Renters Reform Bill Could Cause Many Landlords To Sell

Renters Reform Bill Could Cause Many Landlords To Sell
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1 August 2023 – The new Renters Reform Bill is on its way through the lengthy parliamentary process to become law. But a law firm warns that it could lead to many landlords leaving the rental market.

In April 2019, the Government proposed the Renters Reform Bill, which aims at adding protections to tenants. In particular, the Bill will end so-called ‘no fault’ evictions.

Under current law, landlords can evict a tenant on a periodic tenancy without giving a reason. But the changes to Section 21 of the Housing Act 1988 that are proposed by the Bill will change that.

While this is good news for renters, many landlords oppose the new Bill. A law firm has warned that the introduction of the Bill could make many buy-to-let landlords leave the market.

Outlawing Section 21 Is The Main Sticking Point

London-based law firm Bishop & Sewell LLP has said that they have seen a sharp rise in buy-to-let landlords enquiring about selling their rental properties. The firm of lawyers said that proposed changes to Section 21 are the main reason for the rush to sell.

Under the Renters Reform Bill, landlords will no longer be able to evict tenants without giving a reason. This will mean that if a landlord wants to sell their property, they have to negotiate an extra hurdle to remove their tenant.

It would also make it more difficult for buy-to-let landlords to secure a mortgage. Lenders are more likely to lend if a landlord can easily gain possession of their property.

Because the proposed changes will make this more difficult for landlords, lenders could be less willing to lend to them.

Even though it will take some time for the Bill to become law and will likely be challenged and amended in the Lords, many landlords are concerned and are looking into selling their rental properties.

The buy-to-let market is already a challenge for many landlords, with rising mortgage rates and energy costs as well as additional costs caused by the Building Safety Act. The fear of the Renters Reform Bill passing into law forces many concerned landlords to consider selling up.

If buy-to-let landlords do decide to leave the market en masse, it causes huge problems with supply, which is already at a worryingly low level. This, in turn, will cause rents to rise even further, making renting more expensive.

It’s fair to say the buy to let market faces some significant challenges, including proposed renter reforms, the Building Safety Act and rising mortgage and energy costs. The danger is that the very reforms designed to help renters end up squeezing out investors from the buy to let market, with all the potential for disruption to supply and rents that could bring.

Charlie Davidson, Senior Associate with Bishop & Sewell’s Residential Proeprty Team

So while the new Bill is meant to support renters, it could have the opposite effect, if it forces landlords to leave the market.

Landlords Encouraged To Lease To Housing Association

Derventio Housing Trust has urged landlords who are considering selling due to the proposed Renters Reform Bill to lease their properties to them instead.

The trust operates in five counties (Derbyshire, Nottinghamshire, Staffordshire, Warwickshire and Wiltshire), providing over 600 single bed spaces of accommodation for homeless people.

Due to the cost-of-living crisis and rising mortgage costs, many people are falling behind their rents or mortgage payments.

This leads to them losing their homes and needing accommodation. But the trust says there aren’t enough landlords to cover the additional need.

With many landlords concerned about the Bill looking to sell up, Dervinto Housing Trust urges them to move into the social rental market instead.

The trust’s leasing scheme could provide landlords with a guaranteed income without having to deal with any of the many issues they have to face as private landlords.

We offer a great scheme for potential landlords, with three years of guaranteed rent and no voids, plus the option to extend the lease after that. There are no letting, property management or inventory fees – that’s all free. We take care of the utility bills and council tax, and we’ll also inspect properties weekly, garden in the summer, decorate when needed and clean any communal areas all year round at no cost to the landlord.

Annabel Flint, Procurement Manager at Derventio Housing Trust

Some of the main concerns for private landlords, such as Section 21 notices and minimum EPC ratings, don’t apply in the social housing sector. So by leasing their properties to the housing trust, landlords could get rid of many of their concerns.

Wether private landlords decide to sell up or move to the social rental market, the Renters Reform Bill could spell trouble for the rental market.

With rents already at record highs and supply levels low, the reforms aimed to help renters might cause them even more pain.

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  • News Desk

    Our news desk team includes a qualified architect, a freelance journalist, and a fanatical property expert who has over 12 years experience in the industry.

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