Renters’ Rights impact assessment: Will the figures add up?
With the news the Renters' Rights Bill will cost businesses a total £33 million a year according to the Government’s impact assessment, NRLA policy officer Dan Cumming looks behind the headlines, to find out what this means for landlords.
The long-awaited impact assessment, published by the Government last week, suggests the annual costs for landlords will be £12 per rented property and for agents £1,719 a year.
This doesn’t sound like much where landlords are concerned… but do the figures add up?
It is worth noting first of all that the impact assessment has been given a ‘green’ rating by the Regulatory Policy Committee (RPC), the independent government body for scrutiny of regulatory proposals.
This means that they see it as fit for purpose even if there may be areas for improvement, with individual parts of the assessment scored as ‘weak’.
Going through the document, there do seem to be inconsistencies when it comes to the figures and modelling, and the interpretation of these.
Concerns
We are sceptical of the suggestion that there will be ‘cost benefits’ to landlords, which will reduce the cost to landlords from a gross of £22 a year to £12.
This is based on a reduction in letting agents fees due to fewer tenancy changeovers. But it’s highly likely that agents will seek to recoup these ‘lost’ fees from landlords in alternative ways.
According to the document the estimated cost for joining the ombudsman scheme is an average £6 per landlord per property. For the new private rented sector database the impact assessment assumes a registration fee of £28.58 per property for three years.
These costs were estimated by looking to the devolved nations where similar systems are in place. However, the charge for registration in Scotland for example is £80 plus, as well as a fee of £18 per property – so these cost to individual landlords could be greater in reality.
One of the biggest issues for landlords will be risk when it comes to renting homes under the new system, in the context of the loss of Section 21 repossessions and the higher level of arrears tenants can build before you can take action.
We have warned of the risks of rising demand on the courts as a result of the changes – and challenged the Housing Minister who has suggested concerns are ‘alarmist’.
But the Government itself puts a value on the issue in this document, stating ‘landlords are also likely to incur additional court fees as tenants will have greater ability to challenge section 8 evictions. This may mean additional cases enter the court system with the associated costs’.
It estimates this would total a £113.6 million cost to landlords, plus a further £27.5 million in additional time taken to evidence Section 8 claims. This equates to just under £500 per possession case.
Impact on the supply of homes
The view of what will happen to the supply of homes to let as a result of the Bill also appears confused.
The impact assessment does not predict a mass exodus of landlords from the sector as a result of the changes, the biggest shake up of the private rented sector in more than 30 years, however there is no robust evidence to back this up.
The Government suggests there was no impact on supply when similar reforms were introduced in Scotland, where the PRS underwent significant reform in 2017.
However, we would argue this data has been skewed by emergency regulations introduced from 2020 as a result of Covid-19, and then the cost of living crisis, which restricted repossessions; and the nature of Scotland’s reforms, with tenancies transitioning ‘naturally’ to the new regime, rather than the ‘cliff-edge’ proposed for Renters’ Rights.
Furthermore, the report points to the sector in Scotland more than doubling from 1999 to 2019. But this hides the real story about what has happened since the 2017 reforms. The Scottish Landlord Registration System in fact reached a high of 370,000 registrations in 2016, and had fallen to 340,000 by 2022, over the time that the reforms were taking effect.
Any good news?
The assessment does makes reference to a grace period for signing up to both the ombudsman and the PRS database. This will be necessary as in all likelihood the secondary legislation required for these parts of the Bill will not be ready in the timelines that are rumoured for it to come into effect – which the Government still aims to achieve by summer 2025.
More information
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A date has yet to be set for the Bill’s next stage in the Commons, but you can read more about its progress so far here.
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For all the latest on Renters’ Rights visit our dedicated members’ hub here.
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Extra dates have been added for our new Renters’ Rights course, after training sessions sold out in record time. For more information and to book click here.
