The controversial Renters Rights’ Bill continues to progress through parliament but there are warnings that it could actually leave some tenants in a worse position.
The Renters’ Rights Bill will introduce a ban on no-fault evictions and in-tenancy rent rises in England. Banning fixed-term tenancies and limiting advance rental payments to one month will also be among the key changes.
It is another blow to buy-to-let investors.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Get 6 issues free
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The Bill is set to reach the report stage in the House of Lords in July before a third reading to consider any amendments.
While tenant groups have welcomed the changes and extra protections for renters, research suggests the reforms could actually block access to good-quality housing for people who don’t fit the standard referencing mode, including overseas applicants, the self-employed and those without a UK credit history.
Research by LRG warns that the cap on advance payments means landlords may be unwilling to take tenants on lower incomes or the self-employed as they would currently ask for more money upfront as a form of security.
It comes amid warnings from Tory peers and landlords that the reforms are being rushed and could drive landlords out of the market, pushing rents up further.
Research by flatshare website SpareRoom claims that two thirds of UK landlords plan to leave the rental sector or reduce their portfolios this year with 88% expressing no confidence in the rental market in 2025,
While renter associations have backed the plans, landlords have stressed they will need time to digest the reforms.
Ben Beadle, chief executive of the National Residential Landlords Association, said: “The end of Section 21, ‘no explanation’ repossessions represents the biggest change to the sector for over 30 years. Once the bill is passed, it is vital that sufficient time is provided to enable the sector to properly prepare.
“Over 4.5 million households will need tenancy agreements updating, letting agent staff and landlords will need to undertake training and insurance and mortgage providers will need to adjust policies and rates.
“None of this will happen overnight and the government needs to publish guidance.”
Housing minister, Matthew Pennycook, said: “The Bill will modernise the regulation of our country’s insecure and unjust private rented sector.
“It will empower renters by providing them with greater security, rights and protections so they can stay in their homes for longer, build lives in their communities and avoid the risk of homelessness."
What is the Renters’ Rights Bill?
The legislation intends to introduce a range of new requirements in the hope they will more comprehensively protect tenants in private rented homes.
It goes further than the previous Tory government's Renters' Reform Bill, which had said it would delay scrapping Section 21 notices.
This Bill would ban no-fault evictions and also prevents landlords from blocking tenants on benefits or with children.
It introduces fines for landlords of up to £7,000 if homes do not meet a “decent standard”.
Landlords would additionally only be able to raise rents once a year, and only to the “market rate”.
Rather than typical 12 month contracts, all new tenancies will be automatically converted to a periodic tenancy.
Tenants will still be able to end the agreement with two months' notice but landlords will require a legitimate reason for eviction.
Rental reform campaigners have, perhaps unsurprisingly, welcomed the reforms as they give tenants more security.
But analysis by LRG suggests the advance rent cap means landlords may get less security so could become more picky about who they rent to.
LRG asked landlords how likely they were to accept people on low income with or without several months’ advance rent. With additional advance rent, 41% are likely to accept a low-income tenant. However, without it, this figure falls to just 6%.
Allison Thompson, national lettings managing director at LRG, said the intention to make renting fairer is positive, but she warns that fairness must start at the application stage.
She said: “Our data shows that many tenants rely on rent in advance as a practical, proven solution. Four in ten landlords are open to this where it helps a reliable applicant secure a home. Capping advance rent could have the opposite effect to what’s intended, making the system less fair for those who already face barriers.”
LRG is urging Parliament to protect the option for landlords and tenants to agree a higher upfront payment where it’s the only route to securing a home.
Thompson added: “Negotiated advance payments, used with safeguards, are a bridge into housing, not a loophole.”
Landlord groups and some members of the House of Lords have also raised concerns about the end of fixed term tenancies, which supporters claim provides more certainty for property investors.
There are warnings that this could hit student accommodation, especially as there will be more requirements for serving an eviction notice.
There is an exemption in the legislation that allows landlords to regain possession of properties let to students in line with the academic calendar but only where the property is a house in multiple occupation (HMO) with three or more bedrooms.
The National Residential Landlords Association (NRLA) warns that this excludes many landlords with smaller student lets.
Ben Beadle, chief executive of the NRLA, said: “If landlords are not confident they can regain possession in time for the next academic year, many will stop letting to students altogether. The result will be fewer homes, higher competition, increased rents, and less choice for students.”
Estate agency trade body Propertymark has warned that more landlords could exit the sector due to the extra regulations, especially given that tenants can more easily end a contract with just two months’ notice.
Propertymark past president Greg Tsuman, said: “Because the Renters’ Rights Bill means that any tenant can leave a fixed-term tenancy with two months’ notice, this may give tenants more freedom of movement without any fees, but it will also increase landlords’ costs.
“This could then push more landlords out of the private rental sector because it is yet another cost they would need to consider, alongside how much rent they are going to charge. This could then lead to fewer properties for tenants to rent.”
Rather than helping tenants, the legislation could therefore actually mean rents rise due to a shortage of properties.
Lettings platform Goodlord adds that a ban on bidding wars in the legislation and new eviction rules could actually be detrimental for tenants.
Oli Sherlock, managing director of insurance for Goodlord, said: “The ban on bidding wars could unintentionally cause a rapid increase in average rent prices as soon as the new legislation comes into effect.
“With landlords forced to accept no more than the advertised rent, many will understandably be tempted to up their prices from the off.
“When it comes to Section 21, there is a real risk that removing this power from landlords may lead to more rental disputes going to court. This could see thousands more tenants receiving County Court Judgements for issues such as rent arrears – damaging their credit scores and potentially restricting their access to properties further down the line.”
New Zopa Bank Biscuit current account offers 7.1% regular saver – how tasty is it?
Brits could use ‘highly effective’ estate planning tool to cut inheritance bills by 10%
