A place to stay, a place to call home: a strategy for the private rented sector in Scotland

CHAPTER 4 DELIVERING FOR TENANTS AND LANDLORDS

DELIVERING FOR TENANTS AND LANDLORDS

The Scottish Government wants to help create a sector that meets the needs of tenants and rewards high quality landlords. A key component of a quality private rented sector is a tenancy regime that is fit for purpose. In addition, tenants and landlords must have access to information and advice to improve consumer awareness and ensure vulnerable tenants are supported.

Tenancy Options

Effectiveness of the Tenancy Regime

The tenancy regime is central to the efficient functioning of the sector, as it establishes the legal agreement between tenant and landlord.

A key challenge for this Strategy is to address the growing demand for private rented housing from a range of different household types. This includes those that will continue to look for flexibility from the PRS and those that are now looking to settle in the sector longer term.

The current tenancy regime in Scotland originates from the 1988 Housing (Scotland) Act which was introduced for all new private rented tenants from 2 January 1989. The 'Short Assured' Tenancy ( SAT), which runs for a minimum of six months, is by far the most common.

The efficacy of the current tenancy regime was a key issue discussed by the Private Rented Sector Strategy Group. The group identified two key issues in relation to what the tenancy regime may offer tenants and landlords:

• Security of tenure: a tenant's right to remain in a property and the circumstances in which the landlord may seek to regain possession of their property, subject to the terms of the tenancy agreement; and
• The length of tenancy: how long the tenancy agreement is for.

The Group held a range of views on the suitability of the current tenancy regime with some members proposing that the time was right for reform, while others proposing that the current regime had the ability to meet the new requirements being placed on the sector.

The consultative Strategy therefore posed two questions on tenancy:

• What more can be done to meet the demand for longer tenancies and greater security of tenure through the existing Short Assured Tenancy?
• Should the Scottish Government consider alternatives to the Short Assured Tenancy in order to enable greater tenancy security?

Consultation responses to these questions show a variety of views on whether the longer and more secure tenancies could be achieved through the existing regime, or whether an alternative tenancy regime is now required, with a key consideration being the impact any tenancy reform could have on potential future investment within the sector.

Alternatives to the Short Assured Tenancy Regime

Responses to this question were mixed, with some calling for reform of the Assured Tenancy Regime to improve security of tenure, and others stating that the current Short Assured Tenancy ( SAT) works effectively for the majority of tenants.

Some stakeholders proposed that greater security of tenure is required for tenants that are looking to stay in the sector in the longer term. In particular, those with families looking to settle down.

Responses suggested that it would be important for any new tenancy regime to have clear procedures for recovery of possession for a landlord and clear notice grounds and periods for ending a tenancy, and that reform of the current SAT would also need to retain the flexibility that many of those living in the sector still require.

The impact of reform of the tenancy regime would need to be carefully considered on this Strategy's aims for growth and investment. Lenders can insist on the SAT for 'Buy-to-Let' lending purposes, and some respondents to the consultative Strategy suggest that the current SAT is likely to be more attractive to institutional investors.

Working within the existing Short Assured Tenancy Regime

Some stakeholders pointed out that the current tenancy regime already has the ability to offer longer tenancies to those that want this, and thought that there was little evidence to suggest reform was needed. Enabling access to redress was raised however, as a key theme to making the current SAT work more effectively.

It was proposed that landlords could be encouraged to offer longer tenancies within the current SAT in circumstances where this was mutually beneficial. For landlords, this can offer greater security of rental income and less 'transaction costs' associated with finding new tenants, whilst benefiting the tenant who wants the property as their longer-term home.

Review of the Tenancy Regime

Recognising the importance of the tenancy regime and the range of stakeholder opinion with regards to the case for tenancy reform, the Scottish Government will initiate a review of the suitability of the private rented tenancy regime.

This review will report to Ministers with recommendations on actions that can be taken to ensure that the tenancy regime will meet the needs of all of those in the sector in future.

ACTION 6: Consult with all stakeholders to examine the suitability and effectiveness of the current private rented sector tenancy regime, considering legislative change where required.

Greater Consumer Awareness

As well as having an effective regulatory regime, consumers can help drive improvement through the choices they make and identification of bad or illegal landlord practice.

A drive to improve consumer awareness was broadly supported by stakeholder feedback on the Consultative Strategy. A common theme across the majority of responses was the role of information and advice in helping to empower consumers.

For those landlords providing a high quality of service, greater consumer awareness can only benefit their business as consumers will feel more confident moving into the sector aware of both their rights and responsibilities.

Moreover, an informed consumer may be more inclined to engage with their landlord or their letting agent to challenge poor service or property condition.

Improved Consumer Information and Advice

Work has already begun to improve consumer awareness in the private rented sector with the new mandatory Tenant Information Pack coming into effect from May 2013.

This pack forms part of the Scottish Government's offer to support tenants and landlords to understand their respective rights and responsibilities, in order to enable a better functioning and more consumer-focused sector.

We know from previous research that landlords generally do provide relevant information about private renting but it is important to promote greater understanding amongst tenants and landlords about all of their rights and responsibilities ^[22] .

An online Hub or portal dedicated to providing a wide range of information and advice for tenants living in the PRS received strong support in the consultative Strategy. The Scottish Government is working with PRS stakeholders to develop such a Hub for the sector, to be implemented alongside the Tenant Information Pack.

Local authorities also have a crucial role to play in providing information and advice to landlords, agents, tenants and their neighbours in order to improve compliance with relevant property and management standards.

Charities such as Shelter Scotland, Citizens Advice Scotland and many community organisations also have an important role to play in providing independent housing advice to private rented tenants.

Advice for Landlords

More information and advice for landlords was suggested in response to the consultative Strategy, as a means to improving the functioning of the sector.

The re-stated purpose of Landlord Registration in Chapter 3 proposes that Local Authorities continue to use the register as a means to engage with landlords to improve practice and disseminate information about managing property in the sector.

Landlord Accreditation Scotland ( LAS) ^[23] is a voluntary scheme that provides support to landlords and letting agents by providing training and access to advice and information, as well as standards for Accredited Landlords set out in a voluntary code of practice.

Landlords and letting agents can join and access services provided by membership organisations such as the Scottish Association of Landlords, Scottish Land and Estates or the Association of Residential Letting Agents to obtain information on their rights and responsibilities.

ACTION 7: Work with stakeholders to develop an online information hub aimed at tenants and landlords in the private rented sector. This will provide a 'one-stop shop' for accessible information and advice on the private rented sector.

Supporting Vulnerable Tenants

The private rented sector caters for a diverse range of people and households and that diversity is set to expand. Looking to the next decade, we recognise that this Strategy will need to help raise standards for all those housed within the sector, including more vulnerable tenants such as:

• individuals or families at risk of homelessness;
• migrant workers entering the country for the first time who may experience problems with language and have little knowledge of private renting in Scotland;
• low-income households who cannot access social housing and therefore privately rent but often encounter affordability issues; and
• households that contain older members or disabled people.

The Scottish Government published a National Strategy for Housing Older People in December 2011, which includes older people living in the PRS ^[24] .

Respondents to the consultative Strategy highlighted that vulnerable tenants in the PRS may not always be easy to reach by conventional information channels, and that a problem area often lies in enforcing rights which already exist.

The Scottish Government will continue to work with a wide range of stakeholders to ensure that vulnerable tenants continue to be supported through the delivery of this Strategy. This will be particularly important as the impact of UK Government's changes to the welfare system unfold.

UK Government Welfare Reform

The private rented sector has a key role to play in providing housing for lower income households, including those in receipt of housing benefit or local housing allowance ^[25] . One-fifth (20%) of all households in receipt of housing benefit in Scotland live in the PRS ^[26] .

The UK Government's Welfare Reform changes are intended to simplify the benefits system, remove disincentives to work and control public expenditure. This includes the introduction of Universal Credit from October 2013, which will bring together six benefits including Housing Benefit.

Overall reduction in the amount of Housing Benefit available, and the increase in the age threshold for the Shared Accommodation Rate from 25 to 35, will mean that there will be less support for these tenants in particular, and may change the pattern of demand from people reliant on benefits, particularly younger people.

ACTION 8: Monitor the impact of UK Government Welfare Reforms on the sector as it progresses and continue to work with COSLA and other stakeholders to support the sector to respond.