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A Rental Guarantee Scheme – a solution to a lack of affordable housing in Wales?

January 29th 2019

Having attended the Welsh Government’s Housing Seminar on the 24th of January, Steffan Evans reflects on some of the challenges and opportunities presented by a new Welsh Government policy idea, a rental guarantee scheme.

On Thursday the 24th of January the Welsh Government hosted a Housing Information Seminar at the Millennium Stadium in Cardiff. The seminar focused in particular on the private rental sector (PRS) with a number of different speakers providing participants with new insights into the way that the sector operated in Wales.  One of the speakers at the event was the Head of PRS reform at the Welsh Government. Matthew provided an interesting presentation setting out the latest policy developments concerning the PRS and outlined the Welsh Governments thinking on future ideas. One of these potential future ideas caught my attention in particular, namely the Welsh Government’s intention to introduce a rental guarantee scheme in the PRS.

Whilst still at an early stage of development, participants at the event were given some information about the potential shape of the scheme. Under the rental guarantee scheme the Welsh Government will guarantee the rental income of a PRS landlord if they agree to house a tenant who is in receipt of housing benefit or Universal Credit, with the rent set at Local Housing Allowance rates. In addition to this, landlords will be provided with an incentive to improve the quality of any homes let out under the scheme, with tenancy support also being provided to the tenant.

The rental guarantee scheme, a positive solution to the housing crisis?

The attractions of the scheme are immediately apparent. With a shortage of social housing in Wales, the scheme could provide a short-term solution to the problem by increasing the number of homes that are made available to those who currently struggle to get access to tenancies in the PRS. Some local authorities have already developed a similar approach when seeking to find accommodation for homeless people within their communities. The incentives provided by the Welsh Government for landlords to improve the quality of their housing could also help raise the overall standard of homes in the PRS.

What are the potential risks?

There are some questions that the Welsh Government will need to consider as the scheme develops, however. First, whilst an attractive short-term solution, is this scheme the best approach to find long term solutions to the housing crisis in Wales? No cost was provided at the seminar for implementing the policy, but, it seems unlikely that it will be a cheap undertaking. If we want to resolve this problem in the long term, would that money not be better spent on boosting the number of social homes under construction, as opposed to subsidising the rental income of PRS landlords?

Second, at present, to register as a Registered Social Landlord with the Welsh Government and to gain access to grant funding, housing associations in Wales must be non-profit making organisations. Under the rental income guarantee scheme, however, could a new category of landlord emerge? Landlords taking part under the scheme will be given access to Welsh Government funds, will be providing homes at rent levels similar to social rent, and will be housing tenants who are likely to also be eligible for social housing, yet these landlords will still be permitted to make a profit. Could this lead to calls by some within the sector to revisit the current arrangements? Afterall, profit making bodies are permitted to provide social housing in England.

There are clearly attractive elements to the proposed scheme that are worth considering further. It is vital, however, that as the policy develops that the Welsh Government considers how the scheme fits into its broader aims of providing more affordable housing and solving poverty, both in the short and long term.

Dr Steffan Evans is a Policy and Research Officer at the Bevan Foundation 

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