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Dreaming of a decent home in Oxford?

July 31, 2018

Oxford may be a “sweet city of dreaming spires” as the poet Matthew Arnold put it, but it has a bitter outcome from the broken housing market earning the tag line, the “least affordable city in the UK”. It is arguably a microcosm of the bigger picture facing landlords and tenants, balancing a return on investment against a decent home to live in.

Nationally the private rented sector (PRS) has doubled in size over the past decade with 4.8m homes overtaking the social sector that continues to shrink as a consequence of right to buy properties not being replaced. - 18% of households are living in “council homes”, resulting in PRS now being viewed as a longer-term housing option.

There has been a change in the households living in PRS. Traditionally the PRS housed, in the main, a more mobile population of younger single people and couples; however over the last 10 years there has been an increase in the proportion of households with dependent children living in the sector. The expansion of PRS has resulted in greater focus on conditions in the sector.  In response, landlord organisations point to the ‘burden’ of existing regulation and argue that more regulation in the form of registration schemes will be ineffective in identifying and tackling the worst offenders.

Housing is a devolved matter; in England, the Government adopted a less interventionist position on the basis that additional regulation would increase the burden on reputable landlords with the risk that additional costs would be passed on to tenants. However, this position is changing for political rather than evidential based reasons as more landlords consider selling up and seek a better return elsewhere.

Oxford along with other cities that have similar characteristics has its challenges, with a number of neighbourhoods among the most deprived in England coexisting alongside one of the highest concentration of million pound plus homes.

The shire city is at risk of flooding, the centre of the city is listed and it is surrounded by a greenbelt with little space for new build in a designated special growth area.

For Oxford landlords the high entry costs means lower yields of around 4% however, capital gains have been excellent over the past ten years and demand remains strong resulting in steady 2-3% rental increases being achieved. The knock on effect is that Oxfordshire wages have not followed, widening the affordability gap to taking 56% of average earnings to pay the rent or over £300 a month over the Government set local housing allowance (LHA) cap for a 2bed.

Oxford has 30% of homes in the PRS and already has licence and planning laws controlling Houses in Multiple Occupation (HMO) with a proactive approach to educating and failing that, prosecuting, a small amount of landlords who are taking advantage of the broken market to undercut good landlords.

Oxford’s homelessness rate is creeping up with rough sleepers around 37 and approximately one per thousand households accepted as homeless, 2,500 applicants are on the housing list with only 450 social vacancies of mixed property types a year. The perfect storm of lack of decent shelter is in clear evidence, impacting recruitment and retention in low wage and public sector industries in the county.

The Government spend on social housing investment is one of the lowest for decades at 44% of the housing budget. Local Authorities have had to innovate to boost supply, prevent homelessness and manage expectations under new expanded homelessness laws. Oxford is one of them, and has been innovative by creating a separate housing company, partnerships with social investors and has attracted new landlords with its Rent Guarantee Service (RGS).

Many Councils have private rented access schemes mainly of the tenant find and support type as a homelessness prevention tool with variable success. Our research confirmed fears that only 5% of landlords were willing to take families on housing benefit/universal credit and that the uptake was shrinking because of the perceived operational and financial risks. Nationally this figure is around 20%.

In response, Oxford offers a RGS similar to many London Boroughs. However the difference being that, the rents are 10% above LHA and the tenant has a coach to nudge them to become more financially independent over the medium term, in return for the council paying a rent top up.

In addition, landlords benefit by having three months’ rent paid in advance with no further rent worries ( the council is the rent collecting agency), freeing up their time rather than spending time chasing tenants or Council/DWP offices for rent. Landlords can also choose the tenants; get a complimentary support and compliance service from trusted repair companies.

Within eighteen months nearly 30 landlords have joined the scheme with 60 homes in management, a target of a further 20 is expected over the next six months. The service is not a magic bullet to stop homelessness but for those landlords who want a decent return, have less hassle and be able to make a difference the feedback has been very positive.

Vesta is a new innovative digital estate agency that sells and buys properties with tenants included, a quadruple win for the two investors, tenant and local authority.  As part of its homelessness prevention work Oxford City Council has been recommending landlords to explore RGS as an option to minimise the risk in transaction cost and income loss.

The industry average length of tenancy is growing to around 2.8 years whereas for low income families with children it is nearly double that length, therefore further reducing operational costs over voids and refurbishments.

The Oxford RGS has attracted interest from nearly 25 other Councils either starting afresh or building on existing partnerships with local landlords and is listed as good practice by the National Homelessness Prevention Service which has been set up to advise housing authorities to implement the Homeless Reduction Act.

More homes are part of the solution, letting councils borrow more to invest and unfreezing the LHA rates to bring them more in line with the local housing market will help scale up help for people who want to improve their housing conditions.

If you are a potential or current landlord making an investment or relet decision, do seriously consider the rewards of “making a difference” by including tenants in the purchase arrangements, by choosing Vesta and searching on Google “your Councils offer for private landlords helping to prevent homelessness” for more guidance.

If you have homes in Oxfordshire the Oxford RGS can be contacted on 01865 252501 or rentguarantee@oxford.gov.uk and do watch our 2 minute video made by landlords for landlords interested in the rent guarantee and help a family achieve their dream of having a decent home to live in, without spiralling rent https://www.oxford.gov.uk/info/20114/landlords_and_agents/1219/rent_guarantee_servicerentguarantee@oxford.gov.uk and do watch our 2 minute video made by landlords for landlords interested in the rent guarantee and help a family achieve their dream of having a decent home to live in, without spiralling rent https://www.oxford.gov.uk/info/20114/landlords_and_agents/1219/rent_guarantee_service

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