Overview
London is home to an estimated 2.7 million private renters. Privately rented properties now account for 30% of homes in the capital, much higher than the national average of just over 20%. A lack of affordable housing means that many Londoners are either denied a path to home ownership or a secure tenancy in social housing. As a result, having access to a safe, secure, and affordable private rental property is vital for many Londoners.
The Renters (Reform) Bill will:
- Abolish Section 21 ‘no fault’ evictions and replace assured shorthold tenancies with periodic assured tenancies.
- Introduce a wider range of possession grounds and make it easier for private landlords to repossess properties in cases of anti-social behaviour, rent arrears and other issues.
- Introduce an independent rent tribunal for tenants to appeal excessively above-market rents.
- Create a Private Rented Sector Ombudsman, which will be mandatory for private landlords to join and an accompanying Privately Rented Property Portal, which aims to help landlords understand their legal obligations and demonstrate compliance.
London Councils welcomes the above measures included in the Renters (Reform) Bill and supports the government’s aim to deliver a fairer, more secure, and better quality private rented sector. However, in the context of London’s severe housing crisis, growing homelessness pressures and the lack of available private rental properties, there are several areas of concern, as well as fundamental issues with the private rented sector, which remain unaddressed by the Bill.
London Councils’ views on the Bill
- We strongly support the abolition of Section 21 ‘no fault’ evictions, the use of which is a major contributing factor to homelessness in the capital. London Councils estimates that there are now 170,000 Londoners living in temporary accommodation organised by their borough, equivalent to approximately 1 in 50 Londoners including 1 in 23 children. However, we are concerned that the new grounds for possession have the potential to recreate Section 21 by the backdoor. We propose that notice periods should be increased to six months to give tenants stability and sufficient time to prevent them becoming homeless.
- The Bill does not do enough to address the root causes of homelessness or support private renters who are already struggling to pay their rent, alongside other cost-of-living pressures. To address this, London Councils believes Local Housing Allowance should urgently be increased to cover at least 30% of local market rents.
- The Bill places significant new regulatory and enforcement responsibilities on councils without additional funding to meet these responsibilities. To ensure councils can effectively exercise these new responsibilities the government must carry out a full new burdens assessment and provide them with the necessary additional funding.
- The Bill has been introduced in the context of reduced availability of privately rented properties in London, which is further driving London’s homelessness crisis (see below), and research has identified that the Bill may be a contributing factor. To prevent this situation from worsening, the Bill must be implemented as part of an overall package which doesn't lead to an even greater reduction in the availability of properties. Th government should develop a long-term private rented sector strategy alongside the Bill, which supports the provision of sufficient good quality, private rented sector homes to meet demand.
- In light of the above issues the government should conduct an urgent cross-departmental review into the supply of privately rented properties. This should include an assessment of the collective impact of all relevant government policies, including the Bill and key economic factors, such as the maturation of the buy to let market.
London’s private rented sector crisis
London is in the midst of a severe housing affordability crisis, driven by several factors including an unprecedented reduction in the availability of private rented properties, alongside a rapid increase in rents. Not only does this shift represents a significant challenge for London which the Bill doesn't address, but the new legislation may be a contributing factor to reduction in supply. In order to mitigate this impact and bolster falling supply, particularly of properties affordable to low-income households, the government should consider introducing fiscal incentives for landlords through the Bill.
Research commissioned by London Councils and partners, undertaken by Savills and the London School of Economics, found that:
- Rental listings have fallen across London. The number of 1-4 bed properties available for private rent is down by 41 per cent on the 2017-19 average. This compares to a 33 per cent fall in new lettings nationally.
- In February 2023 asking rents were close to 20 per cent higher than they were at the start of the first Covid-19 lockdown in March 2020. The weakness in new supply coming to the market indicates that further rental growth is likely.
- Between January 2023 and March 2023, only 2.3 per cent of London listings on Rightmove were affordable within Local Housing Allowance rates. This has fallen from 18.9 per cent in 2020-21.
The report identified a complex mix of causal factors driving this reduction:
- London’s buy-to-let market is contracting, with more private landlords reducing rather than growing their portfolios. The number of rental properties being advertised for sale has more than doubled since the pandemic, and the proportion is rising.
- Policy and economic factors are increasing landlord costs, and this impacts particularly those letting at lower rents. Challenges leading more landlords to consider selling include the abolition of Section 21, increased mortgage rates, and new rules on EPC ratings.
- Tenants are remaining in rented homes for much longer periods, with tenancy lengths broadly doubling. This is driven by the lower availability and higher cost of alternative properties within the private rented sector, as well as increasingly restricted access to home ownership. While in many respects longer stays in a property are to be celebrated, reduced churn in the private rented sector means that properties are re-let less frequently.
The contraction in London’s private rented sector has had a severe impact on the London boroughs’ ability to prevent and relieve homelessness. The shortage of social housing in London means that securing privately rented properties is in most cases the only viable option for prevention and relief of homelessness. The reduction in supply, combined with increasing rents, has severely undermined the ability of London boroughs’ to source housing, either as part of prevention activity or as settled move on accommodation for those in temporary accommodation.
Without significant government intervention, all the indicators suggest that the current crisis will continue to worsen. The Bill offers the opportunity for intervention and London Councils believes the government should use it to develop fiscal incentives for private landlords to participate in the lower end of the market. For example, landlords who agree to let to a lower sub-sector of the market for a reasonable length of time could be offered mortgage interest relief or capital gains tax relief.
The government should also enable a greater amount of public acquisition of properties leaving the market. Councils have very limited capital funding for acquisitions. The government’s Local Authority Housing Fund to purchase homes for use as temporary accommodation is welcome, but additional funding is needed. The government could provide further grants or other capital funding so that properties can be purchased by councils or their partners.
Other key issues of concern in the Bill
London Councils has also identified the following specific areas of concern:
- In the context of London’s growing rents, the proposals to prevent above market rent increases in the Bill are welcome, particularly establishing an independent tribunal that gives tenants the ability to challenge excessive rent increases. However, as it stands it appears the tribunal would also have the power to propose a higher rent increase. The risk is that this would discourage tenants from using the tribunal. We propose therefore that the Bill be amended so that the tribunal can only either accept the proposed rent increase or reduce it.
- The Bill proposes a two-month notice period for the ‘landlord need’ eviction grounds (if a landlord decides to sell up or move themselves or a family member into the property) and a ‘no reletting period’ of three months. This creates the possibility of landlords evicting tenants under these grounds and then re-letting the property after only three months. While we recognise greater flexibility for landlords is necessary in order to strike a balance with tenant stability, we propose the Bill be amended to provide a six-month notice period alongside a no reletting period of six months.
- The strengthened possession grounds for anti-social behaviour allow landlords to seek possession with no minimum notice period, even for offenses such as ‘nuisance or annoyance’. This creates a real risk that these grounds for eviction could be abused to evict tenants for unfair interpretations of anti-social behaviour. We are concerned about the lack of a notice period under these grounds and the ambiguity of the Bill’s definition of anti-social behaviour. Further work is necessary to reduce the risk of abuse by landlords.
- We also have concerns about the lack of funding attached to the proposals so far, especially around the local authority enforcement role - resources are already extremely stretched in this area. It is crucial to note the significant financial constraints boroughs currently face: London boroughs' overall resources are 18% lower in real terms than in 2010. Without significant additional funds, we are concerned that the proposals are unworkable. Councils need both strong enforcement powers and resources to ensure any changes in the law succeed in helping tenants and boosting standards.
