First, it’s important to be clear about what are we trying to achieve. The problems as we see them are that:
- There are too many no-fault evictions – i.e. people forced to move without having done anything wrong
- Moving home is incredibly stressful and costly so if it is unavoidable then this upheaval should be minimised
- The threat of being forced to move without being at fault means that tenants lack confidence to make requests of their landlord, or to invest time in their home or their community
We therefore need a policy that addresses each of these. Our proposal is:
- Abolish Section 21 – this would create open-ended tenancies.
- Landlords could still evict, using Section 8 of the 1988 Act, so must prove grounds in order to do so. The grounds should be enforceable, so if they evict to sell, but subsequently re-let the property, for example, then they would face a penalty.
- A relocation payment for tenants evicted on no-fault grounds, equivalent to three months’ rent.
- A longer notice period to allow tenants to find a new home.
- Limits on rent increases to wage inflation.
This package of measures would reduce the number of no-fault evictions by preventing retaliatory evictions, and, with the added burden of a relocation payment, would encourage more landlords to sell with sitting tenants, or to move into a different property. The relocation payment and extra notice would mitigate the upheaval for the tenant. And rent regulation and the need for grounds for eviction would encourage tenants to make requests of their landlord without fear of a rent hike or eviction in retaliation.
Ideally no landlord would evict to sell or move back in, but even then there may still be scenarios where a landlord needs to take possession from a tenant who is not at fault. For example, they might need to undertake extensive refurbishment to ensure a home is safe to live in. That means there has to be a mechanism to allow this while encouraging alternatives, and we think the relocation payment is it – it is used in a handful of cities in the USA, and is also part of Section 8 grounds.
Much discussion about security of tenure focuses on longer tenancies – three or five years. But, whichever arbitrary fixed term you pick, that still doesn’t give tenants the long-term certainty they might need. By ending Section 21, landlords would be unable to enforce a fixed term, so tenancies would become open-ended by default. A tenant could give notice to leave, and the landlord could still take possession if they had a good enough reason and met their obligations.
We selected wage inflation as the ceiling for rent increases because it is more closely linked to affordability. If we used the Consumer Prices Index then you could have a scenario where your wage increased by only 1% but your cost of living, including your rent, rose by 3% – the kind of scenario that has occurred frequently in the past decade. A ceiling is better than rents automatically rising in line with wages. If landlords and tenants were locked into annual rent rises, and the rent in the wider market fell, then the tenant would be better off moving to a cheaper home. That would involve costs for both tenant and landlord so it’s better to have downward flexibility to avoid such situations.
It should be said that this is not rent control. Much greater efforts are needed to bring rents down, including building more homes, specifically public housing. Over the long term rents rise in line with wages, so the primary purpose of the cap in this package is to give tenants confidence and certainty – the ability to complain without the landlord responding by raising your rent, and the ability to plan.
This package of measures would improve the situation of the tenant enormously, and it enjoys the support of the public, including voters across the political divide. But we also need to consider how landlords would react. We’ve sought to accommodate the majority who already want to provide long term homes to their tenants, while raising the standards for everyone else.
Some landlords depend on their ability to boot tenants out with no reason required – either they rely on an easy eviction process to evade their obligations to provide homes fit for human habitation, or they are speculating on property prices and selling when the price is right.
In our proposed system they should sell up with sitting tenants to professional landlords. But some might continue to let using other forms of occupation to evade detection. That’s why any reform must be underpinned by a national register of landlords. A tenant considering whether to apply for a tenancy should be able to check the property against a central database and find out if the owner is legally allowed to rent it out. The government is already proposing that all landlords be required to join a redress scheme – this is just one step further.
Other landlords would complain that evicting tenants who have broken their tenancy would become harder if Section 8 became their only option and they had to prove grounds for eviction. But evidence for this is doubtful. Ministry of Justice figures show that in 2017 the median possession claim under the Section 21 process took 17.0 weeks to conclude with an eviction by bailiffs, and only 16.1 weeks under Section 8.
But landlords’ fear of having a tenant with rent arrears is genuine, thanks to reforms and cuts to housing benefit which increase the risk that claimants miss payments. The government must review its housing benefit and universal credit policies to ensure that no one can accidentally fall behind on rent. One option to prevent discrimination against benefit claimants could be to beef up rent guarantee insurance – if all landlords had to buy it as part of registration, and the government underwrote it, the premium would fall.
Tenants with unavoidable reasons for arrears should be protected and accepted as unintentionally homeless by the council if evicted. Tenants who deliberately break their agreements would have an incentive to move out promptly, before they received a court order.
This should assure most landlords, but those who simply don’t like extra security for tenants will probably leave the sector. Good. We’d obviously prefer them to sell with sitting tenants to avoid upheaval, but even if they instead sold to owner occupiers, it would have a neutral effect for tenants overall. It would reduce the supply of rented property, but, by freeing up homes for first-time buyers, it will also cut demand for rented property.
The size of the private rented sector is already shrinking, following recent tax changes for landlords which has led to a reduction in buy-to-let demand. But we have seen that this fall in supply has not affected rents, because people have moved from renting to owner occupation at the same time. We published a paper examining this in more depth last month.
Neither will landlords exiting the market reduce new supply to the rental market. The only investors directly adding new private rented homes to the supply of housing are Build to Rent landlords – pension funds and the like – and they already offer decent terms to tenants. Better minimum standards for the rest of the market won’t affect them.
Thirty years ago, the Housing Act 1988 ushered in private tenancies so miserable that people are desperate to buy, but they cannot as speculators have driven up prices. On this anniversary, the government could pursue reform that both gives tenants adequate protection and long-term homes, and help more first-time buyers by discouraging undesirable landlords.