Renters' Rights Bill

Written evidence submitted by Placefirst to The Renters’ Rights Public Bill Committee (RRB43).

A fair private rented sector (PRS) is a crucial part of the UK’s housing market, providing homes to millions of individuals and families, while enabling workers to move across the country for new jobs, supporting economic growth and productivity.

However, we recognise that action needs to be taken through this Bill to raise standards within the rental market. We support the overall intention of this Bill and welcome it.

By way of background, Placefirst is an experienced build-to-rent developer and regeneration specialist with a specific focus on family homes, we are committed to transforming areas into aspirational neighbourhoods of high-quality, well-maintained homes that realise the area’s full social value.  We have ambitious growth plans and are always looking for new sites and local authority partners. In areas where we have worked previously, regeneration has brought city-wide benefits.

We also manage thriving neighbourhoods across multiple regions, a mix of quality new build and innovative refurbishment, single-family rental homes, and apartments.   Our flagship regeneration scheme, Welsh Streets in Liverpool won development of the Year 2023.  

The lack of high-quality rental housing in the UK makes single-family rental a key option for renters of all ages to benefit from professionally managed property that has been designed specifically for long term rent, developed to a high specification and sustainable standard.

More than 40% of our residents are key workers and of these over 25% are NHS staff. We provide homes for key employees who, not only benefit the local economy, but also the local community and the health service.

As a responsible landlord, Placefirst welcomes the new Renters’ Rights Bill. These reforms will improve the experience for the millions of people who want and need a safe and fair rental market.

However, we have identified a few specific areas that will have adverse consequences for renters and for future investment in – and supply of – new, high-quality much-needed rental homes.

These include:

· the risk of increased short-term lets caused by the ability for tenants to serve notice to leave as early as Day 1 of their new tenancy;

· the risk of spurious challenges to rent increases overwhelming the First Tier Tribunal and the need to get the balance right on the new right to challenge ‘unreasonable’ rent increases; and

· the importance of readying the courts with adequate support and resource for additional Section 8 cases

The lack of minimum terms risks a rise in short-term let accommodation and will deter investment

· Under current drafting of the Bill, renters would be able to serve a two-month notice on their landlord from Day One of their tenancy agreement, rather than after a six-month period.

· This will have several unintended, adverse consequences for renters, while making it much harder for developers to invest in new homes, by increasing operational costs and the risk profile of BTR investment:

o The ability of a renter to issue a two-month notice immediately upon commencement of a new tenancy risks opening a back-door to misusing rental homes for short-term lets. If a renter can sign their tenancy and submit their notice period on the same day, tenants will be able to use a property meant for long-term worker and family rental for short-term purposes.

· From a financial perspective, an increase in shorter term lets will increase the gross to net leakage on investment which could result in increased rents to compensate.

· This part of the Bill is not compatible with our focus of creating communities by offering long term rental.

· The risk of this misuse is particularly high in the Build-to-Rent sector because of the ‘turn-key attractiveness’ of BTR homes for short-term use. Our homes provide easy move-in, furnishings, built-in Wi-Fi, and high-quality facilities:

o With this loophole, a landlord could not be sure if their new tenant proposed to stay for 2 months or a significant period. This represents a barrier to investment in the delivery of new rental homes, as lenders and developers would have no certainty about the occupancy levels and revenue base underpinning the scheme.

o Landlords need surety over a tenant’s contract to invest, but the lack of clarity and the likely growth of short-term tenures would create a risk that landlords need to offset. The lack of a minimum term will increase tenant churn and oblige landlords to factor in a higher cost margin in their appraisals.

o The result would be a significant loss of investment in the delivery of new homes, as well as an inadvertent upwards pressure on rents, particularly cities, which will make it harder for people to find homes they can afford to rent.

Getting the balance right on the new right to challenge ‘unreasonable’ rent increases

· The Bill ensures rent rises can only be undertaken via Section 13 notices and enables renters to challenge their increase through the First Tier Tribunal (FTT). The only constraint is that challenges must be made within the first six months of the increase. We acknowledge the aim to allow renters to challenge rises that are unjustified in relation to the market. However, the sector believes that the sweeping nature of this new right will cause adverse consequences.

· Without clarity about what constitutes an ‘unreasonable’ rent rise, the BTR sector is concerned that almost all PRS households will have an incentive to challenge their rent increase (at no cost or risk), causing an exponential increase in caseload for the FTT. Given a rent increase would not come into force until after the FTT rules, it will be a clear method to delay legitimate increases. Similarly, if the FTT cannot rule that a market rent could be higher than the landlord has proposed, a delay can be sought without risk.

· The Government should set out clear guidance on how market rent is determined. Our experience of the FTT has been lengthy and time consuming for the landlord. This proposal will inevitably encourage most tenants to challenge the rent and will not only backlog the FTT system as noted, but will also generate an incredible amount of extra work for landlords and agents.

· As a responsible landlord, we aim to retain tenants by implementing fair rent increases. As currently drafted, the Bill could result in everyone who does not want a rent increase at all going to FTT which would be unsustainable.

· The delays that would arise from the widespread use of the right to challenge would destabilise BTR’s financial model, suppressing investor confidence in the sector and reducing our capacity to deliver new homes.

· Clarity is also required on what constitutes ‘market rent’ - how will determine this and how? Will it be necessary to increase rents by a material amount to justify a challenge?

Getting the courts ready ahead of significant additional Section 8 cases

· Without Section 21, the sector will be dependent upon issuing Section 8 notices to deal with anti-social tenants.

· As a landlord, we have found Section 8 procedures to be slow and inefficient, making swift resolution of anti-social behaviour difficult to achieve. Even after a possession order is made by the court, there can be a delay of several months before it is effected, causing significant arrears which are invariably impossible to recover.

· In our experience, Section 8 is currently only robust enough for us as a business to pursue non-payment of rent as it has both mandatory and discretionary grounds, some of which can be difficult to prove.

· As per legal advice we have received, we would only ever use a Section 8 on mandatory grounds to give certainty on the outcome.

· The Government should set out clear guidance on evidence required for anti-social behaviour to ensure an efficient and cost-effective service. This evidence will likely put strain on other vital services, such as the police and local authorities.

· The Government has committed to improving and digitising the courts system it inherited, but the BTR sector is concerned about what reform and how much investment is proposed and when this will come forward. This uncertainty is holding back supply of new homes, as institutional investors looking to support new rental homes but are unsure about when these assurances will be delivered in relation to the commencement of Section 21.

· The BTR sector would be grateful for assurances on the specific and measurable reforms and investment proposed for the courts, the timescales envisaged, and the outcomes sought.

October 2024.