The Changing Landscape for Tenants

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The private rental market is shifting significantly as proposed new legislation seeks to reshape the balance of power between tenants and buy-to-let landlords in England. These changes, driven by political initiatives and tenant activism, mainly aim to improve security and affordability for renters, and reform grounds for repossession by landlords. 

Why Reforms are Happening

The impetus stems mainly from the concern to improve tenancy conditions for 11 million private renters in England1. These tenants comprise 4.6 million households, representing about 19% of households in England2 On average, private renters spend 33% of their household income on rent, compared to 27% spent by social renters. Other than rent affordability, issues around unfair evictions have also come under public scrutiny. 

tenue of household in england that are private rented sector
Source: Gov.uk²

Successive governments have sought to expand home ownership. But high property prices have kept homeownership out of reach for many aspiring buyers, sustaining demand for long-term rentals. The average price of a home in England (£275,000) is 8.3 times average household disposable income (£33,000)3. Such dynamics have forced lawmakers to prioritize tenancy reform.

The Renters’ (Reform) Bill

The UK government introduced the Renters’ (Reform) Bill to Parliament on 17 May 2023. Subject to parliamentary processes, the bill is expected to become law sometime in late-2024.  

Key measures covered in the Bill include:  

  1. Abolition of no-fault evictions under Section 21, enabling tenants to report issues and resist unfair rent increases without running the risk of losing their homes, and making periodic tenancies the norm. Periodic tenancies have no end date. Thus, tenants will have greater security than under the current fixed-term tenancy system. They will be able to leave by giving two months’ notice, while the landlords will be able to gain repossession on genuine grounds, as discussed immediately below.
  1. Making repossession by responsible landlords for genuine reasons, such as selling, family occupancy, and enforcement against rent arrears and anti-social activities, easier.
  1. The ability for tenants to appeal to an independent tribunal, the First-tier Tribunal, if a landlord increases rent excessively (above market), while providing for fair increases in line with the market.
  1. The creation of a housing ombudsman to mediate many disputes quickly and cheaply without long and expensive court actions. Landlords will be required to join the scheme. Tenants will be able to seek redress for free it their complaint is legitimate.
  1. The creation of a privately rented property portal service, supported by a private rented sector database, to track landlord obligations, provide renters with better information and decision-making aids, and help councils target enforcement. Landlords will be required to register themselves and their properties on the portal.
  1. Empowering tenants to request having pets, which requests landlords cannot unreasonably refuse. Landlords will be able to require pet insurance against damage to their property.

The government also intends to introduce legislation to introduce other measures, including:

  1. Applying the Decent Homes Standard to the private rented sector in order to improve the safety, value and quality of housing in this sector.
  1. Making it illegal for landlords and letting agents to ban renting to tenants on benefits or with children.
  1. Strengthening councils enforcement powers against criminal landlords.

What BTL Landlords Need to Know About the Proposed Section 21 Reform

The Renters' Reform Bill brings a seismic shift - the potential abolition of Section 21. This "no-fault" eviction route has long afforded buy-to-let (BTL) landlords flexibility when repossessing properties. Its removal promises greater security for tenants but also poses challenges.

As a landlord, what might this mean for you? And how can you adapt your approach accordingly?

Enhancing Legal Literacy

Without Section 21, repossession relies on establishing grounds defined in Section 8. Landlords must familiarize themselves with these grounds, which include rent arrears, tenant misconduct, and selling intentions. Evidence must be provided.

Robust Systems

More diligent tenancy management and record-keeping are key. Ensure agreements set clear expectations and address any breaches firmly yet fairly. Maintain communication and evidence.

Consider Alternatives

Section 21 reform encourages landlords to explore alternative options. Can issues be resolved amicably? If selling, could a sitting tenant purchase? Openness to compromise smooth transitions.

Know Your Rights

While favouring tenant security, laws still uphold landlord rights - when applied judiciously. Seek proper counsel to guarantee informed, lawful practice.

Change takes adjustment. But by enhancing their legal knowledge, administrative skills and communicative approach, BTL landlords can navigate the post-Section 21 landscape smoothly.

Bridging the Affordability Gap

The widening income gap between England's private renters and homeowners is an urgent problem. Renters allocate far more of their pay to housing than buyers do - and the proportion of households renting has risen steeply.

Since 1997, the ratio between house prices and earnings for full-time workers has nearly tripled from 3.5 to 9.1. The affordability crunch is most extreme in London, where values wildly outpace incomes. This gap locks renters out of ownership and strains budgets.

And renters now make up over a third of English households, up from 29% in the mid-1990s. Growth is concentrated among 25-34-year-olds, with private renting rates tripling in this group. Already impacted by stagnant wage growth, their average rents have surged 53% in London and 29% nationally after adjusting for inflation.

With homeownership receding for young workers, which is key to the economy, resolving the imbalance is imperative. Failing that, an entire generation risks being consumed by housing costs with little chance of stability.

Ongoing Challenges and the Path Ahead  

Source: ONS⁴

While the movement on upgrading tenant rights and holding landlords accountable has gained steam, substantial work remains to modernize the sector. With many UK households renting privately, the market's stability impacts national well-being.

Fair allocation of costs between tenants and buy-to-let investors and balancing their competing needs through this transition remains contentious. Small-portfolio landlords argue that externally imposed upgrades and loss of no-fault evictions destabilize their already slim profit margins (or increase their losses). Tenant advocacy groups counter that reform is essential after decades of unchecked landlord powers and substandard living conditions. 

As the discourse continues evolving across partisan lines, tangible progress in improving baseline rights and standards reflects a recognition that the UK rental market's governance framework needs rebalancing for the long-term sustainability of housing provision countrywide. Getting incentives right on all sides presents complex challenges but holds the prospect of a more equitable rental experience over the coming decade.

FAQs:

Q. What recourse do tenants have if a landlord fails to comply with the Levelling Up Initiative's housing standards?

A: If a landlord fails to comply with the mandated housing standards under the Levelling Up Initiative, tenants can report this non-compliance to their local council. The council can take enforcement action against the landlord, including fines or orders to make the necessary improvements.

Q. Will the Renters Reform Bill affect the current rent levels?

A: The Renters Reform Bill includes provisions for tenants to appeal against above-market rent hikes. While it does not directly set rent levels, it aims to protect tenants from unjustified rent increases, potentially influencing rent stabilization.

Q. Can landlords still end tenancies under the new reforms?

A: Yes, landlords can still end tenancies, but the reforms aim to ensure that they do so for legitimate reasons, such as selling the property or needing it for family use. The phasing out of Section 21 means landlords can no longer evict tenants without a valid reason.

Q: How does the proposed housing ombudsman under the Renters Reform Bill help tenants?

A: The proposed housing ombudsman is designed to provide a quicker, more accessible way to resolve disputes between tenants and landlords. This could range from issues with repairs and maintenance to disagreements over rent or deposits.

Q: What are my responsibilities as a tenant under the new reforms?

A: You'll still be responsible for paying rent on time, adhering to the terms of your tenancy agreement, and taking reasonable care of the property. The reforms won't absolve you of basic responsibilities, but they do offer greater security and protection against unfair treatment.

Q: Do I need to make any changes to my current tenancy agreement?

A: Existing tenancy agreements remain valid, but it's recommended to familiarize yourself with the new reforms (particularly regarding rent increases and ending tenancies) to understand your rights and responsibilities more clearly. Consult your local Citizens Advice or tenants' union for tailored advice.

Q: How can I challenge a rent increase I believe is unfair?

A: The reforms introduce a process for appealing excessive rent hikes. If you think your landlord raised the rent above market value, you can submit a complaint to a tribunal. Gather evidence supporting your claim, like comparable rental listings in your area. Consider seeking legal advice or assistance from tenants' unions for navigating the process.

Q: What happens if I lose my appeal against a rent increase?

A: Even if your appeal is unsuccessful, the new legislation prevents your landlord from evicting you solely for contesting the rent unless they have valid grounds (e.g., selling the property).

Q: What steps should I take if my landlord isn't addressing necessary repairs?

A: First, communicate clearly with your landlord in writing, outlining the repairs needed and requesting a timeframe for action. Keep copies of all communication. If they fail to respond or remedy the issues, you can contact your local council's environmental health department to report the disrepair. Remember, the reforms require landlords to maintain properties to a decent standard.

Q: Can I withhold rent if repairs aren't done?

A: Withholding rent is generally not advised as it could breach your tenancy agreement and potentially lead to eviction. Instead, follow the proper procedure as described above and seek legal advice if necessary.

Q: What are my options if my landlord wants to evict me under the new reforms?

A: The reforms make evictions more challenging for landlords, requiring valid reasons like selling the property, anti-social behaviour, or rent arrears. If you receive an eviction notice, carefully review it, understand your rights, and seek legal advice immediately. Tenants' unions and Citizens Advice can also provide support and guidance.

Q: Where can I find resources and support if I'm facing eviction?

A: Several organizations offer free or low-cost assistance to tenants facing eviction. Contact your local Citizens Advice, Shelter, or tenants' union. They can advise you on your rights, help negotiate with your landlord, and even represent you in court proceedings.

References

1. Guide to the Renters (Reform) Bill | Published 17 May 2023 | Gov.uk
2. English Housing Survey 2021 to 2022: private rented sector | Published 13 July 2023 | Gov.uk
3. Housing Purchase Affordability, UK: 2022 | Release date 27 July 2023 | ONS
4. Housing affordability in England and Wales: 2022 | Release date: 22 March 2023 | ONS
5. The cost of housing for low-income renters | Published on 13 October 2017 | IFS

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