There is often a tendency to assume that things are going to remain the way that they are. Even if the laws which regulate it change.
I can remember, a couple of years ago, talking to a law professor about the time when the Housing Act 1988 first came in.
At that time, the ‘default’ tenancy type was the assured tenancy, which was very similar to the protected tenancy which preceded it under the Rent Act 1977.
He told me that they all assumed that this (ie the assured tenancy) was going to be the main tenancy type and that the new ‘shorthold’ tenancy would be the occasional exception.
How wrong they were!
As we now know, landlords avoid assured tenancies like the plague and are only interested in shorthold tenancies, where they are guaranteed the return of their property.
Then and now
At that time, the private rented sector was very small. The result, largely, of tenant-friendly legislation which put tenants rights above landlords.
The regulation started during the first world war (to protect homes for workers needed for the war effort) – at which time some 80% of households lived in rented accommodation.
However after that time, and particularly after the tenant-friendly legislation of the 1960’s and 1970’s (culminating in the 1977 Rent Act, which one of my landlord clients once described to me as ‘expropriation without compensation’), the private rental sector reduced dramatically.
No-one wants to invest in property if you can’t charge a market rent, or evict your tenants if they turn out to be unsatisfactory.
As it is now
The reason we have a buoyant buy to let market and private rented sector today is because the Housing Act 1988 made it more attractive to investors.
True, there are a lot of problems and not a few bad landlords who behave appallingly. However the vast majority of landlords are fairly decent and look after their properties well. The biggest problems we have stem from a lack of available housing, not a preponderance of poor landlords.
However, as pointed out by Mary Latham in her excellent post on Property Tribes recently, things do not always stay the same.
Most people invest in property because it gives a good income and if there are problems, it is reasonably easy for them to recover vacant possession of the property and sell up. So they feel safe.
The changes coming
- The chancellor plans on taking away many of the tax advantages associated with buy to let meaning that in three years time it will be considerably less profitable
- Recent legal changes are making it considerably harder for landlords to use the section 21 ‘no fault’ ground for possession
- New regulations are being introduced, and stiffer penalties. For example the new Immigration Bill is planning on bringing in custodial sentences for landlords who breach the right to rent check regulations.
What long term effect is that going to have, do you think? Is it going to encourage investors to invest in buy to rent property, or scare existing landlords into selling up while they still can?
So where are we going?
The fact that we have a buoyant buy to let sector just now does not mean it is going to remain that way. People tend to act in the way that promotes their best interests. So, as Mary Latham has predicted, there is a strong likelihood that the private rented sector could shrink considerably over the next few years.
Is that what we want? Because there has been no debate about it.
Indeed many landlords voted for the Tories because they thought they would best serve their interests. Maybe they are regretting it now.
Landlords selling up and a shrinking private rented sector is not going to help tenants either. There will be fewer homes for them to rent. And probably higher prices.
Nobody knows for sure what is going to happen in the future and there are always surprises. However, I think that it would be foolish to assume that the status quo will continue.
Social changes come about slowly and it will be a while before we see the real effect of the legal changes that are being made.
They may not be what you think or want.