Renters Reform Bill Hits Parliament
Following on from my article in March, the Renters Reform bill has now been put to parliament for its first reading. Essentially, this means that since the publication of the white paper, the proposed legislation has been reviewed, refined and the time when it becomes law is drawing ever closer.
What does the bill contain?
The following points have now been confirmed within the bill:
- Abolishing section 21 “no fault” evictions.
- A move to periodic tenancies and the removal of assured short-hold tenancies.
- Strengthening section 8 grounds – particularly for anti-social tenants.
- Reforming the courts process – with new digital processes to reduce delays.
- A new ombudsman and digital Property Portal.
- Further legal rights for tenants to request a pet in their rental property - with tenants expected to get pet insurance or to pay for the landlord’s pet damage insurance.
- Applying the Decent Homes Standard to the Private Rented Sector for the first time.
- Stopping landlords and agents from issuing blanket bans on tenants on benefits, or with families.
- Strengthening enforcement powers for councils.
Full details of the bill can be found here.
What does this mean for landlords?
Agents and landlords alike are concerned that certain areas of the bill will result in more landlords leaving the sector due to tighter regulations and more complications when it comes to ending an unwelcome tenancy.
Whilst I don’t completely agree with the proposals, ultimately the government will need to introduce incentives at some point to keep landlords in the market. They don’t currently have an alternative solution to social housing and if more landlords leave the sector, it will negatively impact tenants (the opposite of the government’s intentions).
There are some benefits to consider
As long as the strengthening of the Section 8 notice is made relatively straightforward and the court application process is not too legislatively complicated, then landlords should still be able to take comfort if they need to give notice for more obvious reasons. For example, if they need to sell or move back into the property.
The new ombudsman process should make the resolution of disputes easier. It’s also possible that having a regulating body to listen to arguments on both sides might give the government a better overall view of the sector. This could result in more balanced legislation for the sector in the long run.
Having a “Decent Homes Standard” will help reward landlords who look after their tenants and provide well-run properties. It should also help identify landlords who are not treating their tenants fairly and cut them out of the system.
When will these changes become law?
It’s important to remember that this bill still has a lengthy parliamentary process to go through.
Timothy Douglas from ARLA Propertymark provided members with an idea of the next steps, suggesting that this is only the first reading of the bill. There will be a secondary reading later into June where the detail will be debated in parliament. Only then will it be voted on.
It’s at this point we’ll have a clearer understanding of exactly when we can expect these changes to come into law.
Some important stats for landlords to consider
We as a business are already seeing on average over 30 applicant leads per property that we’re listing to let, with rents increasing over 4% to the year.
Referencing agency Goodlord have studied data from the agents they work with across the sector and have published a very interesting view on the state of the sector. It shows that 80% of all landlords are “somewhat” or “very” concerned about the impact of upcoming legislation while 87% of tenants said the rising cost of rent was their key concern.
Below is a snapshot of some of the data they’ve collected.
Our view at Nicol & Co is that until the government decides how to incentivise landlords, landlords need to look at the benefits of remaining in the market.
- Increased rent in the short-to-medium term. JLL predict cumulative growth in rental values of 15.9% in the five years to 2027 with the highest level of growth this year.
- Increased capital gain over the long term. As shown below, from 2000 to 2022 price averages increased from £140,000 to £260,000 (approx.) representing an average annual return of 5.3% over 20 years.
- Good prospects for future returns. A survey by Dataloft completed in December 2022 suggested that private renters typically stay longer in their homes (2020-2021 figures indicate an average of 4.3 years) and 73% of renters intend to stay put when their current fixed-term agreement expires, giving landlords more security. There is a strong appetite for renting privately in the UK which isn’t likely to change anytime soon.
To conclude…
Our message to landlords across the sector is essentially: worry not.
There are still huge benefits to letting your property and when changes like this occur, a new normal will be established. The best advice I can give is that now is a good time to communicate with your local managing agent on any queries.
At Nicol & Co, we’re happy to help and answer any questions you have. If your question requires specialist legal or financial knowledge, we have solicitors and accountants we can refer to in order to provide the best advice.