The Welsh Government has been embroiled in controversy following its decision to embrace several suggestions forwarded by the Senedd’s Housing & Local Government Select Committee. The most important suggestion is that landlords have to compensate evicted tenants under particular circumstances, chief among which are landlords wanting to sell or move back into their property currently occupied by a tenant.
Such an endorsement has sparked a backlash among landlords regarding the negative effects it would have on the Welsh property market. It is therefore useful to explore this reaction and understand the reasons for the concern directed at the Welsh Government.
What is the Welsh Government Planning?
Under Recommendation 6 of the Committee Report, the ‘Welsh Government should explore the feasibility of enabling tenants who are subject to no-fault evictions to retain the last two months’ rent of their tenancy as compensation for the financial and wellbeing impact of a forced move, and write to us by April 2025 to set out its conclusions.’
This suggestion was accepted by the Welsh Government, outlining that they ‘will engage with a wide range of stakeholders, including members of the Stakeholder Advisory Group who supported the development of the White Paper on Adequate Housing, Fair Rents and Affordability to explore the feasibility of this proposal.’
Underwriting this endorsement are the general principles put forward by the UK Government to provide ‘much greater security and stability [for tenants] so they can stay in their homes for longer, build lives in their communities, and avoid the risk of homelessness.’
Furthermore, this call is situated within the broader context of the Welsh Government raising Land Transaction Tax by an additional one percentage point on second properties as part of the draft budget scheduled for 2025-26.
To put this into perspective, it would cost landlords between £9,750 to £11,890 on an average residential property purchase worth £214,000. This is due to the new Land Transaction Tax raising the percentage points for properties valued between £180,001 to £250,000 from 7.5pc to 8.5pc, a noticeable increase for those wanting to expand their property portfolios in the Welsh market.
Why is this Bad for the Property Market?
Confronted by rising costs within a short time frame, landlords are increasingly concerned that these measures will harm the property market by driving away investment and participation.
It is what Vaughan Schofield, Estate Agent at Belvoir Wrexham, described as the Welsh Government’s ‘sequence of really wrong judgement calls,’ adding that ‘all this will do is drive more landlords away from owning rental properties, which in turn will put huge pressure on tenants, as there are fewer rental properties and rents will just increase further.’
Ben Beadle, Chief Executive of the NRLA, has launched a scathing critique of the Welsh Government by calling the proposed eviction compensation an ‘absurd’ policy. ‘If the Welsh Government is so concerned about losing private rented housing stock and the impact this has on renters,’ Beadle argued, ‘they must ensure housing providers have the confidence to remain and invest in the supply of high-quality rental property.’
Here lies the issue many landlords have with this proposed policy: instead of focusing on the systemic issues of the Welsh property market – issues ranging from the lack of new property supply to accommodate growing demand to the uneven regional price growth of property value – policymakers are narrowly focusing on extracting more money from landlords.
Such a strategy not only discourages landlords from participating in the property market by driving up costs, but it also negatively impacts tenants due to reduced property availability and increased rents, thereby offsetting the benefits of eviction compensation for renters.
Issues with property supply delivery have plagued the Welsh property market. Despite seeing a 10% increase in market activity in 2024, the delivery of affordable housing has consistently lagged behind consumer demand: the new supply of affordable housing fell short of the 2023-24 quota by –12%, compared to the previous year failing to hit the housing target by –7%.
For these reasons, Beadle observed that the proposed eviction compensation taken alongside other policies ‘will do nothing to help renters who are already struggling to find a home to rent. To discourage investment in the market with punitive taxation at a time when Wales needs many more homes for rent is a frankly baffling move.’
What are the Main Takeaways?
Ultimately, the proposed policy further deepens the distrust landlords have towards the Welsh Government, and this will likely play a factor in informing increases in rents and less commercial property investment.
Despite these issues, there is space for optimism due to the Welsh Government focusing on increasing property supply over the next parliamentary term. Just recently Housing Minister Jayne Bryant, collaborating with landlord organisation Tai ar y Cyd, confirmed the new housing layouts for construction, remarking that this ‘represents a significant step forward in our commitment to building sustainable and affordable homes here in Wales.’
Yet if the Welsh Government wants to develop the property market efficiently, it is vital to assist landlords, not constrain them.
