Warnings rental reform could disincentivise landlords as bill returns to House of Lords

Peers have been warned government moves to bring in rental reform risk making it “less attractive” to be a landlord.

The Renters Reform Bill returned to the House of Lords for its second reading on Wednesday, which prompted warnings of landlords “selling up”.

Ben Beadle, chief executive of the National Residential Landlords Association (NRLA), said “all parties need to accept widespread calls for policies to boost supply in the private rented sector”.

He added: “Landlords selling up is the single biggest challenge renters face. The only answer is to ensure responsible landlords have the confidence to stay in the market and sustain tenancies.

“As peers debate the Renters (Reform) Bill, it is vital that it works for landlords as well as tenants… we are calling on peers to support the Bill to give the sector certainty about the future.”

While Tom Bill, head of UK residential research, at Knight Frank, told City A.M. the legislation will make it “ultimately less attractive to be a landlord”.

The property expert said news of the legislation has been another incentive for homeowners who rent out their properties to sell up on top of “tax changes and red tape changes that have just haven’t really stopped the last 10 years”.

He said: “[This] lowers the amount of rental stock there is in the market, which means that rents rise so ultimately, there’s a financial cost to tenants.”

But renters rights groups hit back, accusing landlords of spreading “scare stories”.

A spokesperson for the Renters’ Reform Coalition posted on X, formerly Twitter: “Politicians should treat scare stories about landlords selling up with caution – countries like Germany where renting is much more heavily regulated still have large rented sectors.

“The fact is, if this bill isn’t strengthened it will fail renters.”

And a Generation Rent spokesperson added: “Landlords sell up for all sorts of reasons, but right now, renters get only two months of notice and no help with the cost of moving.

“The Renters Reform Bill is our chance to help tenants facing unwanted moves and avoid homelessness.”

Over two and half million people in London rent their home privately, according to a manifesto by Renters Rights London.

“Some privately rented homes are well maintained and affordable but the very worst housing conditions – and the highest levels of poverty – are found in the private rented sector,” they said.

In the last eighteen months housing costs for tenants have skyrocketed, with average advertised rents in London now 5.3 per cent higher than last year.

The recent study by Rightmove showed rental prices climbed by two pounds in the first three months of the year to a record high of £2,633 per month.

While rental costs in the capital remain elevated, growth on rents has steadily slowed since the peak of 16.1 per cent in the third quarter of 2022.

Many renters are likely to still struggle with costs and finding an affordable place to live due to poor wage growth- which has left employees in London around £50k worse off since 2010 – and rises in other household expenses.

The number of available rental properties is 11 per cent higher than last year, but 26 per cent below 2019, with Britain’s 50,000 homes behind the pandemic.

Consistent interest rate hikes made by the Bank of England last year in efforts to reduce inflation have damaged the entire ecosystem of the housing sector.

Landlords began either selling their properties to dodge rising mortgage payments – limiting the pool of supply – or passing high costs onto their tenants.

Bill does not think a green light for the legislation will hinder recovery of the property market.

“I think that the fate of the UK housing market is inextricably tied to the interest rate environment and what’s going to happen to mortgage rates,” he added.

The Renter Reform Bill intends to level the playing field between landlords and tenants, however it has been shrouded in controversy, with the government watering down some of its proposals such as no fault evictions. It has been beset by delays, and now has 200 amendments added to it.

Richard Donnell, executive director at Zoopla told City A.M. “The rental market is under pressure from high levels of demand and a lack of new investment in growing the size of the market.

“Reform of the sector to provide more certainty for renters has been sought for some time and the majority of landlords accept we should push through the current proposals as an important mark of progress on the journey to an improved rental market.

He added: “Even with these changes, the greatest priority remains growing supply which is the primary route to boosting choice and raising standards by unlocking greater consumer choice.”

Timothy Douglas, head of policy and campaigns at Propertymark said: “The legislation once passed will undoubtedly bring about the biggest change to the private rented sector since the 1980s.

“Most agents and their landlords have been reassured by the UK Government’s commitment to court reform and that there will be an effective way to recover possession of their property when things go wrong.”

He added: “However, with the removal of fixed term tenancies still a concern and open ended tenancies reducing the certainty for agents and landlords the big question is how do we encourage landlords to stay in the Private Rented Sector?

“Furthermore, tenants need qualified and licensed housing providers to level the playing field and legislators must not miss this opportunity to regulate property agents and bring in additional protection for both landlords and tenants.”