Controlled Rent Increases
This proposal will mean that you will still be able to agree an initial level of rent with your tenant, but once you have done so any increases must be in line with an approved benchmark. This is to be set by the Royal Institution of Chartered Surveyors (RICS), based on market averages.
- Setting increases in line with market levels established by the RICS removes the incentive for landlords to improve their properties. The overall quality of rental properties on offer will suffer.
- Landlords who do not think they will get maximum returns from their property will sell up, and potential new landlords will be put off, reducing the amount of rental accommodation. Since the government relies on the private rented sector to house many people, especially those on benefits, this will contribute to the housing crisis and increase the cost to the taxpayer.
- The procedure for setting initial rents will be unaffected (so unregulated). Therefore, landlords may simply set higher initial rents, reducing the intended effectiveness of the proposal.
- How will the system work if mortgage rates increase or when other relevant costs go up? The lack of security will destabilise the market yet further.
- Landlords have often had to work very hard and take on significant risks to pay for their rental business, as well as to sustain it. Surely it should be up to them to set the rent as they see fit?
- It’s pointless: landlords who are happy with their tenants will not increase rents unless absolutely necessary. Legislation enforcing this is a waste of time and money.
Even those who looked favourably upon the plans tended to agree that they would merely be the formalisation of good practice which is already widespread. Rogue landlords already flout so many laws that one more would not make a difference. This view is perhaps reflected in the fact that while a total of 25.28% were favourable or slightly favourable to controlled rent increases in theory, only 14.94% thought it likely or very likely that they would work in practice.
Three year tenancies
This proposal will alter the length of a standard tenancy to a three year period, with an initial 6 month probationary period, at the end of which landlords and tenants can end the tenancy. After this probation, tenants will be able to give notice to leave and landlords will be able to take back the property if they wish to live there themselves or sell it. The ability to evict a non-paying tenant, or for other breaches of contract, remains unchanged.
Again, the general view on formalising three year tenancies as standard is unfavourable. You have provided helpful details on the various reasons for this:
- A vast number of tenants will not want three year tenancies, even if many landlords do (provided the tenant is good). So enabling tenants to leave with only 1 month’s notice is hugely unfair on the landlord, especially when the landlord must give 2 months’ notice and have a specific reason.
- Longer tenancies mean more thorough background checks are needed, so landlords need time to conduct these. If a tenant only needs to give one month’s notice, this does not give the landlord enough time to find a good new tenant. This increases the risk of void periods both before and during tenancies.
- Again, landlords who are wary of the effects the reform will have may simply leave the market, creating the same problems of reduced supply as outlined above.
- It increases the difficulty of removing problem tenants (by removing Section 21 notices) while reducing obligations on the tenant. This is a fundamentally unfair imbalance.
- It is unclear how the changes will affect existing mortgage deals and it is very likely that problems will arise from this, again creating unnecessary disruption and uncertainty in the market.
Under this proposal, letting agents will not be able to charge fees to prospective tenants. This could mean that if you require services such as a background check, you will have to pay for them yourself.
The final proposal reveals much the same pattern of disapproval, although with a notable minority who are strongly in favour. In light of the recent debate on this specific measure, we have produced a special article in response.
Overall dissatisfaction with the Labour’s rental reforms was notably high amongst landlords:
There were plenty of interesting suggestions for alternative proposals from those who took part in the survey:
- The government must build much more social housing, and renovate existing empty residential housing and brownfield sites (areas that were previously industrial)
- Greater targeting of rogue landlords. Increased house building will help this: increasing supply will drive up standards and help to eliminate the rogue element
- More should be done to help landlords do their jobs well, such as preventing councils charging full council tax between tenancies
- A capital gains tax exemption for previously rented properties, which would encourage some landlords to sell without putting off other (or new) landlords from buying.
- Greater flexibility over tenancy length while making the obligations for ending a tenancy equal between landlord and tenant