Apr

‘More government regulation of the PRS won’t work – here’s why’

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It is common to hear from both politicians and campaign groups that the Private Rented Sector (PRS) needs more regulation.

But the question they have not addressed is what the purpose of this regulation will be.

If it’s to drive landlords out of the market, then it will succeed. If it’s to drive bad landlords out of the market, then it will not. That sounds wrongheaded but let me explain.

We have a very unusual market made up of millions of small landlords owning less than three properties who often do not have the capital resources to deal with onerous regulations.

Many of them want to comply with the current rules and most provide homes that range from very good to OK.

But if they are faced with new regulations that they cannot afford to meet then they will leave the market.

The bad landlords who do not comply with the existing rules are unlikely to comply with any new ones.

What is more, if as a result of good landlords leaving the market there is a massive surge in demand the bad ones will see this as an opportunity.

As more tenants are forced to occupy their properties at higher rents because they have nowhere else to go, so bad landlords will prosper.

But surely, you say, the new rules will drive them out of the market?

No – enforcement in practice does not work because it’s incredibly expensive to enforce rules against those who will not comply because, although they are a small percentage of the overall market, it still means policing 100,000s of properties.

What’s our PLAN?

History shows that if you want to create new conditions the carrot is far more effective than the stick.

If the objective of a policy is to create more landlords providing better homes, then we must encourage more landlords into the market who have the resources and scale to create good homes for tenants.

Such landlords will have the capital resources to invest in properties, comply with regulations and provide good homes.

To do that, you need to create a framework that incentivises such landlords to come into the market.

Instead of cutting supply, you will increase it. And if you increase the supply then you give tenants more choice and create the right market, one which will respond positively to regulations.

Surely that should be the objective of policy for all parties and stakeholders be they Conservative, Labour, Generation Rent, Shelter or whoever?

Unfortunately, it does not appear the be. My organisation, PLAN, is trying to win support to rethink the whole strategy for the PRS and appeal to those who agree with this to support us.

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