Independent landlords under threat from renters’ reform: Fall out could push up rental costs

Introduction

In June 2022, the Department for Levelling up, Housing and Communities (DLUHC) published the White Paper: A Fairer Private Rented Sector. The document set out how the [Johnson] government wished to reform the Private Rented Sector (PRS). The anticipation at the time was that a Renters’ Reform Bill would be presented before Parliament following the publication of the White Paper.

In response to the White Paper's publication, the NRLA launched a consultation with its members, landlords who are not members, and the wider supply-side of the PRS industry. The NRLA consultation took place during August and September of this year.

The full results of the landlord consultation, in which over 3,200 independent landlords took part is attached below.

Key findings

Fixed term tenancies

Landlords typically use fixed term tenancies. It provides assurance to their business models and underpins the investments they make in raising the safety and eco-efficiency of their properties.  Almost 20% of landlords stated they used fixed term tenancies because it was a condition of their mortgage or insurance provider.

The increased risk to the business model from abolishing fixed term tenancies may mean landlords face added pressure from lenders and insurers to protect themselves against that risk. Landlords who have either (i) invested in property using mortgage finance, and/or (ii) provide accommodation for students feel particularly threatened.

The consequence of abolishing fixed term tenancies may be the withdrawal of property in the PRS as risk becomes too great.

What is more, almost 80% of independent landlords at present either “Never” or only “Sometimes” raise rents annually. A pattern which is confirmed by tenants themselves. The irony of proposals to limit rent increases could be that, instead, annual rent rises become baked-in, so  an increased number of tenants experience annual rent increases: A product of landlords feeling they have to raise rents at every opportunity – especially between tenancies - to manage risk and risk expectations, whilst remaining in line with legislation. 

We rent to students: we need to know that the student will leave on the end of tenancy date so that the new tenants may move in. There is a small window of 4 days between lets, if the students do not vacate we will have students waiting to move in that won't be able to. I can't see how the new system will protect the rights of the new student tenants waiting to move in.

Student landlord

Reform of possession grounds

Over half of landlords who had issued a notice (be that Section 21 or Section 8) has had to do so at some point to address a tenant’s anti-social or criminal behaviour.

Landlords face difficulties in securing necessary evidence to use the courts to evict such tenants. This is an issue compounded by the level of support from the resource constrained police or local authority. Hence, Section 21 is a necessary tool: it enables landlords to act quickly and decisively in cases of anti-social behaviour.  It is a piece of legislation which protects communities as well as landlords.

For many landlords – almost 70% - the replacement of Section 21 – would not itself be likely to trigger an exodus of landlords. This is providing alternatives to Section 21 give landlords reassurance. However, almost three-out-of-four landlords disagree the reforms being proposed in mitigation to the abolition of Section 21 provide that confidence. 

There are very rarely "no fault" evictions. Section 21 was a quick and easy way to regain possession without having to collect evidence and witnesses to anti-social behaviour or go through a lengthy and costly court action. [Court action] was often delayed or refused due to delaying tactics by the tenant, whilst not paying rent. 

Landlord

Other reforms proposed in the White Paper

A full summary of landlord views can be found in the report. Landlords feel the proposals add costs and piles regulatory burdens on to them, without providing an equivalent access to justice and fairness. The report also outlines pathways to securing increased support among landlords for individual reforms. The report outlines why it is crucial for the sector's future for government to listen and provide those reassurances and mitigation. 

However, as a wider point, the pathway to increasing support for PRS reform among landlords could be made easier were the government rhetoric towards them not be so hostile and rooted in stereotypes. The government seem however to see the independent landlord as a barrier to the smooth functioning of the PRS.

As long as the Ombudsman recognises that there are bad tenants as well as bad landlords and is fair, this system should work. BUT the proposed law is biased towards the tenant

Landlord

Summary

Despite government rhetoric, the reality is that independent landlords are vital to securing a functioning PRS. Independent landlords provide tenants with flexibility, choice, and value for money at any price point. Tenants appreciate the role independent landlords play in the PRS, this reality is in contrast to the tone the government strike in their White Paper.

The overall package of proposals in the White Paper bring additional risk to landlords. Risk which will necessarily be reflected in increased rents. Landlords also will be forced to lower their exposure to the consequences of the reforms through reducing their portfolios.  This means a reduction in the supply of accommodation, especially when property is either (i) provided in the PRS through Buy-to-Let finance or (ii) supplying the student market. Unless greater attention is paid to the proposed mitigation measures, the changes to the grounds for taking possession of a property not only increases risk to the landlord but also the wider community. 

I have sold two of my four buy-to-let properties since the reforms were announced and two will be sold next year. I never raised rents to the same tenants, even after seven years, and have allowed reduced or non payment periods when tenants faced financial hardship. Two of my properties are let at cost to needy people whom I will have to evict. Kind landlords like me will disappear, only corporates left.

Landlord

Nick Clay Research Manager

Nick Clay MSc, PgDip is the lead researcher for the NRLA. He previously worked for the RLA where he introduced the Landlord Confidence Index. Nick takes responsibility for the Research Observatory's content and rigorous approach to data analysis. He is a Certified Member of the Market Research Society.

Nick was formerly a Senior Economist for a multi-national consultancy. He has expertise in business support and entrepreneurship. He has written academic research, undertaken evaluations and developed strategies for business support organisations across England & Wales.

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