Katy John, a volunteer for, an online group campaigning for first-time buyers and cheaper housing, agrees. She says: “Families who have children attending local schools don’t want to be uprooted every six months or year. Longer notice periods, fairer contracts and regulation of annual fees would all help.”

The balance of power

Most tenants today are likely to find themselves bound by an assured shorthold tenancy, a type of tenancy that was introduced in 1989 and gave landlords more rights than previously, according to Freddie Jackson, solicitor at Cripps Harries Hall.

“Landlords have much more control than they had with old Rent Act tenancies. While they cannot repossess before the first six months of the tenancy has elapsed, they can end the tenancy after six months, without providing any specific reason, by giving at least two months’ notice,” she says.

But it is not all power to the landlords. “One of the tenant’s key protections is the protection from Eviction Act (1977), making it unlawful to evict a residential tenant without a court order. The landlord is also forbidden from harassing the tenant in any way.”

During the fixed term (which is agreed between the landlord and the tenant and despite the name need not be ‘short’), the landlord cannot unilaterally end the tenancy unless the tenant defaults on the rent or breaks a clause in the tenancy agreement.

Jackson says: “However, subject to these restrictions, provided the landlord can satisfy the court that it has followed the correct procedure to end the tenancy, it will be granted a court order for possession and, if the tenant remains unwilling to leave, a warrant for possession.”

One of the most welcome improvements for private tenants to date has been the introduction of tenancy deposit protection schemes, which mean since April 2007 deposits paid to landlords and letting agents must be protected in a government-authorised scheme and returned to tenants within 30 days of the end of their tenancy.

Unfortunately, in reality, the scheme hasn’t provided any real protection,” Jackson adds.’s John says: “People say we are obsessed with owning our own properties and point to what goes on in European countries such as France, where the rental market is very successful. But that’s because tenants have real rights there, with longer tenancies and other protections.

“In the UK, there is lax regulation and letting agents are able charge high fees. I had to pay a letting agent £400 for a year’s contract and then was told I would need to pay £100 to renew it.”

Win win for the agents

It’s certainly an agent’s market. Alakeson believes the current model suits the agents: “Agents don’t make money if people don’t move. They don’t have the incentive to encourage long tenancies or to be transparent about fees.

"When tenants move they often have to pay fees to the new agent before getting their deposit back from their old landlord. For loads of middle-income families money is tight and so this is a huge problem. And the landlord can hold back the whole deposit if there is a dispute about damage.

"The tenancy deposit protection scheme offers some transparency but not getting the deposit back in time is the issue.”

John believes that stronger tenant rights, better protection against rogue landlords and more certainty in terms of rent levels would help improve attitudes.

Still, many believe the most pressing concern is soaring rents. Alakeson says: “The government has not put forward much in the way of an assistance plan to increase rental stock. With the cost of a mortgage less than rent in many places, it flips the whole thing on its head. There’s a sense of unfairness. The buy-to-let landlords are not creating new supply, just shifting it.

"They are moving the chairs on the Titanic.”

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