Don’t let red-tape drive out good landlords

A leading taxation advisory firm, Blick Rothenberg, warns today, there’s a distinct danger of turning the steady flow of landlords leaving the industry into a flood, if new relations due soon, and too much red tape, become overbearing for responsible buy-to-let landlords.

With the long-awaited draft Rental Reform Act, due to be published this week, the upgraded Bill under Michael Gove it is said will represent a “new deal for renters”.

Last month Boris Johnson announced that his government would “improve lives of millions of renters” and although these plans have been a long time coming, it seems they are finally to see the light of day in detail.

Things have changed says the government

The government argues that the private rented sector (PRS) has seen “significant shifts” over the past few decades with issues of quality, stability and affordability regularly highlighted in the media. The new proposals, re-announced in the Queen’s Speech last month, says the government, represent a long overdue change needed to bring the renter’s experience into the 21^st Century.

A Renter’s Reform Bill

The Rental Reform Bill, first proposed under Teresa May in April 2019, is aimed at removing some of the insecurities tenants experience while renting in the private sector in England, but the Covid pandemic got in the way.

Announcing the plans, Mrs May said at the time:

“Everyone in the private sector has the right to feel secure in their home, settled in their community and able to plan for the future with confidence.

“But millions of responsible tenants could still be uprooted by their landlord with little notice, and often little justification.

“This is wrong – and today we’re acting by preventing these unfair evictions. Landlords will still be able to end tenancies when they have legitimate reasons to do so, but they will no longer be able to unexpectedly evict families with only eight weeks’ notice.”

The Rental Reform Bill re-introduced

Included in the Queen’s Speech in May 2022, Prince Charles read out that a Bill would be brought forward, promising “to strengthen the rights of tenants”, affecting landlords and will likely change things for 4.4 million private renters in England.

What are the likely changes?

We don’t know the full details of Michael Gove’s revisions to this Bill until they are announced this week, but rumours of giving tenants the legal right to have pets in rentals and the removal of the no-fault (no reason given) evictions are increasing landlords’ anxiety levels.

The main target for the reforms it seems is the long touted abolition of section 21 no-fault evictions.

Removing the section 21 clause from the Housing Act 1988, it is argued, will give more security for tenants in the PRS, giving tenants the power to challenge landlords who fail to maintain and repair, and who impose unfair rent increases, without the fear of a retaliatory eviction.

There will be among other things a drive to improve rental home living standards, using the Decent Homes Standard to be extended to the private rented sector for the first time, designed to give all renters the right to a safe and warm home.

A National landlord register

A national landlord register is proposed, similar the one in operation in Scotland, and the Bill is to create a new ombudsman for renters, independent agencies designed to deal with complaints against landlords – similar to the one in operation for letting agents – without the need to go to court.

A website designed to help tenants keep track of their landlord’s performance, and to hold them to account, was also included in the draft legislation.

Heather Powell, head of property and construction at Blick Rothenberg said:

“Renters need rights to ensure rogue landlords are required to provide safe, secure homes but it is critical the responsible landlords are not driven away from the sector”.

Her warning is in response to announcements on the Bill made by government so far, revolving around issues about radically improving renters’ rights, indications that scare many landlords who have put their life savings into providing buy-to-let type rental accommodation.

Blick Rothenberg is arguing that on the one key issue, the abolition of section 21, any new Rental Reform Act must ensure that buy-to-let landlords “have the right to repossess their properties when their situation changes, with appropriate notice to tenants.”

It is critical that on this one key issue any change does not result in responsible landlords being driven away from the sector, warns Heather Powell.

Falling rental property numbers

Recent figures produced by Propertymark in June (2022) show that the number of rental homes available to tenants have fallen in the UK, with only half the number of properties available to rent in March 2022 as at the same time in 2019.

Worryingly, over 80 per cent of landlords who are no longer active in the rental market have put their properties up for sale, prompting Ms Powell to warn of the critical danger that the Bill could “reduce the supply of good, safe rental properties” still further.

“Any reduction in the number of homes to rent is bad news for the UK economy as affordable accommodation is essential if employers are going to fill the 1.295mn job vacancies reported at the end of March 2022,” says Ms Powell

Some landlords have already been motivated to sell by a long series of tax reforms and increasingly onerous regulations. More recently, the urgent need to bring their properties up to standard to meet stringent energy efficiency standards is also taking its toll.

Further, Blick Rothenberg warns, pledges by the Labour party to increase tax on unearned income (buy-to-let investments are classed as unearned income by (HMRC) would have yet another devastating impact on the rental market.

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