Rental stock would drop by almost 1m dwellings if abolition of Section 21 goes ahead, warning

Letting agents would have the challenge of greatly reduced stock if Section 21 – the so-called no-fault eviction process – is abolished as the Government proposes.

A new study, commissioned by the National Landlords Association and carried out by Capital Economics, claims that private rental dwelling stock in England would fall by 20%.

This would equate to the loss of 960,000 dwellings.

The study also claims that in addition there would be a 59% reduction in private rental homes available to households claiming Local Housing Allowance or Universal Credit.

A key result of the changes would be rent rises affecting some 600,000 homes, says the study, as landlords become pickier as to the type of tenant they would choose.

The NLA surveyed more than 2,800 members on their views on the abolition, with 43% saying they would be more selective about tenants, 16% saying they would exit the private rented sector, 10% saying they would reduce the size of their portfolios, and 11% saying they would raise rents.

The study calls for the Government to “consider carefully” the impact that dumping Section 21 will have on the supply of homes.

The full study is here:

http://cdn.roxhillmedia.com/production/email/attachment/760001_770000/NLA%20Section%2021%20Government%20Proposals%20Print%20Version.pdf

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12 Comments

  1. James Wilson

    Wow. 1 million homes available to buy.  Sounds like much lower prices and generally good news.

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    1. JamesB

      These homes would be dripped into the market over a number of years as landlord exit gradually when tax and mortgage terms permit I doubt it would create any shock to prices. The legislation is not planned to be retrospective so it’s also likely existing tenancies will be left to run and properties would not be relet further spacing the sell off

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    2. Realitycheck97

      A few years ago, RICS modelled a 10% shock exit of PRS stock; made little difference to house prices for those hard-pressed first time buyers. Dribbling even 20% of PRS stock to market will make little difference, as per James B’s comment.

      But it will devastate supply of rentals for lower end of market, for those who are already struggling to afford a roof of any kind. We’re talking serious misery, and increased homelessness, for those least able to cope with it.

      ”And the weak suffer what they must.” Again.

      Getting seriously fed up at the awesome lack of holistic thinking by those who bash the PRS. It might be a fashionable, on-trend thing to do. But it is seriously stupid and will hurt the most vulnerable people.

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    3. Will2

      Wow 1 million more properties on Airbnb. Should make holiday rentals a little cheaper. Shame about tenants losing their homes

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    4. JMK

      James I know you just come on to this forum to wind people up and tbh I don’t believe you’re as dumb as you make out.  So here’s a prediction for you.

      Whichever Government is in power over the next couple of years, we will see more and very significant QE.  This drives up asset prices and will especially so if supported by more low interest rates.  I suspect there will be plenty of that and I certainly wouldn’t rule out NIRP.

      What we have right now is what some economists refer to as the ‘mid-cycle slow-down’.  That being the case then there are some years to go before the cycle completes and that in itself suggests more house price inflation.  So personally I think we’re going to see prices rise, not fall, until the next significant downturn (or crash) in around 5 to 7 years.

      Whether it happens then or sooner is bad news for those that want to get ‘on the ladder’ and I’m guessing that includes you.  It is hard to believe that you don’t at least have an idea of how housing fits into the general economy but I’ll start by saying it’s an important piece of the jigsaw.

      If prices drop as you are hoping for (and btw JamesB is completely right) then lenders will withdraw products faster than you can count.  This has a lot to do with the fact that they DO understand how housing works in the overall economy.  Falling prices will likely precede a recession and if that hits companies of all sorts start cutting back.  Now that being the case which of their employees will get the chop?  Will it be the guys that have been there for years and will qualify for big redundancies, or will it be the newer people that have fewer employment rights?

      Many of the newer employees will be the youngsters that are only starting out in life.  Lenders aren’t daft.  They know that and they know that this group present a significant risk of defaulting.

      Meanwhile builders stop building because prices are dropping and this exacerbates the likelihood of an even worse recession.  It all snowballs and leaves the likes of yourself renting for many years to come.

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      1. APE

        Spot on JMK!

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        1. Deltic2130

          Yes JMK!

          What some price-crash FTB-ers never seem to realise or remember is that the reason they think landlords are always ahead of them is because they were the one group lenders immediately turned the taps off to in the aftermath of the last crash. They were considered a worse risk than investors and were denied mortgages such that their buying power collapsed. Ever since then FTBs have been blaming landlords when in fact it was lenders and the wider economic circumstances that caused them to be held back.

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  2. Property Poke In The Eye

    Bring it on!!

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    1. Will2

      A real poke in the eye putting tenants on the street.

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  3. pd@mastermandavies.co.uk

    Yes, reducing the rented sector increases the owner-occupation sector.  What is the govt policy on this?… I fear that no-one has even thought about it!
    Housing has multiple sub-markets with mobility of houses & households between owning & renting.  In each sub-mkt, SUPPLY & DEMAND are balanced by the price mechanism.  Higher price chokes off dmd & higher dmd drives up price: equilibrium. 
    Perceived hsg “shortage” or UNAFFORDABILITY is therefore not usually soluble by building more.  New units are a trickle in relation to stock & sell at prices set by extg units, so renters/buyers driven out by current prices will not be able to afford the new supply. 
    What is widely missed is the VALUE EXTRACTING nature of LAND assets where prices are determined by MONEY SUPPLY available to marginal purchasers, just as for works of art, but nothing like normal goods.  Hsg is also an item of ESSENTIAL human need seizing priority in financial decisions.
    Add to this 20 years of FINANCIALISATION: QE $$ printing, credit creation & ultra low int rates raising the WHOLE ASSET PRICE LEVEL + the attraction of any rising mkt to SPECULATORS & INVESTORS geared up with low int loans + tax regimes encourage vacancy & under occupation…
    Result: unltd demand from the better off for 2nd, investment, larger, vacant etc. units.  Meanwhile, those with incomes tied to the PRODUCTIVE economy are priced out of ownership & face rising rents (which are the return on capital values for investors). 
    Just building more can never end “shortage” or UNAFFORDABILITY unless FINANCIALISATION is tackled and there is a coherent policy in relation to DEMAND. 

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  4. Gromit

    Boom time for shipping container manufacturers, b&b providers as the poorest in society will take the brunt of this loss, and homelessness soars. All paid for by massive increases in Council Tax to pay for it all.

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  5. Woodentop

    If someone is providing you with necessities, you shouldn’t disrespect them, be ungrateful, or criticize their behavior lest he or she turns around and take away what you need.

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