Balancing Tenant and Landlord Rights

Posted by Colliers on 16th March 2023 -

As the run-in to the next UK general election gathers pace, the housing market and regulation of the English private rented sector (PRS) is one of the big political footballs to get kicked around. 

With annual rates of rental inflation topping double figures in most UK cities during 2022, positioning on where each party stands regarding regulation in the Private Rented Sector (PRS) will undoubtably start to ramp-up in coming months. Below is a summary of the key policy state of play from the both sides of the pitch.   

Conservative

The Conservative government remains opposed to blanket rent controls arguing that they could have negative consequences for both tenants and landlords. Their current policy:

• does not support open market or mid-tenancy rent controls
• has a two month notice period for landlords to inform tenants of rental increases, with only one increase allowed during any 12 month period
• does not propose landlord licencing or short-let restrictions 
• will remove section 21 "no fault" evictions, except for instances of sale and family need for the property. 

Labour

Labour is generally more supportive of rent controls in the PRS as a way to address the housing affordability crisis and improve rights and protections of tenants. Labour’s proposals include:

• rent controls during the tenancy, but not open market - however regionally devolved powers could see regional differences
• a four month notice period for landlords to inform tenants of rental increases
• the introduction of landlord licensing (as many Labour authorities have already done) and restrictions on short lets
• restrictions on landlords to prevent ‘no fault’ evictions.

The UK is one of the most unregulated countries in Europe when it comes to rent controls on PRS properties. Legislation in the English PRS is more comparable to countries such as Hungary and Slovakia, rather than Germany and France. The key difference between England and these two markets is that they are not experiencing the same demand for rental housing and as a result, haven’t seen the same surge in rental increase. The demand for housing in the UK, coupled with a lack of regulation around PRS, creates an environment where some unscrupulous landlords can thrive and that leaves tenants vulnerable. Although the government has added additional regulations on landlords in recent years in order to improve the quality of housing they provide, the enforcement of these regulations is patchy, and tenants often are unaware of their rights and are vulnerable to eviction if they complain. 

Meanwhile the individual Buy to Let landlord has been exiting the market in recent years, between April 2017 and March 2021 the private-rented sector in England shrank by c.80,000 homes. Thanks in-part to unfavourable tax changes introduced by the government, as well as incoming legislation around energy efficiency measures which could force landlords with inefficient homes to sell off rather than invest in improvements. 

In the wake of all of this the Build to Rent sector is making strides to create high end sustainable housing and while the BTR market in the UK presently only accounts for a fraction of the overall UK PRS, it is rapidly growing. 

Of course, what is needed is balance. There is a lot of noise in the market surrounding this highly politicised debate of rent controls, and this is only expected to be exasperated as we move closer to the next general election. In Scotland, we’ve seen how a heavy-handed approach to rent controls can have an adverse impact on the market. Landlords continue to protest the extension of imposed rent controls (capped to a 3% maximum increase) which were initially introduced as a temporary measure. This is a prime example of where the impact of these more heavy handed rent controls on landlords can out way the benefits to tenants. 

When we look at what the two UK parties are proposing, neither are as extreme as what Scottish leadership has put in place recently. However, there’s still a long way to go until the next election and we’ve seen a fair number of housing ministers come and go in recent years, and there are some question marks around to what degree Labour will empower regional leaders. Although both Labour and the Tories are coming at this issue from slightly different political standpoints, cut through the fluff and both approaches are rearkably similar and do not look set to negatively impact the market. 

Read article on Colliers website

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