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Proposed government rental reforms will lead to imbalances and anguish – Cox

by: Steve Cox, chief commercial officer at Fleet Mortgages
  • 01/07/2022
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Proposed government rental reforms will lead to imbalances and anguish – Cox
June has been a month where the very future of the private rental sector (PRS) has been up for debate, and where – if the measures announced in the recent ‘Rental Reform White Paper’ secure passage into law – we will see a move towards some significant changes that will undoubtedly shift our sector decisively.

There is a lot to unpack in these measures, some of it good – for example, who could argue that tenants shouldn’t be housed in ‘decent homes’. But some of it which puts a further burden on landlords, over a period when the burden has become far greater than it has ever been and where the costs of being a landlord are only going one way. Up. 

‘Bad’ landlords 

For a start, the paper talks about ‘redressing the balance’ between landlords and tenants which reminds me of the ‘two legs bad/four legs good’ approach of the animals in George Orwell’s Animal Farm.  

Here it appears that landlords are still the ‘bad guys’ who don’t really deserve to own these properties, and if we – the government – can continue to raise their costs, to make it more difficult for them to gain back their properties, to make a profit on an investment, etc, then more properties will flow from the PRS into owner-occupation. 

Of course, this is a fabulous misreading of the needs of the UK housing market and the key role that the PRS plays in housing 4.4 million tenants. For those who might fail to understand, 4.4 million people will not be in a position to buy a home just because the government thinks this is a zero-sum game where landlords have been holding back millions of first-time buyers. 

Michael Gove talks about tenants at the mercy of ‘unscrupulous landlords’ yet the paper explicitly says that the majority of tenants enjoying safe and secure rentals. It can’t be both, so which is it? 

High satisfaction 

The government’s own work into private rental tenants, groups them into six demographics: Comfortable Renters (44 per cent); Low Income Savers (16 per cent); Families Getting By (17 per cent); Older Renters (three per cent); Vulnerable Singles (10 per cent); and Struggling Families (11 per cent).  

Read into this research and you’ll see the majority of tenants do not struggle to pay their rent, again with most happy in the PRS, feeling that they have an opportunity to purchase if they wish to in the future, and are generally satisfied with their current accommodation.  

There is cause for concern for those who are not housed in good homes, and clearly action to be taken against the small minority of landlords who take advantage of these people, but the majority appear to be in a decent space. I find it therefore hard to understand a set of policies that seeks to ensure greater under-supply of PRS properties, when demand is actually rising, which is likely to translate into higher rates at a time when the cost of living is increasing. 

The need for rental homes 

We’ve heard a lot about economic self-harm in the last few years, but – and this is worth reiterating – you don’t shift ‘Generation Rent into Generation Buy’ by removing a supply of property that Generation Rent rely upon, while they work/save their way to becoming owners. It is crazy to do this and again, will only result in higher rents based on lower supply. 

As mentioned, anyone who works in this sector is all for decent homes, for ensuring tenants’ rights are maintained, and ensuring they have as much security and certainty of tenure as they need. But it should surely work both ways?  

Here, tenants appear to be able to leave tenancies at the drop of a hat, not being liable for rent not paid, but landlords have to jump through hoops to secure a property back, even with a sound reason. 

Again, the scales are severely weighted on one side, and this is only going to produce a further unbalanced market. As we move further into 2022, we should prepare ourselves for much anguish about rents rising, but when you have an imbalance of supply and demand, and you pursue policies which only exacerbate this, then you’re likely to get price increases.  

The phrase, reap what you sow, somehow comes to mind. 

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