Despite many voices of reason warning of the potential unintended consequences of implementing the Renters’ Rights Bill – including forcing landlords out of the market, pushing up rents to record levels, increasing the number of homes lying empty and possibly creating more homelessness – the government does not appear to be in listening mode.
In fact, when the Bill received its third reading in the House of Commons last week, ministers confirmed a proposed amendment which could also result in fewer properties being available for overseas students, and put a dent in the £40bn+ they contribute to the UK economy each year.
The latest amendment to the Bill will prevent landlords from receiving more than one month’s rent in advance of a tenant moving in to a property. On the face of it this sounds perfectly reasonable, but in specific sectors such as the student rental market it could in fact wreak not a little havoc.
Despite a recent decline in numbers due to rule changes introduced by the last government, 25% of the UK’s student population is made up of overseas students. The vast majority live in rented accommodation, usually paid for by their parents or other family members. By definition, as they live overseas, those parents or family members do not have a credit history in the UK and cannot be checked out by potential landlords.
As a result, it is common (and reasonable) business practice for a landlord to require three or six months’ rent from an overseas student in advance.
Banning landlords from receiving rents before a student moves in could severely hinder overseas students’ chances of finding suitable/affordable accommodation near their place of study, which could act as a further disincentive to studying in the UK.
The rules will not apply to the Purpose-Built Student Accommodation blocks, which are usually owned by institutional investors rather than individuals or small businesses, tend to be far more expensive than standard accommodation and routinely ask for a year’s rent in advance. The introduction of the Bill will make the student accommodation playing field less even for large and small investors, and more expensive for overseas tenants.
This latest clause simply adds to the list of elements in the Renters’ Rights Bill which risks upsetting the delicate balance between tenants’ and landlords’ rights, ultimately to the detriment of the tenants.
Perhaps the most hotly-debated headline changes are the removal of fixed-term assured tenancies and Assured Shorthold Tenancies (ASTs)and the abolition of so-called ‘no-fault’ evictions. Under the new Bill, a landlord will not be able to decline to renew a disruptive tenant’s contract as there will be no end-date to a tenancy, as tenants will have the right to remain indefinitely. They can only be removed if the landlord wants to sell or move into the property or where there are rent arrears or evidence of anti-social behaviour. However, enforcement of these grounds will require potentially lengthy court processes, which will only add to the backlog of cases which has been clogging up the legal system since the pandemic (County Courts took an average of 51.6 weeks to process small claims cases last year, while the Crown Court has a backlog of 52,000 cases).
The removal of ASTs may also lead to an increase in the number of empty homes in the UK. Currently, homeowners who have to leave their property for a year or two because they have been posted to a different city or country with work can rent out their home for a specified period, safe in the knowledge that they will be able to move back in when they need to. If the Bill passes unamended, many people in such situations may be reluctant to rent out their homes for fear that it might require a protracted legal process to get them back. This was precisely the sort of circumstance which the introduction of Assured Shorthold Tenancies, under the Housing Act of 1988, was designed to address. There are over a million empty homes in the UK already. It would be a complete own goal to add to that number.
But the greater risk posed by the Bill is an exodus of landlords from the PRS which is such an integral part of the UK’s housing landscape. Private landlords now provide homes for just shy of 20% of the nation’s households, with tenant ‘types’ including not just the traditional transient groups such as students, peripatetic professionals and younger (and not so young) people yet to put down roots, but increasingly families with children (who made up 34% of private renters in 2023/24) and older people (9% are over 65 years old).
Rents are already at record highs, having increased by 9.2% last year to an average of £1,362 per month in England, according to the Office for National Statistics. That ranges from £706 in the North East to £2,220 a month in London. If more landlords lose their nerve and sell up, the supply of rental properties reduces and the cost of renting increases even further. It’s basic economics, but it also reflects a lack of landlord confidence in government that has been mounting for more than a decade. Landlords are likely to put rents up not just because the laws of supply and demand say they can, but to protect themselves from further onslaughts by the state, be they further tax or legislative changes.
The last Conservative administration failed to get its Renters’ Reform Bill in place before they lost the election, and cynical observers might say the current government is determined to prove it can achieve what the competition couldn’t. But to use the country’s tenants as a political football would be misguided. The UK is suffering an acute housing crisis. It is vital that the government wakes up to the dangers of further damaging the PRS, and the potentially calamitous impact the Renters’ Reform Bill could have on renters themselves.
*The Renter’s Reform Bill is due to go for its second reading in the House of Lords on 4 February.
Kate Davies is executive director at IMLA
