OPINION: Rental Reform – will it work in England?

Across the UK nations there’s been a rolling programme of rental reform, one new tenancy regime after another, but has any of this really worked for the benefit of tenants or landlords?

We don’t yet know the final form the Renters (Reform) Bill will take, there’s a long way to go yet as the Bill progresses through Parliament, but we do know roughly the shape of things to come, and we can conjecture their likely impact.

More tenant protection

In this, the third decade of the 21st century, we can discern the direction of travel, the way tenancy laws are going across Great Britain. That direction is away from free-market “lighter touch” landlord friendly regulation as introduced by the Assured Shorthold Tenancy in 1988. There’s now in progress a swing back in the direction of pre-1988, the 20th century era of greater tenant protection.

I worry that far from improving the rental market in England for landlords and tenants, this Bill could end up making life more difficult for both, while at the same time imposing an enormous cost burden on the country in terms of lawmakers’ time, courts’ time, and that of the judiciary making endless amendments, not to mention the additional cost to landlords and tenants.

An international journey to reform…

The Irish Republic on these isles (though not in GB) led the charge with their Residential Tenancies Act 2004 (as amended). This offered far greater security of tenure for Irish tenants coupled with a degree of rent control, what they termed “Rent Pressure Zones”.

This was followed closely in Scotland by the Private Housing (Tenancies) (Scotland) Act 2016 with similar scope and effects, and more recently in Wales with the Renting Homes (Wales) Act 2016, effective 1 December 2022.

These reforming laws affect residential tenancies in the jurisdictions in different ways, with differing rules and regulations in each, but with similar overall results. Without doubt all this new legislation must have involved many thousands of hours of civil service and law makers’ time.

There’s no doubt that some of these measures have modernised and improved tenant safety and security, for example. Some regulations needed tightening up. But as far I can see, there’s no evidence that any of this monumental effort has improved the letting market in any of these nations – no discernable improvement in the supply of affordable accommodation for renters? In fact, just the opposite appears to be the case.

The Economist Nov 2017:

“Last month a survey of 13,000 expatriates put Dublin fifth from bottom of a list of 51 global cities, ranked by quality of life. Their main gripe (as with Paris, which finished two places lower, sandwiched between Riyadh and Jeddah) was not a sudden collapse in the city’s charm, safety or amenity but its high cost of living, and in particular the difficulty of finding somewhere to stay.”

Edinburgh News April 2023:

“Housing crisis: Tenants in Edinburgh forking out nearly half of salary on rent. Rents are likely to be pushed up further as a shortage of properties sees tenants chasing a limited number of homes.”

The Bevan Foundation Sept 2022:

“New research illustrates the severe shortage of rental properties for low-income households in Wales. As the cost of living continues to skyrocket, Wales’ most influential think-tank, the Bevan Foundation, has revealed the scale of the challenge faced by low-income households trying to find a home in the private rental sector.”

In England the story is no different, and these sweeping reforms have yet to come.

Daily Telegraph September 2022:

“Britain is stumbling towards a Euro-style rental catastrophe. The unrelenting war on private landlords is going to backfire spectacularly. In Ireland, foreign exchange students are forced to live in tents because of the shortage of homes to rent. In Sweden, the market has just about collapsed. And Berlin has just been forced by the constitutional court to end a catastrophic experiment in price controls…

“The [UK] Government has spent five years waging a war on landlords. The predictable result? Many of them are pulling out of the market, sending prices soaring and creating intense supply shortages. In a country made up of as many renters as homeowners, that matters more than ever. In truth, we urgently need to build more homes, both to buy and rent – but the war on landlords is going to backfire spectacularly.”

Change is coming…

Enter the Renters (Reform) Bill in England. Yet another radical change of rules and regulations to be added to several hundred laws already affecting the Private Rented Sector (PRS). This work is aimed at improving the tenant’s lot, but with no guarantee it will make a tenant’s life any easier. Again, despite the many thousands of lawmakers’ hours devoted to producing these new laws, some experts feel they will not make a jot of difference, and indeed could make matters far worse.

The Government says the new Bill will “bring in a better deal for renters” by abolishing the paper based “no fault” Section 21 eviction process and switching to a county court based Section 8 procedure. This is said to be a fault-based process based on specific grounds for eviction and an end to fixed-term tenancies. It will entail beefing up the Section 8, grounds for eviction.

Fixed-term tenancies will be abolished, and while tenants will be able to leave at any time by giving a short notice, landlords will only be able to terminate a tenancy if they have a good reason (capable of convincing a county court judge), if they want to sell, or they or a relative want to live in the property.

As I understand it there is to be a data-base of landlords, their rental properties, and their tenancies, a monumental administrative task. This no doubt is to be paid for by landlords, along with several other measures in the Bill, all of which will eventually get passed on to tenants in the form of increased rents.

Landlords will no longer be able to refuse applicants who are receiving benefits and tenants will be given the right to request a pet, which landlords cannot unreasonably refuse, though some provision will be made to require tenants to take out pet insurance.

The Bill, says the Government, recognises that “responsible landlords” face challenges of their own and wants to “celebrate the overwhelming majority of landlords who do a good job”. More comprehensive grounds for possession will, it says, give landlords “peace of mind that they can repossess their property when a tenant is behaving badly, or their circumstances change”.

Housing Secretary, Michael Gove, has said:

“Our new laws introduced to Parliament today will support the vast majority of responsible landlords who provide quality homes to their tenants, while delivering our manifesto commitment to abolish Section 21 ‘no-fault’ evictions. This will ensure that everyone can live somewhere which is decent, safe and secure – a place they’re truly proud to call home.”

The Government has been under political pressure for many years from the cause célèbre of the housing charities and the media to abolish Section 21. They committed at the last election to replace it with a system which will mean every eviction needs a court appearance – or use the promised enhanced electronic court process – yet to be devised, in what seems to many an already a failing county court system. If you think the court process is slow now, I suggest you wait until this new law comes in.

Apparently the new measures will make it easier to remove tenants causing nuisance with anti-social behaviour. But it’s never going to be easy to deal with this because the issues will always be complicated and need to go before a court, solid evidence will be required, and the process is a snail’s pace slow.

As Ian Narbeth, solicitor at DMH Stallard argues that word changes (strengthening) Section 8 grounds, while abolishing section 21 will mean the government is helping nuisance tenants at the expense of the weak and vulnerable…

“Lawyers may argue about the subtle change in wording, but most cases don’t get to court and by the time they do, the behaviour is serious and anti-social – not just capable of being so. Until now, landlords served section 21 notices on anti-social tenants and did not need to go to court.

“With the massive backlog in cases, it can be many months before cases are heard, witnesses may fear harassment by an aggressive neighbour or their family and friends, while landlords can give no guarantee of succeeding and witnesses will fear reprisals, especially if the eviction fails.

“Instead of landlords dealing with the problem simply and confidentially, abolishing section 21 means troublemakers must have their day in court and many victims will choose to suffer in silence or else leave their homes rather than give evidence. The government will be helping nuisance tenants at the expense of the weak and vulnerable, which is the opposite of what it is claiming.”

Kate Faulkner OBE, argues in a recent podcast, that the new rules could actually make it easier to remove unwanted tenants and get your rental property back. And I can see how this might be the case, but what might be possible in theory, given the delays in the system, I just don’t see it happening in practice.

Secondly, the way the wording of Ground 1 stands, it leaves lots of loopholes for unscrupulous landlords to remove tenants by devious means. I can see lots of court cases coming up, and amendments being made, if things stay the same as they are in this Bill.

Small-scale landlords

According to the latest available English Private Landlord Survey published May 2022, just under half of all landlords owned one rental property, though nearly half of tenancies were owned by landlords with five or more properties. 43% of landlords owned one rental property, representing 20% of tenancies. A further 39% owned between two and four rental properties, representing 31% of tenancies. The remaining 18% of landlords owned five or more properties, representing almost half (48%) of tenancies.

What landlords need…

So, by far the majority of landlords in England are small-scale, they’ve invested their hard earned savings, on which they’ve already paid tax, plus borrowings, into rental property. This is mainly because ostensibly bricks and mortar offer a high degree of security – people feel safe with property as opposed to the stock market. Other cash investments, banks and the building societies, have until recently offered derisory returns.

But all that has changed: high inflation, higher mortgage rates, penalising income tax rates on buy-to-let income, a stamp duty surcharge and reduced capital gains tax allowances, all make it difficult to show a profit for any landlord with a mortgage to pay.

Couple this with increasingly onerous regulations, energy efficiency standards requiring substantial further investment for some, and now a radical change in the renting laws through this new Bill. It all adds up to a recipe for driving good landlords out of business.

In my view the Government should be doing everything in its power to encourage landlords to invest in the PRS, to use their own capital rather than public money to provide the housing we desperately need. I’m sorry but I don’t think this Bill will achieve that in its present form. In fact, as many are predicting, it will probably do the opposite.

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