Welsh Government Housing Reforms

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Welsh Government Housing Reforms

The Welsh Government published a White Paper and consultation on further housing reform at the end of October. This was based on an initial Green Paper and consultation on fair rents and reducing housing costs that took place in July 2023.

This is clearly being considered with care as the White Paper has a further consultation which runs until the end of January 2025. Given that the initial Green Paper also had a substantial consultation period and there has been significant period of time between the end of that consultation and the publication of the new paper it is clear that this is not policy-making “on this hoof” and considerable thought is being given to this.

At the same time, English lawyers and landlords should watch what happens in Wales with interest. There are elements in the Renters’ Rights Bill that have clear origins in Wales and with a Labour government in both Cardiff and Westminster it is likely that ideas that are found to be effective in Wales might appear in England.

Key Proposals Under Consultation

The white paper focuses on three key areas that could reshape the Welsh housing landscape. First, it seeks to produce and enforce a minimum standard for adequate housing in Wales. Secondly, it looks to target the issue of affordability in the Private Rented Sector. Finally, it seeks to improve access to rental property.

All of these proposals build on existing policies but they also all need further legislation to bring them into effect. In that sense these proposals are, as the White Paper says, long-term in nature and so there is not likely to be imminent change.

Housing Adequacy

The first aspect of adequacy is how to define it. The Welsh government is following a UN definition produced by the Committee on Economic, Social and Cultural Rights (CESCR) which uses seven criteria:

  1. Legal security of tenure;
  2. Availability of services, materials, facilities and infrastructure;
  3. Affordability;
  4. Habitability;
  5. Accessibility;
  6. Location;
  7. Cultural adequacy.

The general objective is to have a “minimum core” of rights which provides a basic level of protection against the seven criteria and the Welsh government is, in accordance with UN suggestions, taking steps to move towards those standards. To a large extent the Welsh government believes its current legal framework meets the seven criteria but it is focused on the UN recommendation that a strategy is produced against which progress can be measured. It intends to bring forward legislation to require a housing strategy to be produced that supports improvements in housing adequacy. It is anticipated that this will include requirements to monitor progress and review the strategy regularly. However, the scope of the legislation is extremely hazy.

Fair Rents

The Welsh government is clear that it is not proposing rent control as it could lead to supply-side reductions. Landlords are likely to breathe a sigh of relief at this clear statement. It does however intend to improve the capture of market rent data so that there is a better picture of the exact cost of renting in the PRS. Data has long been an issue so getting a better idea of how the PRS works is likely to be a step forward.

That said it is clear that there is interest in the new rent increase reforms that will come into effect in England with the Renters’ Rights Bill. Wales had made itself something of an anachronism here by having a rent increase mechanism in the Renting Homes (Wales) Act that had no restrictions at all on the scope of rent increases. It looks like the Welsh government now wishes to correct this omission but may do so in a different way from England as it is considering using Welsh Rent Officers to provide adjudication on increase notices with a possible appeal to the Welsh Residential Property Tribunal.

There is now a proposal to have Rent Smart Wales collect rent data. It is now thought that the best way to do this is to get all RSW registered landlords to provide an annual update to confirm that they are still renting but also to provide annual data on rents.

As a part of this annual update there is also a desire to ask landlords to give some form of annual property condition update and declaration. This is likely to include:

  • Confirmation of valid gas safety checks;
  • Confirmation of valid electrical safety checks;
  • Certification that no hazards within the Fitness for Human Habitation categories exist;
  • Confirmation that mains-wired smoke alarms are in place and have been tested; and
  • Appropriate Carbon Monoxide detectors are installed and have been tested.

It is intended that the outline of this data will be available to prospective tenants so that they can be confident that the property they propose to rent has an annual property record.

Accessibility

The Welsh government is also keen to limit barriers to renting. They have in effect done this to some degree as parts of the Renters’ Rights Bill will apply in Wales but they seem to wish to go further.

There is a desire to assist the guarantor process. The proposal seems to be that the Welsh government will act as some form of guarantor for impecunious tenants who have no other option. At least initially the government aims to create national guidance on being a rent guarantor which is aimed at local authorities. This is intended to give local authorities confidence in acting as a guarantor to assist tenants. Any guarantee scheme would be for rent only and so landlords would need to decide if they were prepared to accept the risk of damage with limited prospects of recovery.

This may also end up being coupled with limitations on rent in advance so that only a certain amount can be sought and that it will be held in a bond to give the tenant some certainty that they can get it back if it is not used.

For tenants with pets there is no direct plan to allow tenants to request a pet and to make it hard for landlords to refuse. But there is an intention to amend the Welsh equivalent of the Tenant Fees Act to allow landlords to ask tenants to pay a premium on a pet insurance policy. This is replicating this small part of the Renters’ Rights Bill.

Finally, the Welsh government has for some time had a rent to rent scheme in operation which allows landlords to rent properties to a local authority and then receive a rent equivalent to the Local Housing Authority rate. The local authority then rents the property on to a tenant themselves. There is a proposal to make this a lot more attractive by allowing landlords to reclaim uplifts on Land Transaction Tax (the Welsh equivalent of Stamp Duty Land Tax). As in England this tax is uplifted for those buying additional properties, a tax that falls specifically (although not exclusively) on landlords. That uplift could be recoverable for landlords that are prepared to rent property at a reduced rate. For some investors in specific areas this could be a very attractive offer depending on exactly how it works. This mirrors a proposal that has been put forward by landlord groups to government before and if the Welsh government adopts this then it may well attract investment in property.

Conclusion

There are some interesting proposals here which may well attract larger landlords who are more investment minded. Ultimately it will be necessary to see the actual details of what is produced.

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