Monday, February 17, 2014

Comparing Housing Regulations Across Atlantic

As economy improves, so does the housing market. Increased activity on that market causes prices to go up, together with the pressure on tenants who pay below the market rent. This general rule appears to work the same way in various urban markets, which makes it interesting to take a look at how it is handled across the Atlantic, in London, UK.

The prerequisites are in: BBC informs that the economy is improving, putting "UK housing market in widespread recovery." Not surprisingly, another BBC article declares that "Tenant evictions reach their highest level ever recorded."

I then was curious to see how evictions are handled in London, and whether the process has anything in common with the "unlawful detainer" action we go through here in California. The action itself is called in UK the "landlord possession claim." It is a different term from our "unlawful detainer," but is not a complete stranger to United States. Hawaii and Michigan appear to use "landlord possession claim" or "landlord's summary possession claim."

One of the London law firms specializing in evictions posted an article, from where I've learned that there are similar steps involved:
  • A pre-litigation notice is required, and there are certain conditions for that notice to be valid;
  • Possession claims can be brought under the accelerated possession procedure (possibly reflecting the summary kind of litigation afforded for evictions here);
  • Post-litigation execution is handled by sheriffs (assuming that their "warrants" equal our "writs");
  • and the tenant is afforded a chance to bring an application to stay the eviction.
I also noticed that the tenant there may bring a counter-claim. This is not a possibility for a tenant in California [Knowles v. Robinson, 60 Cal. 2d 620 (Cal. Sup. Ct. 1963)], although the rule does not technically prevent a tenant from filing a separate complaint against the landlord, especially if the issue of possession is not raised in that action.

Another noticeable difference is the general attitude toward the problem. Their public housing agency (Shelter England) advises those at risk of a non-payment eviction that "Paying your rent should always be your top priority. If you have other debts as well, you can take action to deal with these separately, but should sort out your rent problems first."

Compare this with the San Francisco Tenants Union position: "You may have various legal defenses: Your not paying rent can be justified because you were withholding rent because of uncorrected housing code violations or your lease said nothing about dogs or you know for a fact that the landlord’s mother’s not moving in because she supposedly moved in upstairs last year. Or you may have procedural defenses: Your landlord accepted rent after the 30 day notice expired or the eviction notice was not a legal one."

Both organizations aim at the same goal, but, to me, their approaches appear to be differently prioritized. It is "pay rent" vs. "find a justification why you don't pay rent."

And then I looked up, if UK has subsidized housing programs or rent control. Turns out, they do have both, but, unlike visible similarities in the eviction process, the application of these concepts significantly differs from ours.

For instance, rent control laws were deregulated in UK in 1989. The Wikipedia article cited here states that "no new protected tenancies had been created after 15 January 1989." If this is true, no surprise in the fact that their rent control is steadily losing its significance since 1989.

Much more active scene is in British subsidized housing. It differs from the US HUD "Section 8" program in many aspects. For instance, the UK government provides actual dwellings (called "council houses") vs. here the US government primarily compensates private property owners for taking Section 8 tenants. This difference led to a unique program in England, allowing those tenants an option to buy their occupied properties, if certain qualifications are met, under a "Right to Buy" scheme. Obviously, it also creates a difference in budgeting the programs: in UK, subsidized tenants pay the government, only the received rents are lesser than the market rent; in US, the government spends on subsidized tenants, paying to a third-party private landlord the difference between the market rent and the portion paid by a tenant. In my opinion, these two cash-flow concepts are opposite to each other.

Another major difference is in treating tenant's income, where tenant's financials in UK are only checked once, at the time of the initial application. Consequent increases in income do not affect tenant's right to subsidized housing. This has lead to a currently widely discussed situation, where about 5000 recipients were found to be among country's top 5% earners.

In US, HUD requires annual certification of each tenant's income. HUD Handbook 4350.3. A change in the income may place a recipient outside of the previously approved "voucher," while an intentional misstatement of such income may lead to termination of HUD's subsidy.

The programs also differ in at least one more way, probably stemming from their core difference in the ownership and management of the properties. While a subsidized tenant in USA is under scrutiny from both the government and the private landlord, a similarly situated tenant in UK has no additional private "eye" to report to. It appears that in UK the issue with tenants' fraud is a much more common problem. Subletting, selling leases or rights to purchase the properties, led to a recently adopted "Prevention of Social Housing Fraud Act 2013." From a relative absence of any regulation, UK now swings into a much stricter enforcement, including two newly added criminal offenses. In USA, a possibility of subletting of subsidized tenancies will vary from site to site, based on the degree of control by an on-site manager, who may (or may not) make sure the people seen on the property are the same people who are stated on the lease. Yet, aside from the possible unauthorized subletting or assignment, there is no phenomena of selling those leases, since the US subsidized tenant does not incur any marketable property right.

Another peculiarity caught my eye is that UK Council Houses are allowed to set "no children" and "no pets" policies. A simple search reveals how common the practice is. The "no children" policy would be treated as a straight-forward case of housing discrimination in the US. Even "no pets" has exceptions, for instance, "A building with a no pets policy must allow a visually impaired tenant to keep a guide dog."

I conclude these notes with the words of Sir William Blackstone, whose Commentaries are celebrated on both sides of the Atlantic:

More real property posts

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