According to the National Residential Landlords Association, 41% of the landlords surveyed are planning on reducing their rental portfolios over the next year. By comparison, only 5% of the landlords surveyed intend on expanding their rental portfolios during the same period. Mounting financial pressures are causing some landlords to contemplate whether to remain in the property industry. Such concerns are being intensified by the upcoming Renters’ Rights Bill, which is currently slated for a House of Lords review on 22 April.
Renters’ Rights Bill Provisions
The Renters’ Rights Bill is set to bring the biggest changes to the rental market in over thirty years. Housing Minister Matthew Pennycook said that the ‘Renters’ Rights Bill delivers our manifesto commitment to transform the experience of private renting’. The intent, Pennycook continues, is to ‘improve the current system for the 11 million private renters and 2.3 million landlords in England.’
Concerningly, Tenant Trends has identified that not many landlords understand the full ramifications of the Renters’ Rights Bill. According to Tenant Trends, 43% of respondents said they were either ‘slightly aware’ or ‘not aware at all’, alongside 20% answering that they were ‘somewhat aware’ and 5% saying that they ‘don’t know’.
Of all the various provisions proposed, some of the most important include abolishing section 21 evictions, otherwise known as ‘no fault evictions’; clamping down on the extent to which landlords can raise the bidding prices from potential tenants; placing stronger requirements on landlords in having to address dampness, mould, and other health hazards under Awaab’s Law; restricting the ability of landlords to deny pets that tenants may bring; and limiting the interval at which landlords can raise rents.
General Expectations
For many landlords, these provisions are seen as another financial hurdle. Joel Osbourne, national acquisitions director at Spicerhaart, said that ‘many smaller agencies simply won’t have the resources to manage the operational, legal, and financial implications of such a significant change in legislation.’
According to the Government’s impact assessment, the bill will cost letting agencies around £391.7 million over the next decade. Because of these further financial costs, the Lettings Industry Report has recorded that 66% of letting agents surveyed believe that fewer rental properties will be available over the next year.
Underpinning the discourse is the general view that the Renters’ Rights Bill will erect additional regulatory and financial barriers constraining the activity of the market. The Lettings Industry Report shows that 53% of letting agents are currently expressing pessimism over the rental market, the lowest rate ever documented by the report.
Not surprisingly, 69.7% of letting agents believe that the Renters’ Rights Bill, contrary to the view espoused by the Government that it will bring positive changes for landlords and tenants, will negatively impact the rental market.
These views are already influencing the activity of the property market, with some landlords seeing it as an opportunity to either exit the market or reduce their property portfolios. According to Mark Long, director of Pegasus Insight, ‘while the government is holding fast to its claim that the RRB will not force landlords out of the Private Rented Sector, the fact that more than half (56%) of those who have given their tenants notice to quit plan to sell the property, up from 37% a year ago, is surely significant. Again, tenant concerns that the Bill will lead to a reduced supply of properties appear well-founded.’
Should Landlords Consider Selling?
Whether a landlord decides to sell or remain, it is clear that the upcoming Renters’ Rights Bill will reshape the rental property market. Its impact will be significant. Much more will be expected of landlords under these provisions, and it is therefore imperative for landlords to start thinking about whether remaining in the market is the right choice. Prepare now while the bill is still undergoing the ratification process.
For landlords with smaller portfolios, these provisions are going to squeeze more revenue and could make staying in the rental market untenable. As Harry Flanagan, senior CLA legal adviser, outlines, ‘the quality of properties will be key in future and there’s going to be a lot more admin, and there are hefty civil penalties. I think the days of the amateur DIY landlord are at an end, you need to be fully compliant and well organised.’
For others, this revenue squeeze could potentially be handled. The rental market continues to be a highly lucrative industry due to strong rental demand and yield, and it is unlikely that this will sharply change anytime soon. According to the English Housing Survey, the number of households privately renting has increased by 93% in the last 15 years, while the number of owner-occupied households has grown by 3%.
It is therefore worth assessing to what extent the Renters’ Rights Bill will reduce your income and whether you can sustain the additional financial costs.
