"Responsible landlords may welcome many of the Bill’s measures, particularly if they serve to protect tenants, help to rid the PRS of unscrupulous landlords, and give landlords adequate protection from troublesome tenants"
The Government’s long-awaited Renters (Reform) Bill is intended to provide ‘the biggest shake-up of the private rented sector in a generation’. While the Bill nominally sets out to improve the health of the Private Rented Sector, the actual impact of its provisions may take some time to become apparent – and there is a longer-term risk that more landlords may decide that renting out property no longer makes sense in the current economic climate.
How will the generational ‘shake-up’ take form?
The most publicised of the proposed changes are the Bill’s abolition of ‘no fault’ evictions and of Assured Shorthold Tenancies. Both were introduced under the Housing Act of 1988. Prior to that legislation, the number of private individuals who became landlords was relatively small. The 1988 Act gave more prospective landlords greater confidence that, if they did rent out property, they would be able to regain it if they wished to end their tenant’s contract.
As a result, more private individuals became landlords and the “buy to let” mortgage market began to flourish. This has become a critically important element of the housing market, with some 4.6 million households (19%) now renting from a private landlord, housing the equivalent of 11 million people.
The abolition of “no fault evictions” has been hailed as a victory for tenants who may have found themselves at risk of ‘backdoor eviction]’, where above-market rents are set purely to force tenants out. By way of balance, the Bill specifies a number of legitimate grounds which landlords can cite when seeking to regain their property.
In practice – it’s hard to say precisely how many tenants may have had their contracts terminated on unfair grounds in the past. In the future, landlords will be entirely entitled to end a tenancy agreement because, to give just two examples, they wish to sell the property or install a family member in it. Neither of those grounds is the “fault” of the existing tenant – but the new legislation will not prevent the tenancy from being terminated.
Similarly, it is hard to see how the abolition of the Assured Shorthold Tenancy will operate in tenants’ interests. Under the AST a landlord could not give a tenant notice until an initial 6-month period had passed. Thereafter, two months’ notice was required.
The new provisions will retain the two months’ notice, but there is no initial 6-month period. Future tenants will have “periodic” tenancy agreements – and will effectively have no more than two months’ security of tenure.
There are some positive provisions for tenants, who will now be able to challenge above-market rent increases and be able to request the right to keep a pet. Landlords will not be allowed to reject tenants with children or those on benefits.
They will also be required to register all let property on a new Property Portal, which will comprise a database of landlords and privately rented properties in England. All such properties will be required to meet the Decent Homes Standard and have all required safety requirements and other certifications. Local councils are to have increased investigative and enforcement powers in order to enforce the new law.
Putting the Bill in context
So far so good – but the structure of the new Bill needs to be considered in the context of an economic environment which has become increasingly challenging for landlords. Increased regulation, combined with the tax changes introduced under former Chancellor George Osborne, was already making a number of landlords’ business models look unattractive. Recent sharp increases in borrowing rates, and in landlords’ own cost of living expenses, have added to the challenges.
There have also been calls for rent freezes in some parts of the country – although the fact that the Bill specifically provides that landlords will need to give tenants two months’ notice of any rent increases would appear to indicate that the government is not minded to go down the route of rent freezes in England. (The Scottish government did introduce a rent freeze in October 2022, with a 3% cap on increases for 6 months after 1st April 2023.)
There is a risk that attempts to freeze rents may have the opposite effect in the longer term, if landlords decide to exit an increasingly unprofitable market, leaving fewer properties available for private rent.
A further – as yet unquantified – challenge may come in the form of requirements for landlords to upgrade the energy efficiency of rented property. Proposals set out in a September 2020 consultation have yet to be crystallised but, if costs are not proportionate, more landlords may decide to throw in the towel.
Balancing landlords’ and tenants’ interests
Responsible landlords may welcome many of the Bill’s measures, particularly if they serve to protect tenants, help to rid the PRS of unscrupulous landlords, and give landlords adequate protection from troublesome tenants.
It will be important to remember that private landlords play an essential part in housing provision in the UK – and that measures which upset the balance between their interests and those of their tenants risk influencing more landlords to exit the market. That will have a knock-on effect on the availability of rental properties, which will only cause further harm to tenants.
