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					                                                                          AGENDA ITEM: 1
                        MIDDLESBROUGH COUNCIL

                            EXECUTIVE REPORT

Report Title: Engaging with the Private Rented Housing Sector
Executive Member for Regeneration and Economic Development
Director of Regeneration
Date 26th May 2010


PURPOSE OF THE REPORT

1.    The Council’s broad approach to the Private Rented Sector is outlined in
      Middlesbrough’s overarching Housing Strategy 2008/11. This paper seeks to outline
      the first step in the development of a Private Rented Sector Housing Strategy for
      Middlesbrough, which will consider the impact of the sector within the town and
      strategic fit for new and emerging work.

2.    The development of such a strategy will be especially important the light of the
      review of the Gresham older housing area and consideration must be given to how
      the Council will prioritise resources and deliver and target services.

SUMMARY OF RECOMMENDATIONS
3.    It is recommended that the Council develops a strategy for the Private Rented
      Sector in the town, with a view to moving forward the issues highlighted in this
      report.

IF THIS IS A KEY DECISION WHICH KEY DECISION TEST APPLIES?

 4.     It is over the financial threshold (£75,000)
        It has a significant impact on 2 or more wards    
        Non Key

DECISION IMPLEMENTATION DEADLINE

5.    For the purposes of the scrutiny call in procedure this report is

       Non-urgent                    
       Urgent report

      If urgent please give full reasons
BACKGROUND AND EXTERNAL CONSULTATION

Strategic Overview and National Perspective

6.         The Private Rented Sector has grown from 8 per cent of all housing in England at
           the end of the mid eighties to 12 per cent in 2007 and 14 per cent in 2008. The
           growth of the sector nationally began in the 1990s when more properties became
           available for rental following a slump in housing prices on the owner occupied
           market. A number of individuals who were unable to sell their properties let them,
           and other landlords took the opportunity to expand their residential property
           portfolios through the purchase of repossessed properties. From 1996, the growth
           of buy-to-let mortgages offered cheaper financial deals for the purchase of property
           to let. These deals became available at a time when house prices were rising and
           confidence in the stock market as a secure and long term investment option were
           low1. It was at this time also that many first time landlords took advantage of the
           boom within the sector to purchase properties.

7.         In more recent years, the impact of the global recession has had a significant
           impact on housing markets. In the first quarter of 2009 there were 12,800
           repossessions nationally (including buy-to-let mortgages) in comparison with 10,400
           in the previous quarter and only 8,500 in the first quarter of 2008 2. This will have a
           potentially significant impact on the Private Rented Sector as more households
           seek accommodation within the sector, due to the repossession of either owner
           occupied or rented property and the ongoing demand for social rented
           accommodation. This, coupled with a lack of available finance for new entrants into
           the housing market means that the private rented sector will come under increasing
           pressure to meet future housing needs.

8.         The Government commissioned an independent review into the sector and the final
           report was published in 2008. The Rugg Review highlighted that the sector presents
           a number of policy challenges relating to such issues as property quality,
           management standards and security of tenure. It outlined a number of policy
           directions of travel and identified distinct sub markets of private renters within the
           sector, including students, young professionals and Housing Benefit claimants for
           whom the sector plays very different roles.

9.         On 13th May 2009 the Government published their response to the review and
           entered into a period of consultation with stakeholders. The response included a raft
           of recommendations, which are further detailed at Appendix 1. Whilst many of the
           recommendations will require a national response, there is scope for local and sub
           regional approaches. The strategic and enabling role of the Council can be
           developed in order to influence the future growth and development of the sector, to
           foster stronger working relationships with Private Rented Sector Landlords and to
           professionalise the business of private renting.

The Private Rented Sector Housing Stock in Middlesbrough

10.        The number of privately rented residential properties in Middlesbrough has
           increased significantly since 2001. In the census that year the number of properties
           recorded within the sector was 3,910, representing 7.1% of the overall housing
1
    The Private Rented Sector: its contribution and potential, Julie Rugg and David Rhodes 2008
2
    Council of Mortgage Lenders May 2009

                                                             2
      stock. Middlesbrough’s Stock Condition Survey however shows that this had risen
      to 6,100 or 10% in 2004, and to 7,400 or 12% of all dwellings within the town by
      2008.

Table 1 – Tenure split changes in Middlesbrough between 1981-2008


                                       Middlesbrough's Tenure Split - 1981 to 2008


        70%


                                   61%                61%              62%              62%
        60%

                     54%
        50%



        40%          40%                                                                      Owner Occ
                                                                                              Social Rented
                                   33%                                                        Private Rented
        30%
                                                      28%              28%
                                                                                        26%

        20%


                                                                                        12%
        10%                                                            10%
                     6%            6%                 7%


         0%
                  1981          1991              2001             2004              2008
                                                   Year




11.   The figure of 12% for the level of private rented properties within the town however
      is based on information extrapolated from a sample survey in the 2008 Stock
      Condition Survey (SCS), and anecdotal evidence would suggest that this level may
      be higher. Should trends continue it is likely that the level of private rented
      properties within the town will be higher than RSL properties by 2027. There have
      been a number of influences on the growth of the sector, including the development
      of the University of Teesside, low house prices within inner urban areas and the
      availability of buy to let mortgages. It is also feasible that the slowing of the housing
      market in recent years has led to an increase in reluctant landlords, who are unable
      to sell a property and so make it available for residential letting until the market
      recovers.

12.   The sector therefore plays an increasingly significant role in Middlesbrough’s
      housing offer, especially within the inner urban areas. The 2008 Strategic Housing
      Market Assessment (SHMA) highlights that the majority of private rented properties
      are terraced (69.1%) and shows that the north, older housing and Grove Hill areas
      of the town have the highest concentrations of private rented properties at 21.8% of
      all dwellings. Indeed of the 316 private residential properties purchased so far by
      the Council in the older housing clearance area 208 (66%) were privately rented.



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13.        The Council’s 2008 Private Sector House Conditions Survey considered the
           condition of properties within the overall private sector in terms of the Government’s
           Decent Homes Standard and its component, the Housing Health and Safety Rating
           System (HHSRS). By definition, a Decent Home is one which:

           a.      meets the current statutory minimum standard for housing (dwellings which
                   fail this criterion are those which contain one or more hazards assessed as
                   serious by the HHSRS);
           b.      is in a reasonable state of repair;
           c.      has reasonably modern facilities and services; and,
           d.      provides a reasonable degree of thermal comfort.

14.        Overall the survey highlighted that there was a high instance of non decency in
           properties constructed pre-1919 and that 38.7% of properties in the private rented
           sector were non decent, compared to 21.8% in the owner occupied sector. This
           highlights the need to both encourage and enforce raising standards in this sector.
           Given that some of the most vulnerable households live within the sector poor
           property conditions could potentially lead to social exclusion, exacerbating issues of
           child poverty and poor physical and mental health.

Middlesbrough Private Rented Sector Demographics

15.        The private rented sector is increasing in importance in meeting housing needs in
           response to changes in demographics, social structure and mobility. The 2009
           Strategic Housing Market Assessment for the Tees Valley highlights that in
           Middlesbrough, 10.5% of privately renting households had moved from elsewhere
           in the Tees Valley and 22.5% had moved from outside the Tees Valley area (either
           from within or outside the UK). Table 3 highlights the motivations for those moving
           into private rented property3

Table 3 – Reasons for Moving into Private Renting

            Main Reason for Moving                                                   Percentage
            Wanted larger property or one that was better in some way                    8.8
            Needed a smaller property                                                    1.4
            Major disrepair of home                                                      4.1
            Wanted own home/to live independently                                       11.4
            Divorce/separation/family stress                                             5.9
            Forced to move e.g. eviction, repossession, tenancy ending                  14.2
            Harassment                                                                   5.4
            Couldn’t afford rent/mortgage                                                2.4
            To move to a better neighbourhood/more pleasant area                         0.8
            Increased levels of crime in the area                                        3.7
            Other reasons                                                               41.9
            Total                                                                        100


16.        One of the more positive aspects of the sector is that it provides readily available
           and easily accessible accommodation that offers mobility and choice for people
           during various stages of life. However reductions in the availability of social housing
           have increased reliance on the private rented sector to provide accommodation for
           some of the more vulnerable members of our community.
3
    Tees Valley Strategic Housing Market Assessment Final Report 2009

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17.   Issues can arise when exclusion policies within the social housing sector preclude
      those with histories of anti social behaviour from taking up tenancies, leaving the
      private rented sector as the only choice for accommodation. Where landlords leave
      anti social behaviour issues unchecked, either wilfully, or unintentionally due to lack
      of management experience, this can contribute to neighbourhood decline. The short
      term nature of tenancies and transient nature of those within the sector also
      weakens community structures.


18.   It is therefore evident that a coordinated intervention is needed by the Council to
      reduce the real risks of neighbourhood decline and damage to communities in
      areas where the private rented sector is prevalent and continues to grow. Landlords
      must be engaged and encouraged to invest in their properties and to tackle anti
      social behaviour to ensure that vulnerable households are appropriately
      accommodated and supported.

THE FUTURE PRIVATE RENTED SECTOR IN MIDDLESBROUGH
19.   There are wide ranging legal powers available to the Council to tackle anti social
      behaviour, poor housing standards and public health concerns. The Council’s
      current focus is to give advice and, where appropriate, take robust enforcement
      action. Further information on the powers available to the Council and current
      actions and initiatives in relation to the sector is detailed further at Appendix 2. It
      should be noted that the future of selective landlord licensing, which is detailed in
      the Appendix, is currently being reviewed. A report appraising the options will be
      brought forward shortly around the future approach. To help develop a broader,
      strategic and corporate approach to the private sector housing stock across
      Middlesbrough, effective involvement is needed from the Primary Care Trust,
      Children Families and Learning as well as Strategic Housing, Community
      Protection, Housing Benefits and landlords.

20.   It is evident that the growth of the sector in recent years is likely to continue and it is
      important the Council considers its current range of interventions, emerging policy
      work and activity to ensure it is aligned to deliver real benefits for the sector and for
      Middlesbrough. It is important to ensure that landlords are engaged and
      encouraged to tackle anti social behaviour and to invest in their properties and to
      ensure that vulnerable households are appropriately accommodated.

21.   It is also clear however that the available statistics paint a bleak picture of the
      sector, which is not necessarily reflective of private rented housing as a whole. The
      private rented sector also provides an important supply of accommodation for
      students, for those moving into the area for work and newly forming households for
      whom owner occupation remains an aspiration in the current economic climate.
      Further research is required in order to gain a baseline understanding of the
      dynamics of the private rented sector and who its landlords and tenants are.

Private Rented Housing Strategy

22.   A Private Rented Housing Strategy is needed to underpin the future growth of the
      sector within Middlesbrough to provide quality, choice and flexibility. The strategy
      will focus on key objectives, which will build upon the current powers available to

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      the Council and also consider the implementation of new initiatives. The Private
      Rented Housing Strategy will focus on 8 key objectives:

      a.     increasing the Councils knowledge of the dynamics of the sector;
      b.     improving the quality and condition of properties within the sector by
             encouraging landlords to invest in their properties;
      c.     improving the standards of local private rented property management;
      d.     structured consultation with private sector landlords to assist in local policy
             development;
      e.     reducing in crime and anti social behaviour/increasing stability and quality of
             life within neighbourhoods;
      f.     increasing access to/reducing exclusion from the private rented sector;
      g.     working with registered social landlords to ensure that problematic tenants
             are not forced into private rented housing; and,
      h.     ensuring that current and emerging activity is fit for purpose and supports
             immediate, medium and long-term objectives, such as the review of the
             Older Housing Area.

23.   The Council currently has limited information about the sector. There are varied
      individual businesses within the private rented sector with a spectrum of levels of
      stock from one or two properties, to largely absent investors, to landlords with large
      portfolios of stock within the town. It is a notoriously difficult sector to engage with
      and has little representation. Little evidence exists as to sub markets within the
      sector; students, asylum seekers, migrant workers, professionals or benefit
      claimants and a baseline needs to be developed.

24.   Whilst considering the future direction of the sector and the development of
      intervention it will be vital to carry out evidence gathering, as recommended by the
      Rugg Review, in order to gain a sound knowledge base of how the sector operates
      and can develop in relation to the specific situation in Middlesbrough.

25.   The Association of North East Councils (ANEC) has recently procured Nathaniel
      Lichfield and Partners (NLP) to undertake a study into the sector within the north
      east region, to gain a better understanding of how it works in order to inform
      strategic development. Middlesbrough Council has identified additional Working
      Neighbourhood Fund (WNF) resources in order to fund a more detailed study into
      the sector within the town. This will then enable comparisons to be drawn between
      Middlesbrough and the rest of the region to identify issues particular to the sector
      locally.

Consultation

26.   As highlighted in the Rugg Review there is a need for local authorities to develop
      their strategic and enabling role within the private rented sector in their area, which
      will complement the existing enforcement powers available to them. Consultation
      with private landlords is key to the strategic development of the sector in order to
      gain a better insight into the issues facing those within the sector and to ensure that
      the Council’s current and emerging plans for activities in the sector are coordinated
      and targeted.

27.   Since August 2009 a number of consultation events have taken place with private
      sector landlords and letting agents in order to gain a broader perspective of issues
      and to seek their views on how policies and services can be developed in
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      Middlesbrough. A landlord and letting agent focus group has now been developed,
      which will be involved in regular dialogue with the Council in the development of
      policies and initiatives relating to the private rented sector.

28.   Further consultation will be carried out with private landlords, letting agents and with
      representatives from the National Landlords Association (NLA) in order to gain a
      view on how the Council can engage with landlords and develop a closer working
      relationship with the sector. A cross service strategic steering group will also be
      developed in order to consider issues specific to Middlesbrough which will enable
      officers to consider the future potential of the sector within the town. Membership of
      the group will comprise Strategic Housing, Community Protection, Erimus Housing,
      Social Care, the PCT and representatives from the private rented sector.

AREAS FOR DEVELOPMENT
29.   The following paragraphs consider new and emerging initiatives relating to the
      sector within Middlesbrough.

Landlord Accreditation

30.   The Rugg Review highlights landlord accreditation, either locally or sub regionally
      as key to improved and proactive working relationships between local authorities
      and landlords. On 30th November 2009 became one of 5 authorities nationally to
      pilot a landlord accreditation scheme in partnership with the National Landlords
      Association (NLA). The scheme is based around three key areas, landlord training,
      independent dispute resolution and adherence to a code of conduct and will run for
      an initial period of six months.

31.   It is hoped that Middlesbrough’s involvement with a nationally recognised body in
      the delivery of the scheme will increase confidence within the sector and encourage
      landlords to join, raising awareness of landlords’ roles and responsibilities,
      improving knowledge of the legislation and thus professionalising the sector and
      providing greater accountability.

Financial Assistance for Landlords

32.   Financial assistance for housing repairs and improvements in Middlesbrough is
      currently only available to owner-occupiers. Approval is currently being sought for
      Middlesbrough Council to adopt the Regional Financial Assistance Policy, endorsed
      by the North East Housing Board and Government Office North East, which will
      become operational from 1st April 2010.

33.   The policy outlines assistance which can be made available to landlords within the
      private rented sector to bring empty properties back into use or to convert existing
      properties family sized dwellings where the local Housing Strategy has highlighted
      such a need. A loans first, grants second approach will be adopted and landlords
      will only qualify for grant assistance where other forms of lending have been ruled
      out.

Private Sector Leasing

34.   A Private Sector Leasing scheme is currently operational in Middlesbrough and is
      managed by Endeavour Housing. Private rented properties are leased to the
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      scheme manager for a prescribed period and these are then used to house
      homeless households. There are currently 15 properties available under the
      scheme and assessment and Erimus Housing, which delivers the Homelessness
      and Housing Advice Service on behalf of the Council, makes referral of tenants.
      This is a small but valuable scheme that helps to reduce the need for bed and
      breakfast accommodation.

35.   A review will be carried out to consider whether there is scope for a larger scheme
      focussed on bringing empty properties back into use. Such a scheme may be
      particularly attractive to reluctant landlords; those who are unable to sell their
      property due to current market conditions and have therefore left it empty.

Private Sector Investment

36.   A number of private sector investors have recently approached the Council to put
      forward proposals to bring individual empty properties throughout the town back into
      use. A similar scheme is currently in operation in Leeds and further investigation
      into this is currently under way. The development of such a scheme would provide a
      useful alternative in some cases to the lengthy Empty Dwelling Management Order
      (EDMO) process.

37.   The Investors in Middlesbrough initiative, currently being developed by the
      Community Protection Service will match empty properties with private developers
      wishing to add to their portfolios within the town. Investors’ details will be registered
      on a database and then passed to property owners with Middlesbrough Council
      acting as a conduit in any negotiations.

Compass (Choice Based Lettings)

38.   The Tees Valley wide Choice Based Letting Scheme offers a one stop shop
      approach to RSL properties throughout the sub region. Any private landlord in
      Middlesbrough may advertise their properties to rent through the Compass scheme.
      Although private landlords are not subject to the common allocations policy which
      dictates the bidding system by which social rented properties are allocated, they are
      able to advertise their properties at a central point.

39.   Currently there are only a small number of private rented properties advertised
      through the scheme, and further consideration should be given as to how the
      scheme can be promoted to private sector landlords.

Community Regeneration, Neighbourhood Management and Tackling Anti Social
Behaviour

40.   Whilst these issues are not only issues that affect the private rented sector, it will be
      key to the future of the older housing area to engage both private sector landlords
      and tenants. As part of the review of Gresham the Council will examine the role of
      complimentary environmental and neighbourhood management approaches in the
      broadest sense within the area. The emerging Citizens’ Charter and close
      partnership working with antisocial behaviour teams to review schemes and
      initiatives within the older housing area will be important to consider as the
      Gresham review moves forward. A subsequent neighbourhood action plan will be
      brought forward examining these issues in more detail. This report seeks to

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      consider the emerging influence of the PRS in Middlesbrough and will also feed into
      this process.

EQUALITY IMPACT ASSESSMENT
41.   An initial equality impact assessment (EIA) has been completed and has concluded
      that there is insufficient evidence that the report should be subject to a part, or full,
      EIA.

OPTION APPRAISAL/RISK ASSESSMENT
42.   The Council is not required to develop a Private Rented Sector Housing Strategy
      however without a strategic vision and document outlining what the key issues are,
      the current and planned activities and identifying priorities for the future then the
      Council will continue to be challenged by the sector rather than take a coordinated
      and strategic lead on tackling the issues and working with the sector.

FINANCIAL, LEGAL AND WARD IMPLICATIONS

43.   Financial – £15,500 has been allocated from the Working Neighbourhoods Fund
      budget to fund the study into the private rented sector within Middlesbrough as
      highlighted in paragraph 25, which will provide the Council with a baseline position
      for strategic development. The study will be undertaken as part of a wider regional
      study, procured by ANEC and will therefore offer value for money.

44.   Ward Implications - Further research is required into the precise locations of the
      private rented housing stock within the town. Although there is evidence to show
      significant levels of private rented properties within the older housing area, it is likely
      that there are such properties within all wards.

45.   Legal Implications – It is not envisaged that there will be any legal implications.

RECOMMENDATIONS

46.   In conclusion, it is clear that there are significant opportunities for the Council to
      develop more effective working relationships with local landlords in order to
      professionalise and standardise the quality of the private rented sector within the
      town, continuing with and further building on existing activities. It is therefore
      recommended that the Executive Member approves;

      a.     consultation be carried out with local landlords and stakeholders to support
             the development of the strategy, policies and procedures;
      b.     a draft strategy for the future growth and development of the sector in
             Middlesbrough be developed;
      c.     that the strategy development and recommendations for activities
             surrounding the sector be investigated by a cross authority project group
             represented by Strategic Housing, Community Protection, Erimus Housing,
             Social Care and the Primary Care Trust (PCT) and representatives from the
             Private Rented Sector; and,
      d.     that a specific strategy action plan be developed for the future of the sector.


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REASONS
47.   The recommendations are supported by the following reasons:

      a.     to gain a better understanding of how the private rented sector works
             specifically in Middlesbrough;
      b.     to engage more proactively with the sector through increased knowledge of
             how the sector works;
      c.     to professionalise the sector, improving housing conditions and management
             standards through the development of a broad strategic approach; and,
      d.     to influence the future development of the sector within Middlesbrough

BACKGROUND PAPERS

The following background papers were used in the preparation of this report:

The Private Rented Sector: its contribution and potential, Julie Rugg and David Rhodes
2008

The Modern Private Rented Sector, David Rhodes 2006

Tees Valley Strategic Housing Market Assessment 2009

Middlesbrough Private Sector Stock condition Survey 2008




AUTHOR: Sarah Wilson
TEL NO: 01642 729454
______________________________________________________
Address:
Website: http://www.middlesbrough.gov.uk

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