15 February 2024

Landlords are being punished through no fault of their own


Our inability to build is perhaps the most pressing issue facing Britain today. It affects everything: stifling growth, repelling investment and worsening depopulation. It’s also toxified our politics, creating perverse political incentives that have given Nimbys a significant foothold over approvals. Matters have gotten so bad that both main parties have been dragged kicking and screaming into acknowledging that we need to build more and at a much faster rate.

So with this in mind, you’d think that the last thing the Government wants to do is make it more difficult to rent. Apparently not.

Until 2017, the term ‘no fault evictions’ had simply been used to distinguish between a Section 8 notice, in which a tenant is evicted because they’ve broken the terms of their tenancy agreement, and a Section 21 notice (the Section in question), when someone is evicted because their tenancy has expired. This basic tenet of property rights was, until recently, uncontroversial: a landlord should be entitled to reclaim their property after an agreed period, because it is their property.

Now, Michael Gove has reaffirmed his commitment to banning no fault evictions, a promise first made by the Tories in 2019. The move is intended to protect tenants and create a ‘fairer rental market’, but the real consequences are likely to be the opposite.

In reality, no fault evictions are often used by landlords to evict poorly behaved tenants with less legal nuisance, take repossession to move into the property, or to rent the property to a friend or family member. This isn’t surprising – landlords want tenants who look after the property and pay their rent on time. Making it more difficult to do so will predictably discourage landlords from renting out their properties altogether. For those that continue to, it would make sense to be more selective about who they allow to rent their property.

This would then incentivise discrimination against riskier tenants – young people, migrants, and those with less financial security. The rental market would be systematically geared towards older tenants with stable incomes or those who can count on help from Mum and Dad. This is the exact opposite of what the Government intends to achieve.

The end to fixed term tenancies means that contracts that include an end date will not be allowed. This will particularly hurt students, who are already facing a tight rental market, and, unless they’re living in purpose-built student accommodation, are not excluded from this change. Even the Levelling Up Select Committee found that including student tenancies ‘could push up rents or reduce the availability of student rental properties’ in February 2023 – a warning which the Government swiftly dismissed. 

But if you are not convinced by the impact this policy will have on poorer tenants, then zooming out and analysing the policy in its broader context might. The ban on no fault evictions is best seen as part of the Government’s wider attack on fundamental property rights. Legislatively, this comes in the form of the Renters Reform Bill. The Bill includes swathes of restrictions on tenancy agreements that will make it significantly harder to rent. Looking at the legislation as a whole, it is astonishing that it has even made it through Parliament.

Disputes between landlords and tenants will also be settled by an ombudsman, which the former will have to pay to join. This is part of a compulsory ‘redress scheme’– detailed in the Bill – for all private landlords, where the Ombudsman will be able to require landlords to apologise, provide information, take remedial action, and/or pay compensation of up to £25,000. All of these additional costs could also ultimately be passed on to tenants in the form of higher rents.

All of this will only add to the existing set of restrictions facing landlords. Namely, that they can generally only raise rents once a year, and that if a tenant feels they are disproportionate, they are encouraged to challenge it through a tribunal. This system risks establishing de facto rent controls, with the tribunal excessively limiting rises. Rent controls have had disastrous consequences everywhere they have been tried, most recently in Edinburgh

Declaring war on landlords and scapegoating them for years of failed housing policy will inevitably result in many choosing to sell up altogether. Populist policies like this only serve to distract from the issue at the heart of this debate – that we need to build more homes. This would drastically improve conditions across the rental market, as landlords would have to compete for tenants in an environment where they are presented with more choice. Yet more burdensome red tape, which only makes it more difficult to rent, is certainly not the answer.

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Reem Ibrahim is Communications Officer at the Institute of Economic Affairs

Columns are the author's own opinion and do not necessarily reflect the views of CapX.