Renters' Rights Bill – landlords have their [first] say

Introduction

The NRLA asked landlords in its recent consultation on their early views on the Renters Rights Bill. The NRLA launched the consultation in the week the government published the Bill. So, these views are very first “first impressions.”

The NRLA asked members in the consultation:

• Which specific element(s) of the Bill were causing the most concern.
• How they feel the Bill could impact across the private rental sector in its entirety. 

In the same survey, the NRLA also asked landlords:

1. What would be the range of responses to the Bill. 
2. Whether court reform could engender confidence in an RRB-based Private Rented Sector. 

Specific elements of concern

The NRLA asked landlords to “bucket” different components of the Bill into groups depending on the level of concern. Chart 1 shows those elements of the Bill generating most concern:

There are three key areas around which landlord concern is greatest:

1. Firstly, the changes in the rules for mandatory possession on the grounds of rent arrears.
2. Secondly, the loss of section 21.
3. Thirdly the fear of greater restrictions on a landlord’s ability to remove the property from the PRS. 

These three issues stand by some distance apart from others listed in Chart 1.

Areas of less concern

The NRLA also asked landlords to group the elements of the bill landlords felt they could live with. Top of this list (not graphed to avoid confusion) were the following:

• Ban on accepting rental bids above the initial asking price (abolition of “Bidding wars”)
• Creation of a landlord/property database
• Ombudsman service
• Application of Decent homes Standard

At least half of landlords polled placed these issues in the “not particular concerned” box.

A note on student possession grounds

Note that in the interest of full reporting - “Changes to student possession grounds” also appears in this second list BUT only because a relatively low proportion of landlords let in this market: For those who do this measure features highly in the “most concerned” box. 

Concerns about the future of the PRS

The consultation gathered data on the level of concern landlords had on their first sight of the bill. 

1. When asked directly, 76% of landlords stated they were “Concerned” or “Very concerned” compared to just 13% at the two lowest levels of “Not so concerned”.
   • A similar percentage of landlords (74%) also “Agreed” or “Agreed strongly that the Bill meant “an uncertain future” for the PRS 

There was an almost equal divide across the following groups:

1. landlords “most concerned” about the bill;
2. those “most concerned” about potential future tax rises; and
3. those who see these twins (regulatory change and tax change) equally as threats to their business. 

Some further observations:

1. Portfolio landlords were most concerned about the contents of the Bill
2. Those who have recently expanded their portfolios are much more likely to “shrug off” the RRB seeing it as “another thing” a landlord must get to grips with.
   • However, do not overstate this positive sentiment – this group of 'shrugging' landlords are still heavily outweighed (by a ratio of two-to-one) by those more pessimistic.
3. Finally, there is a clear correlation between those landlords with outright concern about the bill and those planning to sell or exit the sector.

Possible supply-side responses

On this last point, we asked all landlords how they may respond. The NRLA presented a range of response strategies to landlords. Chart 2 outlines the thoughts of landlords on each of these: 

The chart shows that:

1. Many landlords are considering either reducing their portfolios or quitting the sector altogether (68%).
   • Even if just some landlords carried through on this response, then the current shortage of housing experienced in many parts of England may well be set to get worse. 
2. Many landlords (60%) are also planning to tighten their approach to referencing and screening. 

These two options are by some distance the most preferred responses of landlords. Note that “do nothing – keep going” is an option only 7% of landlords are considering. There is also a low proportion of “unsure” responses as well. 

Irrespective of the actual path landlords will follow, there is no doubt landlords feel this Bill represents a "disruptive event" to the supply-side of the private rental market. 

Can court reform engender confidence?

NRLA’s previous research on possession reform has highlighted the same message from landlords: landlords indicate they can live with many proposed reforms, including the abolition of Section 21.

But this is only the case providing they have confidence that necessary court reforms are in place. Chart 3 shows that, landlords are consistent in expressing this view:

Chart 3 highlights the impact of court reforms on landlord confidence. When asked how confident they are that they would be continuing as a landlord, responses varied depending on whether court reform was in place or not. 

Without court reform, well over half (58%) had at least some doubts about carrying on as a landlord. With court reform in place however, this proportion falls dramatically – albeit over one third (37%) of landlords will still be doubtful of continuing. 

Summary

The Renters Reform Bill, once passed, is the biggest regulatory change to the PRS in England in almost 40 years. As with any disruptive event, shake-up and shake-out is inevitable.

What is also inevitable is that some landlords who responded to the consultation will leave the sector. Many independent landlords are reported as already selling up and exiting the market, further tightening supply. The question is, how many more will do so?