A regular monthly survey of members conducted by the agents’ professional association, the Association of Residential Letting Agents (ARLA), shows that Labour’s proposals to introduce 3-year tenancies and cap rents will cause landlords to exit the market and reduce the supply of rentals.
They say that three quarters of letting agents are very concerned about Labour’s commitment to the introduction of compulsory three-year tenancies included in the Labour Party manifesto.
Around 72 per cent of ARLA letting agents who took part in the survey said three-year tenancies, with a cap on rents, will cause landlords to pull out of the market. They also think the move will result in an even greater shortage of suitable rental properties.
The survey indicated that the most likely areas to lose landlords leading to a decrease in the supply of rental property would be in the North West and East Midlands where around 84 per cent of agents in these parts expressing their concerns.
Seventy four percent of respondents believe Labour’s “triple whammy” of three year-tenancy agreements, rent controls and stricter rules to make it more difficult to evict tenants will, in the end, work against tenants’ interests.
Conversely, ARLA agents agree that new starter homes offered at a discount to first time buyers, a Conservative Party pledge, would be best option for the private rented sector. This would help those currently renting to get on the housing ladder, they say, freeing up more homes for would-be renters, helping to ease supply shortage and bring down rent levels through market competition.
David Cox, managing director of ARLA commented:
“The third ARLA Private Rental Sector Report identifies what those at the heart of the sector are most concerned with – and excited by – in regard to the upcoming General Election. A vast majority of ARLA letting agents are worried that Labour’s proposed three year tenancies with strict caps on rents will only cause the gap between supply and demand to widen. Flexible tenancies are what makes the sector work, if this changes, some landlords will be forced to exit the market and tenants are likely to automatically incur rent hikes and feel driven to stay in agreements for longer before getting on the housing ladder; thus not freeing up rental properties for other tenants.
“The proposals are aimed at reducing opportunities for landlords to raise rents and to create stability for tenants, as Ed Miliband outlined yesterday. However, Labour’s proposals aren’t necessarily the solution. If you put a cap on rent increases above inflation, tenants are likely to experience automatic annual hikes. Whereas, in reality, landlords appreciate good tenants and would avoid raising rents to retain them. Our March report shows that the average time tenants stayed in a property is 17 months and a third (31%) of agents reported that they had successfully negotiated a rent reduction for tenants. So, if this law comes into play, instead of tenants getting a potential reduction, they may be more vulnerable to automatic increases.
“It will be interesting to see what happens on May 7th. We need more homes and while house prices are still sky high with no signs of these dropping any time soon; getting onto the property ladder is a difficult feat. Therefore, renting a property is the only option for many. However, we are concerned that current government policy on housing cannot deliver what is required.”
ARLA “Private Rented Sector Report” March 2015 – read the full report and survey here