The impact of the Renters’ Rights Bill on the residential sector
Originally featured in BE News, our Assistant Director of Policy Theo Plowman shares insights in his latest blog on the Renters’ Rights Bill and its impact on the residential sector.
The Renters’ Rights Bill, tabled earlier this month, closely resembles the original reform bill from the previous parliament, with few surprises in line with Labour’s established positions. Those in the sector who supported the amended version from July will be disappointed that key changes are now missing.
The Bill will likely be progressed as a matter of urgency, with a potential commencement of summer 2025, and it is unlikely given Labour’s strong majority and political positioning that many amendments will be successful.
The BPF’s position has remained pretty much unchanged since the Bill was first launched under the last government. We will continue to focus on a minimum tenancy, reform of the courts, selective licensing and ensuring a smooth transition.
Perhaps most importantly for the investment community and tenants alike will be the chance for stability and certainty over a Bill which has loomed large for over five years.
Implementation timeline
Unlike previous versions, the Bill will not follow a two-stage process for new and existing tenancies. Instead, all tenancies will shift to periodic leases on a date yet to be announced. This transition is unlikely to occur immediately upon the Bill’s passage, though the sector may have less than six months to comply, leading to implementation before the end of 2025. This will have obvious implications for the wider PRS, but may also be a headache for the professionally managed sector having to work up changes to tenancies and alter systems to tight timeframes.
Lack of a minimum tenancy
Under current proposals, tenants would have the ability to serve two months’ notice as early as day one of their tenancy, unlike landlords who would have no ability to utilise any possession grounds until a six-month protected period has passed. This is likely to have several adverse consequences:
- Increased transiency in communities and risk of short-term lets by the back door. Renters wishing to stay for the long-term will likely lose out to renters who only wish to stay for short periods, with landlords’ ability to prioritise long-term renters diminished.
- Inability for landlords to manage between-tenancy maintenance and re-letting costs – therefore putting an upward pressure on rents as operational costs increase.
- Increased risk and cost assumptions in the investment underwriting process – reducing investment value and viability of new schemes.
- Financing impact and loss of investment – with no certainty of income past two months, the risk premium for this type of investment is significantly increased, putting off lenders and investors and forcing them to require higher returns. This will stymie investment and the delivery of new, high-quality rental homes, and put upward pressure on rents to offset the increased risk.
Grounds for eviction: watered down
Grounds 14 and 8A, which cover anti-social behaviour and persistent rent arrears, have been scaled back, leaving them less robust than initially anticipated. However, there is a continued commitment to improve court processes, though this will not be made a condition of abolishing Section 21 (no-fault evictions), as we had secured on the previous Bill. This is a cause for concern in the industry where many of our members see the day-to-day impact of anti-social behaviour on entire communities with a long and difficult path to resolution for those affected.
Student exemptions
Purpose-built student accommodation (PBSA) remains exempt, provided the supplier is part of the Student Codes. This is welcome news if not unexpected as this has remained a constant since the beginning of the Bill.
Rent regulation and tribunal powers
Rent tribunals will have the power to block excessive rent increases, but cannot raise the rent beyond the landlord’s original request. The Bill seeks to prevent rent bidding wars with a new clause mandating that advertisements for AST properties must state the specific rent amount. It also prohibits accepting or encouraging offers exceeding this stated rent. Early reading of this suggest that the Bill may go somewhat further than anticipated on bidding wars. It is easy to foresee a scenario where initial stated rents may be inflated to hedge for rental gains.
Rent repayment orders will also be expanded, but mainly for repeat offences, not one-off errors. There will be understandable concerns that with no disincentive to challenge a rental increase then the First Tier Tribunal may be flooded with requests, leading to longer arbitration and thus rent a form of rent stifling. There will be no formal rent controls, but tenants will still have the right to appeal rent increases to a tribunal. The Bill is also exploring how far back tribunals can adjust rent amounts, balancing fairness for landlords and protection against significant tenant arrears. So, a mixed bag on rental increase measures, but no rent controls are on the Government’s agenda.
Pets
As with the previous bill, the right to request pets remains with the right for landlords to request or cost-in pet damage insurance.
Notices and grounds for possession
While tenants’ notice periods will remain at two months, landlords will see their notice period extended from three months to four months – short of the six months Shelter had advocated for. The protected period for grounds like selling or own-use will be extended, although specific details have yet to be confirmed.
Licensing, registration, and ombudsman
The Bill addresses licensing and registration, seeking to harmonize the two systems. With so many robust new regulations coming online, including the landlord portal, it seems logical that some of the processes enforced by local authorities could be streamlined to reduce duplication, ensuring a more efficient and cohesive approach to compliance across the sector.
After months of evidence gathering and scrutiny, the Bill has largely returned to its original form under Michael Gove. We support many provisions of the Renters’ Rights Bill, recognising its potential to enhance the sector. However, we believe that the Bill could be strengthened further through the inclusion of certain practical measures, such as establishing minimum tenancy terms and streamlining court systems and processes. These measures would not help create a more balanced and effective legislative framework, but crucially secure the confidence and support of our members to help deliver that.
