The Case FOR the RENTERS’ RIGHTS ACT

Transcript

 Hi, I’m Ruban Selvanayagam from Property Solvers.

The Renters’ Rights Act has become one of the most debated pieces of housing legislation we’ve seen in years.

Depending on who you ask, it’s either a necessary reform that finally rebalances the relationship between landlords and tenants, or it’s another example of policymakers making life more difficult for landlords who are already facing increasing regulation, taxation and compliance requirements.

In this video, I want to take a slightly different approach.

Rather than focusing solely on the negatives, I want to explore whether there is actually a case for the Renters’ Rights Act from a broader market perspective.

Let’s get into it…

Now, before I go any further, let me make something absolutely clear. 

I’m under no illusion about the range of challenges this legislation creates.

My business partner James Durr and I have been landlords for over two decades and we’ve seen plenty of top down intervention during that time.

We’ve also experienced first-hand the realities of rent arrears, anti-social behaviour, property damage and difficult possession cases.

And let’s be honest – the court system is already under enormous pressure.

Many landlords are understandably concerned about the removal of Section 21 when possession claims can already take months to work their way through the courts.

Those concerns are entirely legitimate.

In fact, if the court system isn’t properly resourced and improved, some of those concerns may well prove justified.

So this isn’t a video arguing that the Renters’ Rights Act is perfect.  Far from it.

What I’m suggesting is that despite the obvious downsides, there may be some longer-term benefits that aren’t being discussed enough.

The first potential benefit is the continued professionalisation of the private rented sector.

For decades, the UK’s rental market has been a mixture of accidental landlords, those who inherited properties or struggled to sell who then decided to rent them out, part-time investors and portfolio owners who scaled when interest rates were much lower than they are today.

Increasing regulation inevitably favours those who approach property as a genuine business.

Now whether that’s a good thing or a bad thing will depend on your perspective.

But over time, it could result in better managed properties, more consistent standards and a more professional rental sector overall.

Supporters would also argue that tighter regulation helps filter out rogue landlords. Broadly speaking, I’d agree with that objective, provided responsible landlords aren’t caught in the crossfire. 

The second potential benefit is a stronger and more sustainable rental market.

Many landlords have already faced substantial pressure from higher interest rates, Section 24 mortgage interest restrictions which is essentially a tax on revenue for personally owned properties, licensing schemes, compliance requirements, EPC proposals and rising maintenance costs.

The Renters’ Rights Act may simply accelerate trends that were already underway.

We may see fewer highly leveraged landlords operating on very thin margins and more emphasis placed on long-term ownership, stronger balance sheets and sensible contingency planning.

Now, that’s not necessarily good news for everyone – including the tenants this legislation is intended to protect. A fair and common-sense argument is that if enough landlords leave the sector, rental supply could tighten further. And when demand remains strong but supply falls, the natural consequence is often upward pressure on rents. 

Some would argue that this could eventually increase political pressure for some form of rent control or rent stabilisation measures.

Personally, whilst obviously I’m going to bias as a landlord myself, but I think that would be a huge mistake. Looking at examples from elsewhere in the world, rent controls have often resulted in significantly negative knock on effects, including reduced investment, even lower supply and deterioration in housing quality.

Indeed, one thing that landlord bashers often fail to appreciate is that providing rental housing is neither risk-free nor inexpensive. But I think this is going to be one of those “let’s wait and see” issues.

So assuming rent controls are avoided, a smaller and more professional private rented sector could potentially support stronger rental growth, better-managed housing stock and a healthier long-term investment environment.

Related to this, another area worth considering is institutional investment.

Large investment and pension funds have been increasing their exposure to residential property or build to rent for years.

While many smaller private landlords understandably see regulation as an additional burden, these larger operators often prefer regulatory certainty because it allows them to make long-term investment decisions.

The result could be further investment into professionally managed rental housing, purpose-built rental communities and larger-scale residential developments.

And whether people welcome that shift or not, it’s already happening.

The next point is tenant stability.  One of the core objectives of the legislation is to provide greater security for renters.

Now, landlords will naturally focus on the risks associated with that.  But from a societal perspective, there are potential benefits too.

People are often more willing to put down roots, engage with their local community, maybe look after the properties better and make longer-term decisions when they feel secure in their housing situation.

Of course, all this is difficult to quantify, but it’s one of the broader arguments supporters of the legislation make.

Perhaps the most obvious market impact, however, is what happens when landlords decide to sell.  There’s little doubt that a notable amount of landlords are exiting the sector.

We’re already seeing it. The question is where those properties go next.

In many cases, they end up being purchased by owner-occupiers and first-time buyers. In fact, many of the personally owned properties that James and I have sold over the years have ultimately gone to exactly these types of buyers.

Now I’m not suggesting this suddenly solves Britain’s housing shortage. Nor am I suggesting that house prices are about to collapse.

But if additional affordable housing stock becomes available to owner-occupiers in addition to the more professional landlords, that may not necessarily be a bad thing.

For a government that has repeatedly stated its desire to increase home ownership, that’s likely to be viewed as a positive outcome.

And perhaps that’s the key point.

The challenge with housing policy is that it’s rarely possible to optimise outcomes for everyone at the same time.

The Renters’ Rights Act is ultimately an attempt to balance the interests of tenants, landlords, first-time buyers and the wider housing market.

Whether it succeeds remains to be seen. Personally, I remain somewhat sceptical. And I think there will almost certainly be unintended consequences along the way.

But I also think it’s important to recognise that not every consequence is necessarily negative.

The legislation could contribute to a more professional rental sector and quite possibly create more opportunities for owner-occupiers. 

It may also reshape the housing market in ways that are more nuanced than either supporters or critics currently expect. 

As is often the case in property, the truth probably lies somewhere between the two extremes.

I’d be interested to hear your views in the comments.

A big thanks for watching. If you found this useful, please like the video and subscribe to the channel for more practical, evidence-based property insights.

See you in the next one.