Renters Reform to spark landlord exodus?

"44% of landlords considering selling" shouts the headline, It's nonsense of course, but there is one corner of the market that could see some serious thinning out.

Forgive our scepticism, but we've been here before. Many times. Any event which may negatively impact on property investors prompts surveys by advocacy groups. They almost always forecast dire results which are then amplified in the press and social media.

'Considering' is the operative word here. Yes, landlords may 'consider' selling, then  the majority will do what they usually do - see how it goes for a while, adjust to the new normal then carry on as before.

Look at the hurdles investors have faced in recent years - stamp duty surcharges, a reduction in mortgage  tax relief, Brexit, Covid, rising interest rates and upcoming EPC changes. All of this has happened within the last eight years, yet the number of rental properties has barely changed since 2016.

Upsides to rental reform

The loss of Section 21, or so-called .'no fault' evictions, has attracted most attention. While this provides a safety net for landlords in dealing with problem tenants, the current system has been widely abused by less scrupulous landlords to intimidate and evict tenants with justified grievances. This misuse of Section 21 has attracted enormous negative press and its demise was inevitable.

In its place will be a defined and process for landlords to repossess their properties in reasonable circumstances and a rental system that allows for landlords to adjust to market rents annually. A responsible property owner who seeks to achieve a fair return on his investment by offering good quality properties on a long term basis to good quality tenants should be well served by the new reforms.

If Renters Reform works well, perhaps it will end the constant vilification of property investors and good landlords who are in the vast majority will no longer be tarred with the same brush as the bad. It will up to the government to ensure that the provisions to replace Section 21 work as intended.

An unintended downside?

One possible consequence of the reforms could be a shrinkage of the low cost sector of the market. The UK has the oldest housing stock in Europe,  much of it let out as lower cost rentals. Rental reform on its own will not cause owners to sell older properties, but taken together expensive and perhaps unviable upgrades required by upcoming EPC rules and the Decent Homes Standard, rental reform may be the trigger for landlords to rotate into higher quality homes.

The effect will be most keenly felt by the lowest income groups. Many could be served with Section 21 notices while they still exist and ;local authorities could see a spike in demand for emergency accommodation at a time when they are already stretched beyond breaking point.

The government has work to do.