Lindsay de Sausmarez: Regulating the rental sector

There’s nothing like being summarily evicted to make you appreciate the importance of security of tenure. Not that I thought about it in precisely those terms at the time…

Back then, I was in my early twenties and living in a small apartment in a big city. I’d got up that morning and gone to work, when I had a call from a friend who lived in the same block to tell me to drop what I was doing and run – my landlord had gone a bit mad and was chucking all my belongings out of the window onto the pavement below. By the time I got there, he’d changed the lock and was ranting incoherently from the other side of the door, so I was relieved that he’d at least done an efficient job of jettisoning my possessions.

Now, I was young with a pretty portable lifestyle, so I didn’t waste time wondering whether he’d acted lawfully. I called some friends with a comfy sofa and was soon back on my feet. Afterwards, though, I was never complacent about the security of the roof over my head. If I had such an unstable landlord now, when I have dependent mouths to feed, it would shake the very foundations my life is built on. Most landlords are nothing like him, thankfully.

More than a quarter of Guernsey homes are in the private rental sector, so it’s a hugely important part of our housing market – but it’s not without its problems.

First of all, there’s the question of availability – for many in Guernsey, it’s hard to find somewhere to rent in the first place. If you have children or pets, or if you rely on income support to supplement your earnings, you might find it particularly difficult.

Next, there’s the issue of affordability. Let’s not put any lipstick on this particular pig – Guernsey’s private rental market is even more systemically unaffordable than the ownership market, and that’s saying something. You’re advised to assume the brace position while I run through these stats.

The average single-income lower quartile household (in other words, a household of whatever size with just one earner, whose income is in the bottom 25% of the earnings scale) needs to spend a whopping 78% of their income on rent. Believe it or not, that is in fact an improvement – two years ago, that same average household would have needed to spend 83.5% of their single income on rent. 35% is the maximum proportion of income spent on rent to be considered affordable, so we still have an incredibly long way to go.

The amount spent on rent might be eye-watering, but are renters at least getting their money’s worth? Many rental properties are of good or even excellent quality, but the sector is currently unregulated, so a small minority of rogue landlords get away with charging good money for sub-standard and even unsafe accommodation.

‘But why can’t tenants just report these unsafe properties?’ I hear you ask… Well, that’s because they are largely unprotected in law, so they know that dobbing in a rogue landlord could mean they are swiftly turfed out on their ear – and when affordable accommodation is so scarce, that’s not a risk many are prepared to take.

And spare a thought for all the good landlords out there too – they are also largely unprotected in law, so sometimes have no recourse when they have a nightmare tenant on their hands. The wider economic climate really isn’t helping – good landlords who are impacted by increasing mortgage costs are leaving the market, and buy-to-lets just don’t stack up as a financial proposition as they might have done a few years ago. The sector is struggling to retain landlords and attract vital new investment. If the proportion of rental properties in the market contracts further, that will make problems worse around availability and affordability.

Having taken you on a whistle-stop tour of the problems, I’ll try to shine a light through the gloom and focus on what we’re doing to address them.

Availability and affordability are related, of course, and one of the fundamental problems across the whole of our housing market is that there is more demand than supply. I’ll talk about the perfect storm of supply-side problems and how we’re working to increase the rate of house-building in a separate article, but one of the things we’re doing specifically to help the private rental sector is working with institutional investors and the Guernsey Development Agency to establish build-to-rent schemes – something that is not well-established in the island but which would hugely benefit the private rental sector if we can scale it up.

Build-to-rent attracts investment into good-quality developments that bring more rental homes (usually apartments) onto the market at a range of price points – including an asset class known as affordable private rent. These developments make sense from an investor’s perspective, because they get a reliable long-term return on their investment, and they make sense for renters because they have a wider choice of good-quality units at a more competitive price, with a stable and secure tenancy agreement.

What are we doing about quality in our existing rental market? Guernsey is a real outlier by not setting minimum standards for rented properties and defining hazards in law, so we’ve developed, drafted and consulted on some legislation that will do exactly that. Once the final version is approved and takes effect (we hope next year), tenants can be confident their home is of an acceptable quality and safe to live in. Most landlords will already be meeting these standards so have nothing to worry about, but we need this legislation to tackle the few that do not act in good faith and exploit vulnerable tenants.

While it’s important to establish some long overdue regulation in this sector, it’s also essential that the regulations are not overbearing or burdensome for landlords. They and their properties will need to be registered and houses in multiple occupation will need to be licensed, but we’ve been careful to develop a system that is proportionate, pragmatic and – crucially – not overly bureaucratic or costly, either for landlords or for the taxpayer.

We’re also changing the law to give both landlords and tenants additional and more robust rights, and to set their respective responsibilities in law as well. We’ll be going out to consultation on this in the next few weeks, so if you have views on issues like minimum notice periods, the grounds for repossession and the process around evictions and disputes, please have your say – that feedback will shape the legislation for the better.

Guernsey’s private rental sector is an essential part of our housing market, home to a huge range of people – from high-flying professionals, to key workers living here for just a short time, to some of the most economically-vulnerable people in our community. We need it to work for everyone, for tenants and for landlords. We’re working to improve availability and affordability, and to make it a more attractive, safe and secure tenure of choice. Like so many others, I have a deep and personal appreciation of why that’s important.