Controversy surrounds the Renters’ Rights Bill currently being debated in the House of Lords, with some peers voicing fears its negative impact on landlords will cause them to leave the sector.
The legislation is the Labour government’s answer to the Conservatives’ Renters Reform Bill, which was shelved in May 2024, ahead of the General Election, and never became law.
© Vitalii Vodolazskyi / Shutterstock
A shake-up of the private rental sector began when the previous government’s reforms were introduced to Parliament in May 2023. However, in October 2023, during the Bill’s second reading, ministers decided further amendments were needed before abolishing Section 21 “no fault” evictions.
The Conservatives’ proposed review of the courts system to accommodate the Bill led to criticisms from charity Shelter, who argued that more tenants could be left homeless if the legislation was delayed. As a result, the Labour government has pledged to introduce its new Rental Rights Bill as soon as possible.
Lords’ primary concerns
Following the new Bill’s passage through the House of Commons, it made its way to the Lords for its second reading, where fierce debate ensued. The Labour Party has placed great emphasis on improving renters’ situations – and as a result aims to progress the legislation through Parliament as quickly as possible.
However, the Lords’ main concern is that this comes at the expense of landlords’ wellbeing. Fears have been raised that if the Bill makes an already challenging economic climate untenable, more landlords might sell up and leave.
The government’s apparent “fast-track” approach came under fire from Baroness Scott of Bybrook, Conservative shadow housing minister, who said the reforms’ potentially negative consequences weren’t being addressed.
She felt the Renters’ Rights Bill had removed many landlord safeguards present in the original legislation, while it also increased the potential losses incurred if tenants didn’t pay their rent by extending the mandatory eviction threshold for arrears from two to three months.
In addition, the time limit for landlords to consider the “significant issue” of permitting a pet in their property is being shortened, while Labour has also been accused of “rushing” the implementation of Awaab’s Law from social housing into the private sector.
The law is named after two-year-old Awaab Ishak, who tragically died of a respiratory illness on 21st December 2020 as a result of exposure to damp and mould in his Rochdale home. It requires social housing landlords, such as local councils and housing associations, to fix health hazards within tight timeframes. However, Baroness Scott felt more thought needed to go into applying the legislation to private housing in relation to smaller landlords.
Financial implications
Some peers felt the Bill could also negatively impact tenants due to restricting the payment of rent in advance to one month. Although aimed at preventing discrimination and reducing pressure on poorer tenants, it may make landlords less likely to take a risk on them.
Critics fear this will affect the student rental market in particular, including those from overseas, who make up around one-quarter of Britain’s total student population. The proposed new rule wouldn’t apply to purpose-built student accommodation such as halls of residence, so would discriminate against private landlords.
The abolition of fixed term shorthold tenancies may allow student renters to stay in their accommodation after the end of their university course. Landlords who have bought a property and installed student accommodation furniture for this particular demographic may have no suitable grounds to possess the property unless the renters breach their tenancy agreement. This means existing tenants could move out midway through term, when most students are already settled in, leaving the property empty for longer periods.
In addition, restrictions may be placed on who can be a guarantor for tenants, such as references, credit checks and certain income requirements. Guarantors may have to earn three times as much as the tenants’ annual rent and landlords may be empowered to check with employers to verify their earnings.
Other amendments include the requirement for landlords to compensate tenants in certain circumstances if they need to repossess their property, such as when the tenant has made significant improvements – even if the landlord has no choice other than to take the property back – adding an extra financial burden at a difficult time.
Lord Cromwell, Lord Best and Baroness Thornhill echoed Baroness Scott’s concerns amid fears unfavourable market conditions could lead to a “landlord exodus” from the private sector. This could reduce tenants’ access to affordable housing and potentially increase homelessness, despite Labour’s intention being exactly the opposite.
Labour had already faced similar criticism during the Commons readings, but the Bill eventually passed through to the Lords after various amendments. Now it appears to be facing a similar rocky ride through the Lords.
Potential benefits for tenants
Despite the Bill having critics, supporters say it will benefit tenants by providing greater stability, particularly with the abolition of Section 21 evictions. Labour has steadfastly defended the reforms, led by Labour housing minister Baroness Taylor of Stevenage.
Responding to concerns about abolishing fixed-term tenancies and no fault evictions, she said providing “security of tenure” was a “core principle” of the Bill, with the new legislation offering the best structure for tenants. Labour believes fixed terms oblige tenants to pay rent regardless of the condition of the property and restrict their freedom to move out when they need to.
All private existing tenancies would be covered by the new system immediately to avoid what Labour describes as a “confusing two-tier system”. The Renters’ Rights Bill would apply across the whole of England, with parts of the legislation covering Wales too.
Landlords in Scotland could face their own challenges with the Housing (Scotland) Bill due for consultation in the Spring. Aimed at protecting tenants and preventing homelessness, the Bill was introduced in March 2024. If approved, it would empower Scottish MPs to place limits on rent increases and introduce rent control areas.
Currently, the new laws don’t cover the private rental sector in Northern Ireland, where some changes were implemented already on 30th May 2024, under the Private Tenancies Act 2022, including new standards for smoke and carbon monoxide alarms and improvements to the tenancy deposit scheme.