Latest update on the Renters Reform Bill: Second Reading 23rd October 2023

The Renters Reform Bill proposes considerable changes to the private rented sector (PRS) with the intention of creating more security for tenants. Due to the fact that the changes are so significant, the Government has spent some time consulting with tenants, landlords and agents to ensure the Bill works ‘on the ground’ when introduced.

It was fantastic to see research from our own landlord survey mentioned by Rt. Hon. Craig Whittaker MP in the Commons chamber during this reading. We're grateful to our landlords who take the time to fill out our occasional surveys - this is the impact they can have!

As a result there have been some changes to the originally proposals and the Bill has passed its second reading on 23rd October 2023, meaning it is likely to come into effect prior to the end of the current parliament.

To keep you up to date, here is a summary of the aims of the Bill and the changes this will now bring. We believe though, that rather than increase security for tenants, it will do the opposite, while from a landlord perspective, as long as you abide by the law and treat your tenants well, the Bill will have minimal impact.
 

The aims of the Renters Reform Bill

From the time the original Bill was introduced, there has been an attempt to address issues that cause both tenants and landlords problems when letting:

• Tenants should have a “good quality, safe and secure home”
• All tenants should be able to “treat the house as their home and be empowered to challenge poor practice”
• Landlords should be provided with information on “how to comply with their responsibilities and be able to repossess their properties when necessary”
• Both landlords and tenants should have a system that “enables effective resolution of issues”
• Local councils should have “strong and effective enforcement tools” to tackle poor practice.
   

Key changes proposed in the Bill

To achieve these aims, the Government is proposing the following changes to the way we let and rent homes in England:

Changes to the eviction process:

• Section 21 or ‘no fault evictions’ will be abolished. Landlords won’t be able to evict tenants after the end of a fixed term without giving a specific reason.
• Section 8 will be strengthened so that the grounds for repossession, without Section 21 will make sure landlords can still gain possession of their property if needed.
• Landlords will be able to repossess their properties more quickly if there are problems with anti-social behaviour, arrears or the property needs to be sold.
• Improvement of the eviction court process, to make it quicker and easier for landlords and tenants – including a mediation service to help avoid the need to go to court at all.

The Government has also stated they “will not proceed with the abolition of section 21 until reforms to the justice system are in place.” Which suggests the eviction changes will take some time to implement.

Other changes include:

• Rented properties will not have a fixed term anymore, they will have a “periodic tenancy” which means a rolling tenancy each month and no specific end date. Two months’ notice will be required by the landlord/tenant for the tenant to leave unless there are issues with rent payments or anti-social behaviour.
• Rents to be increased on an annual basis only, requiring two months’ notice and tenants will be allowed to challenge excessive rises.
• Landlords will be required to join an Ombudsman Scheme.
• A new ‘Privately Rented Property Portal’ will be introduced to give landlords and tenants information on their rights and responsibilities. The portal will ensure that landlords demonstrate they are compliant with lettings legislation for example, showing their membership of the Ombudsman Scheme, who owns the property and the property’s energy performance.
• Landlords won’t be able to flatly refuse tenants with pets unless the property isn’t ‘suitable’, for example a large dog in a small flat or ownership is banned by a leasehold agreement. Both landlords and letting agents should be able to require pet insurance to cover any damages.
• Local authorities will be given more enforcement powers to crack down on criminal landlords.

In the future, landlords will also be required to provide homes which are of a specified ‘decent standard’ and won’t be able to reject tenants because they have kids or receive benefits.

How will this affect the rental market?

Some of these changes have already been implemented in Scotland and Wales, and, in the main, they haven’t impacted too harshly on the market. In Scotland however, they have introduced rent controls and this has does appear to have had a damaging effect on the supply of properties.

We are supportive of the intentions behind the Bill as we understand the need for regulation to prevent the unscrupulous behaviour of a small number of ‘rogue landlords’, and we support the effective enforcement of legislation.

However, in our view, although there have been some changes already to the Renters Reform Bill, they don’t go far enough to help make tenants lives better.

Michael Cook, Group Managing Director, explains: “Our figures show, the main reason for rental increases is lack of supply due to landlords selling their property asset. The proposed changes make the sale of the property one of the few reasons which enables tenancies to end. So the Bill does little to address the supply and demand imbalance which is the causes of the greatest distress, both to landlords and tenants.”

The additional changes we believe are required for the Bill to work

Removal of Section 21 of the Housing Act 1988

One of the key components of the Bill is the removal of Section 21 ‘no fault evictions’; instead tenants may only be evicted through Section 8 (see below).

We have conducted some research of Section 21 usage which found that Section 21 is rarely overused, and even more rarely misused. Recently we took a sample from our 65,000 strong landlord client base across the estate agency brands in Leaders Romans Group (of which we are one of the brands). Of those who responded to our survey, 80% had never used Section 21. Of those that had, a significant majority (over 60%) did so because the tenant was in breach of the lease.

The English Housing Survey 2021 to 2022 found that only 6% of tenancies ended at the landlord’s volition.

Both figures demonstrate the fact that the vast majority of landlords don’t evict tenants on a whim. In reality, Section 21 notices are commonly used simply as a straightforward way to bring a tenancy to an end when both the landlord and tenant agree, or when there’s another good reason for a landlord to evict their tenant.

To end no-fault evictions through abolishing Section 21 is extreme, unnecessary, and damaging to landlords and tenants alike.

Changes to Section 8 of the Housing Act 1988 as a replacement for Section 21

We believe that this means tenants, who were previously given a six-month fixed term tenancy can now be evicted within just two months’ notice, for example if the landlord wants to sell, which creates less, not more security for tenants.

Moving all assured shorthold tenancies onto a single system of periodic tenancies

The Bill confirms the Government's ambition to simplify existing tenancy structures, by moving all assured shorthold tenancies onto a single system of periodic tenancies.

The average time that a tenant remains in a rented home is four years. Assured shorthold tenancies (typically of six or 12 months) are currently the standard rental agreement in the PRS. After the specified time has elapsed, a decision is made to either renew the contract or switch to a periodic (e.g. month by month) payment.

Instead, the Renters Reform Bill proposes that all rental properties will be under a periodic tenancy - rolling on a month-by-month basis without having a specified end date. The Bill removes both the security of the let and its flexibility.

Impact on supply

Rents are rising at unprecedented rates, due to a failure of supply to meet demand. Zoopla’s recent data shows that demand for private rented housing is up 51% compared to the five-year average. Rightmove notes that the number of properties is down 46% compared to 2019 while the number of people enquiring is 173% higher.

Our fear is that the removal of Section 21 notice will result in a ‘wave’ of evictions to come before rental reforms are implemented – exacerbating the lack of supply in the market.

Landlords selling up is already the biggest cause of homelessness: as early as the English Housing Survey 2019-20 stated that the most common reason tenants report for landlords ending their tenancy is their landlord selling up, occurring in as many as 33% of cases.

The reality is, good landlords and agents, don’t have anything to fear from these reforms, it’s mostly tenants that will be adversely impacted - and that’s our major concern.

We think there should be much more focus on the fact that the existing 170 pieces of legislation are not yet properly enforced by local authorities and more regulation with little or no enforcement results in fewer good landlords and more rogues filling the void to meet the demand.

Finally, the key problem in the rental market is currently a lack of supply of professionally let, properly regulated landlords that own high quality, energy efficient homes. The focus currently should be on improving supply by preventing the good landlords from leaving the PRS or moving into the short-term lets market.