Newham now has the largest private rented sector in London. - 40,000 + .... companies/money laundering/ property flippin
Improving the Private Rented Sector John East – Director: Community Infrastructure London Borough of Newham CIH London Branch AGM 21st January 2014
CONTEXT
Olympic Park
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CONNECTIVITY
• Royals and Stratford to Tottenham Court Road: 10 mins • To Heathrow Airport: 40 mins
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HOUSE PRICES
Deprivation
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YOUNG & DIVERSE
• Multi-cultural (70% ethnic diversity) • Over 200 languages and dialects spoken • Youngest population in London (42% under 24)
Housing Tenure in Newham % Housing stock 2001
% Housing stock 2011
20%
35%
LBN Properties (tenanted)
25%
18%
Owner Occupier Properties
43%
33%
Registered Social Landlords
12%
14%
PRS - Homes in Multiple Occupation
PRS – Single Occupation
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Private Rented Sector Shift 2009
2001
Distribution of Private Rent 2001 (UK Census of Population)
Distribution of Private Rent 2009 (Newham Household Survey 2009) Slide 10
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.
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So what…..
2 tenants were renting a commercial walk in freezer in a basement.
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So what…..
Cellar used by a tenant paying £50 per week.
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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.
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So what…..
Dumped rubbish and furniture commonly associated with PRS out of control.
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Housing market changes led to major re-think • 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. Slide 16
Overview of private rented property licensing •
Originated from the Housing Act 2004
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Mandatory HMO licensing applying to large shared houses/flats since 2006.
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Additional and selective licensing property powers are discretionary and may only be adopted subject to certain conditions.
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May be all or part of LA area.
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The conditions for adopting discretionary property licensing relate to anti social behaviour, housing demand in the locality and property management.
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Exemptions to licensing include landlords regulated by the HCA.
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Licensing is concerned with management not conditions.
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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
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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.
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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 PRS (HMOs) PRS LBN Owned RSL Owned Owner Occupier
Percentage proportion of Residential Housing Stock with ONE or MORE incidents of ASB 35.63% 12.70% 9.08% 9.21% 7.50%
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Delivery 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. Slide 23
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 24
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.
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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
Stronger together
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Good housing enforcement starts with solid intelligence
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Developing a multi-agency enforcement approach is pivotal
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The ability to proactively identify and then target criminal landlords is critical
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When sending 1000 warning letters a month to unlicensed rented properties - important to be able to separate unlicensed rented properties from owner occupiers!
Support from the Police, Planning, HMRC, DWP, UKBA means you can make progress against the most slippery landlords & tenants
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Stitching the complementary powers of different enforcement agencies together brings major benefits
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/onlineapplications//search.do?action=simple&searchType=LicencingApplication Slide 34
Top Consolidated View
etc
etc
Getting the enforcement right (2) Well trained professionals
Efficient enforcement
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Since 2010 Newham private housing has actually reduced the number of managers and officers
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This has been offset by focusing on delivering efficient enforcement - lean processes have significantly increased productivity
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In the last 3 years – prosecutions have quadrupled and continue to increase
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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
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.
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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.
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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.
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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
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Demand • • •
Waiting List – 24,000 Homeless – 2,633 in TA Overcrowding – Top 5 overcrowded wards in England in Newham
Supply • •
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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
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Newham Private Rented Vehicle - Overview
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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 42
Financing • •
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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
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Other Returns to the Council
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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
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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
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Info – Private Rented Property Licensing For further information • Website
www.newham.gov.uk/propertylicensing
Contact us • Email
[email protected]
• Post
Private Housing & Environmental Health, Newham Dockside, 1000 Dockside Road, London, E16 2QU
• Telephone
020 337 31950 Slide 46
