The Renters' Rights Act came into force today, celebrated by Labour frontbenchers, but analyst Ben Hopkinson warns of severe consequences. Swedish economist Assar Lindbeck once called rent control the most efficient technique to destroy a city except for bombing. Despite brief rumors of a rent freeze, the government proceeded with the Act.
Key Changes in the Renters' Rights Act
The Act abolishes Section 21 evictions, ending fixed-term tenancies and making all tenancies indefinite. This removes landlords' certainty of regaining possession, forcing them through backlogged courts and bailiff queues. Unsurprisingly, thousands of landlords issued last-minute Section 21 notices in April.
Additionally, the Act bans rent in advance and above-asking-price offers, forcing competition on non-price factors like CVs and references. This disadvantages first-time renters without rental history or high income.
Most significantly, the Act introduces backdoor rent control: tenants can challenge rent increases at tribunals, paying existing rent until a decision, which cannot be backdated or set higher than the landlord's proposal. With 11 million renters and only 34 tribunal judges, the system will likely be overwhelmed, effectively freezing rents.
Impact on the Rental Market
The Act adds to existing landlord burdens like increased stamp duty, tax changes, and regulatory requirements. Between 2016 and 2023, the private rental market lost 300,000 homes. In the past year, 254,000 buy-to-let properties were put up for sale, a trend expected to accelerate.
Hopkinson concludes that instead of backdoor rent control, the government should improve renting for both tenants and landlords. Labour's celebrations will likely turn to shock as rental properties vanish from cityscapes.
