Labour’s Renters’ Rights Bill moves a step closer to law today as it passed its third and final reading in the Commons. From here, it will go to the Lords.
The bill is the biggest shakeup of private renting since Margaret Thatcher’s 1988 Housing Act deregulated the sector, removing rent controls and reassuring mortgage lenders that landlords could quickly and easily turf out tenants via Section 21 “no fault” evictions.
These changes, combined with the introduction of mainstream buy-to-let mortgages in the 90s, caused a private landlord boom that has reshaped Britain’s housing market.
As it became harder for first-time buyers to obtain mortgages following the financial crisis, the easy flow of buy-to-let lending coupled with fewer restrictions on landlords, saw the number of households living in privately rented homes rise from 2.7 million in 2007 to 4.5 million by 2017.
Today, more people are living in privately rented homes than in social housing.
Like the earlier Tory version of this bill, Labour’s reforms will ban “no-fault” evictions. Instead, landlords will have to use Section 8 evictions which are only allowed when a tenant is in significant rent arrears or has been reported for serious anti-social behaviour.
However, Labour will boldly go even further than previous Housing Secretary and so-called reformer-in-chief Michael Gove.
Under the stewardship of Deputy Prime Minister Angela Rayner and Housing Minister Matthew Pennycook, the Renters’ Rights Bill will also cap the amount of rent upfront that landlords can ask for at one month, as The i Paper reported exclusively last week.
Labour will also introduce soft regulation of private rents by giving tenants new powers to challenge “unreasonable” rent increases.
Once law, the Renters’ Rights Bill will mean that landlords will be able to increase rents once a year to the market rate – the price that would be achieved if the property was newly advertised to let. To do this, they will need to serve a simple “section 13” notice, setting out the new rent and giving at least two months’ notice of it taking effect.
If a tenant believes the proposed rent increase exceeds the market rate, they can then challenge this at the first-tier Tribunal, which will determine what the market rent should be.
By the time the Tories left power, there was consensus between the centre and the left that Britain’s housing crisis was out of control. That’s why, broadly, the Tories’ Renters’ Reform Bill and Labour’s Renters’ Rights Bill look similar.
Even as long ago as 2015, then-Tory Chancellor George Osborne knew that incentivising landlordism was putting the brakes on homeownership and inflating house prices. That’s why he introduced Section 24 of the Finance (No 2) Act, which restricted tax relief on mortgage interest for buy-to-let landlords.
According to the latest English Housing Survey, most private landlords own between one and four homes.
If Margaret Thatcher’s 1988 Housing Act created the small-scale amateur private landlord and made investing in one or two rental homes possible for greater numbers of people, Osborne was accused of “killing off the buy-to-let dream”.
Labour’s reforms may just become the nail in its coffin. When combined with Rachel Reeves’s changes to Stamp Duty for people buying additional properties, the Renters’ Rights Bill will disincentivise small-time landlords by making it more expensive to get into and less easy to make a quick buck from.
In the long run, this could be good news for first-time buyers and private renters alike because it will make it more difficult for people who already own their own homes to buy up additional homes as investments. That could mean that more housing is available for first-time buyers.
Labour’s reforms are an opportunity to rebalance Britain’s housing market and make it more secure for renters.
However, Reeves, Rayner and Pennycook need to make sure they keep talking to each other. A shortage of privately rented homes could spell disaster at a time when there isn’t enough social housing to go around for low-income families – which is why so many have ended up relying on private landlords in the first place.
The Renters’ Rights Bill must work alongside an increased supply of social housing for those who need it. Indeed, it must also work alongside measures that get mortgage credit to would-be first-time buyers who are currently caught in the rent trap and struggling to save deposits even though they earn enough to repay a mortgage.
These twin issues should be at the top of Reeves’s to-do list if she wants to promote growth and make sure the 1.5 million new homes promised by the Government actually get built.
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