MPs debate and vote on the Renters (Reform) Bill for the first time on Monday evening. The Bill was published in May and it is unusual for the government to take so long to schedule what is known as the Second Reading – but it shows the government does want to get it done and into law.
There will be many more committee sessions, debates and votes in both Houses of Parliament before the Bill becomes an Act. Here’s what you need to know so far:
What are the benefits of the Bill?
Firstly, and perhaps most importantly, the bill will abolish Section 21 evictions. This will mean that landlords must provide a valid reason to evict a tenant. While they can evict if the tenant is in rent arrears, or wish to sell or move into the property, they cannot evict in order to raise the rent or to remove a tenant who complains.
The bill means that it will be easier for tenants to challenge a proposed rent increase through the First-Tier Tribunal, or to complain about disrepair and mistreatment, without fear of retaliatory eviction. This is especially important for renters who have been evicted as a result of trying to challenge a rent increase or make a legitimate complaint; renters who will have suffered in poor housing conditions because they fear they will be evicted will have much greater rights and faith in the system.
– Replacing fixed-term assured shorthold tenancies with rolling periodic tenancies means that tenants won’t be trapped in unsuitable properties by fixed terms, and won’t face pressure to move out when a fixed term ends.
– A new Property Portal where every landlord is registered will allow tenants to check that their landlord is letting the home legally, before or during the tenancy, and make it easier for councils to take enforcement action when necessary.
– A new Ombudsman for private landlords will give all tenants access to redress services, which offer a cheaper way of pursuing complaints than the courts system.
– Tenants will have a right to ask their landlord if they can keep a pet and the landlord will need a good reason to say no.
– The government has also said it will introduce measures to extend the Decent Homes Standard to private rented homes, and ban discrimination on the basis of tenants receiving benefits or having children.
Is the Bill sufficient?
– There is a risk that landlords could abuse eviction grounds that allow the landlord to sell or move back into the property, for example to remove tenants who complain, only to then re-let the property. The Bill will prohibit re-letting of the property for three months after the tenant moves out, but this is not long enough to be a deterrent, and it is not clear that there is enough of an incentive for tenants to report breaches. Scotland has Wrongful Termination Orders worth up to six months’ rent.
– Tenants evicted legitimately under grounds for sale or moving back in will get just two months’ notice, a period of just six months’ protection at the start of the tenancy, and no financial support to move. Generation Rent wants tenants affected by these grounds to get at least four months’ notice, two years’ immunity and a relocation payment worth two months’ rent.
– The success of the Portal depends on landlords registering, but as the Bill stands we will rely on underfunded councils to enforce this, and there are limited incentives for tenants to check their landlord is compliant and to report them if they are not. The government should entitle tenants to a refund of rent if their landlord is not registered with the Portal, and require landlords to lodge eviction notices with the Portal.
– Although landlords will now need to serve a formal notice to raise the rent, which the tenant can challenge at the First-tier Tribunal if it is excessive, the Tribunal will use the market rent as the benchmark for its decisions, rather than what the tenant can afford. This could result in “economic evictions” if market rents rise more quickly than incomes.
How common are Section 21 evictions?
– The number of Section 21 cases in the court system is at its highest level since 2017 – 7,491 claims in 2023 Q2, and 26,501 in the 12 months to June (Source: Ministry of Justice). Because a valid Section 21 notice cannot be overturned by the court, most tenants who receive one leave before the case reaches court.
– In 2022-23, 74,500 households in England faced homelessness at the end of an assured shorthold tenancy, of which 42,110 (57%) were due to the landlord wishing to sell or re-let (Source: DLUHC Homelessness statistics). This illustrates how important it is to protect tenants when their landlord wishes to sell.
– Pre-pandemic, roughly 134,000 households underwent an unwanted move in 2019-20: 57,000 after being evicted from a private tenancy; 66,000 moved due to a fixed-term tenancy ending; and a further 11,000 moved due to a rent increase (Source: GR analysis of the English Housing Survey 2019-20). The latest analysis is from the years of the pandemic when there were restrictions on eviction – 23,000 households were evicted per year, with a further 67,000 leaving because the fixed term ended (2021-22 PRS report, Annex Table 3.4).
– The existence of Section 21 creates a chilling effect on tenants’ willingness to complain about disrepair, resulting in lower standards in private rented homes, as well as evictions themselves. A quarter (23%) of private rented homes are non-decent, compared with 10% of social housing (Source: English Housing Survey, Headline Report, 2021-22).
What is happening to rents?
– Since March 2021, rents on advertised tenancies in the UK have increased by 26% according to Zoopla figures, which puts annual rent inflation at 10.5% as of September 2023. Zoopla finds that rent was worth 28.4% of gross earnings in July 2023, compared with a 10-year average of 27.2%.
– Between June 2021 and June 2022, the number of young adults living with their parents fell by around 300,000, indicating a post-pandemic increase in demand for private rented homes. It is likely that this was a driving factor behind the initial dramatic increase in rents.
– These higher market rents are being increasingly passed on to sitting tenants. In Generation Rent’s survey of private renters in July 2023, 60% of respondents who had not moved in the past year said they had been asked to pay a higher rent in the previous 12 months, up from 45% in July 2022.
– This initial surge in rents on new tenancies may have created a vicious circle by discouraging tenants from moving even if they wanted to – in most cases even if rent has gone up within a tenancy, it is likely to be lower than on a new tenancy. Even as Section 21 evictions hit their highest level since 2017-18, churn in the sector, measured by the proportion of tenancy deposits returned in the course of the financial year, fell from 40% in 2018-19 to 31% in 2022-23. This reduced natural turnover meant fewer homes coming onto the lettings market and more competition for each one that did, pushing up rents further.
– The Office for National Statistics rent index, which covers existing as well as new tenancies, recorded the highest rate of rent inflation since the series began in 2006 in September 2023.
Are landlords selling up in response to the Bill?
– Landlords who would only ever have valid grounds to evict should welcome this Bill; we should question whether anyone who is selling up now and blaming the Bill is the kind of person who should be providing housing in the first place.
– Many landlords on interest-only mortgages are under increased financial pressure because interest rates have increased dramatically since 2022, and the market may not allow them to raise rent to cover the increased payments when their fixed rates end. In summer 2023 the Bank of England’s Financial Stability Report suggested that 14% of landlords will be under substantial financial pressure by the end of 2025.
– Where landlords sell up, our primary concern should be with their tenants who will face a particularly stressful search for a new place to live. If higher interest rates are likely to prompt more sales, this underlines the need for better protections for tenants affected.
– A home sold by a landlord is either bought by another landlord, or by an owner-occupier, who may be, or may be freeing up a home for, a first-time buyer who no longer needs to rent. The overall impact on supply and demand in the rental market is therefore typically neutral.
– We have concerns about supply in tourist hotspots where landlords have incentives to switch to holiday lets, often using Section 21 in the process. The government has policies seeking to reduce these incentives, including powers for local authorities to charge council tax premiums on second homes and impose planning restrictions. Generation Rent believes they need to go further with licensing of holiday lets and removal of mortgage interest relief, to counteract these incentives and encourage homes back into residential use.
How could the removal of Section 21 impact the courts/tenants in rent arrears?
– Data suggests that Section 8 grounds-based evictions take place in less time than Section 21. According to Ministry of Justice data, the Section 21 eviction process currently takes a median 28 weeks from serving the notice to repossession by bailiffs. On current figures, the Section 8 process would take a median 27 weeks, taking into account the four-week notice period for rent arrears proposed in the Bill.
– If there are concerns about the length of time to resolve possession claims in the courts, we suggest that this is related to the resources at the courts’ disposal, rather than the nature of the process. Moreover, any legal process must be fair to both sides, and this is one of the principles behind the abolition of Section 21.
– Some landlords believe that tenants in rent arrears will face County Court Judgements (CCJs) against them after Section 21 is abolished, but this is likely already happening under the current system. Courts made more possession orders under private sector Section 8 processes than Section 21 processes in the five years 2018-23, indicating that most rent arrears cases already go through Section 8. There will therefore likely not be a dramatic increase in such cases or in County Court Judgments following the introduction of the measures in the Renters (Reform) Bill.
– Even where landlords must provide eviction grounds, the experience in Scotland suggests that tenants won’t challenge a notice if they don’t have a case. Scottish Government data indicates that 204 eviction cases went to tribunal in May-Nov 2021, and 142 such cases in Sept 2019 to March 2020. This is a very small proportion of the rental market, which suggests that post-reform we will continue to see many tenants moving out without challenging the notice.