Trial of rent guarantees and loans to bring more private rentals into use for social tenants

(Title Image: landlordnews.co.uk)

If you’ve been reading Senedd Home for the last month or so you’ll realise that housing has become a hot topic in Welsh politics.

Yesterday, the Local Government & Housing Minister, Julie James (Lab, Swansea West), announced a trial to bring more private rentals into use for social tenants.

Overcoming “a competitive market”

The Minister told AMs that many councils are seeking private rentals to house households at risk of homelessness or actually homeless.

However, the private sector was very competitive and through the principle of supply and demand, private landlords can pick and choose whom they rent to, pushing vulnerable households out of the market or resulting in a “revolving door” where such households can only maintain private tenancies for six months or so at a time.

The Welsh Government is set to trial a new method:

“In exchange for a commitment from private sector landlords to lease their properties to a local authority for a period of up to five years, those property owners will receive guaranteed rent, every month, for the period of the lease….Additionally, property owners will be eligible for a grant and an interest-free loan to bring their properties up to a required standard….Interested private sector landlords will receive rent at the relevant local housing allowance rates….less a sum equivalent to a competitive management fee.”
– Local Government & Housing Minister, Julie James

Rentals will be expected to meet the Welsh Housing Quality Standard (WHQS), and tenants will be assured of up to five years of accommodation in the private rental sector at local housing allowance rates. Councils will now be invited to express interest in taking part in the trial.

Trial broadly welcomed

Shadow Housing Minister, David Melding AM (Con, South Wales Central), broadly welcomed the trial and noted there were similar schemes in England that Wales could learn best practice from. While he believed five years was perhaps too long and there should be some form of reasonable break in the contract for exceptional circumstances, he believed the trial would reassure landlords that they can take on vulnerable groups like ex-offenders, care leavers and low-income households.

Leanne Wood AM (Plaid, Rhondda) believes the solution lies in social housing, which is often less expensive, and she questioned the possible levels of subsidy involved:

“….your statement acknowledges that social security payments themselves limit the choice that people have within the private rented sector so it’s unclear whether this scheme will introduce greater subsidy to bridge that gap, or whether you are hoping that landlords will accept lower rent in exchange for a five-year guaranteed payment. So can you clarify whether additional subsidy is being put forward here to help enable people on benefits to access more expensive private rented properties than would otherwise be the case?”
– Leanne Wood AM

The Minister confirmed that the Welsh Government won’t be subsidising a higher rent, simply guaranteeing it at local housing allowance rates for five years. That five-year guarantee is seen as attractive by some landlords and it would provide secure tenure for tenants – though the Minister didn’t provide any figures for how much it could potentially cost.

Mike Hedges AM (Lab, Swansea East) said the trial could provide stability for families with children who often have to move once or twice a year; under a five-year guarantee, a child moving in at age 11 would remain in the same house when taking their GCSEs.

David Rowlands AM (BXP, South Wales East) also found little to criticise, though he thought the scheme had to represent a good return on landlords’ investment.

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