Renters' Rights Bill

Written evidence submitted by Richard Bate (RRB05)

I write in my personal capacity but as:

(a) the recent longstanding head of arguably the largest real estate practice in a UK headquartered, international law firm; and

(b) a private landlord of a portfolio of well-maintained, fully let houses built up over 20 years, creating a series of safe and happy communities and which, because of the RRB I feel compelled to sell; and

(c) I submit this evidence to help the government to avoid exacerbating the housing crisis and achieving the exact opposite of its (worthy) intentions

1. Executive summary

1.1 the RRB rightly intends to enhance the security and safety of tenants. The current proposals are certain to have the opposite effect

1.2 Government must strike a fair balance between the competing interests of those over whom it seeks to legislate. The RRB needs significant modification to achieve that balance

1.3 Governance should focus on rogue landlords and malpractice, not drive from the market professional and caring landlords

1.4 The institutional BTR sector is not ready to fill the void which will inevitably be created as the RRB drives private and effective landlords from the market

2. Detail

2.1 the cocktail of previous and proposed legislative change makes "buy-to-let" unattractive (at best) and economically unviable, despite recent rent rises. This is to the detriment of society at large.

The withdrawal of s.21, without significant investment in and reform of the sclerotic judicial system, makes lettings by private landlords wholly unappealing. So private landlords will get out and the supply of rented properties will hugely contract. This at a time when the number of households is exponentially increasing and housebuilding volumes cannot make up the shortfall.

2.2 The combination of sustained and increasing demand coupled with reducing supply will have 2 important consequences for tenants:

2.2.1 rents will continue to rise inexorably

2.2.2 landlords will divide into 2 camps. Those who "do the right thing" (and would have done so anyway, without the proposed legislation) and those who do not and never will. As many good landlords exit the market the ratio will skew towards the latter and more tenants will suffer

2.3 The Housing Act 1988 (including s.21) was necessary in consequence of the right of Council tenants gaining the right to buy their homes without Councils being obligated to re-provide the stock they had lost. That is the base of the problem

2.4 The government is deluded if it thinks institutional investors will take up the slack. Once they realise the complications and cost of maintaining dwellings to an appropriate standard they will vacate the sector. Often institutions behave like sheep. Once the understanding has developed that net residential yields are generally less than half of commercial lettings (or alternative investment asset classes) once properties are more than a few years' old, funds will vacate this sector. Then government will be left with little council house stock, few institutions investing and the private rental sector unwilling to make up the shortfall. In short a much worse housing crisis even than now.

2.5 Government "talks big" about easing planning red tape. But even if all the planning taps were gushing like geysers (which is inconceivable), there is insufficient capacity among the construction industry to meet anything like the planned 300,000+ new homes pa. So buyers will acquire the stock of departing private landlords and renters will face ever more reduced supplies. Government badly needs to encourage good private landlords, not kill them off

2.6 There are very few "no fault" evictions. Few landlords ever wish to serve s.21 notices because the income stream from the rent is the whole point of the letting. They do for 3 principal reasons. These are because:

2.6.1 they must sell for personal circumstances (which is relativly rare); or

2.6.2 they have nightmare tenants; and

2.6.3 deeply ironically, the planned removal of s.21 has prompted many to get out while they still can. Landlords who would never have served a s.21 otherwise!

The fact that s.21 exists has kept most tenants honest. It preserves a decent balance between the parties. If s.21 is removed, that balance will be lost & poor tenant behaviour will soar. That experience will drive more landlords from the sector, further exacerbating the supply problem and rent cost, at a time when it is impossible for any other parties to take up the slack.

2.7 What the RRB should focus on is requiring properties to be let to a good standard and to make the concept of renting more appealing to both landlords and tenants. Over and poorly-judged regulation will distort and damage the market and the interests of everyone

2.8 What the government should do is to:

2.8.1 Retain s.21 (or create a viable alternative)

2.8.2 create a new use class of dwellings within the Town and Country Use Classes Order: those which can only ever be used for letting, not private sale. Then housebuilders will focus on sites used for market sale and registered providers of social housing will be able to bid competitively for land for this purpose. Then the supply of rented stock will increase;

2.8.3 understand that most landlords are good at their job – but to legislate (harshly) against those who are not;and

2.8.4 invest in and improve the court system (which is woefully under-funded and hardly fit for purpose); and

2.8.5 fund Councils or registered providers of social housing to replace the lost council housing stock

16 October 2024