How can we Improve Standards in the Private Rented Sector?

SUMMARY

• The English private rented sector (PRS) faces challenges with property standards relating to inadequate renovation, maintenance and upgrading.
• Supply side problems include complex and confusing laws, rogue landlords, and insufficient numbers of homes.
• Demand side problems include tenants being afraid to exercise their rights, or not knowing what they are.
• In addition, criminal sanctions are insufficient to act as a serious deterrent.
• Labour’s Renters’ Rights Act increases the rights and protections of renters.
• Beyond this, practical policy interventions to improve it could use the concept of leverage points to think about ways to change system behaviour, and include professionalising business models and changing societal perceptions of poor landlords.

The English private rented sector (PRS) faces challenges with property standards relating to inadequate renovation, maintenance and upgrading. For example, in 2022-2023, an estimated 14% of households in the PRS lived in homes that did not meet the Decent Homes Standards. While policies to tackle poor standards have been introduced, implementing and enforcing those policies remains a challenge. As a result, they have not improved tenants’ housing experiences as much as anticipated.

We need to think more broadly about the practical policy interventions to improve PRS standards. Focusing on more powerful leverage points associated with system design and intent can transform the culture of the sector towards compliance with standards.

The problems with England's private rented sector

Relating to the supply side:

1. Insufficient numbers of social rented and owner-occupied homes mean that many people are living in the PRS who would not have traditionally done so.
2. The prevalence of small-scale landlords who do not operate as businesses presents a further challenge: landlords may not know about their obligations and they may not use financially robust business models.
3. The law can be complex, and some landlords don’t understand it.
4. Some landlords operate outside the law.

In relation to the demand side:

1. Because it has been relatively easy for a landlord to end a tenancy, tenants are afraid to exercise their rights if there is a maintenance issue.
2. Many tenants do not know their rights and so cannot exercise them. Years of funding cuts mean there is less help available from local housing advice and support services.
3. Some argue that criminal sanctions are insufficiently severe and rarely applied so they cannot act as a serious deterrent.

How should policymakers respond to challenges in the private rented sector?

Successive governments have changed policy and legislation with the aim of improving PRS standards. Most recently, Labour’s Renters’ Rights Act increases the rights and protections of renters. The key measure is the abolition of ‘no fault’ evictions and reforming the grounds for possession. The Government is also extending the Decent Homes Standard to cover the PRS, introducing a new ombudsman and creating a national PRS database. In addition, the Act aims to strengthen local authority enforcement powers by expanding the availability of civil penalties and rent repayment orders and extending investigatory powers. Importantly, the Act also places a duty on ‘every local housing authority to enforce the landlord legislation in its area’ and to report on this activity.

How should we regulate standards in the private rented sector?

The conventional approach to regulation – in housing and elsewhere – is known as command-and-control: establishing a performance standard and using a deterrence mechanism to drive compliance. However, this approach has been critiqued since the 1970s, with a greater emphasis being placed on more flexible and informal ‘compliance’ approaches.

Moreover, deterrence approaches can mean that the emphasis is on addressing episodes of non-compliance, rather than fostering a culture of continuous compliance. Applying a broader understanding of the drivers of compliance means considering, in addition to the ‘enforced factors’, the ‘spontaneous’ factors which influence landlord behaviour (see Figure 1).

Here, we are using the systems thinking concept of leverage points to think about policy interventions to change system behaviour. Shallow leverage points are relatively easy to reach, but are not powerful in (re)shaping system behaviour. Deeper leverage points are more powerful, but are harder to reach.

Existing policy debate tends to focus on the relatively shallow realms of leverage - parameters and feedback in the bottom left quadrant of the table - whereas those realms likely to be more effective – design and intent – are associated with spontaneous compliance (top right quadrant) and remain relatively unexplored.

The government’s current proposals focus on ‘enforced’ compliance factors and information accessibility. These are parameter and feedback leverage points. The focus on removing ‘no fault’ evictions aims to improve security of tenure for tenants, and potentially could therefore encourage more tenants to assert their rights regarding property quality and condition. These policies, while coherent, rely heavily on consumerism: tenants asserting their rights. Implicitly, the belief is that greater knowledge of the rules will lead to higher levels of compliance.

There is a question of whether these reforms are sufficient, and also uncertainty regarding whether adequate resources will be available to allow local authorities to fulfil their new responsibilities. There are several reasons other than lack of security of tenure to account for tenants’ reluctance to engage in formal legal proceedings to compel their landlord to address poor property standards. While making information more readily available to landlords will most likely lead to greater compliance, the effectiveness of acting on this dimension of spontaneous compliance is lessened by a lack of change of other factors.

What policies could improve the private rented sector

Addressing the deeper leverage points has greater potential to address the causes, rather than symptoms, of problems with standards. This would require acting in the design and intent realms:

1. Professionalising business models to increase the likelihood of adequate property maintenance;
2. Utilising alternative, non-official influences on compliance, such as through other housing-related organisations that distribute information and advice on rights and responsibilities, and which can potentially alert local authorities to non-compliance; and
3. Changing landlord behaviour by changing societal perceptions of poor landlord practice to increase social sanctions, which could then shift norms of property management. It would also impact upon other “spontaneous” compliance factors, including the degree of acceptance of regulation and respect for the regulator.

Changing social norms requires careful consideration and a multistranded approach. This cannot simply be top-down, nor can it be a short-term initiative. It requires effective non-state messengers and regulators and a (re)new(ed) sense of social expectation which exerts social pressure on landlords.

Barriers to accessing deeper leverage points

We identify three key barriers to change:

1. The need for a long-term, strategic approach to the housing system and housing issues by government.
2. Challenges relating to affordability, public spending and housing supply. There is a risk that improving standards will lead to rent increases, and potentially therefore increase the housing benefit bill. An alternative route might be through selective tax-expenditures on renovation and upgrading. Whichever route is taken, there is likely to be higher housing-related public spending.
3. The need for greater clarity and consensus over the purpose of the PRS. To embed a discourse focussed on the necessity of providing good quality housing, in a way that meaningfully impinges upon landlords’ behaviour, would require a shift to prioritising housing as a right over housing as a commodity.

Concluding thoughts

By providing a framework with which to think more expansively about intervention, a systems thinking perspective can offer some fruitful routes forward. System redesign and shifting system intent require considerable thought and care. To access and operate these levers requires engaging with fundamental questions within housing policy, including how – and where – to embed good quality housing as a right.

Digested read created by the authors with editorial support from Anya Pearson.