Reforms to private renting will deliver a step change in renters’ rights, but the Government must get the detail right for them to be truly effective.
Yesterday the Government published its long-awaited white paper on reforms to the private rented sector.
This is a big deal. The private rented sector (PRS) has grown substantially in the last two decades. Despite this, households have faced regulations which are out of date, create insecurity, and do little to address the high proportion of poor-quality homes in the sector.
It is therefore welcome that these reforms set out to achieve a significant shift in the balance of power between landlords and tenants. They aim to increase security for renters, improve access to housing and drive up standards in the PRS. Crucially, this should ensure that tenants have greater control over their homes.
But will they work?
There is much to like in what has been proposed in the white paper but, as ever, how far the proposals will achieve their aims rests on the details.
A long-overdue shift in the protections afforded to renters
These reforms will outlaw the use of Section 21, otherwise known as a ‘no-fault eviction’, where a landlord can end a tenancy with no reason, giving tenants just two months to find a new home. Under the proposed reforms, tenants will be on open-ended, periodic tenancies which mean that while tenants would have the right to move at any point, a landlord would need to prove ‘grounds’ to ask them to leave. This is a marked, and welcome, change compared to the current system.
Abolishing Section 21 is an important step to improving renting privately. Not only does the threat of a no-fault eviction lead to tenants feeling inherently insecure, it creates a striking imbalance of power between a tenant and their landlord. For example, many tenants worry about reporting repairs for fear of being seen as complaining and kicked out.
The proposals will also apply the Decent Homes Standard to private rented homes and invest in enforcement to ensure landlords are meeting it. While the detail on this is limited, and subject to an upcoming consultation, this is another welcome move. The private rented sector has the highest proportion of homes which fail to meet this standard of any tenure, with one in five privately rented homes falling short (21% compared to 13% in the social rented sector, and 16% in the owner-occupied sector).
The Government has also targeted discriminatory practices. The white paper includes pledges to outlaw ‘No DSS’ discrimination – where landlords refuse to let to people in receipt of social security benefits – alongside preventing blanket bans on renting to families with children.
These proposals, and others in the paper, should lead to a step change in the experience of renting. But the Government’s approach in some areas risks undermining the bill’s effectiveness.
Loopholes in the proposals need closing to truly improve security
Ending Section 21 is undermined if landlords can evict tenants in other ways. Reforms to improve renters’ security need to be watertight and avoid creating loopholes, which provide a route for unscrupulous landlords to circumvent the new laws. One such route which organisations, including JRF, have been particularly concerned about is through increasing the rent.
If a landlord can hike rents to a level that they know, or at least suspect, a tenant cannot afford, this gives them a route to drive a renter out without having to follow the new formal, legal route.
The reforms do deal with rent increases, proposing to limit rent increases to once a year. There are also plans to provide a clearer route for tenants to challenge any unreasonable rent increase.
It is welcome that the Government has considered this, but there are significant problems with this approach. Much will depend on how this process is designed, and it still relies on tenants knowing, and then proactively enforcing, their rights. A better approach would be to limit the amount a landlord can increase the rent within a tenancy, such as connecting rent rises to inflation (CPI), local earnings growth, or whichever is lower in any period.
Insecurity in the private rented sector is not just legal – it’s structural
The majority of private landlords are individuals, renting a small number of homes. The English Private Landlord survey finds that just under half of all landlords owned one rental property. This creates a churn as landlords enter and exit the market. As a consequence the most common reason tenants report for landlords ending their tenancy is their landlord selling up (English Housing Survey 2019-20).
This can have devastating consequences for tenants and for our society: a landlord ending a tenancy in order to sell the home has consistently been the biggest reason for a household being owed a homelessness duty by a local authority in recent years, accounting for a third of cases (33%) in the third quarter of 2021.
The previous consultation on reforms to the private rented sector sought to manage this by placing a restriction on landlords using this reason to sell for the first two years of a tenancy. This would essentially introduce an initial fixed term, giving tenants greater security.
This proposal has been weakened in the white paper: now landlords would be able to sell only six months into a new tenancy. This will give tenants little protection from the most common reason for no-fault eviction. If the Government is serious about giving tenants greater security, then they must ensure this notice period is extended in the upcoming bill.
These reforms still rely on tenants to know and exercise their rights
In many areas, the reforms propose to empower tenants with greater rights to challenge bad practice from landlords. New rules would allow tenants to ask to be able to have a pet or decorate, with landlords unable to refuse reasonable requests. The plans around rent increases, as discussed, allow tenants to challenge an unreasonable hike. And the introduction of the Decent Homes Standard will improve processes for reporting poor conditions.
These are significant improvements on the current situation, but they still require tenants to know their rights and then take action. Plans for a communications campaign to promote awareness of the reforms is welcome, and will help. Research with tenants in Scotland shortly after similar reforms were introduced found that tenants and landlords were often unaware of the changes which had been made.
But, in all of these cases the same intent could be designed with an approach that either places the burden on landlords to prove they are compliant, or restricts their ability to be non-compliant. For example, to have pets or to decorate could be the default, with the burden on landlords to prove where there is a reasonable exception.
The reforms need to sit as part of wider plan for the housing market
Scotland is further ahead than England on reforms to the private rented sector, having implemented similar reforms in 2017. Research examining their impact suggests that this is having a positive impact on tenants. The changes are also a factor in the private rented sector shrinking, as landlords sell up due to the new reforms, alongside other changes to the tax system and the upcoming need to retrofit homes. This has led some to raise concerns about the impacts of what was proposed yesterday on the supply of housing.
Instead, this change in the balance of tenures in our housing system should be embraced. These reforms should be seen as a a key component in delivering a smaller, higher quality and better managed private rented sector, which provides flexibility to those that choose to live in it.
Attention needs to be paid to how renters, particularly those on low incomes, are protected during this transition. In part this needs to be through recognising that improving access to housing cannot just be achieved through rule changes, but must also be delivered through improvements to the social security system. Currently, local housing allowance – the housing benefit for private renters – is frozen and is failing to cover the rent of a majority of those who claim it.
At the same time, we need policies which proactively shape the market and offer ways for homes to move from being owned by private landlords, to being owned by homeowners or providers of social and affordable housing. This should, at least in part, be about trying to support the equitable re-distribution of homes sold off by private landlords. This would mean working to develop, support, and build models which:
- Intervene directly in the secondary market to buy homes, re-fit them to high, and environmental, standards, and then let them out at more affordable rents.
- Support access to homeownership for those for whom it is feasible, focussing on the barriers to access and introducing policy that manages to overcome them, including both supply- and demand-side interventions, such as mortgage market reform.
- Creating routes for landlords to socialise their homes, retaining ownership but accepting a lower rental yield and greater security.
JRF are currently working on proposals in this area, and will be publishing thoughts in the coming months.