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Private landlords exodus backfires on public housing

Far from being insulated from the ups and downs of the real estate market, social and emergency housing has become tethered to it - and is facing an entirely new crisis of its own. 

October 21 2023, 08.47am
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Private landlords are selling off their properties at a record rate. Though the number of properties coming onto the market is helping to reduce house prices for buyers, the exodus of private landlords is not good news for Generation Rent. The mass sell-up, provoked by rising mortgage costs as well as imminent changes to the laws protecting tenants’ rights, is adding heat to the already burning fire of the private rental market. According to the estate agency Hamptons, between 2016 and the end of 2023, there will be approximately 300,000 fewer buy-to-let landlords offering their homes for rent.

As well as increasing competition for scarce properties, this mass sell-off is creating another problem: it has left councils with nowhere to house homeless people in an emergency.

This might seem counterintuitive: what do the decisions of private landlords have to do with homelessness provision? The answer is a lot. Just three decades ago, almost every homeless family requiring temporary accommodation would have been placed immediately in social housing provided by either a housing association or a local council. But since the buy-to-let boom of the early 2000s there has been a ready supply of private landlords with properties to rent out who want a high return on their investment but not the arduous job of managing a tenancy.

This sudden glut of hobbyist landlords coincided with the rapid shrinking of the social housing sector as homes were sold off through the right to buy and also by housing associations “rationalising” their property portfolios. That meant housing associations and councils had fewer social homes in which to place homeless families on a temporary basis. To turn a quick profit, these speculative property owners were willing to rent their property to local authorities, or brokers working for them, to provide temporary accommodation. 

It wasn’t a perfect solution, but it was an effective stop-gap. Now it is falling apart. 

In the capital, where the housing crisis is most acute, more than 3,500 homes that were available for temporary accommodation placements for homeless households were withdrawn by landlords between September 2022 and April 2023, according to figures published by London Councils. 

The issue is just as pressing outside the capital. The failure to raise the Local Housing Allowance, the benefit paid towards housing costs, to meet the actual cost of private rents has meant that landlords right across England have been backing away from working with local authorities. Providing temporary accommodation for homeless applicants is no longer the stable, solid income stream for investment landlords it once was.

So far no other region has surveyed councils about how many private landlords have withdrawn from the sector, as counted by London Councils in the capital. It’s not possible to state the speed of loss in other areas. However, data held by the Department for Levelling Up, Housing and Communities shows the rising cost to councils of meeting their legal obligations under the Homelessness Reduction Act 2017. English councils spent £368m on this in 2022/23, up from £314m in the previous year - a rise of more than 17% in one year. The legislation forces councils to help families at risk of homelessness find alternative or intermediary accommodation. 

According to a 2023 House of Commons report, the cost of providing temporary accommodation to families in emergency need has risen by almost 40% since 2010. In total almost £1.6bn was spent on temporary accommodation in 2021/22, according to the latest analysis. These high figures are prompted not only by growing numbers of households at risk of homelessness but the cost of providing temporary accommodation when it is increasingly only available through the most expensive sources: hotels, hostels and bed and breakfast accommodation.

There are two pressures for councils. Many landlords are choosing to get out altogether, but those that want to remain in the business are finding that the inexorable rise in market rent means they can get more renting on the open market than by relying on the security of a fixed contact with local authorities. They are being pushed and pulled away from the temporary accommodation market.

Deborah Garvie, policy manager at the housing charity Shelter, said the reason for a sudden exodus was “complex” but appeared to be leaving councils with very few options. “In some cases, it’s because their contracts with councils are coming to an end; in others, individual private landlords might have decided to sell that property. Whether or not it’s possible to procure other temporary accommodation is the big issue at the moment. The fact that private rents are now at record levels means that private landlords might be thinking they’ll go back to letting direct to tenants on higher rents.”

A further threat is also opening up as Home Office staff desperate to find stable accommodation for refugees leaving hotels are offering higher rates per night, hoovering up some of the remaining landlords interested in public housing contracts.

Ironically, the decision of thousands of private landlords to sell up their rented homes is also a driver of homelessness too, with tenants issued with ‘no fault’ evictions to speed up their exit when landlords are looking to for a buyer.

Councils encourage tenants to get evicted 

The shortage of temporary accommodation is forcing councils to spend even more money on temporary housing, placing homelessness households in emergency shelter, increasingly provided by hotels and B&Bs. Almost 10,000 families were housed in B&Bs by June 2022, around a quarter of those with children, and the number is rising. Given the acute social housing shortage these placements can be relatively long-term, over periods of six weeks or longer, and these settings are damaging to families’ prospects of recovering their lives after experiencing homelessness.

Ben Reeve-Lewis, a former council tenancy relations manager and now a housing advocacy worker, said temporary accommodation was now increasingly being provided by household travel names such as Ibis, Premier Inn and Travelodge. 

“This [crisis] is forcing councils to use more hotel chains to provide accommodation to homeless families but there are no cooking facilities in the rooms and people can’t afford to eat out, so they are bringing in cookers. One contact told me recently of a client of hers who got badly burned trying to cook rice for her kids in a kettle,” he said.

Councils, which are already under great strain to manage long housing waiting lists, are seeing the departure of private landlords from the wider rental market lead to a spike in homelessness claims as their tenants are evicted for sale. The pressure is proving unsustainable. “Many homelessness units are on their knees,” Reeve-Lewis said. 

In some areas, it is feared that the added financial pressure of providing temporary accommodation at such high cost is expected to contribute to a destabilising of entire local authorities. One insider working close to local government said the issue had the potential to lead to district councils, which retain responsibility for housing and homelessness support, “falling over financially”.

A spokesperson for the Local Government Association admitted that the use of hotels, B&Bs and out of area placements was now becoming a necessary part of managing homelessness. “While homelessness has often been viewed as an urban and metropolitan issue, we are now increasingly seeing the pressures to find suitable housing with higher costs significantly impact more rural areas and districts as well,” they said.

At Shelter, Garvie sets out the scale of the problem: “The housing emergency is at the worst it's been in decades. We’re at the point where even councils are struggling to procure temporary accommodation. People need access to settled homes but this is extremely difficult because there is no affordable housing and housing benefit is still frozen at 2020 levels.”

Pressure on the housing sector is now so acute that councils are routinely telling private tenants to overstay their contracts and be evicted through the courts in order to qualify for housing support (if they choose to leave, rather than being evicted, they can be deemed “intentionally homeless” meaning their local council has no legal duty to support them). With temporary accommodation now an unaffordable burden on councils and private landlords unwilling to work with local government when they can earn more elsewhere, rapid development of new social housing is the only way to cut costs for the state while also providing a more stable option for families facing homelessness. 

Labour has promised to build 1.5 million new homes over the course of the next parliament, if it secures a majority at the general election. But if the next government wants to prevent councils being bankrupted by emergency housing costs, a large proportion of those must be for social housing, not for private sale.