The Renters' Plights Bill

The Renters' Rights Bill will harm private renters more than it helps them

Speak to many people in their 20s, 30s, or even 40s and you’ll hear horror stories about the rental market. From personal experience, I’ve seen a friend effectively be made homeless because his flat search failed. Other friends will rightfully complain about the drudgery of the flat hunt or being outbid by other prospective tenants desperate for a home. Even just the all too common occurrence of an estate agent hassling you, knowing that if you don’t make a decision about where to live today, they’ll be able to find several other tenants tomorrow.

The goal of the Renters’ Rights Bill is to fix the ills of the private rental market. It’s back in the Commons this week as it closes in on Royal Assent. However, I fear that the unintended consequences will drive landlords out of the market, reducing the number of properties for rent, and inadvertently hurting the least well-off and connected renters, leading to more horror stories.

Let’s start with the headline policy within the bill, abolishing Section 21 evictions, also known as ‘No Fault’ evictions. A Section 21 eviction is used after a fixed term tenancy ends or during a rolling tenancy without a fixed end date. For example, this could be invoked if Alice agrees a fixed term two year tenancy with Bob, the landlord. At the end of the two years, Bob can issue a Section 21 notice, and Alice would have to leave the property with a two month notice period.

In this case, the Section 21 notice serves the purpose of enabling the two year fixed tenancy. Bob can be confident that he can easily regain possession of his property at the end of the agreed two years, so is willing to let it out. The Bill will remove this protection for landlords and instead shift every fixed term tenancy into an ‘assured’ tenancy.

Basically this gives tenants the near unlimited right to live in the property for as long as they’d like. The landlord can only regain possession of their property under specific circumstances, such as the landlord wanting to move in or sell the property or the tenant runs into persistent rent arrears or breaches the tenancy.

So in practice what the banning of Section 21 evictions does is unbalances the landlord/renter relationship. Under the new rules, the tenant could occupy the property for just two months if they wanted to by serving notice immediately once they moved in, leaving the landlord in the lurch.

While the landlord is given no certainty that they could get their property back at an agreed point. Instead they’d have to jump through several hoops, which could include court backlogs and a queue to get a bailiff, adding up to a year of delays and lost income. That adds a huge risk for landlords, which will drive some of them out of the market and increase the rent demanded for the rest.

The Bill also removes the ability for tenants to pay rent in advance, which directly harms renters who look riskier on paper. That includes students, young professionals without a rental history, renters without a UK guarantor, and foreign renters. Paying rent in advance helps to de-risk these tenancies, in turn opening up renting to these groups who otherwise could be ignored by landlords.

Landlords will also be banned from accepting an offer that goes above their asking price. While being outbid by another prospective tenant is annoying, such auctions offer useful information to the rental market about what people are willing to pay and over time encourage more private rentals to become available.

Without the ability to compete on price, prospective renters will be forced to compete on other grounds. If a landlord has two prospective tenants who both offer the asking price, they will naturally attempt to find a non-price reason to choose one over the other. You could see landlords asking tenants for their CV, references from previous landlords or an over-reliance on personal networks. That hurts people who can’t easily show that they’d be reliable tenants or who don’t know any potential landlords.

The ability to enter into mutually beneficial agreements is further weakened by the right to challenge the agreed rent within the first six months of a tenancy. No matter the fact that both parties agreed to a rent amount, if the tenant thinks that it does not mirror the market rent, they can take the landlord to a tribunal. If you take away the certainty of the agreement and hand over the power to set rents to a tribunal, you risk landlords no longer seeing the point of letting out their properties.

Finally, the Bill will effectively end market rent increases once tenants are in situ. To raise the rent, landlords run the risk of being taken to a tribunal by their tenants who can challenge any rent increase that they think is above market rate.

Until the tribunal decides, the tenant can pay the existing rent, and the Bill won’t backdate it to the tribunal-agreed rent either. The tribunal also cannot mandate a rent higher than the one the landlord proposed. So it doesn’t take a Money Saving Expert to suggest that every time a rent increase is proposed, the tenant should go to the tribunal to keep the lower rent for as long as it takes to make a decision. A decision, which will be a diktat from a bureaucrat, not necessarily one with any market-connection.

This is rent control through the backdoor, as every potential rent increase will be held up by several months as it makes its way through an overburdened tribunal process. The tribunal will also have very limited market rate data as pretty much all rent increases will be set by tribunals, not by mutual agreement between landlords and tenants.

Why does this all matter?

The past decade has seen increased stamp duty for landlords, tax changes that meant that landlords could no longer deduct mortgage interest from their taxes, and increased regulatory requirements like EPC C standard being mandatory in the next few years. Landlords responded to these changes by selling up. Private landlords have already sold 300,000 more homes than they’ve bought from 2016-2023. That might be good news if you’re in the position to be able to buy a flat right now, but in the long term we should want a healthy private rental market, one that provides flexibility and opportunity for people who might not be able to or want to buy a place of their own. You only get a healthy rental market if landlords think that it is in their interest to buy property and rent it out.

Scotland embarked on similar reforms, abolishing no-fault evictions in 2017 and introducing in-tenancy rent caps in 2022. As a result, rents for new lets surged, from a ~3% increase YoY base figure in 2020 to a 13% annual increase by Q4 2023. Landlords also left the market, with 8.4% of stock leaving the private rental sector and 50% of landlords considering selling up.

Ultimately the real reason renting is such a crummy experience is the lack of homes. When the vacancy rate in London is less than 1%, landlords can be confident that they will always be able to find a tenant to live in their property. That means higher rents and lower maintenance standards. We should want to build more homes to level the playing field.

Instead of tenants competing against each other, imagine landlords having to compete to offer better properties at more affordable prices. This isn’t just a fairytale. Austin, Texas built 20,000 new apartments for rent in 2024 and rents started to fall. That’s the equivalent of London building 183,000 new flats in a year. Landlords were forced to offer concessions like $1,000 gift cards or a free month of rent to encourage tenants to resign leases. In turn, Austin has become the most affordable American city to rent a flat in, according to Zillow.

Making the rental market work better comes down to making landlords compete, rather than burdening them with restrictions that force them to leave the market entirely. We’re going in the wrong direction on both accounts. Only 4,170 homes started construction in London last financial year and landlords are leaving the market in droves. We need to fix both of these problems to provide a private rental sector that works for all tenants.