Renters Rights Act: Will it drive landlords from the market?

0:02Hi, I'm Charlie Duffield and welcome back to The Standard Podcast. If you're new here, hit follow and give us a rating. For all the latest news, head to standard.co.uk. Coming up later in the show, will new housing regulations trigger a burst of property sales with landlords racing to exit the market? What we may well see is that the landlords who are in this for the long haul, they do this as a profession, they understand the regulations, they have a business plan, they have a whole bunch of processes in place to deal with these things, will stay in the market. But first. After more than a decade of campaigning and a string of broken promises from different governments, the Renters' Rights Act will finally come into force on May 1st next year, starting with the scrapping of no-fault evictions.

0:57It's the first major shake-up in the private rental sector since 1988, and the new rules would affect more than 11 million people. The changes will see the end of fixed-term tenancy contracts as renters move on to so-called rolling agreements, as well as an end to bidding wars and clearer rules on having pets. As demand outstrips supply, the cost of renting has continued to creep up in the UK. The average rent for a home in London is 1.6 % higher than a year ago at£2 ,736, according to Rightmove's Rental Trends tracker. Housing Secretary Steve Reid said the government was calling time on rogue landlords by initiating a raft of measures.

1:45He added,

1:55According to the lobbying organisation Generation Rent, this package of new laws is a vital first step in righting the power imbalance between landlords and tenants. The Renters Reform Coalition also welcomed the changes, calling them a generational upgrade to renters' rights. The St Mungo's homeless charity said the government had taken a positive, tangible step towards ensuring everyone has somewhere safe and secure to call home. But not everyone's happy about it. The act will be introduced in several stages, and critics have warned that the six-month wait means landlords looking to exit the sector will sell up before the summer, forcing out tenants and indirectly pushing up rents in the process.

2:42According to property website Rightmove, 65 % of landlords already feel unsupported by the government. Approvals for new buy-to-let mortgages, including remortgages, have also sunk by more than a third since their peak in 2015, according to lender trade body UK Finance. Shadow Housing Secretary Sir James Cleverley said the reforms will drive landlords from the market, reduce supply and send prices up for tenants. He added that with a start date of May 2026, we are now set for a six-month fire sale with tenants forced out at short notice. Joining me now is Matt Hutchinson, Communications Director of the flat-sharing site Spare Room.

3:29Matt, this is a long-awaited landmark piece of legislation. Can you remind us what changes will be implemented? Yeah, the key bits really are an end to no-fault evictions, which basically means that unless a landlord wants to repossess the property to move in themselves or sell it, the tenant can't be kicked out. The second bit is fixed-term tenancies are being abolished, which means tenancies just become rolling. You end up with people who can plan a life and stay in the area they want to rather than constantly worrying about having to move again. So tenants will be able to stay for as long as they want, but give two months notice when they're ready to leave.

4:03And the other things, some of the really key things we've seen in the past couple of years that made particularly the London market difficult. There have been a lot of bidding wars and those will be abolished. The rent price, which is set, will be whatever somebody pays. You won't be able to go into a bidding war to try and outbid somebody else to get a property. And the practice of charging several months rent in advance will go as well. The landlord cannot ask you for more than one month's rent in advance. It's another way of managing a bidding war, really, was getting people to pay a lot up front.

4:28So those are already positive. And the Act will also give renters more power to challenge rent increases. So landlords will still be able to put the rent up once a year with two months notice, but it will be by market rates rather than whatever amount they choose. And tenants will have powers to challenge that, which is great as well. And then there's some things around, you know, if it's difficult to live with pets, you can formally request a pet. There's a phase two of this coming in, which will shore some things up with the landlord and tenant ombudsman to help mediate with some things. And also there's a plan to introduce a database of landlords, which gives tenants a bit more info on who they'd be renting from.

5:00Given how difficult it is to get on the property ladder, with people being forced to rent for longer, how important is it that tenants have proper rights and protections? It's important that we have a flexible housing market. If you want to buy a house, you should be able to. If you want to rent, you want to be more flexible. That should work as well. But at the moment, we're seeing people trapped in the rental market because renting is so expensive. And at the same time, dealing with bad conditions or difficult landlords, you know, obviously not in all cases. There are a lot of great experiences renting out there.

5:30But when people are spending so much money on renting, some like basic standards and some basic safeguards to make sure they're okay are really important. And what would you say is the most significant change that this act will introduce? I think this idea of no-fault evictions, of people, you know, worrying about being kicked out of their property at a moment's notice. And it's led to a lot of people avoiding contacting their landlord because they're worried about, you know, a rent increase or people don't report problems in their properties because they're worried what will happen. And it just clarifies those things.

6:01And it means people have a little bit more security about knowing they can query some of these things and they're not going to be kicked out. You know, it's important that wherever you live and however you live, you have some security to know that you can stay there. You've said this Act doesn't actually shield tenants from market rate rent rises. Can you explain a bit more about that? Yeah, so the Act will still allow landlords to increase the rent once a year. They'll be bound by kind of market rates. And what that means still remains to be seen. But you know, you need to be really clear about this.

6:29There are reasons why landlords do need to increase rent. Sometimes it's not always just a case of greed and putting the rent up because they can. There are legitimate reasons for that. But we've seen over the past five years, rents have gone up hugely since the pandemic. And even though the supply and demand equation has bounced out again, they haven't come back down again. So it's just a safeguard to make sure that people aren't constantly facing huge rent increases every year, which is really important. And that's fantastic. I think what we need alongside that is some kind of measure to bring rents down because stopping rents going up by more is fine, but rents are already so unaffordable for such a huge sway that UK rent is at this point in time.

7:07So are you anticipating any specific problems or issues which might arise once this legislation comes into force? I think there'll be a bit of a period of chaos. On one hand, around a third of renters we surveyed didn't know about this act at all. And so there'd be a period of adjustment while they understand what the regulations are. And although most landlords are aware of it, still, I think a lot of people were waiting to find out exactly what would happen and when before they start preparing. So I think, like particularly with tenancies changing from being fixed term to being rolling, all the implications of that in terms of new contracts, people understanding what that means and how it works, it's going to take some time.

7:45And I think there will be a lot of confusion in the market for a while. But once that settles down, I think this will really benefit renters. Let's go to an ad break. Coming up, what are the current trends in the capital's housing market? We'll see you back here in just a moment.

8:07welcome back matt this legislation has been accused of being anti-landlord is that valid what are landlords concerns here i think the important thing is to recognize that we do need landlords in the market and what's happened over the past 10 years or so is government has changed a lot of things including some tax rules this new act that's coming in and it is becoming more difficult to become a landlord. There's more work required. The net effect of that really is it is squeezing some landlords out of the market. But the sense I get is that government is trying to squeeze out maybe some of the smaller landlords.

8:41There are a lot of landlords in the market at the moment who own one property, maybe two. Being a landlord is not their profession. They have another job, but they rent out property on the side. And I think the government is trying to work more towards a market run by bigger landlords who have more professional expertise are in the market for kind of the long game. That's not necessarily a bad thing, but we do constantly hear when we survey landlords, like around a third of them last time we surveyed landlords said they were considering leaving the rental market because of all these changes. So there is a legitimate concern that this will place too big a burden on landlords.

9:15And maybe some of the smaller landlords will just think, you know, enough's enough, this is too much hard work, I'm going to leave. And what would the impact of that be? It depends what happens to those properties. If the properties owned by smaller landlords just get bought by bigger landlords, it won't affect supply and it may well just balance things out a bit. The real worry I think we have is that there's been a gradual slide of residential properties into the short-term and holiday-less markets. And one thing that's become apparent over the past three or four years is that the rental crisis is not just a London thing.

9:47The rental crisis is a UK-wide thing. It just has a slightly different balance in different places. And it's really important that we keep residential supply in the residential market in some form because we have a housing crisis, we don't have a hotel room crisis and there are rural locations and tourist hotspots where there are so many holiday lets now. It's really like sucking away the residential supply and it's really important we keep that in the market. When you say the rental supply has been going up in recent years, can you expand on that? And is that just in London or across the country?

10:16We've been keeping a really close eye on all of this, partly because pre-pandemic there was a lot of legislation changed for landlords and landlords were kind of talking about leaving the market then and with the Renters Rights Act kind of looming on the horizon there's been much more chat about that so we've kept a really close eye on it and actually despite landlords saying they were leaving the market what we've seen is a slow steady increase over the past few years in supply in London and across the UK and the balance of that is changing a bit you know as London becomes more and more unaffordable and as remote working becomes an option for people we are seeing people looking outside of major cities for accommodation now.

10:50And the net effect of that is it's driving rents up across the UK, not just in London. So what are the main trends you're seeing in the capital? So the picture across London is rents are not at an all-time high, but they're not far off. They peaked a couple of years ago in London, but they're still very, very high. And what we tend to see is that people move towards the cheaper areas. People look towards places in South East London, for example, or East London, where rents are a bit lower. But that's been going on for so long now. We're starting to see people think about leaving London. I've heard so many conversations recently from people who live in central London, you know, within sort of zones one to six.

11:26We're talking about moving to places they don't really know because it's cheaper and thinking about commuting. And there's a lot of people have reached their affordability thresholds, I think. What other action would you like to see the government take? There's so many things they could do, but I think the simple things, More protections for tenants, great. That's coming now. There doesn't seem to be any immediate increase in the rate of building properties. So we need to get better at using the ones we've got. There are millions of empty bedrooms in people's homes and people are already taking in lodgers around the UK to help them with the cost of living.

11:57That's something we'd like to see government look at a little bit more. But I think we need a fundamental shift in how we treat housing. At the moment, the vast majority of our housing budget is spent on housing benefits and things like help to buy schemes and we are helping people afford incredibly expensive properties and that's not sustainable. Obviously, all those things are important. Housing benefit is essential, but it should be a crisis measure for a short term to help people get back on their feet. We shouldn't be spending government money on propping up high rents. If we could find a way to divert some of that to actually building housing, building more social housing, building more housing for rent, then actually that money would go into housing rather than just propping rents up.

12:37And other countries, particularly in Europe, do treat renters quite differently, don't they? Germany is always the example people go to there where people do rent for longer. We have an unusual relationship with homeownership in our country and that it tends to be seen as the default thing that everybody wants and everybody aspires to. And there's nothing wrong with that. But there are other countries that seem to have worked out that longer term renting doesn't need to be a disadvantage. And part of that in some of those countries is the investment in the rental market is much more long term.

13:05You're not looking at people who are buying a property, doing it up, renting it out, expecting to sell it a few years at a profit. You were looking at things like pension funds investing long term in renting as a small annual gain, but something that will give them an income over 20, 30, 40, 50 years. That's something that seems to be very much expected in countries like France or Germany. Finally, is there anything else you want to add about the Renters' Rights Act? I think it's a really positive step for renters. I think there's more needs to be done. I think rents need to be brought down, not just capped.

13:36But at the same time, I think once it settles down, my feeling is that the landlords who know what they're doing and understand the challenges and are prepared for them will continue to provide the service they do. Maybe more landlords will use agents to help them stay on top of all the legislation. And there may be some kind of response to this where people do leave the market, but the signs are so far that that's not going to happen. And if what this act does is give tenants security and helps them feel like they can stay in their homes and worry a little bit more about building a life rather than about keeping a roof over their heads, then that's got to be a good thing.

14:17And that's The Standard. For all the latest news, head to standard.co.uk. If you'd like to get in touch please do drop us a line at podcasts at standard.co.uk we'll be back here tomorrow morning we'll see you then