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NAO slams govt’s ‘piecemeal approach’ to PRS regulation

  • 10/12/2021
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NAO slams govt’s ‘piecemeal approach’ to PRS regulation
The National Audit Office has criticised the government’s “piecemeal approach” to regulating the private rented sector, a lack of robust data on what action was needed and the cost implication to landlords.

Over the past decade, the Department for Levelling Up, Housing and Communities (DLUHC) has introduced policies such as mandatory redress schemes for letting agency work, a ban on charging letting fees to tenants and temporary restrictions on evictions during the Covid-19 pandemic.

However, the damning report from the public spending watchdog, told DLUHC that it had taken a piecemeal approach to its intervention and lacked a strategy for the regulation of the sector as whole.

Tenants and industry representatives interviewed for the report described the current system of regulation as “fragmented and over complex”. With no evaluation of recent interventions, the department was unaware of how its actions had affected the operation of the market.


589,000 properties fail standards

The NAO undertook the report to investigate whether the regulation of private renting in England, which spans 36 pieces of legislation, is meeting the department’s objective to ensure the sector is fair to renters.

An estimated 13 per cent of privately rented homes equating to 589,000 properties fail to meet legal standards because they have at least one category one hazard. Category one hazards pose a serious threat to health and safety and carry estimated associated costs to the NHS of £340m a year.

This compares with 10 per cent of owner-occupied homes and 5 per cent of social housing.

Furthermore, an estimated 23 per cent of privately rented homes are classified as non-decent, rising to 29 per cent for those receiving housing support. This compares with 12 per cent of social housing and 16 per cent of owner-occupied homes.


Local authority lottery

The report acknowledged that many local authorities face funding pressures which could hinder their ability to check properties proactively for non-compliance which placed greater reliance on tenants to know their rights and report problems.

Gareth Davies, head of the NAO, said: “The proportion of private renters living in properties that are unsafe or fail the standards for a decent home is concerning.

“The government relies on these tenants being able to enforce their own rights, but they face significant barriers to doing so.”

“The Department for Levelling Up, Housing and Communities should improve the quality of its data and insight into the private rented sector, so that it can oversee the regulation of the sector more effectively. It should develop a clear strategy to meet its aim of providing a better deal for renters.”

The government also came under fire for its inconsistent enforcement of regulation by local authorities and for not helping them to regulate effectively.

The report found that some authorities inspected almost no properties while others inspected a large proportion of their market.

“We were only able to identify 65 out of 308 [local authorities] that have chosen to license more properties than the minimum requirement since 2010, due to data limitations,” the NAO wrote in its report. “We also found low use of some regulatory tools such as banning orders and penalty notices – only 10 landlords and letting agents have been banned by local authorities since new powers were introduced in 2016.”


Government needs clear vision

Further conclusions from the report include:

• A lack of robust data on key issues where regulatory action may be required such as harassment, evictions and disrepair that is not being addressed.

• DLUHC does not know the full costs to landlords of complying with its obligations leading it to struggle to measure the impact of its interventions or establish whether further action is needed.

• While the department works with other parts of government to understand the impact of any related policies on private renting it could do so more consistently. Regular discussions are held but there are no formal arrangements with other departments such as HM Treasury and HM Revenue & Customs, covering issues on tax policy and compliance affecting landlords.

DLUHC recognises that challenges within the sector affect how it should be regulated, and it is planning large-scale reforms to help address these issues. It has committed to publishing a white paper in 2022 which will provide further details on the proposed reforms.

The NAO said for reforms to be effective the government needs a clear vision for what it is trying to achieve and an overarching strategy for how to address the challenges raised by the report. It must work across central and local government where necessary if it is to meet its overall aim to provide a better deal for renters

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