With the new Labour government firmly in place, the lettings industry should anticipate a significant amount of change over the course of this Parliament.
Daryl Tomlinson, Director, Xenia Lettings
Labour’s election manifesto contained several proposals for policies that may signal an era of increased regulation for the lettings industry.
The proposals included the abolition of Section 21 ‘no-fault’ evictions, driving up minimum home standards for the private-rented sector, and a Warm Homes Plan.
While in opposition, Labour also floated the idea of rent control measures to better protect tenants, with these plans potentially coming to the fore while the party is in government.
Impact on landlords
In the King’s Speech, Labour set out immediate plans to abolish Section 21 ‘no-fault’ evictions, which currently allow landlords in England and Wales to serve tenants notice of their intention to seek possession, giving a minimum of two months’ notice.
A proposed bill will aim to simplify the process by establishing periodic tenancies, which will only end if the tenant chooses to leave, or if the landlord has a valid reason, as defined by law through Section 8 grounds.
Section 8 grounds include the landlord wanting to sell the property, redevelopment or allowing a close family member to move in to rent the property, or if there has been a breach of contract or anti-social behaviour.
To provide tenants with even greater security, the introduction of a four-month notice period is also on Labour’s cards. The aim is to give tenants enough time to find suitable accommodation if there is reason for them to leave their property.
Labour also plans to scrap rent review clauses in tenancy agreements as a way to help stabilise spiralling rents. If this comes to fruition, landlords will only be able to increase rents once a year, in line with the market.
There will also be a drive to improve the energy efficiency and set a better minimum standard of accommodation in the private-rented sector via the Warm Homes Plan.
At present, the Decent Homes Standard only applies to the social rented sector. Under Labour, it would be extended to the private-rented sector. There is also a target to require all rented homes to reach a minimum EPC C within this Parliament, making it easier and cheaper for many tenants to heat their home.
This is a lot of change in a relatively short space of time, so landlords will need to navigate these new regulations carefully to ensure they remain compliant while managing their tenant relationships effectively.
What’s the likely market impact?
As with any significant policy shift, the lettings industry might experience a period of instability.
The introduction of new regulations could lead to an initial drop in investment as landlords and developers adjust to the new legislative landscape.
Uncertainty of this kind could result in short-term disruptions, resulting in fluctuating rental prices and a potential increase in void periods for properties.
Furthermore, the introduction of more stringent controls and higher taxes could discourage new investors from entering the rental market.
In turn, the reduction in investment may lead to a decreased supply of rental properties, exacerbating the existing housing shortage.
For example, it’s not improbable that current landlords may consider selling their properties to avoid the increased regulatory and tax burdens, further shrinking the rental market.
Labour needs to tread a fine line between improving tenant rights and the quality of rental properties in the UK, while encouraging landlords to continue investing in the burgeoning market.
Advice for landlords
In the lettings landscape under Labour, landlords must prioritise compliance, ensuring their properties meet the latest regulatory standards.
Investing in property maintenance and upgrades can help avoid penalties and attract reliable tenants. Additionally, landlords should prepare for potential tax changes by consulting with financial advisors to optimise their tax strategies and manage their portfolios effectively.
Broadly, the Labour government’s plans to overhaul tenant rights is a welcome move that should dissuade irresponsible landlords from the market.
However, the policies should be carefully thought-out and implemented to ensure that the private-rented sector remains attractive to responsible landlords, who comprise the vast majority of the industry.
Only time will tell if the level of policy reform planned under this new Labour government will be able to do just that.
