Improving the Private Rented

Sector

John East – Director: Community Infrastructure

London Borough of Newham

CIH London Branch AGM

21st January 2014

C O

N T

E X

T Olympic Park

Slide 4

CO

NN

EC

TIV

ITY

• Royals and Stratford

to Tottenham Court

Road: 10 mins

• To Heathrow Airport:

40 mins

Slide 6

HO

US

E

PR

ICE

S

Deprivation

Slide 8 Slide 8

• Multi-cultural (70% ethnic diversity)

• Over 200 languages and dialects spoken

• Youngest population in London (42% under

24)

YO

UN

G &

DIV

ER

SE

Slide 9

Housing Tenure in Newham

14%

33%

18%

35%

% Housing

stock 2011

Registered Social Landlords

Owner Occupier Properties

LBN Properties (tenanted)

PRS – Single Occupation

PRS - Homes in Multiple Occupation

12%

43%

25%

20%

% Housing

stock 2001

Slide 10 Slide 10

Private Rented Sector Shift

Distribution of Private Rent 2001

(UK Census of Population) Distribution of Private Rent 2009

(Newham Household Survey 2009)

2001 2009

Slide 11

Newham – Private Rented Sector

• Newham population increased from 243,000 to 303,000 between 2001-2011 (Census).

• The PRS is a huge business with an estimated £450 million/yr + turnover in Newham, over a third from HB.

• Newham now has the largest private rented sector in London - 40,000 + properties - 40% of the housing stock in the borough and growing.

• Massive churn in the PRS 25% of households move after 12 months or less.

Slide 12

So what…..

2 tenants were renting a

commercial walk in

freezer in a basement.

Slide 13

So what…..

Cellar used by

a tenant paying

£50 per week.

Slide 14

So what…..

Building site occupied by

11 tenants.

No roof, no windows to

the first and second

floors, floors surfaces

were missing and live

wires exposed.

Slide 15

So what…..

Dumped rubbish and

furniture commonly

associated with PRS out

of control.

Slide 16

• A shift up stream required to tackle landlord and tenant behaviour, rather than simple fixing properties once broken.

• Politicians wanted a larger harder hitting intervention.

• Holistic approach – tackle criminal landlords and tenants (immigration, ASB, fraud, prostitution, etc).

• Use of proactive disruptive enforcement approach – private rented property licensing seen as the answer.

Housing market changes led to major

re-think

Slide 17

Overview of private rented property

licensing

• Originated from the Housing Act 2004

• Mandatory HMO licensing applying to large shared houses/flats since 2006.

• Additional and selective licensing property powers are discretionary and may

only be adopted subject to certain conditions.

• May be all or part of LA area.

• The conditions for adopting discretionary property licensing relate to anti

social behaviour, housing demand in the locality and property management.

• Exemptions to licensing include landlords regulated by the HCA.

• Licensing is concerned with management not conditions.

Slide 18

Regulation and Enforcement tools

• Applying 3 licensing designations all private landlords within an area must hold a licence to rent property or be subject to prosecution under Section 95 & 72.

• Reasonable charges may be made to cover the cost of licensing administration.

• Licence duration up to 5 years – “Fit and Proper”.

• Rent Repayment Orders – 12 months rent can be recovered.

• Management Orders – take control away from the landlord.

• Ultimate sanction – CPO or Enforced Sale of property

Slide 19

Initial Pilot – Little Ilford (2010)

• Housing Act 2004 - lacked framework for strategic ‘area renewal’ interventions so new approach needed.

• First (and only in London) designation of Selective Property Licensing in Neighbourhood Improvement Zone 2010/12 – 560 homes.

• Pilot for new approach to neighbourhood renewal - no additional funding.

• Multi agency approach involving local authority services + other agencies.

Next step need for a big impact (2011)

• Resilience in Newham – Housing - The ability of individuals and communities to overcome and flourish in difficult circumstances.

• New allocations policy - preference for working households for access to social housing.

• Use of the PRS for new homeless households.

• Development of PRS vehicle under LBN control (of which more later…)

• Borough wide private rented property licensing.

Making the case

Tenure

Percentage proportion of

Residential Housing Stock

with ONE or MORE incidents

of ASB

PRS (HMOs) 35.63%

PRS 12.70%

LBN Owned 9.08%

RSL Owned 9.21%

Owner Occupier 7.50%

Slide 22 Slide 22

Slide 23

1. Evidence gathering – risk.

2. Consultation – risk

3. Decision – little risk!

4. Media and Communications campaign – 7 months national campaign

5. License Fee – early bird discount at £150 (£30 p.a.) for 5 years. Thereafter for those that didn’t sign up: £500 p.a.

6. Getting the majority of landlords licensed – Over 32,000 Applications from 19,700 landlords (January 2014).

7. Focus enforcement on the criminal element (next 5 years ) - up to 10,000 properties without applications.

Delivery

Slide 24

Success – Private Rented Property

Licensing – What are we trying to achieve?

• Positive change to residents perceptions of their

neighbourhoods

• Improve the quality and safety of private rented accommodation

• Increase the security of private tenants and reduce transience

• See a significant reduction in ASB and enviro crime across the

borough

• Cultural change leading to better landlords with better business

practices = thriving PRS

• Drive out the criminal landlords who are blighting the profession.

• Provide Newham with a strategic influence on the future of the

PRS

Slide 25

What have we achieved in 12 months?

Application Processing and Income

• 32,000 applications covering 90% of PRS

• 30,000 licences issued

• 19,700 landlords registered, 15,000 in 2013

• Identified 7,000 new private rented properties in addition to the 2011 Census figure of 35,700.

• Collected over £6 million in licence fees to fund the initiative over 5 years up to 2017 with no additional costs to Newham residents.

• Awarded over £1million grant by the DCLG for work on rogue landlords in December 2013 up to 2015.

Enforcement First Year - What about

the Rogues?

• In 2013, 5,600 warning letters were sent and over 1,800 joint operational visits made with the Met Police and UKBA forcing 4,500 “reluctant” landlords to licence.

• 120 new licence applications a week

• 150 landlords have, or are being, prosecuted for failure to licence in 2013.

• No appeals or legal challenges to date

Enforcement First Year - What about

the Rogues? (2)

• 230 arrests (immigration, GBH, fraud,

theft and harassment offences)

• 18 landlords with 120 properties have

been refused licences in 2013 and are no

longer able to manage properties in

Newham.

• 331 landlords “of concern” have been

granted 12 month licences only.

• 94 landlords have accepted formal

cautions to avoid prosecution and paid

over £75,000 to the Council in costs +

accepted a 1 year licence at £500 per

annum

What about the tenants ?

• All tenants in licensed properties are now protected by the Newham Licensing Scheme through:

• Limiting numbers and preventing overcrowding in homes.

• Improving standards of management with specific obligations around rubbish disposal, pest control etc.

• Improved safety obligations for the landlord

• Imposing steps on landlords to deal with ASB from occupiers and visitors.

• Ensuring deposits are protected, references checked and proper tenancies granted.

• Identifying the landlord responsible for the property with contact details for emergencies

• Property licensing provides private tenants in Newham with more rights and protection than anywhere else in the country

Case Study 2013

• Night Op November 2013

• 3 large HMOs High Street North E6

• Private Hsg + HMRC + UKBA +Police +Licensing +Food +Fire Brigade

• 6 arrests

• 3 property licensing offences + 25 conditions offences

• 2 Food safety cases

• 2 tax offences/cases

• 3 planning offences

• 3 Council tax breaches

• 3 Fire notices

Other Benefits

• Tackling Council Tax fraud - Initial 130 landlords identified through the licensing process as serial Ctax avoiders and forced to licence their HMOs and pay £264k. Another 5000 HMO cases have been identified - could produce £5 million income to the Council.

• Rent Repayment Orders( RRO) - 12 months of H Benefit rent payments can be recovered from landlords who have failed to licence. c1000 potential HB cases identified - could produce at least £4 million.

• Fraud cases involving business empires of 93 landlords (sham companies/money laundering/ property flipping/illegal developments etc) have been identified and are now subject to investigation by agencies inside and outside the Council.

• 250 Unlicensed Right to Buy Landlords identified by end of 2013. Should raise £93,000 for leasehold services as part of the lease registration process.

Other Benefits (2)

• HMRC Tax Collection - Details held on the letting businesses of

20,000 private landlords. Up to 20% of landlords in Newham are

operating in the “cash no documents” sector of the PRS.

• HMRC could raise an additional £20 million per annum on rental

income alone using our information. Will have a profound effect on

buy to let business models.

• HMOs returned to family occupation – Up to 500 properties are no longer HMOs since the start of 2013 because property licensing has stopped ‘easy money’. A further 1000 HMO landlords have said they will be returning their properties to single occupation during 2014.

• Tackling crime - 230 arrests (1 in 4 homes) have been made during 2013 for immigration and a number of other criminal offences from joint operational Police visits.

• We are starting to see a decline in some forms of ASB

BWPL - what next in 2014?

• Aim for all homes to be licensed by March 2015 a further 5000 cases.

• Continue joint operations with the Police for the next 12 months until 100% licensing achieved.

• Follow up on our Fair Lettings Project by prosecuting those Newham based letting agents ripping off tenants and landlords (50 companies).

• Aim for 250 new prosecutions for failure to licence offences.

• Continue to target rogue landlord elements with refusals and 1 year licences.

• Prosecute landlords for breaching licence conditions and revoke licences where appropriate.

• Take properties away from worst landlord offenders under Management Order powers and retain under Council control and ownership.

4 Key Requirements to Getting the

Enforcement Right (1)

Good intelligence

• Good housing enforcement starts with solid intelligence

• The ability to proactively identify and then target criminal landlords is critical

• When sending 1000 warning letters a month to unlicensed rented properties - important to be able to separate unlicensed rented properties from owner occupiers!

Stronger together

• Developing a multi-agency

enforcement approach is pivotal

• Support from the Police, Planning,

HMRC, DWP, UKBA means you

can make progress against the

most slippery landlords & tenants

• Stitching the complementary

powers of different enforcement

agencies together brings major

benefits

Slide 34

Intelligence is Key

• 2013 saw the development of a data and intelligence application to

initially identify tenure and occupation across the whole of the housing

stock in Newham

• Refined using statistical methodology during the year so that now the

Council is able to identify tenure and multiple occupation in 95% of

cases.

• This will also be the basis for the soon to be delivered enhancement

to the Intranet providing Council wide information on tenure and

occupation available to all services.

• Landlord licence holder information now available to the public

through the online Register on the Councils website:

• https://pa.newham.gov.uk/online-

applications//search.do?action=simple&searchType=LicencingApplication

Top Consolidated View

etc

etc

Getting the enforcement right (2)

Well trained professionals

• Newham has 25 well trained and motivated housing professionals all focused on tackling criminal landlords. Their skills have been developed over the last 3 years

• The team has a dedicated solicitor working solely on Housing Act cases

Efficient enforcement

• Since 2010 Newham private

housing has actually reduced the

number of managers and officers

• This has been offset by focusing

on delivering efficient enforcement

- lean processes have significantly

increased productivity

• In the last 3 years – prosecutions

have quadrupled and continue to

increase

Slide 37

Lessons from Initiative - 1

• Political support + commitment from key officers.

• Cross departmental work and support of external

agencies essential.

• Risk taking and careful planning.

• Data and intelligence required to make the case.

• 6/12 months start up time.

Slide 38

Lessons - 2

• Online application and payments essential.

• Direct data upload and address links

• Licence type, conditions and fees calculated automatically via software.

• EU Directive on licensing income.

• Online Statutory Register for tenants.

• Data cross checking and mapping to spot rogues.

Slide 39

Lesson 3

• Keep things as simple as possible – processes/fee structures etc.

• Make sure the statutory consultation is thorough.

• Put time into developing partnerships.

• Expect to find large gaps in intelligence.

• Multidisciplinary teams for pre and post designation.

• Effective and credible enforcement.

Slide 40

The Newham Private Rented Vehicle -

Why is the Council going down this

option?

• To Increase Supply as HA Supply Declines

• To Take Control & Manage Risk

• To Secure the Reward

• To Complement The Council’s Borough Wide Property Licensing Scheme

• Drive Up Standards

• Support Resilience & Expand Choice

• Move at Pace

Slide 41

Demand

• Waiting List

– 24,000

• Homeless

– 2,633 in TA

• Overcrowding

– Top 5 overcrowded wards

in England in Newham

Supply • 2008/13 Affordable Supply

– 2,900

• 2103/14 Affordable Supply

– 1,463 (59 without the Village)

• Pipeline Approvals

– 23,954

– 5,227 on site

• Land Capacity to 2027

– 40,000

Slide 42

Newham Private Rented Vehicle - Overview

• LA Company – Trading Commercially

• Not Council Housing but

Council in Control

• Complements the BWPL

• Delivers Good Quality, Professionally Managed Rented Housing

• Boosts Supply of Affordable Housing – Model delivers 33%

• Initial 500 unit new build Programme

• Buys Land & Property to grow to 3,500

homes and more

Slide 43

Financing

• Is State Aid Compliant

• LBN will support vehicle as

shareholder and provider of

funding through loan

arrangements

• Generates surpluses for the

Council to reinvest and create

employment

• Council gets repaid fully after

40 years & makes a return

• Affordable Housing is delivered

through cash and land subsidy

from the Council

Slide 44

Other Returns to the Council

• Council Tax to 2028 - £18.1m

• New Homes Bonus - £1.9m

• Income from payment for

services

• Community Infrastructure Levy

- £17.5m

• Borough Wide Property

Licensing fee - £96,00

• Planning fees - £570,000

• Returns from development &

sale of units

Slide 45

Newham Private Rent Vehicle – Next Steps

• Pilot of 36 x 2 bed homes at Leather Gardens – Planning 21 January 2014

• Completing External Due Diligence

• Developing Loan Documentation, Governance Arrangements & Shareholder/Resources Agreements

• Cabinet in February 2014

• Set up company in March 2014

• Start on Site with pilot in March 2014

• Pilot completed 30 weeks later

Slide 46

Info – Private Rented Property

Licensing

For further information -

• Website www.newham.gov.uk/propertylicensing

Contact us -

• Email propertylicensing@newham.gov.uk

• Post Private Housing & Environmental Health, Newham Dockside, 1000 Dockside Road, London, E16 2QU

• Telephone 020 337 31950