The long read: What might Labour's version of rental reform look like?
With speculation rife that a general election will happen in May, many will be wondering what will happen to the Renters (Reform) Bill should Labour come to power. Here NRLA policy manager James Wood takes a deep dive to examine what we could expect to see.
The Renters (Reform) Bill has promised the biggest shake-up of the private rented sector in decades. But with the bill still to go through a number of stages of debate in Parliament before it becomes law, there is a good chance it may not be passed before an election is called.
But what does this mean?
Should this happen there are two options: .
- The first is that the bill is rushed through in the last few days of parliament during ‘wash-up’. The Government will usually need the co-operation of the opposition for this - and may need to make concessions to get opposition support.
- The second is that the bill falls, meaning it is scrapped. However, the Bill would almost certainly return in some form shortly after the election, with both the Conservatives and Labour committed to removing Section 21.
What's likely to change - and what will remain?
As both parties broadly agree on the main requirements of rental reform, if Labour wins and has to implement it, the new bill would broadly remain the same. So landlords should expect that - sometime soon - all tenancies will be periodic by default, membership of a redress scheme will be mandatory, and Section 21 will no longer be usable.
However, the parties do disagree on the detail of these reforms, so what might a Labour designed bill look like? During committee stage, Labour members of the committee raised a number of amendments, many of them from the Shadow Housing Minister.
None of these amendments were successful, but they indicate the potential direction of travel for rental reform if Labour wins.
Based on these proposed amendments, it is likely several other adjustments would be made, with regards to:
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The timing of implementation;
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Which possession grounds would be mandatory; and
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The length of certain notices.
When would Section 21 be removed?
Under the current version of the legislation, Section 21 will not be removed immediately after the bill gets Royal Assent. Instead, the Secretary of State has powers to set a date on which:
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No new assured shorthold tenancies can be created; and
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Pre-existing assured shorthold tenancies become assured tenancies, losing the right to serve Section 21 notices.
To ensure that the courts are in a position to cope with contested cases, the current Government has indicated these dates will not be set until the courts have been sufficiently reformed to cope with an increase in contested possession cases.
Crucially Labour’s proposed amendment would see the removal of Section 21 notices coming first, with court reform something that looked at after implementation.
Section 8 possession grounds
Many of the amendments tabled by Labour members of the Committee were focused on changes to the Section 8 possession grounds.
As part of the Renters (Reform) Bill, new Section 8 grounds will be added, and some existing grounds amended. This aims to provide landlords with more certainty when applying to court using Section 8.
Changes are set to include:
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Mandatory grounds, which can be used when the landlord intends to sell or move a family member into the property;
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A new 'persistent rent arrears' ground, to be used when a tenant has fallen into two months of arrears three times;
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A new mandatory ground for use in student HMOs;
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A lower evidence bar for the discretionary anti-social behaviour ground.
Concerns
Labour has some major concerns about these new grounds and this is where its version of rental reform would likely be significantly different to that of the Conservatives. Proposed amendments included calls to:
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Change the grounds in which a landlord intends to sell or move family member into the property, so that landlords cannot use it in the first two years of a tenancy (currently six months). It also wants to increase the notice required to four months (from two);
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Require the landlord to offer the property for sale to the tenant before the sale ground can be used;
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Remove the persistent rent arrears ground entirely, as well as giving courts power to adjourn or suspend possession claims brought under mandatory rent arrears grounds;
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Introduce a 'hardship test' to some mandatory grounds, providing the courts with discretion to refuse a possession order if they believed greater hardship would be caused to the tenant than the landlord.
Use of the Property Portal
Labour also tabled amendments to strengthen the financial penalties for failing to sign up to the proposed Property Portal, and requiring landlords notify the Portal where they serve a possession notice. Given these changes, it is likely that financial penalties for non-compliance would rise under a Labour Government.
Rent increases
The Renters (Reform) Bill already restricts landlords in relation to rent rises, by prohibiting the use of rent review clauses.
Instead, landlords must give a Section 13 notice with at least two months notice if they plan to increase the rent. If the tenant challenges this, then the tribunal can set the rent to the market rate, even if this rate is higher than the rent proposed by the landlord.
Labour’s amendments proposed limiting the tribunal here. Under its plans if the proposed increase is challenged by the tenant, the Tribunal would only be able to set the rent at the amount proposed by the landlord or lower. In addition, it also proposed rent increases would only take effect two months after the tribunal had made its decision.
What if the Bill does pass before the election?
Even if the Renters (Reform) Bill does receive Royal Assent in its full form before the election, much of the detail will need to be fleshed out by secondary legislation. This secondary legislation is made by the Secretary of State and covers issues such as:
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When a property meets the Decent Homes Standard;
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When Section 21 notices are removed;
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What information would be included in the Property Portal; and
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What information landlords must give to pre-existing tenants.
If a May election happens, it is likely that none of the enabling legislation will have been passed, and the next Government will have the chance to shape a significant amount of this detail.
Conclusion
Based on the proposed amendments, it’s likely that landlords would have serious concerns about a Labour version of rental reform.
If Labour do include their amendments in a new version of the bill then it would introduce significant uncertainty to most possession claims, reducing the concessions the Government has made to try to retain landlord confidence and protect the much-needed supply of rented homes.
This would very likely have a significant impact on investor confidence, particularly for smaller landlords who are particularly at risk from a tenant going into rent arrears. It would also likely deter new entrants to the market and would also increase the need for the courts to intervene and exacerbate the delays landlords already face.
The NRLA is committed to ensuring that rental reform works for both landlords and tenants, and we are not seeking to retain Section 21. But whatever replaces Section 21 must retain the confidence of landlords.
With that in mind we will continue to make the case to all political parties for possession grounds that reflect the reasons landlords need to end tenancies, a court system that can cope with demand, and certainty in cases where there should be no defence.
More information
To find out more about the NRLA's campaign on rental reform click here.
