Opinion: Abolishing Section 21 and restoring rent controls could return us to bad old days?

The Government has announced its intention to abolish Section 21 – the so-called no fault eviction, by which landlords can claim possession of their property without having to give a reason.

But could this mean a return to the bad old days? And what were they like?

I should know – because I was there.

Aged 24, I was the youngest rent officer in the country, covering Tyne & Wear.

More of rent officers in a minute, but let’s start with Section 21 notices which were introduced by the Housing Act 1988.

It proved to be a ground-breaking piece of Conservative legislation, designed to improve the rights of landlords and stimulate the development of the modern private rented sector that we see today.

Importantly it gave landlords confidence to invest, simply because they knew they could get their properties back.

Before 1988

The picture was pretty miserable, with landlords unable to remove a tenant in occupation (a “sitting” tenant) and the controlled rent meant that the capital value would be typically half what it would be if the property could be sold with vacant possession.

Therefore, letting a property was a reluctant and risky choice.

There were grounds to remove a sitting tenant if the landlord could show that the property was needed by him or herself for their own occupation.

However, this ground failed if the landlord had another residence.

The landlord could use another ground – and propose that the property was required as part of a redevelopment scheme.

But in this case the tenant had the right to demand that the landlord find them suitable alternative accommodation.

Rent controls

The current Labour Party wants to see rent controls in place, and both Labour and the Conservatives want to strengthen the rights of tenants in terms of longer tenancies.

So, what does history tell us?

Before 1998, the private rented sector contained just 9% of UK housing stock and the percentage was falling.

Most private tenancies fell under the Rent Act 1977 which granted to a tenant of unfurnished, self-contained (so not rooms) accommodation the right to remain in occupation provided that they adhered to the terms of the tenancy.

In effect, a tenancy for life.

To ensure that this protection could not be circumvented by the landlord increasing the rent so as to make the property unaffordable, the rent was controlled by a Government agency, the Rent Officer Service.

Its officers – including myself – set Fair Rents under a formula contained in the Rent Act.

Rent officers had regard to the age, character, location, size and state of repair of a property in order to set the Fair Rent.

However, and critically, the officer had to imagine that the supply of such properties was equal to the demand, and determine a Fair Rent which had no scarcity value attached to it.

We would inspect the premises and consider comparable evidence of other Fair Rents.

We never considered market rents in part because the market was dysfunctional, with very little evidence other than a small number of fully furnished lettings by ex-pats, army officers, policemen and vicars of the family home while they were working away, and the furnished student letting market.

The other reason was that if such “unregulated” rents were higher than a Fair Rent, this was probably because of their scarcity value, which under the Act we were obliged to ignore.

Rents could be reviewed every two years unless in between there had been carried out significant works of improvement by the landlord.

The Fair Rent was the maximum that the landlord could legally charge and overpaid rent could be recovered through the courts.

Any attempt to coerce the tenant into leaving or indeed bribe them to move along were actions punishable by criminal penalties under the Protection from Eviction Act.

Then . . . and now

There was a reluctance by landlords to invest and the stock that I saw was generally in a poor state of repair with elderly tenants paying a low rent but unhappy with their lot.

There was hardly any accommodation available to let.

If you have grown up with the PRS that has developed in the last 20 years, then the picture in the late 1980s would be totally unrecognisable to you.

* This is a two-part article by Ian Wilson, chief executive of The Property Franchise Group. In the second part tomorrow he argues for the Section 21 mechanism to be retained 

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20 Comments

  1. jackoTLG

    Labour claiming to be a progressive  politics party, what a joke. Corbyn will take us back to the 70’s and will wreck the PRS

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  2. Bless You

    Time to vote farage. Never thought I’d say it but Tories have turned the UK and my belief system of protecting hardworkers , on its head  .

    labour only good for getting drunk on a train.

     

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    1. JMK

      I’d voted Tory all my life up until the last election.  Now I’ll never vote for them again.

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      1. CountryLass

        I don’t know who to vote for. I won’t vote Labour after the shambles they made, I don’t trust UKIP as I think it will make the country far less tolerant of anyone not 12 generations British. Lib-Dem appears to have vanished into the ether so Tory seems to be the only ones left…

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        1. JMK

          I understand the logic but I won’t vote for a party that’s made such a mess of things and also betrayed their core voters as they have.  I doubt I’ll vote again for anyone.  

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          1. CountryLass

            Personal question, so feel free not to answer. Will you go along and void your ballot paper, or just not go?
            The problem I have with not voting is that then you cannot complain about the party that wins or the way the country is run during that time as you chose not to make your voice heard. To paraphrase Tesco, every little vote helps.
            Maybe it’s just that as a woman I was brought up that I HAD to vote, even if I voided the paper as to do otherwise was an insult to those that fought and died for me to get the right to vote.
            Politics is a touchy subject these days, so I don’t mean to cause any offence to anyone. Each person has the right to make their own decision, and as long as they have thought about it then I have no problems with it.

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            1. JMK

              I think I’ll do the same as last time and just not turn up.  It’ll show as a non-attendance on the records.  
              In Australia I understand they have to vote so they get lots of people that spoil the ballot papers.  Just seems a waste of time to me to achieve the same thing.  
              I’d never missed a vote up until the last election but I simply cannot support these back-stabbing illegitimates.  

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    2. Woodentop

      This should be a very worrying time for the country. There is a dangerous void in UK Politics, no single person or party has the confidence of the electorate. Will this mean a low turn out at the next election = lottery who gets in and back to wheeling and dealing with  a dysfunctional coalition (as we currently have over Brexit) arguing between themselves. MP’s need to have an IQ test and be accountable during office, not years later at re-election and stop hiding behind privilege’s, private bills etc. If ever there was a job that needing overhauling, its bringing UK political system out of the dark ages  … but that would make MP’s accountable!

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  3. Will2

    An accurate article but should have included one additional item that there were also some level of succession rights as well. Fact was there were no new lettings and property conditions were appalling and deteriorating as landlords could not afford repairs let alone improvements or modernisation.  A months rent might just pay for a simple roof repair at the time.

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  4. eltell

    Agreed JMK.   In over 50 years as a voter i have never known such a bunch of dysfunctional, self serving so called politicians who are completely out of touch with reality outside of London.

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  5. Immobilier

    This is an accurate picture of what things were like a few decades ago. Furthermore it should be remembered that the surge of BTL funding that hit the market was generated largely because of changes in the law that meant landlords and lenders could remove a tenant should it become necessary or desirable to do so. This protected the position the lender. Without that protection banks will not continue to lend at the current rates or the current LTVs. This will bring the sector to a sudden halt.

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  6. International

    What Ian Wilson says is “only half of it. The even bigger sting in the tail was the right of succession by tenants in possession. When a tenant died, the tenancy could be passed on to any blood-relation who could claim to have been living in the property for six months prior to the tenant’s death. This could happen twice, so for many landlords, the possibility of obtaining vacant possession was denied for a very extended period, often beyond the landlords expected lifespan. So, time for many landlords to sell up and again starve the market of respectable housing in the rental sector.

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    1. LetItGo

      Unusual for TPFG to comment at all, but its about time one of the largest franchise letting/sales companies started supporting their franchisees.

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  7. JMK

    I have a few questions that someone may be able to offer input on.

    A large number of BTL properties are IO mortgaged and I’d suggest that lenders will be reluctant to offer remortgages if we have the equivalent of lifetime tenancies returning.    So how does this fit into the equation?  If landlords can’t remortgage when they approach the end of term then would it not mean the tenant has to leave anyway?  In essence the landlord would be forced to sell.  Would it be one of the conditions that a landlord can actually regain his/her property because of the end of mortgage term?  How has this been handled in Scotland?

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  8. CountryLass

    I think some form of Rent Control, as in the rent cannot be increased by more than X in a 12 month period is good, and I don’t think anyone would argue against that.

     

    What does confuse me is that so many people seem to be labouring under the impression that a landlord is ‘obligated’ to rent a property to someone. They aren’t. If they choose to leave the property sitting empty for 6months, then fine. It’s their property, and their choice. If they decide that a Tenant doesn’t “fit” with the area after 6 months of them being in the property due to grumbling neighbours caused by too many cars, too loud at weekends, untidy garden or whatever, again IT’S THEIR PROPERTY AND THEIR CHOICE! I’m not saying I would necessarily agree with that choice, but it’s their property so they have the final say.

    why should and Landlord have to allow someone who causes friction in the area to live there? What Grounds would be used if there is strong but circumstantial proof that a Tenant has a pet, or smokes in a property that doesn’t allow it?

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    1. JMK

      Next to bombing, rent control seems in many cases to be the most efficient technique so far known for destroying cities.
      Assar Lindbeck

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      1. CountryLass

        And that’s why I don’t think a full RC is needed, just something that limits what the rent can be increased by each year. A Landlord that increases too much or too often is going to find himself without Tenants, but the Tenant would still have to try and find that extra money until they move out. The market will provide the rent control where needed, as Tenants will pay what they can afford and what they feel it’s worth. Agents just need to make sure that we are not helping Landlords to fleece or put Tenants under financial pressure for no reason. Just because a property rent could be higher, doesn’t mean it should be.

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        1. JMK

          As a landlord for 2 decades I had a rule never to increase rents on an existing tenant.  Most full time landlords adopted the same principle I believe.  Then Osborne came along with S24.  All previous ethics have had to be reviewed.  It does annoy me when the press (particularly the Times) go on about how the tax changes were introduced to skew the market towards FTBs.  Complete rubbish!  It was all about tax and tenants will have to pay for Osborne’s policies.

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        2. qweasdzxc

          What about Section 13 of the Housing Act 1988 which stops a landlord increasing the rent more than once per year and allows the tenant to appeal a rent increase for a periodic tenancy? (As long as the tenancy isn’t a contractual periodic tenancy with a clause about rent increases). The tenant has the right to appeal the rent to the Rend Assessment committtee.

          Rent can’t be increased during the fixed term unless there is a term in the contract that allows it.

          This seems to be rent control to me.

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  9. Woodentop

    A good article and why we should not go backwards. Todays industry drove PRS forwards, not perfect for some but far better than it was and will be a complete disaster to return to. I hasten to guess that the majority of todays PRS is generated from inheritence and an age group of landlords who will look at it all as less hassel “to sell”. 

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