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Appendix A
Market Research & Business Analysis
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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;
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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
analysis we 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.
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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
1.
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?)
2.
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?
3.
Have they worked with any other Councils in the region? If so, what is the experience in comparison?
4.
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…)
5.
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?
6.
What has the Landlord heard about welfare reforms, in particular Universal Credit;
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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..)
7.
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?)
8.
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.
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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
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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
Negatives
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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
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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”
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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 HB
Depts, (although one suspects that this reflects favourably on persuasive Housing Options teams as well).
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Consultees were 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 region
to 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
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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 regional assessment 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:
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Assign dedicated ‘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
This was a comment from Landlords attributed to working with Letting Agencies generally and not just a
comment on the current Council operated schemes. There is a perception that should things go wrong the
Landlord is left very much on their own. Letting Agents will help with enforcement action (for a price), but there
is a feeling that perhaps a Council wouldn’t be so keen to enforce an eviction for example due to their statutory
responsibilities. “Landlords would still be expected to do stuff even if you call it fully managed” was a pertinent
comment.
Given the risk factors of anti-social behaviour, damage to properties and tenants leaving without giving correct
notice, a robust inspection process, indeed a detailed ‘terms of business’, would need to be developed to
protect all parties, as well as reduce the perception of lack of accountability.
However on the positive side consultees indicated that they may feel more comfortable with a Council backed
scheme, as there are clear levels of management and accountability. Therefore this potential market advantage
needs to be built upon and used in the marketing / branding of a LLA. A ‘safe, accountable and sensible
approach’ to lettings?
Issues to consider in Business Development:
 Development of more professional ‘Lettings Packs’, including clarity on what you are charging Landlords
for and how it will be delivered
 Develop a clear and published regional enforcement policy; set out clearly in a Landlords Pack what help
will be provided in the event of problems arising with the tenant
 A LLA would require a ‘terms of business’, service standards and a complaints policy
 Develop the brand and the service as being robust in this area
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Develop a regional Landlords Consultation group to assist as part of ongoing LLA development
Ensure robust regular inspection procedures, end of tenancy & voids procedures
Conflict of Interest
It is clear that the perception exists that by using a Council scheme, Landlords may have to deal with issues such
as additional enforcement inspections and/or Housing Options officers advising tenants to ‘stay put’ if they
receive a S.21 or S.8 notice. It should be noted that this is correct advice given by Housing Options officers to
Tenant concerning their rights, however its not advice a Landlord would expect his ‘Letting Agent’ to be offering
his Tenant.
Whilst these perceptions may be slightly unfair, it is an issue that needs addressing. In the research some
Landlords specifically mentioned the advice given to Tenants (i.e. to stay put if receiving a notice to leave), when
letting through a Council scheme as opposed to using a Letting Agent on the High Street.
Once again, a guaranteed rent offer greatly reduces the impact of the issue, as the Landlord will be less
concerned whether the Tenant pays their rent or not, as it does not affect them directly. However, working with
Council schemes (LLA or not), needs to be seen to be an advantage, and not have any negative connotations,
such as a demand for increased property standards.
Issues to consider in Business Development:
 Clear and concise standards for accommodation would need to be set that are comparable with those
required by the rest of the lettings market in the region
 Remove the conflict of interest that may exist for anyone inspecting properties. (It is difficult to be a
Council Enforcement Officer and commercially driven Lettings Officer at the same time)
 Ensure LLA model reduces the perception that conflict of interest will be an issue for a LLA (i.e. by outsourcing LLA to another provider)
 Clear marketing of the new standards and the reduction in bureaucracy
 Develop the Landlords Consultation group to tackle issues such as ‘conflict of interest’ on an individual
basis as they arise
 Develop the dedicated Tenancy / Account Manager role to provide dedicated support and advice for the
Landlord in the event of problems arising in the tenancy
 Consideration of the guaranteed rent option, as this would remove the Landlords concern about conflict
of interest, as they would not be financially affected by Tenants remaining in the property.
Fees / Level of Service
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Clearly an initial reaction from Landlords and Letting Agents is always going to be a negative one (who is likely to
say “oh yes I’m happy to pay”?). In terms of a comparison with Letting Agents charges and services in the
region, this is looked at in the Mystery Shopping section, later on in this Appendix.
Some consultees indicated a willingness to pay for a management or guaranteed rent service, if the service was
at least equal to, but preferably better than other lettings options they had on the open market. The concept of
a Council backed scheme charging for its services did not seem unreasonable to the vast majority of consultees.
An important point to note here is the doubt that the cycle of advertising and bidding used for Choice Based
Lettings in the region would be competitive due to timescale and bureaucratic requirements.
Tenant Find Service
The most common current service provided through the Council schemes in the region is one that could be
compared to a High Street ‘Tenant Find’ service. This is a service where a Landlord self-manages his property
after being supplied with a suitable Tenant from an Agent. The ‘Tenant Find’ service usually includes advertising,
viewings, referencing, deposit protection, legal agreements etc..
With the rollout of Universal Credit, starting in October 2013, this ‘self managing’ is likely to be a less attractive
option for Landlords, particularly with Clients in receipt of Universal Credit. However, as some consultees
identified ‘self management’ as their preferred letting option, a LLA should offer this as a service. It is unlikely
that any significant charge could be made by the LLA, given the perception of the ‘hassle’ involved in managing a
Client in receipt of UC, but the benefit to the Councils in housing Clients and developing relationships with
Landlords would be advantageous.
Fully Managed Service
A traditional ‘fully managed service’ may not play to a LLAs strengths. This type of service manages the tenancy
(with the resource implications that implies), including rent collection, but only passes on the rent which it is
able to collect. The perception that a Council backed service would be softer on Tenants in terms of eviction and
rent collection, would make this type of service a difficult sell to Landlords. A comparable traditional High Street
service, not bogged down with conflicting issues, would be a more attractive option.
It should be noted here that the staff and systems required to run a fully managed service are very similar to
those needed to run a guaranteed rent service. The only real difference is the risk to the organisation. The
financial risk posed by a fully managed service is far less, as if rent is not collected, then the loss to the
organisation is only the management fee, rather than the full rent amount, which it potentially could be in the
case of guaranteed rent.
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However if procurement is to be effective, then a service needs to have customers willing to purchase it, and
therefore a balance between risk and product offered needs to be struck.
Bearing in mind that a LLA would be likely to reduce or waive costs to Tenants, (where High Street Letting
Agents generate significant income), this makes income generation opportunities from Landlords more vital to
the ongoing viability of a LLA. It is unlikely a ‘fully managed service’ offers enough to Landlords to make charging
an option if this service is adopted.
Guaranteed Rent Service
The benefits of operating a guaranteed rent service are discussed at numerous points in this Appendix and the
report generally. However the issue of being able to charge a fee dependent on service has not.
Prior to Universal Credit, a guaranteed rent service would have been an interesting option for Landlords,
although largely made irrelevant by the offer of direct to Landlord Housing Benefit payments. Their risk was
mitigated by the direct payments and it in a sense offered them guaranteed rent, albeit in arrears and still open
to issues in the event of a break of claim or change of circumstances.
However, with the removal of direct Landlord payments under Universal Credit, then a genuine guaranteed rent
service suddenly becomes of major value to Landlords. As a guaranteed rent service would also remove those
other issues that came with Housing Benefit (change of circumstances, break in claims etc..), it is a service that
provides Landlords with a genuine option when they consider their letting options.
Other Fees and Services issues
With a large number of tenancies created by the various Council Rent Deposit schemes across the region in the
past few years, a strategy could be developed to approach these Landlords and offer the more comprehensive
services of a charging LLA. It is likely that if these tenancies are still sustained, the Landlord and Tenant are
reasonably happy with the arrangement. With the rollout of UC, a number of these tenancies will come under
threat, and a charging LLA could offer services that will allow the tenancy to continue.
The importance of bringing in these tenancies to the LLA, and generating a fee income for the LLA should not be
under-estimated, in particular given the noted risk factor mentioned by existing LLAs (later on in this Appendix)
of procuring enough properties to make their schemes viable.
The consultation identified the issue of Landlords not paying for something they currently receive ‘for free’.
Therefore should you decide to develop a regional LLA, strong consideration must be given to making the LLA
the main vehicle for all the partners’ private sector schemes. If you decide to run existing ‘free’ schemes
alongside a new LLA, you may reduce its ability to be viable, both by splitting your resources and creating more
options for Landlords.
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However, if you decided that a LLA could be provided by an external provider, then the responsibility falls to that
provider to have a commercial product that is attractive to Landlords.
Issues to consider in Business Development:
 Consider a guaranteed rent scheme. In terms of services and fees, this would have several benefits to
your LLA. Services are simplified in Landlords eyes, you also provide a competitive option offered by few
existing Agents. It may also allow you to charge a ‘sign up’ fee to Landlords who are then getting
guaranteed rent in advance
 Develop a robust rent collection and management procedure to reduce the risk to the organisation
 Develop a cost comparison tool, to demonstrate to Landlords the financial benefits of working with your
guaranteed rent scheme vs. the other market options
 Develop a strategy and incentives to transfer tenancies from existing schemes to the new LLA
 Consider whether an external provider may be best placed to develop a LLA in the region
Sustainability
Welfare reform provides an opportunity for local Councils to demonstrate the security, sustainability and
support of their approach, when compared to the less tenant supportive approach offered by traditional Letting
Agencies.
A consistent ingredient in the success of LLAs is allocated and sustained funding, certainly in the medium term.
An interesting aspect that came out of the research was the comment that the Councils can offer schemes, and
if they fail, they simply go back to doing what they did before. So, it appears the perceived risk to the Council
(from its Landlord customers) is slight. However, this clearly isn’t the case, but the perception (that the Councils
may not take development and sustainment of a new scheme (or LLA) seriously) is an issue that needs
addressing.
Landlords are more likely to engage with a LLA and plan for the long term if they can see the service is financially
secure and therefore likely to be able to deliver on its terms of business and service provision. Part of this
security is the ongoing fee structure and business plan, which if developed with your Landlords Consultation
group, feeds into the Landlords communication network and is helpful in building reputation.
Another important aspect of sustainability of a LLA is the quality and reputation of the provider. Therefore if an
external provider is considered then any selection process must place a heavy emphasis on track record and
financial stability of the provider.
Issues to consider in Business Development:
 Ensure detailed financial modeling for the LLA is in place for at least years 1-3
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Develop income generating structure and ensure communication and involvement of Landlords
Consultation group
Identify source, sustainability and quantity of start up and ongoing funding. One obvious source are the
current budgets for Private Sector property procurement covering different current schemes in the
different Council areas
Investigate benefits of appointing an external provider for a LLA who may be able to contribute skills and
business acumen to the project, as well as stabilize the risk to the procuring LAs
Letting Agent Mystery Shopping
The Process
Letting Agents operating across the entire region as well as ‘Virtual’ Agents operating services that are accessible
online were mystery shopped as part of this process. A mixture of phone calls, emails and information gathering
from existing and available sources were used to compile the data.
Most Agents offer ‘headline’ figures that are negotiable depending on a number of issues such as;
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Location of property
Number of properties in your portfolio
The negotiating stance that we (The Landlord) take
During the mystery shopping we did not specifically ask whether Tenants who would be placed in our property
may be on ‘benefits’, as this may have alerted the Agents to the purpose of the call, but much comment was
made by all Letting Agents about how professional and comprehensive their referencing processes were. It is
likely that most Letting Agents would look to use Tenants who were not claiming benefits. This is supported by
information from the Landlord and Letting Agent consultation, when most Letting Agents advised they would
not take Tenants on ‘benefits’.
Results
A more detailed list of results from this exercise are contained at the end of this Appendix.
An overview of Agent fees indicated that existing High Street Agents in the region vary widely in fees charged,
between 5 – 15% as a monthly management fee for a ‘fully managed’ Agency service.
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The ‘Virtual Agents’ in particular focus on ‘tenant find’ services and offer services starting as low as £15 for a
simple marketing service. This adds strength to the argument that a Council backed LLA may not be able to make
any charge for a similar ‘tenant find’ service, if it wants to attract Landlords to such a product.
Most Agents offer a range of additional services, that may not necessarily be cost effective for them to offer, but
add to their attractiveness as an Agent. It would be important for a LLA to develop a similar range of services
and not to be restricted to using ‘in-house’ Departments to deliver the service, or be bound by bureaucratic
procurement or tendering rules. Void cleaning, legal help, gas, electric or energy performance certificates are all
services that should be developed to compete with High Street Agents.
Professionalism and marketing of services is not consistent and perhaps reflects that different Agents are
pitching their services to different Landlord markets. However, some valuable lessons can be learnt from the
good and bad aspects of how these organisations portray themselves and market their services.
There are some additional issues relating to fee charging and one revolves around the Housing Benefit issue.
Landlords are unlikely to agree to pay an Agent a ‘sign up fee’ for Tenants who are having their HB paid in
arrears, (a sign up fee is charged by most High Street Letting Agents offering ‘fully managed’ services, and covers
work such as Tenancy Agreements, Inventories, Inspection, Rent Account set up and so forth).
In the mind of the Landlord if they have to wait for Housing Benefit to be paid in arrears, they are then paying a
sign up fee and offering a months free rent up front. This needs to be considered as it would be unviable
commercially to ask Landlords to engage with a fully managed service with new LLA, pay an upfront sign up fee
and also wait several weeks for any rental income.
As most Agents are willing to negotiate once they have engaged you in a dialogue, its important that a
commercial Council backed LLA allowed its officers similar freedom, within sensible parameters.
Issues to consider in Business Development:
 Clearly specified services and fee structure
 Identify a ‘brand’, establish your niche and pitch the services accordingly – do not try to “compete” with
existing commercial services
 Competitive and flexible rates, open to negotiation by the lettings team
 A developed ‘tenant find’ service that is free, but acts as a ‘loss leader’ in the expectation that Landlords
using this service may upgrade to a fee charging service at a later stage
 A free tenant find service would also allow a LLA to work with existing High Street Agents who may
want to access this service, therefore reducing the impact of suddenly excluding all work with existing
Agents
 How to facilitate access to or develop a wider range of services, comparable to those of a High Street
Agent
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Clear communications strategy, including website and other ‘access points’ such as Twitter, Facebook
etc.
Consultation with existing LLAs
Nationally, geographical coverage by LLAs is currently low and random in its spread, although development is
increasing. We are fortunate to have worked with a number of LLAs during their development and business
planning stage, so we were able to use these contacts to discuss with them risks they had encountered and any
success factors they considered essential to their development processes.
Risks Identified by existing LLAs
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Welfare reform and other housing benefit issues including relationship with the Housing Benefit department
Not procuring enough properties to cover operational costs and/or hit financial targets, particularly at the
start of the new business
Detrimental effect to the LLA of staff changes and staff skillset
Financial risk – that the LLA model would not be self-sustaining
Lack of suitable Tenants
Potential compromise on standard of properties to ensure supply
Concerns that the partner private agent (where applicable) would not fulfill their part of the LLA and cooperate with the policies & procedures agreed at the outset
Competition from other local Agents and Schemes who focus on Tenants in receipt of Housing Benefit
Property voids and subsequent loss of income
Anti-social behaviour of Tenants
Damage caused to properties by Tenants
Lack of officer autonomy due to Audit requirements
Success Factors identified:
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Identified start up funding for the medium term (2-3 years) to allow the service to establish itself
A LLA has an improved chance of survival where there is a high % of private rented accommodation in
comparison to the owner occupied and social housing stock
Market research conducted was able to demonstrate a demand / gap for such a service
Establishment of a identifiable brand
Excellent initial and sustained marketing of service
Quality and skillset of front line staff
The focus of the customer service is on Landlords
Inside Housing Solutions
North East Region
15
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Good communication / consultation with Landlords
Good working relationship with Council Departments
Local Housing Allowance and average market rents are close
Products offered are relevant and competitive in the market
It is interesting to note that several of the success (and fail) factors identified here by existing LLAs, can be seen
across the region.
Whilst the LLAs consulted operate in different parts of the country and in very different markets, the factors
listed above were recurring. Of particular importance were the issues that revolved around playing on existing
strengths (such as stability of brand, supply of tenants and support for tenancies), and mitigating perceived
weaknesses (such as quality of tenants, risk of rent arrears and lack of commercial acumen.
As such, it is strongly suggested that the success factors in the list above are used as a checklist during business
development.
SWOT Analysis
Understanding the internal and external factors that a LLA in the region would have to deal with is an essential
part of any business planning process. This involves taking into account the wider social, political and economic
issues in order to identify the factors that may help or hinder development, and consider longer-term issues that
may impact on the enterprise.
Generally, the most common tool used to understand these issues is a SWOT analysis. It is by no means the
perfect tool to use, but we feel it has benefits when looking at the feasibility of a venture such as this, and
should complement the market research we undertook:
SWOT Analysis
Strengths
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Value to Councils in having a specific ‘vehicle’ created
to assist in discharging its homeless duty
Experienced staff with knowledge of local housing
market
Established links to vital Depts, such as HB
Access to large pool of tenants, so turnaround times
and efficiencies (such as reducing voids) possible
Access to existing ‘back office’ resources such as
Weaknesses
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Requires joined up inter-Authority working
LLA model may require ongoing subsidy if unable to
sustain financial projections
Data protection issues
Conflict of interest issues
Not previously charged Landlords for Private Sector
Access schemes
Lack acumen and experience in business start ups
Inside Housing Solutions
North East Region
16
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Finance, Accounting, HR, Legal etc.
Access to many existing relevant policies and
procedures such as lone working, rent arrears and
service standards
Strong local recognition and standing (brand)
Initial start up funding may be available within existing
resources
Landlord Consultation group could be developed to
assist with developing LLA services
A strong regional partnership between the Councils
could be a commercially strong organisation
Opportunities
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Legislation change to support ‘discharge into the
private sector’ with greater ease
Welfare reform, in particular the rollout of Universal
Credit, creating the environment where few
understand or want to be involved in assisting this part
of the market
A relationship with local Landlords already established
due to current private sector working
Develop a more ‘hands on’ Landlords consultation
group
Opportunity for strong regional brand if a successful
model can be developed
Potential to reduce expenditure on discharging housing
duty and in particular in the use of temporary
accommodation
Potential to generate an income from discharging
housing duty, that could offset costs in providing this
service
LLA current hot topic, so best practice guidance,
funding opportunities and business assistance
developing all the time
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Hugely different markets across the region
Restrictions in working with certain contractors or
suppliers due to Council procurement rules
Lack of experience in collecting and managing rent
accounts (although skills do exist due to knowledge of
PSL schemes)
Differing resources, needs and demands can mean that
partnership working moves at the pace of the slowest
Threats
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Landlords may be reluctant to engage with the Council
due to its wider statutory duties including
enforcement of property standards and assisting those
threatened with homelessness
Reaction of existing High Street Letting Agents to a
‘Government funded’ competitor
Benefits’ tenants culture still exists amongst Landlords
Landlords don’t like LHA and are difficult to engage if
they haven’t worked with LHA Clients before
Future Benefit changes, in particular Universal Credit
Long term engagement with private sector could be
affected if LLA fails
Potential for LLAs or competing schemes operated by
neighbouring Councils or other organisations to start
up within region
Efficiencies reduced and bureaucracy increased
through Council procedures / risk aversion
Powers to discharge duty into the private sector come
with restrictions such as minimum property standards
North East Region
Inside Housing Solutions
17
Conclusions and Business Development Issues
Business Development Issues to consider
These issues are pulled together and condensed from the various elements of market research as above;
Welfare Reform
 Services need to be “hassle free” and bring tangible value to a Landlord
 Marketing of this “hassle free” aspect needs to be paramount
 Issues within PRS tenancies need to be dealt with proactively and effectively
 A regular, on-time rent payment approach needs to be delivered
Quality of Tenant
 Can a regional assessment and referencing tool for PRS clients be developed?
 Can a regional minimum “tenancy ready” standard for prospective tenants be introduced that underpins
the perception of an “improved quality of tenant”?
Communication / Customer Service
 Dedicated Tenancy Managers for Landlords with detailed direct contact information made available
 How will out of hours contacts be serviced?
 Ensure good data management system so that a consistent service is provided to Landlords
 Develop a specific website and tools such as use of social media
 Training (staff skillset), including specific Letting Agency training and work on customer service ethos
 Consider LLA branding and marketing 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
 Consider whether a dedicated regional “Rapid Response” team might be able to improve
communications and services to Landlords
Accountability
 Develop professional ‘Lettings Packs’, including clear outlines of charges and services
 Consider regional enforcement policy
 Set out clearly in a Landlords Pack services available in the event of problems arising with the tenant
 A LLA would require a ‘terms of business’, service standards and a complaints policy
 Develop the brand and the service as being robust in this area
 Develop a regional Landlords Consultation group
 Ensure robust regular inspection procedures, end of tenancy & voids procedures
North East Region
Inside Housing Solutions
18
Conflict of Interest
 Clear, concise and consistent standards for accommodation would need to be set
 Remove the conflict of interest for Council officers
 Clear marketing of the new standards and the reduction in bureaucracy
 Develop the Landlords Consultation group to tackle issues such as ‘conflict of interest’
 Develop the Tenancy Manager role to provide dedicated support and advice for the Landlord
 Consider guaranteed rent option, as this would remove the Landlords concern about conflict of interest,
as they would not be financially affected by Tenants remaining in the property
Fees / Level of Service
 Consider a guaranteed rent option. In terms of services and fees, this would have several benefits to a
LLA. Services are simplified in Landlords eyes and it’s an attractive option offered by few existing Agents
 Ensure a robust rent collection and management procedure to reduce the risk to the organisation
 Develop a cost comparison tool, demonstrating the financial benefits of working with your guaranteed
rent option
 Consider a strategy and incentives to transfer tenancies from existing schemes to the new LLA
 Consider whether an external provider may be best placed to develop a LLA in the region
Sustainability
 Ensure detailed financial plan for the LLA is in place for at least years 1-3
 Develop income generating structure and ensure involvement of Landlords Consultation group
 Identify source, sustainability and quantity of start up and ongoing funding
 Consider benefits of appointing an external provider for a LLA who may be able to contribute skills and
business acumen to the project, as well as stabilize the risk to the procuring LAs
Letting Agent Mystery Shopping
 Clearly specified services and fee structure are required
 Identify a ‘brand’, establish your niche and pitch the services accordingly – do not try to “compete” with
existing commercial services
 Competitive and flexible rates, open to negotiation by the lettings team
 A developed ‘tenant find’ service that is free, but could act as a ‘loss leader’ in the expectation that
Landlords using this service may upgrade to a fee charging service at a later stage
 A free tenant find service would also allow a LLA to work with existing High Street Agents who may
want to access this service
 How to facilitate access to or develop a wider range of services, comparable to a High Street Agent
 Clear communications strategy, inc. website and other ‘access points’ such as Twitter, Facebook etc.
North East Region
Inside Housing Solutions
19
Consultation with existing Local Letting Agencies
Whilst the LLAs consulted operate in different parts of the country and in very different markets, the factors
listed in this section were recurring. Of particular importance were the issues that revolved around playing on
existing strengths (such as stability of brand, supply of tenants and support for tenancies), and mitigating
perceived weaknesses (such as quality of tenants, risk of rent arrears and lack of commercial acumen).
Conclusions
A Council backed regional Local Lettings Agency would have a number of strengths that could not be said of
existing Letting Agent competitors on the High Street, allowing the LLA to develop a service that could
potentially fill a niche in the market in this region. Opportunities such as welfare reform, an established
presence in the market and the savings that could be made in the temporary accommodation budget make the
development of a LLA enticing and with huge potential.
A major area for concern is whether it is possible to get a start up LLA business to a stage where it is generating
an income and is stable. Once Universal Credit and other welfare reforms are fully embedded, then a LLA service
would have a clear niche in the PRS procurement and management field. This research has demonstrated that a
LLA that can effectively;
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Reduce the risk (perceived or actual) to Landlords working with benefit claimants
Assist claimants with ‘responsibility’ aspects such as self-managing their claim, budgeting and sustaining
their tenancy through appropriate behavior
Offer ‘softer’ ongoing support to tenancies that may get into trouble, so that the tenancy can be saved
and relationships maintained
would have a tangible value to Landlords, and therefore a chance to be a viable if it could operate effectively as
a commercial concern.
Until that time, this is a difficult business launch, even in ideal circumstances. The demand for a LLA operating as
above has not yet been clearly understood by the market and additionally there remain the following issues that
mean we are not in ‘ideal circumstances’ at the current time;
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The logistical issues in developing a business with many partners across a variable market and a large
geographical area
Many Landlords still receive Housing Benefit for their tenant direct, and may do so up until the end of
2017
Some of the 12 LAs involved do not currently see the need to embark on such a project, and to be fair to
those LAs, some of their markets do not justify such a venture
North East Region
Inside Housing Solutions
20
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The idea of LAs operating commercial services is still fairly new and as such is viewed with considerable
scepticism in some quarters, including importantly, potential customers, officers and funders
Additionally, what appear relatively minor issues, such as effective marketing, branding, rent collection,
distribution of rent to Landlords and an efficient ‘back office’ monitoring and management system would also
need to be developed, process mapped and trialed to make sure they could deliver a service as advertised.
Although touched on above, it is important to reiterate, as this would be a regional project, there is also a
concern that a LLA could struggle with basic partnership working, bureaucracy and a common drive to take the
business forward. For a project of this nature to work, partners need to be committed to taking the project
forward and responsive to making changes that may be required as the business is developed.
Creating a regional LLA would be a huge step in any market, but more so given the reasons outlined above.
Bearing in mind the market research, there are other more sensible, cost effective, yet still innovative steps that
could be taken by the partners in this project to improve PRS procurement in the short term, and improve
readiness to develop services further in the medium term. Once we have looked at other aspects that impact on
service development, these steps can be further defined.
Detailed Letting Agent data
Local / Regional Agents
ANDREW CRAIG
Full management:
Tenant find only:
Referencing:
Rent payment:
Repairs:
Check in:
Check out:
Other “deals”:
Other relevant info:
Operates in:
12.5% plus VAT
£350 plus VAT
Employment history, credit check, previous landlord reference, affordability
check (earnings multiplier), public records
Paid by BACs on full management
All arranged under full management. Get authorisation from landlord to carry
out repair.
Inspection, inventory, utility set up
Inspection
Rent guarantee insurance provided free for first 6 months and after first 6
months landlord can purchase the insurance at a “good rate”.
Named contact provided for pre-tenancy and different named contact provided
once tenancy is being managed
Durham, Sunderland, North Tyneside, South Tyneside, Gateshead, Newcastle
North East Region
Inside Housing Solutions
21
SARAH MAINS
Full management:
Tenant find only:
Referencing:
Rent payment:
Repairs:
Check in:
Check out:
Other “deals”:
Other relevant info:
Operates in:
FRASER LAKE
Full management:
Tenant find only:
Referencing:
Rent payment:
Repairs:
Check in:
Check out:
Other “deals”:
Other relevant info:
Operates in:
15% plus VAT
One month’s rent plus VAT
Employment history, credit check, previous landlord reference, affordability
check (have to earn 2.5 times months’ rent), public records
Paid by BACs on full management, once rent received, deduct fee and pay to
landlord bank account within 3 working days
All arranged under full management. Get authorisation from landlord to carry
out repair for anything more than £150.
Inspection, inventory (costs £200 plus vat for tenant find but free under full
management), utility set up and then regular inspections throughout tenancy
Inspection
Offer rent guarantee insurance for £150 for 12 months but tenant must pass
reference checks
Named contact provided throughout. Tenants have a 24 hr emergency repairs
phone number.
Gateshead, Newcastle-upon-Tyne, South Tyneside
10% plus VAT
50% of first month’s rent plus VAT
Employment history, credit check, previous landlord reference, affordability
check (have to earn 2.5 times months’ rent), public records
Paid by BACs on full management, once rent received, deduct fee and pay to
landlord bank account within 10 days
All arranged under full management
Inspection, inventory (costs £45), utility set up and then regular inspections
throughout tenancy
Inspection
Advertising of property done on Rightmove, Zoopla, own website, shopfront
and local papers
None
Newcastle-upon-Tyne, Gateshead
North East Region
Inside Housing Solutions
22
NGU HOME LETTINGS
Full management:
Tenant find only:
Referencing:
Rent payment:
Repairs:
Check in:
Check out:
Other “deals”:
Other relevant info:
Operates in:
Please note
PATTINSONS
Full management:
Tenant find only:
Referencing:
Rent payment:
Repairs:
Check in:
Check out:
Other “deals”:
Other relevant info:
Operates in:
½ price offer currently at 5%, increases to 10% after the first 6 months
Did not say
In-house referencing completed for all tenants and guarantors Will visit tenants
in their current property to see how they live and take a larger bond/deposit if
there are any concerns
Only charge management fee on rent collected. If tenant stops paying the rent,
they will send an “outbound” officer
All arranged on behalf of landlord
Inventory completed
12 mth inspection completed (included in fee) will advise tenant to put right
anything that needs repairing
None
Normally takes 2-4 weeks to find a tenant
Newcastle, Gateshead, Sunderland, Durham, Northumberland, Middlesbrough,
Stockton-on-Tees, Hartlepool, Darlington
A lot of the properties they advertise are aimed at people on benefits so they
do work in this market however, they are subject to a credit reference check.
They cover a large area so they’re not a million miles away from being a
“social letting agent” for the North East – potential to look at making them
more of a partner or providing funding to assist more benefit clients
5-8% plus VAT
One month’s rent plus VAT
Robust referencing – credit checks, employment checks including 6 months’ pay
slips, must earn 30 x month’s rent, employment reference, previous landlord
reference, character reference. Anyone not passing requires a guarantor who
does pass the above
BACs to landlord account minus management fee
All arranged on behalf of landlord
Did not say
Did not say
Also offer rent guarantee insurance. Will match another Agent’s quote
Regular property checks. Will find a tenant within 2 weeks. Could meet
prospective tenants.
Newcastle, Sunderland, Middlesbrough, Redcar & Cleveland, Durham,
Northumberland
North East Region
Inside Housing Solutions
23
Virtual or Online Agents
Letting Supermarket
www.lettingsupermarket.com
Bronze: £14.99 per month + vat
Silver: £24.99 per month + vat
Gold: £34.99 per month + vat
Also offer a make your own package where you can choose different elements and come up with a fully costed bespoke
package
Secure Guaranteed Rent
www.secureguaranteedrent.co.uk
Bronze: 3% per calendar month (4% for rents under £600)
Silver: £59 upfront then 3% per calendar month (4% for rents under £600)
Gold: £59 upfront then 7% per calendar month (8% for rents under £600)
Gold package includes guaranteed rent.
London based company but covers all UK online
My Online Estate Agent
www.myonlineestateagent.com
Rental package: £49 + vat
Premium package: £249 + vat
Mainly an online advertising service
Upad
www.upad.co.uk
Tenant find: £299 + vat
Full management: £299 + vat plus £60 per month
Photo & floorplan pack: £130 + vat
Photography: £85 + vat
Property listing (advertise property on major property sites): £99.00 + vat
Room listing: £50 + vat
Iigloo
www.iigloo.co.uk
Listing a property on 500 of the UK’s largest property websites: £40 + vat
Tenant find plus (as above plus referencing & tenancy agreement): £80 + vat
MakeYourMove
www.makeurmove.co.uk
Can create bespoke tenant find and management packages – lots of options
Marketing only (ie property details onto major UK property websites): £49 + vat
Full management: 7%
North East Region
Inside Housing Solutions
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WiseMoves
www.wise-moves.co.uk
Market property only: £49 + vat
Enhance property marketing (photos/floor plan/brochure/to let board): £199 + vat
Complete property service: £249 + vat (as above plus tenancy agreement/deposit admin/first month rent payment taken)
Tenants 4 U
http://www.tenants4u.com/landlord_services
Market property only: FREE
Enhance property marketing (photos/floor plan/brochure/to let board): £49 + vat
Guaranteed Rent: (via insurance scheme): £99 + vat (not guaranteed rent, but purchase of an insurance service)
Full Management: £15 per month