Sweeping reforms will protect tenants but drive up rents, experts say
“Solve Rental Crisis” The long-awaited Renters Reform Bill bans no-fault evictions, permits renters to have pets and introduces rolling tenancies in the biggest shake-up of the rental sector in 25 years.
Critics are calling the 89-page Bill a war on landlords. They say it will force landlords – already squeezed by sky-high mortgage rates, the removal of tax breaks and looming eco-rules – to sell up. Supporters say it will provide overdue protections for renters.
“The Government is facing a difficult balancing act,” said Mark Sivarajah, founder of online lettings agency Letio. “It has to reassure landlords to prevent even more abandoning the market – which would worsen property shortages and drive up rents – whilst also delivering much-needed protections for tenants.”
What is the Renters’ Reform Bill?
The bill aims to transform residential tenancies for the UK’s two million landlords and 11 million tenants:–
1. No-fault evictions
Tenancies can currently be brought to an end for any reason usually with two months’ notice. The Bill makes good on the Conservative 2019 manifesto pledge to abolish these no-fault evictions so renters can challenge poor landlords without fear of losing their homes.
Housing Secretary Michael Gove said: “Too many renters are living in damp, unsafe, cold homes, powerless to put things right, and with the threat of sudden eviction hanging over them.”
The Bill will also make it easier for landlords to repossess properties on certain grounds – if they need to sell up, move into the property themselves, move in a close family member, or if a tenant stops paying rent or exhibits anti-social behaviour.
2. Rolling tenancies
The Bill will ban fixed-term tenancies in favour of rolling contracts to give tenants greater security. These new tenancies will continue indefinitely unless a tenant gives notice or the landlord repossesses the property using one of the permitted grounds.
3. Pets in lets
Landlords must consider all requests by tenants to keep pets and cannot unreasonably refuse under the new rules. However, landlords will be able to require pet insurance to cover any damage to their property.
Photo by Erda Estremera via Unsplash
4. A new watchdog
A new ombudsman will provide quicker and cheaper resolutions to disputes over rent, maintenance and other issues between landlords and tenants. The watchdog will have legal authority to compel apologies, take remedial action and force landlords to pay compensation of up to £25,000.
5. A register of landlords
Landlords will be listed on a new digital property portal which tenants can check before they rent. This will be run by local councils which will be able to take action to ensure properties are in a good state of repair, not over-crowded and have the right licences.
6. Decent homes
A strict Decent Homes Standard which currently applies to council and housing association properties will be extended to the private rental sector. Last year, the Government warned the conditions of more than 500,000 private rented homes posed “an imminent risk to tenants’ health and safety”.
7. No blanket bans
It will be illegal for landlords or letting agents to impose blanket bans on tenants who claim benefits or have children. Households with dependent children make up 30 per cent of the private rented sector, and those receiving housing benefit comprise 26 per cent.
8. Improved enforcement
Councils will have to report how many landlords they take action against and how successful they are. The Government is also pledging a reformed courts process with cases against rogue landlords or anti-social tenants digitised to reduce delays. This is important for landlords’ confidence in the market: they want to know they can reasonably repossess properties without prolonged court battles.
A long journey through Parliament
The Bill still has a long way to go before becoming law. It is currently in its second reading before it heads to Committee and Report stages ahead of its third reading. It will then embark on the same journey through the House of Lords before going back to the Commons for consideration of amendments and Royal Assent. The entire process could take months and involve numerous amendments.
Source: UK Parliament
Will the reforms work?
Critics say the Bill is a fresh blow for landlords. The Government started its clampdown on landlords in 2016 when it introduced a three per cent stamp duty surcharge on buy-to-lets in a bid to free up housing stock for first-time buyers then, in 2017, it reduced 100% tax relief on buy-to-let mortgage interest to a tax credit worth just 20 per cent of mortgage interest. Now the Government says landlords will be barred from letting properties from 2028 unless they achieve an Energy Performance Certificate (EPC) rating of C if new eco-rules become law. Retrofitting rentals to a rating of C or above typically involves costly works such as secondary glazing and wall insulation.
With reforms eating into their profits, around a third of landlords in England and Wales were already planning to cut the number of properties they rent out at the beginning of this year – up from 20 per cent at the start of 2021, according to the National Residential Landlords Association. Meanwhile, the introduction of rolling tenancies could drive student landlords out of the market because they rely on fixed-term tenancies tied to the academic year.
There are also concerns about the Bill’s impact on tenants. It makes no provision for rent controls amid growing concern about soaring rents driven by housing shortages. The average asking rent has hit a record £1,190 per month outside London and an eye-watering £2,500 in London.
A spokesperson for The Royal Institution of Chartered Surveyors (RICS) said: “We remain concerned for tenants as to any knock-on effects, as our RICS Residential Survey shows rents continuing to rise alongside the supply of rental properties dropping.
“The reforms, therefore, must be delivered in such a way that gives confidence to landlords and does not result in them leaving the sector further exacerbating the challenges for tenants who are already struggling to find quality affordable homes.”
There are also fears abolishing no-fault evictions will lead to a surge in evictions before the Bill becomes law displacing tenants and overwhelming county courts already struggling with chronic delays.
Supporters of the Bill say it will rebalance the relationship between landlords and tenants and provide both with greater protections. “The Renters Reform Bill, as a package, is the most significant set of reforms for the private rented sector in a generation,” said Rebecca Marsh of The Property Ombudsman. “Requiring landlords to have a reason to evict a tenant while at the same time giving them enhanced abilities to deal with anti-social behaviour seeks to rebalance the landlord/tenant relationship.”
Meanwhile, the debate about the Bill comes amid claims the Government is ducking the bigger issue of house-building as a solution to the rental crisis and capitulating to Nimby’s.