Politicians, Conservative as well as Labour, have welcomed the Renters’ Rights Bill which will abolish ‘no fault’ section 21 evictions but also make all tenancies periodic, allow tenants to leave with two months’ notice at any time and restrict rent increases.
Unfortunately, this Bill when enacted is likely to have adverse consequences for tenants. Some will be worse off, and rents are likely to increase for many. Many landlords will suffer too.
Section 21 does not cause homelessness. In fact, its removal (and other provisions in the Renters’ Rights Bill) is likely to increase homelessness.
The claim that section 21 causes homelessness is an example of a post hoc, ergo propter hoc (or ‘after this, therefore because of this’) fallacy.
It may be true that many people who are homeless receive a section 21 notice. But they are homeless because there are too few affordable properties to rent.
If you think this is untrue, ask yourself: “Suppose a tenant has received a section 21 notice and has had to leave the property.
Will he or she be homeless if there are other affordable properties to rent in the vicinity?” The answer, obviously, is ‘no’.
Many unemployed people have been made redundant using a redundancy notice. Would you say that redundancy notices cause unemployment and the way to reduce unemployment is to forbid employers from serving them?
The causes of the housing shortage are varied and include too much net immigration, too few houses being built and, more recently, properties being withdrawn from the rental market by landlords.
Rents have increased as landlords respond to greater demand for each property. A plethora of laws and regulations in the last 10 years has certainly made life difficult for landlords.
Costs have increased and landlords face disproportionate fines for, in some cases, trivial mistakes.
But let us not forget that some tenants have been badly treated by landlords, including being evicted for complaining about disrepair, others because they will not pay a rent increase.
Neither the Government nor landlord groups appear to have considered an alternative that would give landlords pause before acting capriciously to evict a tenant.
Here’s one idea. With commercial tenancies that are protected under the Landlord and Tenant Act 1954, landlords have to pay “statutory compensation” where they want the property back and the only reason for terminating the tenancy is a non-fault reason.
Compensation could be linked to the monthly rent and the length of time the tenant had been in occupation. Perhaps one month’s rent if the tenancy was a year or less rising to say six months’ rent if a tenant had been there for 10 years.
Landlords are involuntary creditors. If a tenant does not pay the rent, the landlord has to continue to provide the service. Currently, a landlord can seek to evict a tenant if there are eight weeks of arrears.
The Bill will extend this to 13 weeks. That is seen by many landlords as bad enough. If a tenant owes three months’ rent it is unlikely that he or she will pay it back.
The bigger problem is the massive backlog of case in the courts. Already, it can take 12 months to get a court date in some parts of the country.
When Section 21 is abolished, delays will get worse as cases using Section 8 where grounds for eviction must be established take longer to deal with.
Because the risk of arrears is deliberately being increased, landlords are likely to react by taking out rent guarantee insurance and being even more choosy about which tenants they accept. Tenants who don’t pass referencing will not be given a chance.
The previous Labour Government introduced selective licensing in the Housing Act 2006 which gives Councils power to require landlords to be licensed and to comply with various obligations.
One of the main purposes originally was to deal with “low housing demand” and anti-social behavior (ASB). There is now very little of the former but a much greater amount of the latter than in 2006.
How are landlords to tackle ASB without section 21? Using section 8 of the Housing Act means giving the alleged perpetrator his or her day in court.
If landlords are supposed to take steps to deal with ASB they will have to advise the perpetrator the nature of the complaint and the identity of the complainant. Many victims won’t want it to be known that they have complained if their identity has to be disclosed.
A big problem is getting victims to give evidence against the person or persons who may have threatened them with physical violence or damage to their property or vehicle.
A provision in the Tories’ Renters’ Reform Bill that would change the test that conduct was “likely to cause” nuisance or annoyance to “capable of causing” has been dropped by Angela Rayner.
Victims of ASB will in future have to lump it or move home. Anti-social tenants may be emboldened when they realise that they cannot easily be evicted. The rights of the bully will trump those of the victimised neighbour, particularly if they live in an HMO.
Abolishing fixed terms will mean tenants cannot negotiate a rent reduction in exchange for taking longer tenancies. Landlords will also be less willing to make modifications to suit a particular tenant because the tenant could leave after two months.
At present, tenants receiving a section 21 notice may seek council housing from their local council. Councils generally will not re-home tenants who become ‘intentionally homeless’.
A tenant evicted under a section 21 notice ticks the right box. In future tenants evicted for arrears or other breaches of the tenancy will find the door closed.
If, as seems likely, more landlords register county Court judgments for rent arrears, some tenants will find their credit scores adversely affected and will be rejected for a tenancy by both private and social landlords.
Currently section 21 notices do not show up on credit reports and many landlords write off the arrears and are glad to get their property back from defaulting tenants.
Using section 8, more judgments will be registered, and more tenants will be adversely rated.
Councils spend a fortune on temporary accommodation for homeless tenants. It costs them substantially more than if the tenant rented direct from a landlord.
Perhaps the Treasury is subtly trying to ease the financial pressure on councils by reducing the number of eligible tenants.
This will disproportionately affect tenants on low or insecure incomes. Don’t tell the housing minister!
But if section 21 is so bad, was it always so? Those of us who remember the time before its introduction recall a stultified market and Rent Act protected tenants having limited scope to move house.
The Renters’ Rights Bill will undoubtedly pass but MPs should not be surprised when it makes matters worse for everyone.
Ian Narbeth is a Real Estate Consultant at city law firm DMH Stallard.
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