Wednesday, 2 March 2011

Ratings website for private renters could help show bad landlords the door says consumer watchdog

The private rented sector generates more complaints than almost any other. According to a new report issued today by Consumer Focus, the consumer watchdog, one of the biggest issues is that private renters often know very little about their landlords before signing a tenancy agreement.

Today the watchdog has written to some of the largest letting agents and deposit schemes in England calling on them to explore how online feedback could empower tenants by giving them a better insight into their potential landlords.

The new report – ‘Opening the door’ – outlines the information imbalance which works against consumers in the private rented sector. Just 15 per cent of tenants surveyed were able to find all of the information they wanted about a prospective landlord or letting agency.

Over a quarter could find very little or even no information and a third who had found information obtained it from the landlord1 themselves. By contrast landlords or letting agencies can ask tenants for references, deposits, guarantors or other personal and financial information.

Almost nine in ten renters agree that a website to share experiences of landlords would help them to make better decisions before signing a tenancy agreement. Renting is one of the biggest financial commitments consumers make, with private sector renters paying an average of £816 a month for a one bedroom home and this rises to £1,406 in London.2 Yet worryingly, Consumer Focus research shows that over a quarter of renters had cause to complain in the past two years, making the private rented sector the second most complained about market.3 Many of the 1.1 million households who sign up for a new tenancy experience problems with their landlord which only become apparent after signing a legally binding agreement.

Reputational regulation has worked well in other sectors with commercial sites, such as eBay or Amazon, displaying consumer reviews and feedback to people have access to a range of information before they make a decision on what to buy. Consumer Focus believes that a similar site based on constructive feedback could help solve the information imbalance and help people seek out more reputable landlords and avoid the bad ones. Research by the consumer champion has found that websites where consumers share experiences are influential and that, perhaps surprisingly, most people leave positive not negative feedback.4 The site would also reward and incentivise the better landlords in what is a rapidly growing market.5

Claire McAnulty, Policy Expert at Consumer Focus said:
‘Currently the landlord is firmly in the driving seat despite rent being a massive outgoing for many of us. People often sign up with little more than a gut feeling after a cursory tour of the property – if they are lucky, they might have a word of mouth recommendation. The best way to help private renters is to ensure they have the information to know what they are getting into.

‘There is huge potential for a feedback website to give tenants a better idea of whom they’re renting from. Getting behind a feedback website could also help the industry establish a better reputation and build up much-needed trust with renters.’

Shelter Chief Executive Campbell Robb said:
‘Shelter welcomes the findings of this report which clearly highlight the need for better regulation in the private rented sector. The findings echo complaints we hear every day from private tenants about the limited protection they have when they rent privately and the desperate lack of available information on landlords to help them make an informed decision.

‘We are particularly keen to see the use of landlord accreditation grow. It is vital to raise standards, help tenants get information about their landlord, and provide landlords with the advice and support they need to offer a professional service to their tenants.’

In 2008, the last Government published a review of the Private Rental Sector in England (the ‘Rugg Review’). The review concluded that there is a supply and demand imbalance, particularly for properties affordable for tenants on low incomes. As a result, there will be a continuous demand for properties even if they are owned by landlords with a bad reputation. Consumer Focus’ report argues that for this reason market forces alone cannot be relied upon to ‘regulate’ the sector.

To help address consumer protection issues in the private rental market, Consumer Focus would like to see:

•The introduction of a pilot tenant feedback website, ideally in conjunction with one of the tenancy deposit management schemes6. With input from tenant and landlord bodies a successful pilot would ensure that a robust, balanced and large-scale scheme could be taken forward in the long term. Initial support would be needed from a third party to fund and independently evaluate the pilot website.

•A minimum common standard and quality mark to be introduced for all private landlord accreditation schemes. There are at least 80 different types of voluntary schemes operating in England7, meaning the standards that landlords must meet vary considerably. A common quality mark would act as a benchmark to reward good landlords and offer assurance to their tenants.

Notes to Editors

The full ‘Opening the door: Examining the potential for reputational regulation of private rented sector landlords ’ report can be found at the following link.

1.Consumer Focus research undertaken by ICM as an online omnibus survey with a sample of 2,000 people in January 2011. The research also showed that 94 per cent used online review sites to inform their decision before buying goods or services; 80 per cent who used them saw review websites or customer feedback as fairly or very influential; 86 per cent of current, past or potential renters would like the opportunity to find out more about a landlord or letting agency before signing a tenancy agreement and 95 per cent agreed that a website of this type, which allows tenants to share experiences of landlords, is a good idea. figures for rental prices for a one-bedroom property in England. London rental prices are the highest at £1,406 a month (based on January 2011 figures)

3.The ‘2009 Consumer Conditions Survey’ issued by Consumer Focus in December 2009. The survey also found that overall, consumer satisfaction with renting a property or management services from a private landlord ranked just 38th out of 45 private sectors.

4.Quantitative survey data commissioned from Andrew Smith Research in conjunction with Research Now: Unleashing the New Consumer Power, Consumer Focus, Philip Cullum (March 2009). Half of survey respondents had left positive feedback on a dedicated website or blog following a good experience in the past year, with 35 per cent stating they had left negative feedback.

5.The Private Rented Sector has grown substantially over the past decade, and now 3.1 million households (14 per cent) in England rent privately (English Housing Survey – February 2010.) Over a third (36 per cent) of these live at their current address for less than 12 months. New research by the Building and Social Housing Foundation suggests that if housing market trends continue, the UK PRS will be bigger than the social rented sector by 2013, and by the end of the decade up to one in five UK households could be private renters.

6.A pilot website could be developed alongside one of the three tenancy deposit management schemes, which manage a database of landlords legally obliged to register tenant’s deposits. The software already in use by the tenancy management schemes could be adapted to collect consumer feedback. Using one of the schemes would also help to provide a pool of landlords who could volunteer to take part.

7.Data from the UK Accreditation Network (ANUK). These schemes are run at a local level and are largely set up by universities, often in partnership with student unions, or local authorities, often in partnership with landlord associations.

Press Contact Details
John Cottrill
020 7799 8006
Emma Adler
020 7799 8004
Topics: private landlords, private renters, Public services.