COMMENT The General Election of 2017 may be long forgotten, but it was a seminal moment for private rented sector policy. Theresa May threw away her majority and, to the surprise of many, a Jeremy Corbyn-led Labour Party picked up 30 seats. Corbyn’s relative success was fleeting, but in part was attributed to his appeal to young voters – mainly renters – who wanted a better housing deal. From those seeds renters’ reform was born.
North of the border, the Scottish Government had also moved to an indefinite tenancy model in late 2017, and therefore in 2018 the May-led government proposed various private rental policy reforms. These included the removal of section 21 “no fault” grounds for possession – a policy that became a manifesto commitment in 2019.
With the coronavirus pandemic restrictions behind us, the Queen’s Speech of May this year confirmed that government would seek to bring forward a Bill in this session of parliament on renters’ reform, and in June a white paper on a fairer private rented sector was published.
All this history matters, because the government remains under pressure to appeal to young voters, arguably even more so than in 2017. The white paper therefore reflects a radical range of reforms, and the most significant changes in private renting for more than 40 years.
Large vs small
The removal of section 21 will be seen as the removal of a valuable safeguard for investors in the sector. Larger landlords will be able to absorb the change better, but for smaller landlords it could further accelerate the withdrawal of some from the private rented sector.
The proposal is that the sector will now operate off a periodic tenancy, with tenants able to give two months’ notice and landlords reliant on court-sanctioned grounds for possession. To acknowledge landlords’ concerns that they need to be able to better tackle rent arrears and antisocial behaviour there are improved grounds for possession, as well as for cases of refurbishment. Landlords will worry, however, that the courts will not be able to cope. Digitalisation of the courts will help and is being pursued by HM Courts Service. It is important that those behind the reforms deliver a fully developed and tested digital system on time.
Fixed-term tenancies will not be allowed, with one notable exception – they remain in the purpose-built student accommodation sector. Expect strong representations from smaller landlord representatives to be allowed to use them as well.
The provision of redress will be compulsory. Landlords will be expected to be members of an ombudsman scheme. It is not clear yet whether there will be one dedicated scheme or whether landlords will have a choice to sign up with any recognised redress-provider. Some larger landlords voluntarily provide redress and will rightly be miffed if they are being required to sign up to a different scheme on worse terms.
The government also promises a landlord portal. This terminology may simply be to keep Conservative backbenchers onside, some of whom have never supported the idea of a landlord register. If the portal is in effect a register, it will leave some landlords also paying for local landlord licensing schemes. It is imperative that the government avoids such duplication. Many larger landlords are contributing large sums and never get their properties inspected. Where that is the case, they should at the very least get a refund.
A register must be implemented effectively. If it simply gathers the names of the compliant and the non-compliant continue to be able to operate, it will be a missed opportunity. The government is also going to extend the Decent Homes Standard to the private rented sector, which good landlords will welcome.
Cliff-edge effects
What the sector will find perturbing is the government’s proposals on rents. While the sector will welcome reaffirmation of the government’s commitment to market rents, the proposal to ban rent review clauses could hurt both landlords and tenants.
The sector will understand that with indefinite tenancies tenants cannot be indefinitely locked into index-linked rent reviews, or fixed percentage uplifts. But providing rents revert to market at the end of a term, and tenants are provided with a choice, there is sense in continuing to allow short-term use of review clauses, which will cut down on bureaucracy, provide tenants with more budgeting certainty and reduce any cliff-edge effects when rents revert to market.
A final challenge for the sector will be the transition arrangements. The government proposes to move all existing tenancies to the new terms over an 18-month period. If that means issuing new tenancies, it will create a lot of extra work and additional cost.
Ian Fletcher is director of policy at the British Property Federation
