I completely agree that rental reforms have been long overdue and that tenants do need stronger protections. However, I also understand the concerns many landlords have about the potential for an imbalance in rights between tenants and landlords. It’s important to recognize that while reforms aim to create a fairer system for tenants, there are many decent landlords who go above and beyond to look after their tenants, and their voices need to be heard as well.
With over 25 years in the London property market, working as both a landlord and helping clients find pet-friendly rentals, I’ve seen first-hand how these changes impact the sector. The landscape has shifted dramatically, particularly with the recent changes in taxation rules that have made the buy-to-let market far less appealing as an investment. It’s not surprising that a third of private landlords are now considering selling their properties, which only adds to the shortage of rental properties available on the market.
Balancing tenant protections with the needs of responsible landlords is key to ensuring a sustainable rental market that works for everyone. Without addressing the challenges landlords face, we risk reducing the supply of quality rental homes, which will ultimately impact tenants too.
Private landlords selling
Private landlords are selling for a number of reasons going back a few years:
- Inability to offset a mortgage against tax.
- Rental yields have fallen with rising costs and high property prices
- Proposed legislation with the Renters Rights Bill by the current labour government which includes the following:
- Abolition of Section 21 for a landlord to serve notice on a tenant to be scrapped.
- Notice cannot be given within the first 12 months of a tenancy.
- No fixed long term contracts.
- Tenants will be able to give 2 months notice.
- Tenants can go into 3 months arrears before a landlord can take action.
- Being forced to accept pets.
- Proposed increase of Capital Gains Tax
Cautious landlords
The Renters Rights Bill is already reshaping the landlord-tenant dynamic, even before it officially becomes law. The anticipation of these changes is prompting landlords to adopt a much more cautious and risk-averse approach to choosing tenants. This focus on increased affordability and employment security requirements could make it even more challenging for tenants to secure housing, particularly those with less stable income or non-traditional employment.
The trend towards demanding rent guarantee insurance, either directly from tenants or taken out by the landlords themselves, is a clear sign that landlords are looking to safeguard their investments against potential losses. It’s a sensible step for landlords who are concerned about the financial implications of a lengthy eviction process or dealing with non-payment issues in a system that’s likely to become even more tenant-friendly.
It’s also true that landlords will likely become more thorough in their screening processes, given the potential risks. Social media could become a powerful tool for landlords to conduct their own due diligence on prospective tenants, supplementing what they hear from estate agents. With this shift, landlords may take their time to make decisions, knowing that a wrong choice could lead to significant financial and legal complications.
The point about managing agents potentially benefiting from the bill is spot-on. With increased regulations and the potential hassle of dealing with tenant issues directly, many landlords might prefer to offload these responsibilities to professionals. Managing agents could see a rise in business as some landlords, especially those who value convenience and have less time to deal with property management, turn to them to handle these complexities. This shift could provide a buffer for landlords, as agents would handle tenant relations, ensuring compliance with the new regulations and reducing the direct impact on landlords themselves.
In this evolving landscape, both landlords and tenants will need to navigate new challenges. Landlords may find themselves more cautious and selective, while tenants might need to be prepared for stricter financial scrutiny and potentially higher barriers to entry in the rental market. Balancing these changes will be crucial to maintaining a fair and functional rental sector for everyone involved.
Price Increases
Landlords have warned that they may increase rents as they are concerned by ‘Airbnb lite’ Basically, a tenant could give 2 months notice immediately and get an Airbnb for the price of a long let.
I’ve touched on a significant concern that many landlords share, especially with the new reforms potentially shifting the balance of power. The worry is that some tenants might take advantage of the system, knowing that eviction processes can be lengthy due to court backlogs. This possibility makes it tempting for landlords to increase rents as a way to protect their investment and compensate for potential losses.
The idea of landlords listing properties at higher prices to “test the waters” also makes sense in the current market environment. Even if the reforms intend to cap or control rent increases, the lack of flexibility to negotiate above the asking price might push some landlords to set higher starting prices to begin with. This strategy could become a way to offset risks and ensure they’re covering any potential gaps caused by delayed payments or other issues.
The dynamic between estate agents and landlords. An estate agent’s loyalty often lies with the landlord, especially when it comes to those with multiple properties or a larger portfolio. Landlords represent ongoing business and revenue, while tenants tend to be transient and less predictable in terms of future dealings. It’s understandable why agents might prioritise keeping their landlord clients happy, even if that means not pushing back too hard on high asking prices or other landlord strategies.
The challenge here is creating a fair system that doesn’t allow either side to exploit the other. If landlords feel vulnerable, they’ll raise prices to protect themselves, which ultimately affects tenants and makes affordable housing even harder to find. Balancing tenant protections with reasonable rights for landlords is crucial to avoid a situation where everyone feels the need to game the system to stay afloat.
Corporate Landlords taking over
According to Legal & General Investment Management, Britain’s economy would be better off without ‘unscrupulous’ buy to let private landlords. Not surprising when L&G has a property portfolio of over 5,000 build to rent homes.
Citra Living, the property investment arm of Lloyds Bank, has a growing property portfolio and has entered into an agreement with Barratt Homes for a joint £150m venture.
Corporate landlords are rapidly increasing market share. With any corporates taking over a sector, once they are in a strong enough position, rental prices and add ons will increase, which will negatively impact tenants.
Summary
Private landlords often carry a bad reputation, whether deserved or not, and it’s true that corporates are being positioned as the more “trustworthy” option. But, with corporate landlords, it’s ultimately about the financials. The shift to Build-to-Rent developments can feel a lot like the budget airline model, where everything comes with an added cost. What starts as a seemingly affordable option quickly becomes more expensive when you factor in all the extras, like parking, pets, and who knows what else they might add in the future.
The perception that corporate landlords are more professional or “above board” may appeal to tenants initially, but it doesn’t necessarily mean they’ll offer a better or more transparent service. Just like with any large business, the focus is often on maximising profits, which can lead to hidden fees and reduced flexibility for tenants. In the end, the grass may not always be greener on the corporate side of the rental market, especially if it means losing the personalized service and understanding that many private landlords provide.
It’s a complex situation, and while reforms are necessary to protect tenants, they should also consider the impact on small landlords who have been providing a valuable service for years. The danger is that by pushing these smaller players out of the market, we might end up with less choice and higher costs for renters in the long run.
Russell Hunt, leading UK pet-friendly property specialist, advising clients on renting and buying properties in and around London, as well as other parts of the UK.
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