Labour’s Rental Reform Agenda - getting it right

As the new Labour Government settles into power, rental reform will be one of the items at the top of the to-do list.

Labour’s shadow housing team was vocal in its opposition to certain aspects of the Tory’s version of the Renters Reform Bill whilst on the opposite side of the House, but it must not rush out a butchered version of this legislation without fully considering the consequences. 

Centrally, Labour objected to the inclusion in the Bill of a clause to only scrap Section 21 once court capacity had been increased. Many in the industry would urge the Party to review this stance because doing so could be detrimental to the very people it is designed to help – tenants. 

The majority of landlords have accepted that Section 21 will be going. 

However, if it is removed, the Bill needs to ensure that there are robust grounds introduced for landlords to gain possession of their property if they so require. They should also expect a functioning and resourced justice system to cope with the increased number of cases that will be heard by a court. 

The previous version of the Bill that failed to make it through wash-up in the final days of the last Government largely achieved that. 

If Labour gets the Renters Reform Bill right, balancing the needs of both landlords and tenants, it could provide the clarity and certainty that landlords require to give them the confidence to continue to invest in the sector. 

As the tenure of the working population, a flourishing private rented sector will help support Labour’s economic growth plans, facilitating workforce fluidity and flexibility. As new jobs are created, a transient housing option is required to provide homes for those who move for employment opportunities. 

If Labour gets the Bill wrong, then we could be faced with a clogged-up court system and landlords out of pocket if they need to evict a tenant. That damages confidence and could also damage PRS stock levels.  

Let’s consider some of the facts. Zoopla’s influential rental market report recently showed that tenant demand is double that of before the pandemic, yet rental stock availability is down by a third. 

The result? Rental inflation, as simple supply-demand economics dictates. As the report states, ‘Only by boosting supply can we improve choice for renters and increase the chances that consumer demand will start to exert more influence over landlord decisions and the quality of rented homes’.

Rushing out legislation could fundamentally undermine confidence in private rental sector investment and contribute to declining stock levels at a time when demand for rented homes is only going to grow. 

As well as retaining existing landlords in the sector, it’s also important that a new generation of landlords is nurtured to ensure good quality homes are available for those who want or need to rent. 

We recently analysed industry data, which showed that the average age of buy-to-let landlords purchasing with a mortgage is falling, down to 42.9 last year from 46.4 a decade ago. Purchases by landlords in their 30s increased from 21% of properties in 2014 to 31% last year. Overall, three quarters of mortgaged buy-to-let purchases last year were made by somebody under the age of 50. 

That is positive as it shows that property is still seen as an attractive investment proposition. However, these investors like certainty and a stable regulatory and fiscal environment. 

This is why it is so important that the new version of the Renters Reform Bill is carefully considered and reflects the needs of all participants in the PRS.

* Richard Rowntree is Managing Director of Mortgages at Paragon Bank *

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