Letting agents across the country fear that the government’s Renters Reform Bill will lead to a surge of landlords exiting the market.
Agents surveyed by The Guild of Property Professionals think that the Renters Reform Bill could cause many landlords to get out of the game, sighting the ban on Section 21 as the straw that broke the camel’s back.
Graham Wood, MD at Home Sales & Lettings, who has been involved in letting as a landlord for 20 years and the owner of a letting agency for more than 15 years, said: “The outcome of the long-anticipated Renters Reform Bill is to have sufficiently frightened numerous landlords into selling their rental properties.
“Landlords feel that one way or another they have been under constant attack for the past five years. Previously, borrowing through a buy-to-let mortgage had income tax advantages for landlords. However, from 6th April 2017 phased changes have resulted in finance costs no longer being deductible against income on long term let residential properties. Additionally, there has been the threat and now the reality of the abolition of Section 21.”
Wood believes that as a direct result of the constant attack on landlords, agents throughout the UK have experienced a surge in rental properties being sold.
He added: “Within our own agency the most common reason for tenants enquiring about newly listed properties, is that their landlord is selling. Approximately 10% of our managed properties have been sold in the last 18 months. We anticipate this will increase to 15% by the end of 2023.
“We know that from speaking to other letting agents this trend is common throughout the UK. And because the number of available properties is becoming smaller and smaller, the law of supply and demand has caused rents to increase sharply. Once again it is tenants who are having to pay the price of this badly thought through legislation.”
According to Simon Davies, branch manager of Norman F Brown in Bedale, Hawes and Leyburn, the Renters Reform Bill has been portrayed as positive for tenants and negative for landlords.
He commented: “As ever the devil will be in the detail which unfortunately hasn’t been announced yet and this is scaring landlords. Personally, I actually think there will be positive outcomes for both landlords and tenants. The main issue landlords will have will be over the scrapping of Section 21. While this sounds very scary, there will still be mechanisms for taking back possession of the property quickly, such as a sale, anti-social behaviour and if the landlord wants to move back in, and that is just for starters.
“Unless the government announces the detail soon, I fear some landlords will be scared by the uncertainty and sell up. This will reduce the supply of property for tenants and ultimately push rents even higher due to market forces,” he comments.
Alex Umut Sevinc, head of operations at Filey Properties, says that a lot of the landlords he has spoken to relate the Renters Reform Bill as mainly a banning of Section 21.
He explained: “Many landlords feel that they will not be able to remove tenants when they require the property back, some even go as far as to coinciding this bill will also enable the tenant to buy the property off the landlord. This for now seems untrue but there is a lot of speculation.
“A lot of landlords have begun to panic about the mention of a freeze on rent or limit of rental increase. This is on the backdrop of raising interest rates, maintenance cost and also Tax implications.”
According to Sevinc, most of his landlords are particularly worried about the duration it currently takes to remove a tenant and how this may be lengthy process if they are removed by what is known as ‘accelerated possession’, which currently often takes up nine months. He notes that landlords are apprehensive of how long the new style eviction will take and if there will be sufficient grounds.
In conclusion, Sevinc believes that the new Property Portal for Landlords is deemed by many as another potential increase in charges to the landlords, as most landlords have seen the introduction of a selective licence within the last five years in the boroughs they operate. This will be another punishment for abiding landlords.
“Personally, I actually think there will be positive outcomes for both landlords and tenants.” I disagree there can only be one winner, the being able to “fast track” possession when wanting to sell is just paying Landlords lip service-the Government can’t organise anything at the moment.
Freezing rents will just decrease supply so common sense says a U turn will happen very quickly.
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If I were a client landlord (Thank Heavens I am not) of Simon Davies, branch manager of Norman F Brown in Bedale, Hawes and Leyburn, I would be looking for another agent. I would not trust Gove as far as I could throw him. This government are grubbing around for votes from people (tenants) who are most unlikely to vote for them. Those who would normally vote for them, landlords, are being bashed to curry favour with Shelter, Generation Rent etc. They are not my Conservatives.
Finally, as a paid up member of the Spelling Police. “sighting the ban on Section 21” should be “citing the ban on Section 21”.
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I wonder if Simon Davies has ever had to prove a case of anti-social behaviour.
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If only Tenants could see the reason for increased rent and shortage of rental properties available !
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I would suggest that the anticipated surge of landlords exiting the market is already happening. Of course letting agents are worried, they can see their livelihood going down the drain. For me, the conclusion that the ban on Section 21 is the final straw that broke the camels back for landlords is pretty accurate. As far as the Renters Reform Bill goes the flagship move is the Section 21 ban and I don’t see any possibility of a U turn before it comes in. My worry is that the Government will implement this overnight and everything else such as increased powers for landlords to evict over antisocial behaviour and streamlining Court procedures just won’t happen. So landlords will lose even more control over their own property. While banning section 21 might be the final “straw” there are other contributory “straws” like rising interest rates pushing up landlord costs (but also opening up the possibility of similar returns on less risky investments than the PRS), increased cost of repairs, potential new EPC regulations that could cost thousands and what Labour might do to landlords if they get in. So far landlords are able to pass additional costs onto tenants to stay viable. As I see it the Tories have stolen most of Labours clothes with the Renters Reform Bill. All that’s really left for Labour to do to put clear water between them and the Tories is to introduce rent controls of some sort to squeeze landlords even further. All this and anti-landlord sentiment stirred up by Shelter et al, no wonder landlords are selling up.
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I was speaking to a politician from Wales the other week and they say the Welsh market has either lost 40%+ or expected to this year due to its new Renting Homes Wales Act 2016 which the grace period for landlords to comply ends today and many still unaware and what is about to hit them with fines. At least they kept the Sec 21 equivalent (Sec 173 RHWA 2016).
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The simple answer is to just build some more effing property. It’s really not complicated. Except there are so many vested interests pulling in opposite directions that the country goes nowhere. We need a national development framework that cuts through all the party political nonsense. Local Councils should be developing their communities. They should be leading the change.
That a side, I have a question for you…? Is this being done on purpose? As in like “conspiracy theory” style on purpose…
1. Create a situation where the supply of rented property is artificially reduced by driving small landlords out of the market whilst creating a legal framework that is inimical to the little guy but advantageous to big business.
2. Rents get artificially driven upwards because of the artificial shortage.
3. Our current two tier rental market is extended to RSL social housing and megacorp rental companies who Build to Rent.
4. Profit… (for those friends of those politicians who are in the know).
Call me cynical if you like but this divide and conquer tactic is nothing new.
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Hi Anonymous I would extend your point 4. To include all the money the Government is making in Capital Gains Tax every time a Landlord sells up especially as they are cutting the allowances.to make more on every sale. Seems a deliberate move, make more landlords sell up, collect more tax just proves they just pretend to care for tenants despite what they say..
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