At this months Housing Cabinet meeting Councillor Darren Sanders and other cabinet members supported proposals to widen their bond scheme and the use of a community bank to provide low cost loans, with the aim of getting people off of the housing waiting list and into homes in the private rented sector.
(This is the topic we discussed at our January member meeting, watch that here)
Some detail from the recommendation:
"3.1 There are approximately 20,000 homes in Portsmouth which are privately owned and then rented to tenants. These are known as the private rented sector (PRS) which represents 22% of all homes in the city.
3.2.Nationally there are new tenancies in approximately 19% of all PRS properties each year. If Portsmouth is consistent with the national average, around 3,750 new tenancies will start in Portsmouth each year. Many of these will be student lets, coordinated by the University of Portsmouth's Studentpad service. There are approximately 24,000 students studying at the University.
3.3.Just under 4,000 PRS homes in Portsmouth are classified for Council Tax as 'student exempt'.
3.4.An estimated 5,900 PRS households in Portsmouth receive some help towards the cost of their rent, from either Housing Benefit or Universal Credit (Housing Costs Element).
3.5.The council has no data regarding the economic status of the approximately 10,000 PRS households that are not solely students, or in receipt of financial assistance.
3.6.There is no local data available on the number of landlords who operate in Portsmouth, but based on the national average of 1.8 properties per landlord, there would be approximately 11,000 landlords responsible for homes in Portsmouth. Nationally, 61% of landlords use a letting agency. If this is applied to Portsmouth it would indicate that approximately 6,700 landlords use a letting agency, and 4,300 operate independently. Please note that these figures are rough estimates and we have not yet been able to verify them.
3.7. 1,638 households on the council's general needs housing waiting list need to move for health reasons or due to overcrowding, and have a low or medium level of need. They are unlikely to be offered housing through the waiting list under the current level of demand and housing availability.
3.8.However this is just a small part of the housing need in the city, as many do not register on the waiting list due to the lack of available properties. Around a fifth of households in rented housing in Portsmouth were considered to be overcrowded under the 2011 Census.
3.9.The administration have asked officers to outline options for expanding financial assistance to enable more households to access PRS homes in Portsmouth.
5. Financial difficulties in entering the PRS
5.1.There are a number of financial barriers for tenants and prospective tenants in the PRS in Portsmouth:
5.1.1. High demand for PRS housing (evidenced through above inflation rise in market rents which are higher than Hampshire or England averages), including student housing, which increases competition for homes;
5.1.2. Over three quarters of PRS lets in the city are at rents above the cap for Housing Benefit and Universal Credit assessments (the Local Housing Allowance rate);
5.1.3. Lack of security, with most PRS tenancies let on six month Assured Shorthold Tenancies (AST). Although many landlords will be seeking longer-term lets, if the landlord's circumstances change the tenancy can be ended at any point outside of the fixed term with 2 months' notice. The imbalance of information regarding the actual length of the tenancy can create uncertainty for tenants.
5.1.4. Low income and indebted households are unable to qualify under the income and credit check requirements applied by many landlords.
5.1.5. Prospective tenants often are required to find someone willing to accept liability for any unpaid rent and costs, known as a guarantor. Guarantors must meet the individual landlord or letting agency's specific criteria, which can include income, home ownership and credit checks (see Appendix 1 for more detail on the role of a guarantor in the PRS).
5.1.6. Upfront costs are a significant barrier to lower income households seeking to secure PRS accommodation in Portsmouth. Most PRS landlords require a tenancy deposit and rent in advance to be paid before granting a tenancy.
Options to assist access to the private rented sector
7.1. The purpose of any scheme is to help more people to access suitable PRS housing. This could be either to extend the range of help for those currently eligible to receive help, or to provide support to those who are not currently eligible for any financial support.
7.2. The council's ability to assist more residents to access PRS housing is currently limited by operational capacity and financial constraints. The resources currently available are targeted towards meeting the council's statutory duties.
7.3. Appendix 2 details five options which could be introduced to enable residents to access the private rented sector sooner or more easily. Each option has strengths and weaknesses, and will require different levels of financial resource and operational capacity.
7.4. The options are summarised as follows:
7.4.1. Option 1 - Portsmouth City Council (PCC) acting as tenancy guarantor The council acts as the legal guarantor for a PRS tenant, with full liability for any unpaid rent, interest and costs. There would also be liability for any costs as a result of damage or theft not covered by the deposit. Industry standards mean that the size of the liability is unlikely to be restricted. The council would require landlords to make contact if any breach occurred which could lead to cost for the council.
7.4.2. Option 2 - Widen the current bond scheme Instead of acting as a guarantor, the council can provide a bond which could be claimed against rent arrears, damage or theft. The bond agreement would enable the landlord to make a claim during the term of the tenancy, for example for unpaid rent, and at the end of the tenancy, but the bond agreement would stipulate a maximum liability on the council equivalent to four months' rent.
7.4.3. Option 3 - Managing the rent account and providing guaranteed monthly payments to the landlord The council would sign an agreement to pay the monthly rent in full directly to the landlord. The tenant signs an agreement to pay rent to the council. However, the tenancy agreement remains between the tenant and the landlord, so the council does not assume any further responsibility for tenancy management. To limit the council's liability, the agreement with the landlord or lettings agency would include a clause allowing the council to terminate with two months' notice.
7.4.4. Option 4 - Deposit and rent in advance loan scheme The council would work with a community bank to provide loans for deposit and rent in advance to those needing assistance to access a PRS home. Providing a contingency fund of 25% of the total amount loaned will enable the community bank to make the loans at relatively low interest rates when compared to other high street lenders. This option restricts the liability for non-repayments and minimises the level of council resources needed to manage such a scheme. The council also has the option (Option 4b) of providing additional funding in order to enable the community bank to provide loans with zero interest charged to the customer.
7.4.5. Option 5 - Funding an external guarantor scheme The council pays the fees charged by an external guarantor agency who would then provide the guarantor service to the tenant. The tenant must meet the specific income requirements determined by the guarantor agency, and would require a co-signer to take responsibility for any financial liability, but they would not be required to meet the criteria usually required of a guarantor.
7.5. The recommended options are Option 2 (widen the bond scheme) and Option 4 (support low cost/no cost loans for deposits and rent in advance). However all options would need funding, which is not currently identified within the housing general fund budget.
7.6. The proposal is to provide funding to deliver a 12 month pilot scheme in order to better understand residents' needs, landlord requirements, financial costs and risks, and delivery options."
Written & oral information and advice from the Portsmouth & District Private Landlord's Association is given in good faith, but no responsibility whatsoever is accepted by the Association or it's officers for the accuracy of it's information & advice nor shall the Association be held responsible for the consequences of reliance upon such information.