Can the Labour government fix the broken private rental market?

The Renters (Reform) Bill has the potential to radically improve the lives of tenants – but will it work? Sean O’Grady looks at the pros and cons of a landmark piece of legislation

The bill, when enacted, will mean major changes within the sector (PA)

The huge political row about cuts in eligibility for the pensioners’ winter fuel payment overshadowed another potentially even more far-reaching and radical reform proposed by the government – the Renters (Reform) Bill. For Labour, when it is enacted, it will represent another important manifesto pledge fulfilled, and will mean major changes in the private rental market.

The headline move is to outlaw “no fault” evictions, currently permitted under Section 21 of the Housing Act 1988, passed at the high noon of the Thatcher years of free-market-oriented deregulation. The minister for housing, Matthew Pennycook, says the aim is to “decisively level the playing field between landlords and tenants” and “drive out disreputable landlords from the sector”.

What else is in the bill?

In no particular order: the right to request to keep a pet in the property, which a landlord cannot “reasonably” refuse (but it will need insurance cover); rents set for a year at a time; no “bidding wars” when getting new tenants in; various set periods of notice for set conditions for a landlord to gain possession of the property; tenants to gain additional protection for complaining; an obligation on all owners to carry out safety and health inspections (including for black mould, under the so-called Awaab’s law); and an end to discrimination because a prospective occupier has children or is on benefits.

Landlords will still be able to evict tenants, but only if they have good reason, such as persistent rent arrears, antisocial behaviour, rioting, or the landlord has a genuine desire to sell the place.

Weren’t the Conservatives going to do this?

Yes. Theresa May, in one of her more progressive phases as prime minister, promised in 2019 to repeal Section 21 notices. A similar pledge was contained in the manifesto Boris Johnson fought on that year, while under Rishi Sunak, a bill was being pushed through parliament by Michael Gove when the general election was called earlier this year, and the Renters (Reform) Bill ran out of time. The main problem seems to have been a significant degree of resistance put up by Tory backbenchers who stood to be disadvantaged personally.

Do ‘good landlords have nothing to fear’?

That’s what the government says, but they will be faced with a more onerous way of making money from renting property, involving more hassle, more repairs and remediation, and, all in all, lower returns. Lower yields on rental properties, other things being equal, will mean a lower supply, a smaller sector, less choice, and higher rents; but on the other hand, the properties should be nicer and safer.

What could go wrong?

One immediate area of weakness is in the new regulatory structures and watchdogs – the Private Rented Sector Database, the Private Rented Sector Landlord Ombudsman, and the Decent Homes Standard. Hard-pressed councils will also have to police the law, by expanding civil penalties, introducing a package of investigatory powers, and bringing in a new requirement for local authorities to report on enforcement activity. The courts may also have more to do. All these measures will require resources.

In the longer term, of course, there will be more “gaming the system” and distortions built into what was a pretty free market. It’s hard to judge exactly how these will play out – perhaps it will be better for first-time buyers (including ex-renters), but worse for poorer renters relying on housing benefit.

Will the reforms work?

Insofar as they are only taking the rougher edges off the workings of a free market, they shouldn’t cause too much distortion. But, especially coupled with rumoured major changes to capital gains tax, inheritance tax, and maybe in the number of foreign students, the private rented sector will be in for some short-term turbulence at the very least.

Will bad landlords be a thing of the past?

No. Indeed, one problem, as ever with rent controls and the like, is that the existing informal black market for substandard accommodation, often exploiting vulnerable people such as undocumented migrants and the poor with no choice, will expand – resulting in more overcrowded, unregistered, uninsured and unregulated properties. Tracking down such abuses will take time and money, and the new agencies, the local authorities and the courts may find themselves fighting a losing battle with the rogue landlords.

Is it a vote winner?

Given that there are far more tenants than landlords, and the sector has been in crisis for some time, it did attract voters at the last election, and it should do in future. The Conservatives are in a weak position to complain, given the parlous state of the market and the fact that they promised, tried, and then failed to introduce any meaningful reforms of their own.

There is a significant vested interest among the landlord members of the Conservative Party, and a certain ideological zeal for small government and free markets, which will always impede reforms in this area.

In the end, the wider housing crisis will only be ameliorated by a substantial increase in the supply of homes, about which the government has high hopes...