This is a government response to a report by the Levelling Up, Housing and Communities Committee on Reforming the Private Rented Sector
Date Published: 20 October 2023
On 9 February 2023, the Levelling Up, Housing and Communities Committee published its Fifth Report of Session 2022–23, Reforming the Private Rented Sector (HC 624). On 20 October 2023 we received the Government’s response to the report which is appended below.
The 2022 Queen’s Speech committed to reforming the Private Rented Sector (PRS) and bringing forward legislation. Later that year (June 2022) we published our white paper ‘A Fairer Private Rented Sector’, ahead of the introduction of the Renters (Reform) Bill to Parliament on 17 May.
The government is grateful to the Levelling Up, Housing and Communities Select Committee for their report on ‘Reforming the Private Rented Sector,’ published on 9 February 2023. The government has carefully considered the report’s evidence, findings, and recommendations and we have set out our response below. This response should be read alongside the Renters (Reform) Bill.
Everyone deserves a secure and decent home. Our society should prioritise this just like access to a good school or hospital. This means delivering a strong, well-functioning private rented sector that can provide quality homes for all renters. The sector must meet the needs of tenants looking for flexibility, including those on a pathway to homeownership, or those who need to move quickly to progress their careers, while giving stability and security to young families and older renters.
But it also means actively supporting the many good landlords who provide these homes. Good landlords deserve good tenants, and should feel confident that their investment is safe, know that they can get their property back when they need to, and feel supported to navigate and fulfil their responsibilities.
We know that the PRS market must also work for a wide range of landlords, from the 43% landlords who rent out just one property through to those with larger portfolios and large build-to-rent businesses.
We welcome the thrust of the report and the shared ambition to reform the private rented sector. While the sector has doubled in size since the early 2000s, the proportion of private rented sector households has remained stable at around 19% or 20% since 2013–14. Data published on 23 May 2023 continues to show that the sector remains stable in size. However, we know that interest rate rises, and wider cost-of-living pressures mean some landlords and tenants are facing financial challenges. Most landlords and rented properties are sensitive to shifts in interest rates, with almost 60% of landlords (and almost 70% of properties let) financed though Buy to Let mortgages. We must therefore make sure that landlords can set rents without intrusion, and know that a stable, secure tenancy system can help them to operate with confidence.
Significant progress has been made over the last decade to support renters, including strengthening the enforcement tools available to local councils (Housing and Planning Act 2016) and the rules on private rented sector housing conditions (Homes (Fitness for Human Habitation) Act 2018), while banning most letting fees and capping tenancy deposits paid by PRS tenants (Tenant Fees Act 2019). However, while most landlords provide a good service, the sector as a whole currently provides the least affordable, poorest quality and least secure housing of all tenures. Although the overall number of homes which do not meet the Decent Homes Standard (or would not meet the Decent Homes Standard, were it applied to the private rented sector) has fallen significantly since 2010, over a fifth of the 4.6 million households that rent privately endure poor conditions, and 14% of homes have hazards that present an imminent risk to health – compared to 10% and 4% in the social rented sector respectively. Section 21 ‘no fault’ evictions allow landlords to evict their tenants without giving a reason, meaning tenants lack security of tenure in the homes they pay for and worry that challenging poor landlord practices and rent increases will lead to retaliatory evictions. Tenants who have received a section 21 notice are five times more likely to have recently made a complaint to their council than those who have not received a notice.1
We know that a stable, high-quality private rented sector needs engaged and responsible landlords to provide safe, well-cared for properties. But many landlords worry about renting to tenants who refuse to fulfil their side of the bargain by paying their rent on time, looking after their homes and respecting their local communities. They experience court delays in evicting tenants who are at fault, and report frustration at being undercut by a criminal minority who too often feel they can operate with impunity. And they want to know that if their own circumstances change, and they need to sell their property, or perhaps move members of their family in, then they can do that quickly and easily.
Our reforms are focused on delivering greater security and certainty of quality accommodation for tenants, while ensuring landlords rights and investments are protected. Our reforms will support local authorities to crack down on the small minority of rogue landlords that bring the sector into disrepute and support those decent landlords who are providing much needed homes for people.
Our reforms will:
We have undertaken extensive consultation and analysis to make sure we are striking the right balance between the rights of landlords and tenants. We received over 20,000 responses from organisations and members of the public to our consultations on Tenancy Reform and introducing the Decent Homes Standard into the private rented sector.
We remain engaged with landlord and tenant stakeholder groups to understand their reflections and concerns about our reforms, and wider changes to the PRS market. We have responded by:
We are pleased that the Select Committee supports the majority of our reforms including the repeal of section 21, which was a manifesto commitment of this government, and the abolition of fixed term tenancies. We agree that most landlords take their responsibilities seriously and offer a good service to tenants, and that the court system needs to improve. We welcome their support for the introduction of a legally binding Decent Homes Standard and the establishment of a Property Portal. We also understand the Select Committee’s concerns about the cost of renting and note the Select Committee’s call for a significant increase in house building more broadly. The government is committed to delivering its target of 300,000 homes per year to help create a more sustainable and affordable housing market. The most recent figures available show a continued increase in net dwellings - annual housing supply is up 10% compared to the previous year with over 232,000 net additional homes delivered in 2021/22. This is the third highest yearly rate for the last 30 years.
We also welcome the Select Committee’s support for mitigating any unintended consequences of our reforms on responsible tenants and landlords, the court system, and the wider enforcement community.
In our response to the Select Committee’s report, we explain where we accept a recommendation, or where we consider a different approach could achieve the same or a similar result. For example, we have reflected carefully on concerns about the impact of removing section 21 on tackling antisocial behaviour and the impact of removing fixed term tenancies on the student housing market. In these areas we propose solutions that either go further or take a different approach to a similar end avoiding unintended consequences. In some areas we state where we would like to explore solutions during the passage and scrutiny of the Renters (Reform) Bill.
Recommendation on notice periods:
We recommend that tenants be unable to give two months’ notice to leave until they have been in a property for at least four months. This will give landlords the legal certainty of at least six months’ rent at the start of a tenancy. (Paragraph 22)
We are grateful for the Committee’s support for periodic tenancies and agree that many tenants do not have a genuine choice about whether to sign up for a fixed term or not. Under the new system, tenancies will have no fixed period or specified length, meaning tenants can feel secure that their home is theirs until they choose to leave, or the landlord has a valid reason for possession. All parties will better understand their rights and responsibilities with a single set of rules governing when parties can end tenancies. However, we know that some landlords have concerns about this approach and we will continue to work to understand their concerns and ways in which they could be mitigated.
Flexibility is one of the key benefits of the PRS and we think it is critical that tenants can move when their circumstances change. For example, tenants may need to move for work, when the tenancy is no longer affordable or, in more extreme circumstances, to escape abuse or dangerous conditions. Our reforms will also protect tenants from the injustice of being forced to pay for unsafe or non-decent homes.
It is expensive and inconvenient to move house – research from Shelter indicates the average moving cost to tenants was £1,400 per move in 2017. Tenants are therefore unlikely to move unless they really need to, particularly when they have recently started a new tenancy. Tenants will be able to give notice at any point during the tenancy to avoid replication of fixed terms.
In circumstances where tenants do leave unexpectedly, a requirement of two months’ notice from the tenant, increased from four weeks’ notice, ensures that landlords have sufficient guarantee of rent and enough notice to find new tenants and avoid lengthy void periods. Currently, tenants are normally required to provide only four weeks’ notice, unless otherwise specified in their contract, and we have extended this to two months in recognition of the increased flexibility tenants will have.
Tenants will remain liable for the rent throughout the two-month notice period. If a tenant leaves without giving the correct notice or paying the remaining rent, landlords have options to recover their costs. Money from the tenant’s deposit can be used to cover the final month’s rent, and landlords can apply to a county court to claim larger sums if necessary.
Recommendation on student tenancies:
The government should retain fixed-term tenancies in the entire student housing sector but require all landlords letting to students to sign up to one of the existing government-approved codes of conduct. In the longer term, the government should consider replacing the existing codes with a single national code. It should also consider ways of preventing or deterring landlords from abusing the exemption, including by introducing financial penalties for those who do not let student accommodation primarily to non-students. (Paragraph 23)
The government recognises that the student market is cyclical – and that removing section 21 will mean landlords cannot guarantee possession each year for a new set of tenants.
Having engaged across the sector, we understand the cyclical model is critical for landlords’ business models and ensures a timely and robust supply of student accommodation. We will therefore introduce a ground for possession that will facilitate the yearly cycle of short-term student tenancies. This will enable new students to sign up to a property in advance, safe in the knowledge they will have somewhere to live the next year.
Retaining fixed terms for students, as per the committee’s recommendation, would not in itself mean properties are available at the end of an academic year for next year’s students. Unless notice is served, tenants have a right to remain in a property when a fixed term ends, and a landlord must still use a ground for possession or section 21 to evict them. We believe retaining fixed terms would unfairly lock students into contracts, meaning they could not leave if a property is poor quality, or their circumstances change. Student tenants should have the same flexibility as others.
We do not think it is viable to introduce codes which cover all student housing. There are a very large number of private rented sector student properties which would make enforcement extremely challenging, and further regulation would be a significant burden on small landlords. There are key distinctions between private housing rented to students and purpose-built student accommodation (PBSA) which warrants a different approach. PBSA is designed specifically with students in mind and caters for their needs, often with additional facilities or support services that would not be available in a standard home rented to students.
Recommendation on the moving and selling grounds:
We recommend that the government:
Abolishing section 21 will increase security for tenants as landlords will always need a good reason to evict and be prepared to evidence that reason in court. However, we believe that increased security for tenants must be balanced with a landlord’s need for flexibility when they want to sell or move into a property themselves and we are committed to introducing these changes once reforms to the court system are in place.
In the current system, landlords cannot use section 21 in the first six months of a tenancy. Our new restriction replicates this, but with the key distinction that landlords must have a genuine reason for the eviction. A two-month notice period (the same as section 21 currently) balances the needs of both tenants and landlords, giving tenants time to find a new home while ensuring landlords can manage their assets when they need to.
While we understand that some tenants would benefit from a longer initial restriction on the use of grounds or longer notice periods, this may discourage landlords from letting their properties in the first place. Just as tenants’ circumstances can change unexpectedly, landlords may need to sell or move into their property at short notice. Inflexibility could discourage landlords and reduce overall supply to the detriment of tenants and introduce additional hurdles to a smooth-running housing market.
In some circumstances, landlords may wish to sell their property directly to the tenant. To help facilitate this, we are removing the restriction on Ground 2 which currently prevents lenders from using the ground if the tenancy started prior to the mortgage.
We are mitigating against misuse of the grounds by restricting landlords from remarketing or reletting the property within three months of using moving or selling grounds. We judge this will be a strong deterrent as a landlord seeking to abuse the grounds would face a significant void period between tenancies. Any evidence that a landlord has advertised their property for rent during this period will support a tenant’s challenge that the landlord did not genuinely intend to sell or move into the property.
We recognise that landlord’s circumstances can change and that they may need to relet the property if, for example, the property does not sell. In our view, a three-month restriction provides the right balance between these competing factors.
Recommendations on antisocial behaviour:
The government should make existing Ground 14 mandatory and issue guidance to the courts setting out the precise definition of antisocial behaviour and the circumstances in which they must grant possession. It should also publish equivalent guidance to landlords and tenants on what constitutes antisocial behaviour and the evidential threshold required to prove it in court. (Paragraph 50)
Sustained acts of intimidating or disruptive behaviour are entirely unacceptable. Landlords must be able to evict persistently problematic tenants, relieving innocent parties living nearby and protecting their property. We therefore fully agree with the intent of the LUHC Select Committee recommendation and have developed a series of measures that together go further.
We will ensure landlords can act more quickly than ever before to evict antisocial tenants, including by making grounds for possession – the legal reasons a landlord can evict a tenant – faster and easier to prove. This will mean landlords can take immediate action – rather than giving two months’ notice and waiting for the end of a fixed term, as they currently need to when relying on section 21.
In addition to our White Paper commitment to reduce the notice period for the mandatory antisocial behaviour ground and explore prioritising cases in the courts, we will expand on the White Paper by introducing the following additional measures:
We fully support the intent behind the Select Committee’s proposal to make the discretionary antisocial behaviour ground mandatory. However, we think the alternative approach above will ensure landlords can gain possession more quickly, while protecting vulnerable tenants – such as those experiencing domestic abuse or the early symptoms of dementia – who are not guilty of antisocial behaviour.
Mandatory grounds are always attached to an easily-provable threshold – for example, whether the tenant has more than two months’ arrears, or has committed a particular criminal offence. This is to ensure maximum certainty for the landlord – they know they can prove a ground and possession will be awarded.
Specifying such a threshold for all antisocial behaviour would require the government to list specific prohibited behaviours in legislation. Given the huge range of antisocial behaviours, this is likely to mean that some types of behaviours are missed, in fact reducing landlord’s ability to take action. Maintaining discretion means landlords can seek possession in all cases, and judges can consider the facts of each case.
Judicial discretion will also prevent innocent tenants being evicted, where behaviour is unfairly perceived as antisocial. For example, a baby crying or a child practising a musical instrument after school has the potential to cause a nuisance or some annoyance to neighbours, but it would be unreasonable to evict a family on that basis. In more serious cases, perceived antisocial behaviour can be a result of mental health issues or domestic abuse.
We think our proposals better achieve the Committee’s aims – making it far easier to evict antisocial tenants while protecting the security of responsible tenants.
Recommendation on court reform:
We strongly recommend that the government introduce a specialist housing court as the surest way of unblocking the housing court process. Whether it does this or not, it is absolutely essential that the government significantly increase the courts’ ability to process possession claims quickly and efficiently and in a way that is fair to both landlords and tenants. This must involve prioritising and fast-tracking all possession claims in respect of rent arrears and antisocial behaviour. In consultation with landlords, the government should also agree how quickly the courts need to be processing possession claims before landlords can have confidence in the system, and then commit to meeting this target before abolishing section 21. It should also collect and regularly publish data on its progress towards meeting this target. (Paragraph 49)
The vast majority of tenancies end without the need for court involvement, and we expect that to continue after our reforms. However, for those difficult cases which do escalate to the courts, the government recognises the importance of making sure that the process is as smooth and efficient as possible.
In our white paper, ‘A Fairer Private Rented Sector,’ we set out a range of court improvements to target those areas which can currently cause frustration and delays. We are working closely with the Ministry of Justice and HM Courts and Tribunal Service to drive forward improvements to the court possession process so that users have a modern, digital service that will align with the reforms to tenancy law.
Implementation of the new system will not take place until we judge sufficient progress has been made to improve the courts. That means we will not proceed with the abolition of section 21, until reforms to the justice system are in place.
The target areas for improvements include:
We are also strengthening mediation and dispute resolution, seeking to embed this as a member service of the new Ombudsman. This will give landlords stronger tools to resolve disputes before court action is needed.
We are running bailiff recruitment campaigns and have reduced administrative burdens to free up resource for bailiffs to focus on enforcement activity, including the enforcement of possession orders. We will explore further improvements to bailiff’s recruitment and retention practices.
While we understand why the Select Committee have called for the courts to prioritise claims brought on rent arrears grounds, it would not be practical to prioritise such cases. Rent arrears cases account for a significant proportion of claims going to court, therefore prioritising them could cause significant delays to other possession claims being heard and would not improve timeliness.
We do not agree that introducing a Housing Court is the best way to improve the court process for possession. We consulted on this point and this view was shared by the Ministry of Justice and members of the Judiciary who responded to our call for evidence. The cost of introducing a new Housing Court would outweigh the benefits. A new court would not address the primary concerns raised by users about improved advice and guidance, the complexity and a lack of understanding of the process by users, as well as delays. Improving enforcement of possession orders or improving guidance and signposting to legal advice can best be achieved instead by focusing on improving existing processes, rather than by introducing a specialist court.
We have learnt from the experiences of tenancy reform implementation in Wales and Scotland, and we are committed to ensuring that strengthened possession grounds and the abolition of section 21 will be implemented over sufficient time for the courts and the wider sector to adapt to system changes.
Recommendations on energy efficiency:
Given the importance of the MEES to the government’s net zero strategy, not to mention the health, cost and other benefits of living in a warm home, we recommend that the MEES be incorporated into criterion D [of the Decent Homes Standard] and that the government come up with financing solutions for PRS landlords for whom the cost of the necessary improvement works would exceed the £10,000 cap. We also recommend that the government determine the number of homes in the PRS exempt from the MEES by virtue of having a total floor space under 50 square metres and then consider the possible merits of legislating to revoke this exemption. (Paragraph 66–69)
We recognise the importance to tenants of housing quality - having a safe, warm and decent home. Introducing the Decent Homes Standard to the private rented sector for the first time will significantly improve conditions in the sector, giving private renters access to safer, better value homes.
Regarding Minimum Energy Efficiency Standards, the Prime Minister announced in his speech on 20 September that the government will not be requiring landlords to improve the energy efficiency of their property to higher standards than those currently required by legislation. The government continues to encourage households to improve the energy efficiency of their homes where they can.
We are spending £6 billion this Parliament and a further £6 billion to 2028 on making buildings cleaner and warmer. That is in addition to the £5 billion that will be delivered through the Energy Company Obligation (ECO4) and the Great British Insulation Scheme up to March 26. We have supported households with up to half their energy costs last winter and continue to support the most vulnerable through the Warm Home Discount, which is £150 to 3 million households.
Recommendations on the Privately Rented Property Portal:
The government should include the following in the information landlords are required to enter on the property portal: all gas and electrical safety certificates and reports; any other reports generated by tradespeople; energy performance data; and details of ombudsman membership and membership of a deposit protection scheme. Furthermore, the government should take action now to digitise the certificates and other reports that are to be uploaded to the portal, so that rather than being a mere repository of information that has to be trawled through, a coding system can be implemented to enable the portal to verify that documentation is in date and that there are no issues that need addressing. To deter landlords from entering false or misleading information, the government should also introduce financial penalties for such offences. This would be consistent with its proposal for deterring landlords from self-declaring inaccurate information regarding compliance with the decent homes standard. Finally, we urge the government to incorporate the functions of the database of rogue landlords and property agents into the portal as soon as possible. (Paragraph 89)
The Privately Rented Property Portal will provide clear and comprehensive information on landlord duties and responsibilities, helping landlords to demonstrate compliance and navigate their responsibilities. A new, consistent dataset of privately rented properties and their ownership arrangements will support local councils to enforce against unscrupulous landlords who undercut the responsible majority.
We intend to require private landlords to submit compliance information relating to their property to the new service. This information could include gas and electrical safety certificates and we are considering requiring landlords to “certify” on the Portal that they meet the Decent Homes Standard. We want the Portal to hold other information, including the property’s energy performance level, and the landlord’s membership of the new Private Rented Sector Landlord Ombudsman. We are considering data collection options that will minimise the burdens on private landlords submitting information. We will draw on existing datasets where possible and adapt data-collection as and when future datasets may be digitised.
It is vital that the information included on the Property Portal is accurate. We will explore how technology can assist local councils to use data collected through the service. Local councils will be empowered to penalise landlords who provide false or misleading information, and we expect there will be a tiered penalty system with different penalties for different offences. The Property Portal will also replicate some of the functions of the existing Database of Rogue Landlords and Property Agents to improve the quality of offence data available to local councils and support their enforcement against criminal landlords.
We will continue to design the new service in a way that balances landlord’s rights to privacy, with local councils’ need for information to support enforcement work. The new service will have flexibility to support future policy developments and respond to changes in the private rented sector.
Recommendation on enforcement funding:
In the current economic climate, we accept that the government is unlikely to provide significant additional long-term funding for local authorities, but it must consult them, if it has not already done so, on how much short-term funding they will need to get the regime up and running. In particular, local and central government should agree what staffing levels will be required and then fund their recruitment. The government should also assess the availability of environmental health officers and other enforcement staff and work with the sector to ensure that enough places on training courses are available. Local authorities will need many more enforcement officers if the proposals are to make a meaningful difference. (Paragraph 91)
We welcome this recommendation, and we are working to estimate the net additional costs that may fall on local authorities as a result of our proposed reforms. In accordance with the New Burdens Doctrine, we will ensure that, where necessary, these costs are fully funded. We are already providing £14 million to nine pathfinder projects covering 29 local councils to build enforcement capacity and capability, and test and disseminate innovative approaches. It is also the case, however, that local authorities have existing statutory duties to enforce standards, and these duties should be met. We are seeing evidence of very widespread variation in practice between authorities.
Responses to the Secretary of State’s letter to local authority Chief Executives on 19 November 2022, which requested their assessment of damp and mould hazards in privately rented properties in their areas and the action they are taking to remediate them, provided further information on staffing levels, where these are likely to be insufficient, and recruitment issues. On 7 September we published local council responses in full together with a summary analysis2. The Secretary of State has written to local councils setting out his conclusions and asking for further action to improve standards. We will continue to work with local councils and other stakeholders to build the skills and capacity needed to successfully implement our reforms.
Recommendations on Local Council Enforcement:
If it is not already doing so, the government should consult local authorities about what amendments are needed to the civil penalties regime and include any necessary legislative changes in the proposed renters reform Bill. In particular, we recommend that non-payment of a civil penalty be made a criminal offence and that local authorities be given the power to register an unpaid penalty as a legal charge on the property. We also again recommend that the government remove the requirement on local authorities to obtain the permission of the Secretary of State to introduce a selective licensing regime covering more than 20% of private rented homes in their areas. It should be for local government, unencumbered by too much central control, to decide the best way to enforce housing standards. Finally, on prosecutions, we repeat the recommendation of our predecessor Committee in its 2018 report, Private Rented Sector, that courts require offenders to pay costs to local authorities that reflect the actual cost of the enforcement action. We also ask the government to clarify whether landlords are able to avoid prosecution for housing offences by transferring ownership of the property before the court hearing. If this is the case, we recommend it consult on what changes are necessary to prevent this from happening. (Paragraph 93)
We recognise the vital role that good landlords play in providing homes for millions of people across the country. We know that the overwhelming majority of landlords provide a good service. They care for their properties and care about the tenants who occupy them. However, we need to make sure that there is robust enforcement in place to hold to account the small minority of landlords who flout the rules.
The reforms we are introducing through the Renters (Reform) Bill will be underpinned by an effective, consistent, and proportionate enforcement framework. We will make full use of the civil penalty system across our reforms. First (or minor) non-compliance will incur a civil penalty of up to £5,000 and serious or repeat non-compliance, a civil penalty of up to £30,000. We are also extending civil penalties to cover illegal evictions.
Local councils can already place a legal charge on a property for unpaid fines. Although we have no current plans to criminalise non-payment of a civil penalty, current policy allows a local council to refer cases of unpaid civil penalties to the county court for an order for the outstanding payment to be made through that court.
Selective licensing is a tool available for local councils to address and target specific problems arising in particular areas, as part of their wider enforcement strategies. If a local council intends to designate one or more area for selective licensing, and they cumulatively cover more than 20% of the geographical area or the private rented stock, then the proposed designations will need to be submitted to the Department for ministerial approval. We recognise the need, highlighted by the committee, for local councils to have the tools to enforce appropriately in their areas. We are also aware that many landlords find the approval process for larger schemes to be an important source of oversight. With this in mind, we have given selective licensing general consent to Greater Manchester local councils as part of the Greater Manchester devolution trailblazer agreement, subject to consultation with the Mayor. We will be working with local councils to help them share best practice on the implementation and use of their schemes. We will also review the selective licensing schemes once the Property Portal is fully operational to maximise opportunities for streamlining information requirements.
Local councils can already recover the costs of prosecution through the courts. Council officers should seek full recovery of costs for bringing forward a prosecution. Officers will be mindful of the need to keep a full and accurate record of the time spent and costs incurred along with the investigative costs. If a defendant has been convicted of a listed serious offence or has a history of convictions, the court can assume that all their property is the proceeds of crime, and this can be factored into the amount of a confiscation order. Some local councils have already used this in cases of landlord criminality. This must be requested prior to sentencing in which case the matter will be referred to Crown Court.
We will continue to explore how we can clamp down effectively on landlords who seek to avoid prosecution by making artificial arrangements such as transferring ownership of property. The creation and dissolution of multiple companies by landlords in order to complicate and frustrate enforcement action is a matter of concern, and our reform programme seeks to make it more difficult for criminal landlords to evade enforcement, both through providing better information on property ownership via the Privately Rented Property Portal, and through strengthening local councils’ enforcement powers. We will continue to work with local councils to consider how this can best be addressed.
Recommendation on buy-to-let taxation:
We recommend that the government review the impact of recent changes to taxation rules in the buy-to-let sector, with a view to making changes to make it more financially attractive to smaller landlords. If it is not willing to do this, it should at least be much clearer about what role it wants the private rented sector to play in the wider housing mix and, in particular, whether it values the involvement of landlords with very small portfolios (paragraph 106).
Since 2010, a range of changes to the tax system have been introduced to support first time buyers and wider efforts to make the housing market work for everyone. While it is right that people should be free to purchase a second house or invest in a buy-to-let property, the government is aware that this can affect other people’s ability to get on to the property ladder.
Alongside ensuring an effective private rented sector, the government also has a responsibility to make sure that the income tax system is fair. Under the old system, landlords received relief on their finance costs (including mortgage interest payments) at their marginal rate of income tax, which meant that higher rate taxpayers received a more generous tax relief than those on lower incomes.
To address this, and make sure that all landlords are treated the same by the income tax system, the government phased in a set of reforms to restrict finance cost relief to the equivalent of the basic rate of income tax. The reforms mean that all landlords will now receive the same amount of relief. It also reduces the disparity in income tax treatment between homeowners and landlords.
Landlords continue to be able to claim relief at their marginal rate of income tax on the day-to-day costs incurred in letting out a property, such as letting agent fees and replacing furniture. The government’s position is that finance costs are different to other expenses. Having a mortgage on a property allows the landlord to purchase a more expensive property and incur larger gains on the investment than they would have done without the mortgage.
As with all aspects of the tax system, the government keeps the tax treatment of property income under review and any decisions on future changes will be taken by the Chancellor in the context of wider public finances.
Our ambition is to provide safe, secure, and decent homes for everyone regardless of which tenure they occupy. The private rented sector plays an important role in the housing market, and data published on 23 May 2023 continues to show that the sector remains stable in size.3 We value the involvement of all responsible landlords in the sector, regardless of their portfolio size or their specific business model. While the government wants to support those who aspire to be homeowners, we appreciate that home ownership is not right for everyone and that there are many people for whom renting a home is either more practical or more affordable. We need a thriving private rented sector that helps to accommodate these people’s housing needs. Given that 43% of landlords own one property and over 80% of landlords own one to five properties, we understand that the reforms contained in the Renters (Reform) Bill must work for smaller landlords as well as larger businesses.
Recommendation on affordability in the sector:
We recommend that the government use the powers in the Levelling Up and Regeneration Bill, if passed by Parliament, to implement a tourist accommodation registration scheme as soon as possible. We ask that the government also update us on whether the scheme could and will be used to allow local authorities to protect their communities from the holiday-let market. The government should also announce what further action it will take, as soon as the scheme has clarified the extent of the damage being caused by the sector (paragraph 108).
In recognition of growing concerns in areas with a high concentration of short-term lets about their impact on the availability and affordability of local housing, along with concerns about inconsistencies within the regulatory framework in the visitor accommodation sector, the government is introducing a registration scheme for short-term lets in England through the Levelling Up and Regeneration Bill. A consultation was held to consider details on how the registration scheme will operate. Government has also consulted on the introduction of a new use class for short term lets and associated permitted developments rights. This would provide flexibility where such uses are not an issue and allow greater control where there is a local issue. The two consultations have now closed. We are carefully considering responses and will respond in due course.
Recommendation on housing supply:
The current high cost of private renting is rooted in the decades-long failure of successive governments to build enough homes. We accept that the purpose of the White Paper was not to make the PRS more affordable, and that the government is investing in house building, but there are questions about the sector’s ability to deliver the necessary number of new homes, particularly given the enormous financial pressures on housing associations and local housing authorities. Ultimately, the affordability crisis in the PRS, the source of many of the other problems in the sector, can only be properly solved by a significant increase in house building, particularly affordable housing. We call on the government to recommit to delivering the affordable homes the country needs, particularly the 90,000 social rent homes we have previously concluded are needed every year (paragraph 112).
We agree, and the government is on track to meet its manifesto commitment to deliver one million homes over this Parliament. Reaching this target would represent another important milestone in the government’s already successful housebuilding strategy: since 2010, over 2.2 million additional homes have been delivered in England, and the three highest annual rates of housing supply in 30 years have all come since 2018.
Earlier this year, the Secretary of State set out more detail on the government’s ongoing commitment to housing supply and regeneration through the publication of a long-term plan for housing. The plan builds on the existing commitment to deliver one million new homes by the end of this Parliament outlined above, while maintaining the protections that matter most to local people. The plan set out a range of measures including:
Increasing the provision of affordable and social homes is a key part of the government’s plan to build more homes. Our £11.5 billion Affordable Homes Programme will deliver thousands of affordable homes for both rent and to buy right across the country.
The government recognises the need for Social Rent homes to support functioning communities, with the right homes in the right places supporting everyone, regardless of one’s ability to obtain a home at market rates. This is why social rent homes were brought into the scope of the Affordable Homes Programme in 2018. Additionally, the government’s Levelling Up White Paper committed to increasing the supply of social rented homes and in response, a significant number of the homes delivered through our Affordable Homes Programme will be for social rent. The government is working with its delivery agencies to confirm the 2021 - 26 Programme’s capacity to deliver as part of a review of programme commitments in light of economic challenges for social housing developers. The government is also introducing a new Infrastructure Levy through the Levelling Up and Regeneration Bill, which is committed to delivering at least as much affordable housing as the existing system of developer contributions.
The government also welcomes new institutional investment in the private rented sector and has made a number of interventions to support the Build to Rent sector. Build to Rent boosts housing supply, diversifies the private rental sector, and increases quality and choice for renters in cities and towns across England. We have revised the National Planning Policy Framework and issued a chapter of planning guidance to support the delivery of more Build to Rent homes, including affordable rental homes.
Recommendation on Local Housing Allowance rates:
The failure of local housing allowance (LHA) rates to keep pace with market rents is quite obviously making the private rented sector even less affordable for many people who are only there because the social housing sector has been cut back and can no longer accommodate them. If the government believes the PRS is the right place for those on the lowest incomes, it should at least make sure housing benefit does what it was designed to do and covers benefit recipients’ housing costs. For this reason, it should increase LHA rates to realign them with the 30th percentile in each broad rental market area and commit to conducting a review as soon as possible into whether they should once more be aligned with the 50th percentile (paragraph 117).
The Local Housing Allowance (LHA) determines the maximum housing support for tenants in the private rented sector. It ensures that claimants in similar circumstances living in the same area are entitled to the same maximum rent allowance regardless of the contractual rent paid. In April 2020, we boosted investment in LHA rates by nearly £1 billion providing 1.5 million recipients of Housing Benefit or the housing element of Universal Credit with around £600 more housing support in 2020/21 than they would otherwise have received.
We have maintained LHA rates at this same cash level so that everyone who benefitted from the increase will continue to do so. However, LHA rates are not intended to cover all rents in all areas.
Support is available for those who face a shortfall in meeting their housing costs. Discretionary Housing Payments are available from local authorities. Since 2011 the government has provided nearly £1.6 billion in Discretionary Housing Payments funding to local authorities. Local authorities have broad discretion to spend in line with their local priorities, supported by non-statutory guidance, which provides a list of priority groups to assist with their decision making.
At Autumn Statement 2022 the government took the difficult decisions needed on tax and spending to restore economic stability, support public services and lay the foundations for long-term growth. It is vital the government sticks to its plan and maintains economic stability.
The challenging fiscal environment means that difficult decisions have to be made to ensure support is targeted effectively. We must continue to take a responsible and disciplined approach to public spending, while supporting vulnerable people and protecting vital public services. A substantial package of targeted support was announced at last year’s Autumn Statement for those on low incomes. In the Spring Budget the Chancellor announced further support to households with the cost of living and the Secretary of State for Work and Pensions has committed to reviewing LHA rates annually.
Recommendation on rent increases:
The government should assess whether the data held by the VOA could be used to determine justified rent increases in the PRS. If it concludes that it could, we recommend either that this information be made public so that landlords and tenants can easily see what a justified rent increase would be or, if it cannot be, that the VOA be given initial responsibility for determining whether an increase is justified, with the tribunal serving as an appeals court. If the government determines that the data is not suitable for this purpose, it should consider ways of collecting it. One way might be for it to require landlords to declare rent levels through the Property Portal. Whatever the government chooses to do, it should explore alternative mechanisms to those currently used for establishing justified rent increases with a view to removing some of the burden from landlords and tenants themselves (paragraph 128).
Rents in the private rented sector should be agreed between landlords and tenants, and it is not for government to intervene in this. We are clear that landlords must be able to raise rents in line with market prices, but that rent increases which are significantly above this should not be used as a means of backdoor eviction.
Where there are disputes between a landlord and tenant, the First-Tier Tribunal is best placed to resolve these and to determine the market rent. Making a balanced judgement on what the market rent is means a number of different factors need to be taken into account, such as quality of fixings or proximity to amenities. The Tribunal has experts who can assess the true market value of a property, and it is for those individuals to determine which evidence is relevant.
We will update guidance to support all parties in engaging with the Tribunal.
Recommendation on rent review clauses:
By getting rid of rent review clauses, the government could be removing a mechanism for predictable and fair rent rises and replacing it with a system that relies on a resource-intensive and time-consuming appeals process. We recommend that the government not abolish rent review clauses but make it a requirement that they stipulate by how much rents will increase. It should also legislate to require all rent review clauses to include break periods during which tenants may appeal to the First-tier Property Tribunal if they think their rent has risen above local market rents (paragraph 129).
The government wants to avoid very large rent increases being used as a backdoor to eviction, while ensuring that landlords can increase rents to market prices.
In the new system, landlords, as they can now, will be able to increase rents once a year at the rate they deem appropriate. It is only if a tenant thinks this is above market levels that they can challenge this at the First-tier Tribunal. When this happens, an independent expert panel will assess the market price for the property. This could be higher, lower or in line with what the landlord set.
The government is clear that rent should be agreed between the landlord and tenant, and nothing in our proposals prevents parties negotiating as they do now. It is not for government to set or steer rent increases and we do not support the introduction of rent controls. Evidence suggests that these would discourage investment in the sector and would lead to declining property standards as a result, which would not help landlords or tenants.
Rent review clauses can provide a means of backdoor eviction through removing the right to challenge above-market increases and may reduce flexibility for landlords to respond to market changes.
Recommendation on the Ombudsman:
Currently, letting agents are required to belong to one of two government-approved ombudsman schemes, the Property Redress Scheme or the Property Ombudsman, but membership for landlords is voluntary. The White Paper proposed the introduction of an ombudsman for all private landlords, regardless of whether they use an agent. The government says a single scheme will mean a streamlined service for tenants and landlords and avoid the confusion and perverse incentives resulting from multiple schemes. On this basis, we do not understand why the government is not proposing to replace the existing letting agent schemes with a single ombudsman covering all letting agents and landlords. A single ombudsman for the entire sector is the best way of avoiding the confusion the government says it wants to avoid. We recommend that the government introduce a single ombudsman for the whole of the private rented sector and that mediation be firmly embedded within its remit (paragraph 138).
The government recognises the value of consolidating the housing redress system and delivering simpler services for tenants. Our primary focus in the Renters (Reform) Bill is to address the gap in housing redress in relation to private rented sector tenant complaints.
The Bill provides flexibility for an existing or new redress provider to deliver the new private rented sector Landlord Ombudsman service (‘the Ombudsman’). An existing provider may run multiple redress schemes as a single streamlined service. With this flexibility, the government does not think it is necessary to bring different elements of housing redress under a single legal framework. Doing so for letting agents would require major reform of the agent redress landscape which would be legally and practically challenging to achieve. This is because the two existing agent redress schemes are approved for all property agents. If private letting agents were carved out from these schemes, the schemes would still continue to provide redress for sales and leasehold managing agents. This would risk disruption, a potential reduction in agent redress capacity if the existing schemes needed to downsize, and duplication of membership fees for agents working across multiple areas.
Several options are available if the government want an existing housing redress provider to deliver the Ombudsman service. The government will introduce an Ombudsman based on an assessment of the best way to meet the needs of tenants and landlords. Central to this assessment will be making sure that private tenants can easily access redress when their landlord has failed to deal with a legitimate complaint. If delivery is not through an existing agent redress provider, a clear process for tenants can still be achieved through effective cooperation and communication between the Ombudsman and existing agent redress schemes, and we would expect this to happen.
It is our firm intention that mediation will be within the remit of the Ombudsman. The Ombudsman will resolve tenants’ complaints as quickly and amicably as possible, including by employing mediation and conciliation techniques in tandem with or as an alternative to formal redress proceedings. The government is also committed to exploring options for landlord-initiated mediation, for example where a tenant enters arrears or is behaving in an unacceptable way. Research is currently underway to understand the appetite for this service, and the most appropriate means of delivering this provision, either through the Ombudsman or another organisation, or a combination of providers.
Recommendation on blanket bans:
The government says it will make it illegal for landlords to have blanket bans on letting to benefit recipients. If this is a commitment to preventing landlords from discriminating against benefit recipients, it is unrealistic. If it is a commitment to preventing landlords from stating explicitly that they will not consider letting to benefit recipients, it is unambitious. Landlords who do not want to let to benefit recipients will simply choose not to do so. The real issue is twofold: there are not enough homes for rent; and local housing allowance rates have not kept pace with the market in recent years. We call on the government to explain in response to this report how it intends to prevent landlords from refusing to let to benefit recipients, and we again recommend that it uprate local housing allowance rates so that housing benefit better covers the cost of renting in the private rented sector (paragraph 143).
Prohibiting blanket bans on those in receipt of benefits or with children is an important step to protect prospective tenants and their families. It will help make sure that low-income tenants and families don’t fall at the first hurdle when they look to rent a property in the private rented sector.
Landlords and agents will have the ability to make a final decision on who to let their property to and carry out referencing checks within the law to ensure a sustainable tenancy for both parties. This policy is not designed to force landlords to prioritise renting to prospective tenants in receipt of benefits ahead of other applicants. However, they will not be able to use blanket bans as part of the letting process and we will support landlords to take informed decisions on prospective tenants’ individual circumstances.
The proposed ban will help prevent blanket discriminatory practices and provide a route for action if not adhered to. If a prospective tenant believes that they have been discriminated against, they will be able to seek enforcement action through the relevant local council or a resolution though the new Ombudsman and existing letting agents redress schemes.
We are working closely with local councils to ensure the policy is deliverable on the ground. We will provide clear guidance for landlords, letting agents, tenants, and enforcement authorities to make all partners aware of the new legislation and how to update their practice.
There is more work to do to ensure low-income tenants and families can fully participate in the private rented sector. We will:
Recommendation on pet requests:
The proposal to make it easier for landlords to allow pets by making pet insurance a permitted payment under the Tenant Fees Act 2019 is a sensible and proportionate measure that could make a meaningful difference. On the other hand, the proposal to make it illegal for landlords to unreasonably withhold consent from those who request permission to have a pet seems impractical, even if a satisfactory definition of “unreasonably withholding consent” could be produced. We recommend that the government abandon their promise to legislate to make it illegal to unreasonably withhold consent when a tenant requests permission to have a pet. If it cannot accept this recommendation, it should set out in response to this report what would constitute “unreasonably withholding consent” and explain in what circumstances it would be acceptable to force landlords to accept pets, especially where those landlords have had previous negative experiences of tenants with pets (paragraph 148).
We welcome the Committee’s support for our proposal to amend the Tenant Fees Act (TFA) 2019. Allowing landlords to charge tenants for insurance against pet damage, or to require tenants to take out a policy, will ensure landlords can have confidence that all costs will fall to the tenant.
However, we do not agree with the recommendation to abandon our proposal to strengthen tenants’ rights to request to keep a pet, which can bring huge joy to their owners. A report by SpareRoom Pet Think Tank (2018) suggests that around 80% of pet-owning renters have had difficulty finding a property.
While landlords will need to consider requests for pets on a case-by-case basis, they can refuse animals if it is reasonable. While it is not possible to list all circumstances in legislation, given the variety of animals and properties, we anticipate that landlords will take into account a number of factors when making their decision. This might include the size of the pet and the property; whether the property or common areas are shared with other tenants; allergies or phobias and, if relevant, access to outdoor space. A landlord could likely refuse if, for example, the animal was clearly too large for a small property, or if another tenant in a shared house had an allergy or phobia. The Renters (Reform) Bill states that a landlord may also refuse if a superior lease prevents the keeping of pets in a property.
While a tenant may challenge a decision, they have no automatic right to keep the pet if the landlord initially refuses. The tenant would not be permitted to keep the pet unless and until the Ombudsman or court ruled that the landlord had been unreasonable.
Recommendation on guidance:
The success of the government’s reforms depends to a great extent on tenants knowing their rights, and on landlords knowing that they know them. For this reason, the government should update the How to Rent Guide to include details of tenants’ and landlords’ rights and responsibilities, including, in particular, how tenants can seek redress, and produce foreign language versions of this guide. It should then assess the level of compliance among landlords with the requirement to provide tenants with a copy at the start of a tenancy and, if necessary, consider ways of increasing awareness of it. A tenant whose landlord fails to provide them with a copy of the guide should be able to complain to the ombudsman, and, where the ombudsman upholds such a complaint, it should have the ability to award compensation. More widely, the government should review the adequacy of advice and support services to tenants, particularly the most vulnerable, and report back to us on how it plans to make sure tenants have the knowledge and confidence to hold their landlord to account (paragraph 153).
We know that the success of our reforms relies on all parties understanding their rights and obligations as tenants and landlords. Our booklets, ‘How to Rent’ and ‘How to Let,’ provide a concise guide to renting, and letting agents and landlords are only able to issue section 21 notices if they have provided their tenant with a copy of the ‘How to Rent’ guide. Despite this obligation, figures from The Tenancy Deposit Scheme 2022, show that only 34.6% of tenants think they have seen or been given the document.
In the nine years since we first published the ‘How to...’ guides, the way people access information has been transformed. 84% people have a smart phone for private use4 and our research shows that younger people in particular are used to searching for tailored answers to specific questions and may be less likely to read or use longer written guidance. However, we also know that the private rented sector is home to increasing numbers of older people, and to other groups who may have different guidance needs and preferences.
These are once-in-a-generation reforms which will affect both landlords and tenants. We want to make sure that everyone who lives and works in the sector is prepared for these changes and understands what they mean for them. We have carried out extensive research and consultation with stakeholders and will continue to work with the sector to make sure we get this right.
We want to make sure that all tenants and landlords can access guidance that they can trust, in a way and at a time that will be most useful for them. We will make sure that landlords have easy access to the information they need to help them understand their responsibilities. We are working with partners to improve our understanding tenants’ needs, including those who are digitally excluded, have specific language needs, or who are vulnerable. We will consider a range of channels to ensure that tenants both have the knowledge and confidence to hold their landlords to account, and understand their own responsibilities in a successful tenancy, including the kinds of behaviours and breaches that could lead to their eviction. The Privately Rented Property Portal will provide a range of benefits for landlords, tenants, and local councils. For landlords, it will be a gateway providing a single source of information about their legal responsibilities and helping them publicly showcase their compliance. We know that good, responsible landlords want to do the right thing and we want to make this process as easy and streamlined as possible for them. We propose that the Portal will also act as a gateway to all our digital guidance which is hosted on GOV.UK, making it accessible for landlords, tenants and local councils who are all end users of the portal.
The introduction of a new tenancy system provides an excellent opportunity to look in the round at how tenants access advice. We welcome the Select Committee’s focus on vulnerable tenants and are keen to learn lessons from colleagues in Scotland, Northern Ireland and Wales on the impact that their reforms had on demand for, and provision of, advice services as we plan for implementation. We will work with colleagues from across government, including the Ministry of Justice and DWP, the advice sector, and tenant and landlord groups to understand how we can maximise access to advice where it is needed. We will report back to the Select Committee on our findings.
The Ombudsman will also play a role in to raising awareness of the service it provides and communicating it to both tenants and landlords. For tenants, the service will provide advice on how to complain when things go wrong, and organisations such as Citizens Advice and Shelter are able to provide more tailored advice where that is needed. Tenants who are at risk of losing their home, and meet certain qualification criteria, may also receive free early legal advice on housing before appearing in court and will be able to continue to get advice and representation on the day of their hearing, following changes to the extended Housing Loss Possession Advice Service funding through the Ministry of Justice which came into force on 1 August.