Renters' Rights Bill

Written submission submitted to the Renters’ Rights Public Bill Committee by Matter Real Estate (RRB52)

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, Matter Real Estate, is an investment manager which builds real estate businesses. Matter focuses on living sectors where there is structural demand, but supply is held back by barriers to large scale investment.

We channel investment from large scale global markets and funds to deliver new and affordable homes in the UK housing market through SME housebuilders, enabling them to access capital that is usually only available to larger developers. We know that there are many £billions of international capital ready to come into the UK Build to Rent market.

We welcome 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 and our investee companies have identified two 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:

1. 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

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

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 any downside risk.

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

· As responsible landlords, our investee companies 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.

· Urgent clarity is also required on what constitutes ‘market rent’ - what will be the method of determination and who will determine what is market rent? Will it be necessary to increase rents above a specific percentage to justify a challenge or could any increase qualify?

· It would also be helpful for the industry to understand what powers it is envisaged that the Housing Ombudsman will have relative to the courts / tribunal.

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.

· Our investee companies 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 – as well as further distress to neighbours and damage to property.

· In our experience, Section 8 is currently only robust enough to pursue claims for 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, our companies would only use a Section 8 procedure on mandatory grounds to give certainty on the outcome.

· The Government should set out clear guidance on the evidence required to demonstrate 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 will impact the supply of new homes, as institutional investors seeking to support the rental sector are unsure about when these assurances will be delivered following the removal of the Section 21 procedure.

· 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