Every year HCR looks at what appears to be an increasing complex legislative environment for landlords in the UK.
This is important for HR and Relocation/Mobility managers as there is potential for this to affect the amount of suitable housing available for employees who need to move.
In the last year the trends toward renting becoming the norm have persisted. According to recent Office of National Statistics (ONS) data one in three of the millennial generation, born between the mid-1980s and the mid-1990s, are expected to never own their own home, with many forced to live and raise families in privately rented properties. A third of 35- to 44-year-olds in England were renting from a private landlord in 2017; the figure for 1997 was one in ten.
Below we set out the major issues that could affect the rental market.
It is a measure of the political heat surrounding this issue that some of the more recent controversial developments such as Right to Rent and the abolition of agents letting fees to tenants. There are now newer laws in the offing.
Abolition of Fixed Term Tenancy Agreements in England
This is possibly the most controversial proposal. It would mean the abolition of “no fault” “Section 21” evictions that landlords would not effectively be able to limit property tenancies to a specific time period. Landlords would only be able to terminate a tenancy at their volition under certain limited circumstances. Tenants would be able to terminate giving due notice. Supporters of these changes point to the insecurity of tenancies at present and as an indication that the rental market is no longer dominated by young mobile people but now includes families who favour longer term commitments. They can also produce evidence from Scotland where fixed term tenancies were abolished some years ago which does not show that landlord/tenancy relationships have been seriously unbalanced.
The English landlord/letting agent lobby has been warning vociferously even in the pages of the Daily Telegraph that changing legislation “so that no notice to quit can ever be issued to a tenant, the incentive to let disappears.” The implication is that the stock of properties to let will rapidly decline making a bad situation even worse. With some justification the same lobbyists predict that rent controls are also likely to follow.
On 3rd March 2020, when launching his campaign to be re-elected mayor of London Sadiq Khan seized a political opportunity and said “That’s why today I am making the mayoral election on 7 May a referendum on rent controls – showing Londoners that I will stand up for renters”. The request to be granted the right for the Mayor of London to impose rent controls in the city has been a consistent theme of Khan’s mayoralty
Rent controls frequently fall into three categories:
- Capping rents in total
- Capping increases in rent
- Freezing rents temporarily
In many ways, the moral arguments for rent controls of some form are hard to confront. There is no question that many young people in the UK are facing financial hardship and paying a higher portion of their income in housing costs than ever before, particularly in London and the South East. Rental controls of varying different types have been introduced in major European cities such as Vienna, Madrid, Barcelona and Amsterdam. Berlin has recently introduced a rent freeze for five years.
The case against rent controls in the UK is the same as it elsewhere in the world, in that they may solve one problem but create another. Governments are wary that tight restrictions may deter landlords from letting properties altogether which would reduce their availability. In key urban areas this may push landlords into letting on a short-term basis as we explained elsewhere in this newsletter.
Despite their imperfections, there is no doubt that Rent Controls are firmly on the political agenda, and the all stakeholders should be prepared for change.