‘Dangerous’ market controls will backfire, warn landlords and letting agencies
Source - Daily Telegraph 11/09/24
The Government has said it will end fixed-term tenancies, get rid of no-fault evictions and ban bidding wars in a Renters’ Rights Bill presented to Westminster today.
But landlords and letting agents said the legislation could backfire, pushing up rents even faster than they would otherwise rise.
Chris Norris, policy director at the National Landlord Association [NRLA] property body, said landlords will have less financial security under the new bill. Rolling contracts raises the risk of tenants immediately serving notice to leave at the start of a tenancy.
He said this risk, paired with the prospect of long delays to secure an eviction through the courts if problem tenants refuse to leave, “could be worth 5pc to 10pc on rents”.
Rents across the UK have grown faster than earnings for the past three years. In the past 12 months, prices have risen 6.1pc on average, according to the Office for National Statistics. Property portal Zoopla now puts the average rent at £1,226. Most listings in central areas receive over 20 inquiries at least, according to Zoopla.
Timothy Douglas, policy director at Propertymark, said rolling tenancies pose a “huge change” for the private rented sector – and one that could be costly.
He added: “Fixed terms remove flexibility, and landlords will be looking at all their costs. The Government has also talked about banning bidding wars. Ultimately, you’re going to see much higher advertised rents if you do this.
“Negotiations would at least allow for lower rents as well as higher ones. The Government has got to understand the unintended consequences.”
Mr Douglas said tenants were often coming in to offer more because they like a property, and that it is not always landlords demanding more money.
The Government has said it will legally require landlords and letting agents to publish an “asking rent” for their property, and prevent them from asking for, encouraging, or accepting any bids above this price.
Sir Keir Starmer previously hinted at a ban on bidding wars during an election debate in May.
It is understood Labour is drawing from New Zealand, where landlords have not been able to encourage rental bidding since 2021. In New Zealand, however, renters can offer a higher rent if they want to.
In Labour’s bill, it says landlords “must not accept an offer from any person to pay an amount of rent under the proposed letting that exceeds the stated rent”.
Richard Donnell, executive director at property website Zoopla, questioned how a ban on bidding wars would be policed.
“How are we going to track this? Agents will just go for higher prices. It will create an inverse bidding war, where people bid up to the price set.”
Mr Donnell also said it was “dangerous” to introduce more controls in a market where supply has failed to grow in eight years.
He added: “That, and the risk in the Budget that people might be incentivised to sell. More focus needs to be on supply.
“Because ultimately, the people really being squeezed by all this are those who need social housing but are in the private rental sector due to a lack of supply.”
Over a quarter of private housing tenants – around one million – are in receipt of benefits, according to the Government’s English Housing Survey.
Kate Faulkner, chair of the government advisory body Home Buying & Selling Group, said this spillage of social tenants into the private sector was the country’s biggest problem.
“Governments have tried to squeeze the private market to meet social needs, but this has failed. There are over 170 laws already governing it.
“Tenants do the bidding wars because there aren’t enough properties. At least one million homes are being used to house people who should be in a social home. We need to focus on the housing waiting lists.
“Rents used to rise by 2pc a year. Then governments started interfering and rents started to rise faster and stock began to deplete. Regulating agents would have made far more difference.”
A government spokesman said: “There is a broad consensus that more needs to be done to level the playing field between landlords and tenants, and this is exactly what our proposed reforms will do.
“The majority of landlords already meet their responsibilities to tenants and have nothing to fear from these reforms.”
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