If you read about business, you will probably read that what is really needed for business to thrive is certainty.
After all if you are going to invest money into something, anything, you need to be sure that it will be a good investment. Or be aware of what the risks are so you can assess them and decide if they are a ‘deal breaker’ or not.
Landlords are no different from any other business (other than the fact that they are taxed differently – but that’s another story!).
Up until now
For the past 35 years or so, landlords have had certainty. Certainty that if their tenants fail to pay the rent, exhibit anti-social behaviour or damage the property, they will be able to evict them within a reasonable amount of time.
They also know that the rules allow them to charge a market rent. So they know where they stand and can plan for the future.
Change is necessary but …
We all know that the Section 21 no-fault eviction regime is causing major issues and ultimately has to go. However, the manner of its departure is causing major problems.
The abolition of section 21 was first announced in 2019 (I wrote a series of posts about it at that time), but that was FIVE YEARS ago!
Five years is a long time for businesses to have uncertainty about the legal regime that is going to regulate their business.
The current delays
We now have a draft bill, the Renters Reform Bill, which is working its way through Parliament. But there is still uncertainty as we cannot be sure it will become law before a General Election is called. Something which must happen before January 2025.
Due to the delays that have taken place with the progress of this bill, losing it due to a general election is a real possibility. And although we can make guesses about Labour’s plans for the Private Rented Sector, no one knows for sure what their plans are.
Other than the abolition of section 21 as soon as possible.
So this has caused the following problems:
- Landlords, panicked by their uncertain future, are evicting tenants while they still can and selling up in increasing numbers. Reducing the properties available in the private rented sector.
- A reluctance for investors to purchase or build properties for rent due to the general uncertainty.
The other big problem is the massive drop in social housing since the 1990’s due to the Council house sell-off under the right to buy. And the inability and lack of incentive for Councils to build replacement social homes. Making it very difficult for them to comply with their statutory rehousing duties.
The problem this will cause government
No government wants a housing crisis with hard-working families unable to find affordable homes. However, this is what is happening right now.
Unless the uncertainty is ended it is only going to get worse. And this will limit the scope for government to crack down on the private rented sector – as they will need the existing private rented sector homes badly.
No doubt a Labour government will want to regulate the private rented sector more strictly than is done at present.
But they will need to be very careful how they do this. If they scare off the remaining landlords in the sector, we will have a very big problem indeed.
So maybe there is less for landlords to fear than they think.
It’s not the uncertainty causing landlords to sell up, it is the (near) certainty that section 21 is going so they are acting entirely predictably.
They aren’t suddenly panicking, just slowly exiting the market. Due to the illiquidity of property this will take years to play out.
Contrary to the propaganda, landlords don’t evict decent tenants on a whim.