The Intermediary – April 2025 - Flipbook - Page 24
BUY-TO-LET
Opinion
Renters’ Rights Bill
could be net positive
for the sector
T
he Renters’ Rights Bill
is speeding towards the
statute books. It was
only published last
September, and yet is
very nearly through
Parliament. No one is contesting its
stated intentions – greater security,
and safe, decent homes for tenants –
but it is also being described as “the
biggest shake-up to the private rented
sector [PRS] in three decades.” So,
what is the fuss about?
There are around 11 million private
tenants in England and Wales –
almost 20% of the population. One
thing on which all main political
parties agree is that they deserve
greater protections.
The previous administration
introduced a Renters (Reform) Bill,
with similar aims, and many of
the measures in that prospective
legislation are in the current
iteration. However, the earlier Bill
dragged through Parliament for a
year before being abandoned – amid
disagreements over whether it could
succeed in its aims.
In the new Bill, landlords will be
forbidden from discriminating against
prospective tenants and will no longer
be able to accept offers above the
advertised rate, to discourage bidding
wars. It will also end fixed-term
tenancies, so all new contracts will be
on a rolling basis – although tenants
can give a month’s notice. However,
landlords will face greater challenges
regaining possession, as Section 21 ‘no
fault’ evictions will no longer exist.
Landlords must soon use set grounds
under Section 8 to recover properties,
giving four months’ notice.
Meanwhile, rents can only be raised
once annually, in line with market
rates, with tenants gaining free right
of appeal to independent tribunals.
24
The Intermediary | April 2025
STEVEN MACDONALD
is national head of intermediary
business at Handelsbanken
Realistic expectations
Groups representing tenants have
welcomed many of the measures
– no one will argue with those
surrounding safety or treating renters
fairly. However, even the fairest
provisions will mean increased costs
and administrative burdens – which
are likely to be passed on. Some
could even have serious unintended
consequences.
The right to appeal rent increases
has always existed, and were such
appeals expensive, it would exclude
the very people who need protection.
But if there is no downside to
an appeal, it opens the way for
automatic challenge of every increase.
Previously, tribunals could find rents
were actually below market rate and
increase them – even backdating the
increases – which acted as a bar to
vexatious claims. Now, the worstcase scenario for a tenant is that the
increase is upheld, and even then it
may be delayed, possibly for months
given the likely case backlog.
Meanwhile, replacing Section 21
with Section 8 means landlords may
have to prove their case in court,
risking both income and legal fees.
In short, landlords will see both
risks and costs shoot up, while their
opportunities to increase income
through raising rents are curtailed.
The most likely scenarios are that
they front-load such increases or sell
up. The first raises rents directly –
and, if everyone does so, sets a new,
higher, market rate. The second will
cause supply shortages.
Pros and cons
When landlords leave the market,
so, usually, do their properties – in
the last five years more than 160,000
rental properties became owner-
occupied – great news for buyers, but
not for those still hoping to rent.
None of this might be an issue
if rents were not already at record
highs, but it now risks overheating an
already febrile market.
Are there any positives?
If the market rebalances in favour
of institutional and professional
landlords and investors, then many of
the costs could be absorbed.
Such landlords have the scalability
and expertise to deal with the new
requirements – and could take
advantage of new opportunities, since
casual landlords moving to more
profitable assets will want to dispose of
their properties. This, in turn, will be
excellent news for intermediaries.
As interest rates sele, lenders
are becoming more innovative; this
suggests plenty of opportunities for
new business, especially around
refinancing.
The new standards – as well as the
retrofiing required by upcoming
energy efficiency rules – will mean
work, which needs finance, which
should mean even more business.
There is every possibility that,
managed well, the Renters’ Rights Bill
could become a net positive. Tenants
will be more secure, and they will also
be renting from professionals.
Those landlords will have an
opportunity to grow their portfolios.
Lenders will have plenty of new
business, while brokers and advisers
will be vital to shepherd the sector
through the transition. However, this
can only happen if everyone involved
starts planning for it – now. ●
