Renters Rights Bill: Will the new "rights" cost renters much more money?

The renter's rights bill had its final reading in the House of Commons last week. The bill has now passed onto the House of Lords with its first reading complete and second reading scheduled on Tuesday, 4th February. The bill will, in all certainty, gain Royal Assent by this summer. This means there are some significant changes to navigate if you are a landlord or, as the National Residents Landlords Association (NRLA) puts it, the most significant change to the private rental sector in over 30 years. 

The reality of the bill is that it has been coming for a long time, and most responsible landlords would have started to get their ducks in a row a long time ago. However, the Labour Party has gone much further than the previous iteration of the bill under the conservatives, which they named the "Renters Reform Bill". Here are some of the changes that the renter's rights bill brings.  

New Renters Rights Bill: The key changes explained

Abolition of Section 21 'No-Fault' Evictions: Landlords can no longer evict tenants without providing a valid reason. Instead, they must use Section 8 grounds, which require specific reasons such as rent arrears or breach of tenancy terms. 

Introduction of Periodic Assured Tenancies: Fixed-term tenancies are replaced with periodic assured tenancies, offering tenants more flexibility and security. 

Limitation on Rent Increases: Rent increases are limited to once yearly, with landlords requiring proper notice. Tenants have the right to challenge increases they believe are above the market rate, which a tribunal can assess. 

Ban on Rental Bidding: The practice of 'rental bidding,' where tenants compete by offering higher rents, is prohibited to prevent unfair rent hikes. 

Right to Request Pets: Tenants can request permission to keep pets, and landlords cannot unreasonably refuse such requests. 

Establishment of a Private Rented Sector Ombudsman: A new ombudsman service will be introduced to resolve disputes between landlords and tenants, providing an alternative to court proceedings. 

Introduction of a Decent Homes Standard: All rental properties must meet specific safety and habitability requirements, ensuring better living conditions for tenants. 

Prohibition of Discrimination: Landlords are prohibited from discriminating against tenants who receive benefits or have children when letting their property. 

Rent Advance Ban: The new Renters' Rights Bill prohibits landlords from requiring more than a month’s rent in advances.

So then, should the landlords fear the bill and the newfound rights of their tenants? Not quite. The new renter's rights bill may tip some balance of power to the tenants. Still, contrary to most media reports, most landlords enjoy a positive relationship with their tenants. 

According to the English Housing Survey 2022-23, 82% of private renters reported being satisfied with their accommodation, and 76% of private renters reported being satisfied with the service provided by their landlord. The most common reason for ending a tenancy is due to the desire of the renters to move, with 91% of all tenants within the private rental sector ending tenancies willingly. 

This is not to say that the Private Rental Sector does not need reform and is perfect. Still, governments will be better off targeting reforms to areas likely to improve things for tenants in a way that seeds out rogue landlords, improves supply and stabilises rents. For instance, the introduction of decent home standards in the bill is a positive change; the government can do more to limit rent increases for tenants. By this, I do not mean rent caps. I mean getting rid of unnecessary regulations and introducing a fair tax system by abolishing section 24 and reversing the recently introduced 5% Stamp Duty surcharge on second homes; this will allow more flow of investment into the sector, giving renters more choice and stabilising rents. 

Before the introduction of section 24, the private rental sector between 2010 and 2016 grew by 3.7% annually. From 2017 to 2023, the private rental sector only grew by 0.4%, resulting in a loss of 1.2 million extra homes to rent. 

The average rental inflation between 2006 and 2020, before section 24 came into full effect, was 1.9%, according to figures obtained from ONS (Office for National Statistics)

The bill does nothing to address the shortage of supply of rental homes, and until we address that, we have a scenario where 21 people are chasing each available property to rent, leaving them with little choice, and where too many people are chasing too few properties available to rent, resulting in higher rental inflation.   

Until we achieve meaningful and targeted reform within the private rental sector, the changes introduced in the renters' rights bill will likely make renting more expensive. Increased regulations and taxes will lead to higher costs, which landlords will inevitably pass on to renters.

As Ronald Reagan, the 40th President of the United States, famously said: "Businesses don't pay taxes; only people pay taxes." Landlords are already facing high taxation, making it challenging to remain in the market. This bill is expected to raise operational costs for landlords, which will either be passed down to tenants or force landlords to exit the market entirely, worsening the situation for renters.

We currently have too few properties available to meet the needs of too many people, while high operational costs and taxes drive out landlords. As a result, renting is becoming more expensive for those who wish to rent. The renters' rights bill changes will do little to help the average renter; instead, they will likely lead to higher prices and limited choices.