So, This Consultation Was Split Into Three Parts;

North East Region / Inside Housing Solutions

Appendix A
Market Research & Business Analysis

Background

Introduction

A hugely important part of any feasibility study is to look at what the market thinks, wants and can demand. We need to understand not just what we may be competing against, but whether a niche or gap in the market exists. Once we understand these issues, then we can consider whether we are able to develop a service, what that service might need to look like and how such a service might be resourced and delivered.

Our ‘customers’ and market for procurement of properties in the private rented sector are Landlords and Letting Agents. Additionally we wanted to learn from other lettings schemes run by Councils or Social organisations, that are competing within the private rented sector.

So, this consultation was split into three parts;

Landlord & Letting Agent consultation with structured interviews
Letting Agent mystery shopping
Consultation with existing Social Lettings Agencies

Additionally we carried out a SWOT analysis to look at issues not picked up by the various consultations.

Within each part we have identified the issues and offered explanations and reasoning. As part of the business analysiswe have assumed that a regional Local Lettings Agency (LLA) may be developed, and our recommendations are on this basis.

Landlords & Letting Agent Consultation

The Process

We asked all the Councils involved in the partnership to provide us with a range of Landlords and/or Letting Agents who they work with, or who are prominent in their area. To achieve a good cross section of views we feel it is important to speak to all types of Landlords and Letting Agents, including those that have never worked with a Local Authority. Even those without experience have perceptions and prejudices that are useful to explore as part of this process, and it is fair to say that a key to engaging a market with any product, is to ensure that preconceptions about the product or the ‘company’ delivering it, are addressed as far as possible.

The officer who undertook this work is experienced in this type of consultation, so although she had a structured set of interview questions, her remit and experience dictate that the conversations do develop further than might be expected, from just looking at the questions. Additionally, due to her experience she is able to guide a Landlord gently back onto the subject, should the conversation deviate (as it occasionally does), too far from the topic.

Interview Questions

How do they currently work with Council X (i.e. how many properties do they have with current schemes, how frequently do they use the schemes, do they use the schemes for all their lets or do some do a mixture of Council and private – if so why?)

If they no longer work with Council X on their schemes, why not? Was there one key thing that broke the relationship, or is it a list of things over time?

Have they worked with any other Councils in the region? If so, what is the experience in comparison?

What are the good and bad aspects of the current scheme if they work with it? (why are they good, what is it that makes the service they provide good? Or why is it a waste of time? Could it be improved to be a useful thing or does it need scrapping? etc…)

Whether they work with the Council or not, are there any other comments about working with Council X, (or Councils generally) that they might want to add?

What has the Landlord heard about welfare reforms, in particular Universal Credit;

Do they know about the welfare reforms coming in next year?
How are they planning to change their approach to letting (sell up, no benefit tenants, more landlord insurance / guarantors, work only with Agents who manage the tenants not just the tenancy (such as Social Lettings Agencies etc..)
What could the Council do to continue to work with the Agent/Landlord? (guaranteed rent, full lettings management type service, tenant training, better references, cash incentives etc..)

What other letting options might they consider? (self-manage, other schemes, letting agent, housing association leasing scheme etc…)? And why (what are the benefits over the other options?)

And finally, is there any one thing that would persuade them to work with Council X?

Unfortunately not all of the Local Authorities involved in this project felt able to provide Landlord or Letting Agent contact details, so the consultation was not as complete as we would have liked. However, several consulted Landlords / Agents worked across Council boundaries and so some clear themes and issues emerged.

The results from this consultation process are not broken down by Local Authority area, as we felt that would be both unfair to those that were unable to assist in the process, as well as not entirely appropriate, given that this project is a regional one and this document will be read by persons from across the region.

Results of Landlord & Letting Agent consultation

Its important to note that not all consultees comments are accepted as fair or an accurate reflection of the service they may have had, or may receive. Additionally, it is acknowledged that consultees are more likely to highlight negative experiences or perceptions than positive ones. However, the importance of the comments is in directing us to the current issues, perceived or real, so that we can identify and develop approaches to address the issues.

Some recurring themes emerged from the market research. Negative issues such as preconceptions about data protection, type of tenant, the Housing Benefit process, communication, access to and skillsets of staff and a lack of a consistent approach/product were mentioned time and again by the consultees.

Positive issues such as, “Councils are best placed to assist tenants who need ongoing support”, direct housing Benefit payments to Landlords and “helpful and honest” staff were also mentioned

Also, there was a general acceptance (albeit under duress on occasion) that some ongoing and pre-tenancy support (such as completing initial paperwork/HB forms) does indeed have a value to Landlords that could be expressed in financial terms, although perhaps not at current service levels, consistency being the major issue.

Our experience of this type of market research shows, whilst hugely valuable in highlighting obstacles that need to be overcome, it does tend to lend itself to over-reactive statements by Landlords such as “if they charged I’d never use the service”, “when Universal credit comes in I’ll not touch benefit claimants again” and so forth. However, when presented with competitive and realistic new options (such as a more comprehensive charging LLA service), whether Landlords would behave in exactly the way they indicated during this research is doubtful.

Overview of the issues identified by the market research:

Positives

Potential good supply of tenants
Councils best placed to assist, support and ‘manage’ vulnerable clients in receipt of benefits
Some very positive and responsive staff
Good ‘brand name’ recognition
Potentially a level of accountability that is better than a High Street Letting Agent
A small number of Landlords indicated a willingness to pay, “if service could be better than what other Letting Agents currently offer”

/ Negatives

Require rent paid direct to Landlords - will not house HB claimants if rent not received direct or a guarantor not offered
The Housing Benefit process
Inconsistent communication / customer service / confusion about who does what at Council
Poor marketing and information on what the Council can offer for Landlords / Tenants + poor relationship generally
Client mindset (do not see the PRS as a ‘home’, but as a temporary stop prior to social housing)
Conflict of Interest
Staff skillset inadequate
Lack of professional approach
Lack of information given on tenants (even when Council knows information it won’t pass it on)
Welfare Reform worries

Welfare Reform worries / Direct Rent Payments / Housing Benefit (HB) Process

Almost without exception consultees said they would no longer take clients in receipt of HB unless payments were made directly to the Landlord. Even though there was an agreement that not all clients in receipt of HB create rent payment issues, the idea of Universal Credit and Tenants managing their own finances was one that caused strong responses. The key appears to be, that its not a matter of whether Tenants will make their rent payments, but the increased management that Landlords and Agents perceive will be the case once UC is fully implemented.

Consultees were very clear on the additional risks that a claimant in receipt of benefits presented to them. In order to maintain that risk at anywhere near acceptable levels in their eyes, a way to ‘guarantee’ that their rent was paid to them must be found. Clearly Landlords are business people and are well aware there are no guarantees, irrespective of the tenant and their background. However, continued access to the private rented sector will only be possible if the risk can be substantially mitigated.

Knowledge of the impact of other welfare reform issues was limited amongst the consultees, and this actually added to the negative perception of working with clients in receipt of benefits. There is a clear need for Landlords and Agents to be educated on the welfare reform programme and the impact on the private rented sector.

The HB process generally received very poor feedback. This is common when consulting Landlords and not always a fair reflection on HB services themselves, but more a mis-understanding of what HB is for and what the Departments can achieve. Certainly the matter of direct payment of HB to Landlords was one that had been welcomed and lots of good comments were made about how this had been achieved and sustained by some HBDepts, (although one suspects that this reflects favourably on persuasive Housing Options teams as well).

Consulteeswere clear that a large proportion of the ‘hassle factor’ in dealing with HB Clients is not just the Client themselves, but is dealing with HB Department issues and the lack of information and assistance and moreover the HB process generally. Improving how this relationship works with Landlords must be considered. If you proceed with a LLA, then a ‘hassle free’ method of resolving HB issues quickly and effectively is essential.

From a positive point of view, this creates the probability that some Landlords will pay to have this ‘hassle factor’ removed, (possibly via a comprehensive LLA service).

Extending this positivity further, encouraging comments were made about how regular and on time rent payments would be a vital requirement to Landlords if they were to consider working with Clients in receipt of UC. Landlords clearly value this aspect and how it allows them to plan. So in terms of ‘added value’, this aspect would be an important part of a LLA service and is a reason to consider a guaranteed rent option, (which provides regular and on time payments) providing security and reducing the ‘hassle factor’ for Landlords.

Issues to consider in Business Development:

Develop “hassle free” services. Could guaranteed rent be offered, but the risk to a LLA be managed and contained?
Review any additional services from a “what added value do they bring to Landlords” point of view
There would need to be initial and sustained marketing of a new LLA (or any new services) and their positive aspects in removing the hassle factor associated with letting and specifically letting to those on HB / UC. Given the consultees view that ‘Councils are best placed to help clients in receipt of HB’, this needs to be a strong line taken in the marketing and / or establishment of a brand
Consider how any issues within PRS tenancies can be identified and managed quickly across the regionto reduce the impact on the Landlord or the LLA providing Landlord services
Review how a regular, on-time rent payment approach could be delivered through LLA. This means looking not just at the front end product for Landlords, but also how an in house system (such as rent collection and monitoring) might allow this to happen. This process could be helped by close study of the existing arrangements for in-house or partner PSL schemes

Quality and Supply of Tenants

Access to a potentially huge supply of Tenants is a positive issue that a LLA would be able to advertise. However, how these Tenants are ‘supplied’ and the suitability for the private rented sector would need to be managed correctly if that market advantage was not to be lost. The consultation process once again highlighted the poor perception of Clients in receipt of Housing Benefit when it comes to running a tenancy in an appropriate and ‘low maintenance’ way.

Comments such as “traditional referencing useless for HB Clients”, “I’m always given the problem tenants” and “data protection always quoted when we ask for information on Clients” means you would need to review what information you provide on potential Tenants and how it is provided. It is accepted that Tenants claiming HB do not generally fair well when traditionally credit checked, in the same way it is accepted that as a Council you often say “we can’t tell you that about a Tenant because of data protection”. A more commercially minded LLA would be expected to be more Landlord friendly in these matters, and therefore the issue of providing a sensible and relevant reference, yet within the confines of the data protection legislation needs exploring.

The benefits of a guaranteed rent scheme in this regard should be commented upon. This type of scheme clearly reduces the importance of referencing (and ‘quality of Tenant’) for Landlords, as they are receiving guaranteed rent. As such their main issue then becomes whether their property is returned to them in the same condition as when they first let, but this is an easier obstacle to overcome than ‘will they pay their rent’.

Issues to consider in Business Development:

Can a regionalassessment and referencing tool for clients looking for private rented sector accommodation be developed?
Provide clear guidance on how a LLA might reference its tenants, including how the information will be owned by Clients
Can a regional minimum “tenancy ready” standard for prospective tenants be introduced?
If a guaranteed rent scheme is considered, then the need for action on this issue diminishes, but the professionalisation of your brand would benefit hugely from having an identifiable bespoke referencing system, that underpinned an “improved quality of tenant”

Communication / Customer Service

There were inconsistencies such as ‘difficult to get hold of’, ‘have to tell the same thing to different people if you don’t get the right person on the phone’, ‘some very good officers……”, “………but slowed by the system within which they work’ and so forth. Positively, certain officers were praised for their customer service and knowledge of the Landlords perspective. The over-riding issue to come out of this, is the lack of consistency and the knock on impact on the perception of overall professionalism of the organisations. “You might get a good service, but its pot luck depending on who you get hold of”.

There was some feedback that suggested that the idea of letting their properties to HB Tenants was far too complex and therefore ‘not worth the hassle’. This led to discussions around how marketing of new services would need to be comprehensive and clear in what Landlords could expect from the service and how ‘hassle factors’ had been removed. Additionally, even marketing of existing services and information currently provided to Landlords was criticised as inadequate and only added to the perception of the hassle of working with “Council Clients”.

Issues to consider in Business Development:

Assigndedicated ‘Tenancy Managers or Account Managers’ to Landlords and Tenancies with detailed direct contact information made available
Investigate the feasibility of an out of hours ‘emergency’ contact line
Ensure good back office data management system that will include ‘officer notes’ so that a more consistent service can be provided to Landlords even when key officers are absent
Develop a specific website and associated communication tools such as use of Twitter, Facebook, Webchats etc. to enhance the perception of an open and communicative LLA
Training for staff, including specific Letting Agency training and work on customer service ethos
Consider how you will brand the LLA, including the development of a marketing programme for the LLA that clarifies how the service will be different to what has gone before, ensuring a consistent message is delivered to Landlords and other potential Clients of the LLA
If a regional LLA is not developed then consider whether a dedicated regional “Rapid Response” team might be able to improve communications and services to Landlords

Accountability