11 Oct 2021 | Build-to-rent | Residential

Investing in a better private rented sector

The build-to-rent (BTR) sector has successfully invested in redefining private renting over the past seven years – evidenced by its customers, who consistently rate it highly.

The Government has also set itself on a course towards a better private rented sector (PRS).  A manifesto commitment was given by the Conservative Party in 2019 to bring forward a Renters’ Reform Bill. These plans were temporarily stalled by the Covid pandemic, but are now being taken forward, with a white paper promised in the autumn.

The Government and BTR sector share an objective – to make the PRS a better place to live. Hence, importantly, the Government has also promised it will balance the needs of landlords and tenants in any reforms.

The primary aspect of reform is to abolish the s21 ‘no fault’ ground for eviction and thereby offer a more secure home for renters. Having a more secure tenancy is well understood by BTR landlords, who offer longer fixed-term tenancies. Empty units, or voids as the sector would call them, are the enemy of income returns. Tenants that stay for longer are therefore key.

Landlords, however, also have needs and legitimate reasons for sometimes having to finish a tenancy. For smaller landlords, this can often relate to their own personal circumstances, and a need to sell or occupy the property themselves. For larger landlords, they know that keeping places desirable involves regular investment in renovation and refurbishment, which sometimes can involve having to vacate blocks. Another critical reason is to manage anti-social behavior, ensuring that one badly behaved resident is not making the lives of many more residents a misery. Being able to take swift action in such circumstances can often make the difference between protecting other residents, or they themselves wanting to leave.

In previous iterations of its thinking, the Government had indicated it will continue to allow fixed-term tenancies. This would be vital in the student accommodation market, where most academic institutions, suppliers and students work on fixed-term tenancies structured around the academic year. Fixed-term tenancies would also help larger landlords in the circumstances where renovation or refurbishment are required.

Regardless of whether the Government settles on fixed-term tenancies, in a world without section 21, landlords will have to rely more on grounds for possession and access to a court system, which is already stretched and unable to cope with existing workloads.

Concentrating expertise via a specialist housing court is something the Government is contemplating and would be welcome. However, structural reform is less than half the problem. The primary issue that needs to be tackled is modernising the process of our courts. At present, landlords report that access to justice is hellishly inefficient. A system still based on paper and phone calls, rather than digital documents that can be tracked. In an age when we can track parcels or meals halfway across the country, we should also be able to track court cases. Full digitalisation of the courts will underpin reform and deliver fairness – and, most importantly, a courts and tribunal ‘service’ that is befitting of that last word in its name.

To conclude, the abolition of s21 will have different impacts on different landlords and, from a policymaking perspective, the key will be understanding why landlords need to sometimes gain possession of their property.

A better PRS requires investment, but not just by the private sector. The Government must invest too, in the courts and full digitalisation, if its reforms are to be fair and workable.

More details on the BPF’s position can be found in our position paper and summary document.

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Ian Fletcher Director of Policy (Real Estate)