Rental reforms bill: Is more government legislation adding to the supply crisis

In June of this year, the government introduced the "Renters Reform Bill". The bill's main aim is to improve the standards in privately and socially rented sectors. The government estimates that 21 per cent of all privately rented homes are below acceptable standards.

What does the new bill include?

According to the government, the renter's reform bill will deliver the most significant change to renters' law in a generation, improving the conditions and rights for millions of private and socially rented sectors. The legislation entails the following: 

·      The legislation will ensure quality for private renters, extending the Decent Homes standard to the sector for the first time, giving all the renters the legal right to a safe and warm home.

·      It will ban Section 21 "no-fault" evictions, protecting tenants from unfair evictions, whilst strengthening the landlords' legitimate grounds for taking back their property. This will happen under section 8, extending the grounds of repossession.

·      A new Private Renters' Ombudsman will be created to enable disputes between private renters and landlords to be settled quickly, at low cost, and without going to court.

·      The bill will outlaw blanket bans on families with children or people receiving benefits. The landlord or the estate agent previously could refuse applicants receiving benefits. The court ruled that blanket bans go against the Equality Act and discriminate against vulnerable people.

·      Tenants' rights to keep pets. All tenants will have the right to request a pet in their house, which the landlord must consider and cannot unreasonably refuse.

·      Changes to rent increases and rent in advance. The Renters Reform Bill will end the use of rent review clauses and only allow rents to increase once per year. It will also limit the rent the landlord can ask for in advance. Landlords must give two months' notice of any rent change. If a tenant pays multiple months' rent in advance, landlords must repay any upfront rent if a tenancy ends earlier than the period tenants have paid.

·      Introducing a new property portal for tenants, landlords and local councils can access the information they need.

How does more legislation impact landlords

Over the past few years, there have been a series of legislation that landlords have had to adapt. Most have mutually benefited both the landlord and the tenant by improving the quality of homes. However, some policies, like the scrapping of mortgage interest tax relief and an additional 3 per cent levy on stamp duty, have directly impacted supply as landlords sell up, increasing rents. 

 NRLA (National Residential Landlords Association) is warning that governments' efforts to dampen investment in rental housing are fuelling supply crises, hiking rents, and making homeownership more difficult to afford. According to Foxtons data, 28 renters were competing for every new property in July, an increase of 27 per cent from June 2022. It is the highest ever increase recorded.

 Furthermore, the index below taken from the ONS (Office for National Statistics) shows an increase of over 3 per cent across all regions of England. The increase is the highest 12-month growth rate since the records began in 2006.

While there is no disagreement on the fact that the rental sector needs reform and more regulation. Matthew Bailed, chief executive of Paradigm Housing Group, argues that the reality is that by 2024, the sector may well have seen its core income reduced by around a quarter in real terms since 2016. This will, at some point, be passed on to the tenants.

Furthermore, he argues that the governments have been papering over the cracks with ad hoc and, at times, self-defeating initiatives that make it look like the government is doing something without ever making serious inroads into the problem. Since the scrapping of the mortgage interest tax relief, the rents have increased by over 14 per cent, according to the ONS, and one in three landlords are considering selling up due to the loss of mortgage interest relief (Nationwide).

 When it comes to passing legislation, the government is doing little to address the shortage of rental homes, while the renters' reforms bill is welcome and will improve standards for private and social renters. It will do little to address the record rises in rent and demand far outstripping supply. Unfortunately, will add further to the shortage of homes and do little to improve the quality of homes across the country.