Immigration and the Private Rental Sector
With an estimated 41% of immigrants living in the Private Rental Sector, we look at what effects the ‘Right to Rent’ scheme and Article 50 could have on both the immigrant tenants and the landlords they let from.
According to figures from the Office of National Statistics (ONS), in 2014, 8.3 million immigrants lived in the UK, roughly 13% of the UK population. 3 million were from EU countries and 5.3 million were from non-EU countries. 1
As of 2016, 59% of those immigrants living in the UK were in rented accommodation, with 41% living in the Private Rented Sector and 18% in social housing, with the greatest concentration of immigrants living in London (44%). 2
‘Right to Rent’
Since the ‘Right to Rent’ scheme – which required landlords to check all potential tenants aged 18 and over have the right to live in UK before the start of their tenancy – came into effect on 1st February 2016, the results from this crackdown have been somewhat underwhelming.
Designed to tackle the perceived illegal immigration problem and create a “hostile environment for illegal migrants”, the new addition to the Immigration Act 2014, saw only 31 deportations out of 654 identified illegal tenants, as of December 2016; but 75 landlords were penalised with civil penalties.
Landlords who are found guilty of letting to immigrants without the right to live in the UK face penalties of £3000 per illegal tenant and since December 2016, a maximum sentence of 5 years in jail.
For more information on how you can protect yourself under the ‘Right to Rent’ scheme, please see the government’s guidelines.
The rules do not currently apply in Wales, Scotland and Northern Ireland, however in February 2017, the Home Office held meetings to begin the process of implementing ‘Right to Rent’ checks in those countries.
Why is the ‘Right to Rent’ scheme problematic?
As shown above, the scheme has not gotten off to the best start, and could be regarded as something of a flop. The lack of success is not the schemes only pitfall, the practical application of the guidelines is difficult to implement.
Firstly ‘Right to Rent’ places an immigration control emphasis on the landlords letting out the property, or the letting agents doing so on their behalf. Those letting out the property must ensure that tenants “have original documents that prove they can live in the UK."
The problem with this is how many average landlords can tell a genuine identity card or passport from a forged one? This means even with the best intentions, the deck is stacked against the landlord from the start.
The RLA have stated 63% of landlords asked about the scheme stated they feared repercussions from a mistake made in checking documents or from unknowingly accepting forgeries.
The second issue is the scheme is effectively turning landlords against wanting to rent to those who cannot produce original documentation or easily prove their identity, forcing those tenants to turn to unscrupulous landlords who will not worry about checking documentation.
In a report from the Joint Council for the Welfare of Immigrants: “51% of landlords surveyed said that the right to rent scheme would make them less likely to consider letting to foreign nationals.”
“42% of landlords were less likely to rent to someone without a British passport as a result of the scheme. This rose to 48% when explicitly asked to consider the impact of the criminal sanction.”
There is an estimated 17% of UK residents do not own a passport, and as such, could find it difficult to rent privately, despite being born in the very country they want to live in. 3
Andrew Turner, chief executive of Commercial Trust shares his views on the scheme:
The ‘Right to Rent’ scheme was a badly misconceived and an unfair imposition on the Private Rental Sector, who are supposed to become border police with absolutely no training. You cannot expect a landlord to be able to tell whether a document handed to them is authentic or a clever forgery, and have that judgement be their only defence against disproportionate fines or jail time. Considering this government believes the rental market makes ‘a vital contribution to our housing market’, it seems to have little, if any, sympathy or empathy for the landlords who have made it such.
If the ‘Right to Rent’ sanctions were not already stern enough, the government is planning to introduce further penalties to landlords who knowingly rent to tenants who do not have permission to live in the UK, which will be outlined in an upcoming White Paper, due for release in the Summer.
A recent quote attributed to an unnamed minister in The Times stated: “We will be making landlords and employers do a lot of the heavy lifting on the enforcement [of the proposed plans in the White Paper]. That’s the direction of travel.”
However, the RLA have written to Immigration Minister Robert Goodwill MP requesting clarification on exactly what this ‘new plan’ will entail, as it mentioned 5-year jail terms for landlords who break the rules, something that has already been implemented.
The full letter from the RLA to the minister can be found here.
With the announcement on Wednesday 29th March that Prime Minister Theresa May has officially invoked Article 50, and begun the process to remove Britain from the EU, many European citizens living here are faced with the uncertainty surrounding their eligibility to remain living in the country.
The European Parliament has stated it would veto “any Brexit deal preventing EU citizens who move to the UK during the next two years from having the same rights to live and work in the country as those already here.”
It is too early to tell what the government will do with regard to EU immigrants currently living and working in the country who wish to remain doing so, after the House of Lords failed in their bid to secure EU nationals' rights earlier this month.
The Prime Minister has said she would get 'the right deal' and represent the interests of everyone in the country including “those EU nationals who have made this country their home.” 4
Landlords relying on seasonal workers
For those immigrants who come to the UK to work seasonal jobs, such as in farming, food processing and warehouse packing, private renting offers them a flexible and cost effective temporary housing option, while bringing in a concentrated source of income to the local landlords.
Many landlords, for example in areas such as East Anglia who rely on seasonal labour workers to rent their properties, could find themselves facing potential void periods if EU worker travel is curtailed as a result of the exit process.
Without the influx of immigrants using their properties, many of those landlords could be faced with the prospect of having to either sell their properties or try and find tenants elsewhere.
What happens next?
Andrew Turner believes that with regard to Article 50, the drawn out wait is now over. “The Prime Minster has started the countdown and all we can do for now is watch with anticipation as to what happens next. Whatever the outcome, both during and after our exit from the EU, my aim is to keep our landlord clients informed of relevant industry news so that they can make informed decisions about their properties.”
This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.