A “significant minority” of landlords and letting agents may not be following consumer protection rules, according to the UK’s competition watchdog, which raised concerns including complaints about onerous guarantees, discrimination against certain types of tenants and fees charged to older people entering retirement housing.
The Competition and Markets Authority (CMA) laid out on Friday the focus of its work on the housing market, after announcing in February it would look into the private rental and housebuilding sectors.
Among the competition concerns in the market are the large amounts of land owned by housing developers but not built on, known as land banks, as well as charges for owners of properties built on new housing estates.
Sarah Cardell, the chief executive of the CMA, said: “The CMA alone can’t resolve the problems in the UK housing market. But we have a role to play and will do our part to help ensure the private rental and housebuilding markets work better for people and businesses.”
Since launching its study into the housing market in February, the CMA said consumers and others in the industry had contacted it to raise concerns about five areas of private housing rental.
The study comes at a time when private rents in Britain have reached record highs, running well ahead of inflation, and there have been reports of queues of prospective tenants for available properties.
Concerns about the private rental market raised with the CMA included zero deposit schemes, where tenants are not required to pay a large deposit when beginning a tenancy but may be unaware of their liabilities. Sham licences, where tenants were told by landlords that they only had a licence to occupy a property rather than having the full consumer rights of an assured tenancy, were also raised as a concern.
The watchdog is looking into onerous guarantee clauses faced by some tenants, where they faced hefty obligations when renting a property, such as having to provide extensive evidence of assets.
The CMA is also reviewing unlawful discrimination against certain tenants, where some properties are advertised as not being available to housing benefit claimants, with “no DSS” being written on housing adverts.
In addition, the watchdog has received complaints about “event fees” sometimes charged to vulnerable tenants entering specialist retirement housing, which it will review to see whether certain businesses are taking advantage of elderly consumers.
Cardell said the watchdog was “taking action to provide updated guidance for lettings agents so that both tenants and landlords are really clear about their own rights and responsibilities”.
If any agency or landlord is found to be breaching consumer protection law, the watchdog said it would not rule out launching enforcement action.
In addition, the CMA is investigating the economic conditions affecting the housebuilding sector, as well as looking into concerns raised by campaign groups, councils and housing developers.
The watchdog is investigating the huge swathes of land held by the UK’s largest housebuilders, and analysis shows that these have grown in size in recent years, prompting concerns that this might be limiting competition or slowing the rate of housebuilding in some areas.
It will also look into whether complex planning rules and uncertainty about decision-making is hindering the building of new homes, especially those from smaller housing developers. It will also consider whether there is enough competition among housebuilders in certain areas, and whether smaller and medium-sized companies are able to compete.
Among other issues raised were estate management charges, which have to be paid by owners of properties built on new housing estates built over the past five years and not “adopted” by their local authority, meaning that amenities including roads, parks and street lights have to be maintained by a private management company.
Cardell said once its housing work was complete, it would consider “what actions the CMA can take to tackle any concerns identified or whether there are more effective ways to deal with those concerns, such as through recommendations to government for legislative change”.
The CMA will provide updates on its work in the private rental and housebuilding sector in the autumn.
