The UK parliament is currently reviewing proposals to reform the private rented sector with the Renters (Reform) Bill currently passing through parliament. Although it is positive that the Government is looking to address the issues of security and stability in the private rented sector of the housing market, there might be consequences as to how the residential investment market responds to the proposed changes.
So, what are the alterations that are being discussed? The proposed changes will aim to enhance the security of tenants and enable them to contest unfair rent increases and substandard practices without fear of eviction. This will be achieved by removing the Section 21 notice, commonly referred to as "no-fault" evictions, and implementing a simplified tenancy structure where all assured tenancies are periodic.
However, despite the name, this doesn’t mean landlords can only regain possession of their properties if their tenants have broken their agreement. Landlords will still be able to regain possession of their properties if they intend to sell or reside with close family members, as well as cases where this is anti-social behaviour from tenants or repeated rent arrears.
Along with these changes will be the introduction of a new Private Rented Sector Ombudsman, which is intended to deliver fair, impartial, and binding resolutions to many issues. This system should result in a faster, less costly, and less adversarial system than the current court system.
Another proposed change coming with the Bill is that tenants will have the right to request a pet on the premises, which landlords must consider and not unreasonably deny. It will also be made illegal to blanket ban tenants receiving benefits or those with children. Although this is a positive change for tenants, especially young families who are often restricted by having pets and children, some Landlords may be unhappy with the proposed relaxation in control in relation to housing pets due to the perceived costs of cleaning at the end of a tenancy.
Finally, a Privately Rented Property Portal will support landlords in understanding their legal obligations and demonstrating compliance, while also providing tenants with better information to make informed decisions when entering into a tenancy agreement.
So, what is the bottom line for landlords? Well, many factors of the Renters (Reform) Bill are still unclear, making landlords’ position uncertain. With the continued evolution of MEES requirements (energy performance and EPCs), increased cost of finance and changes to taxation in the buy to let sector , the Renters (Reform) Bill could force some landlords to question whether renting is a viable option and could have a knock-on effect on the buy to let market with a reduced supply of rental properties and a consequent upward pressure on rents.
Scott Hubbard, Partner in Glenny LLP's Valuation Division says:
“The Bill represents an important step forwards by introducing greater protection to tenants and to hold landlords accountable which should create a fairer private rented sector. There may however be unintended consequences. It is possible that this policy change could have an influence on residential investors decision making, discouraging some from investing, or continuing to invest in this sector. The reduction in supply of stock will create further upward pressure on rents, which over the past year has been significant anyway."
The lettings market is clearly an essential part of the UK economy. Just as this legislation strives to deliver benefits to the tenants, it also must recognise the needs of landlords – so that it also works with them rather than in opposition.