With the cost of renting a property steadily going up, you probably wouldn’t expect the Government to introduce legislation that makes it more difficult to rent.
But alas, the consequences of new laws are not always obvious. The Government has hailed the return of the Renters’ Rights Bill, which returned to Parliament yesterday, as the ‘biggest shakeup to the private rented sector for over 30 years’. It is, according to the Government’s website, going to ‘make sure housing is accessible and fair for millions of tenants’.
In reality, it will do the exact opposite. It will actually make the rental market significantly less ‘accessible and fair’.
The French economist Frédéric Bastiat differentiated between consequences ‘which are seen, and those which are not seen’. This Bill exemplifies this.
The most prominent part of the legislation is the banning of ‘No Fault Evictions’, or Section 21:
It has already pledged to abolish section 21 ‘no fault’ evictions for new and existing tenancies to stop tenants being unfairly pushed out of their homes through no fault of their own. In the last five years over 100,000 households have faced a no-fault eviction, with 26,000 facing eviction last year alone.
On the surface, this is a well-intentioned attempt to prevent tenants from leaving their homes. But how will landlords respond?
The term ‘no fault evictions’, up until 2017, simply distinguished between a Section 8 notice (a tenant is evicted for breaking the terms of their tenancy agreement), and a Section 21 notice (a tenant is evicted because their agreement has expired).
As a landlord, you want a tenant that pays rent on time and looks after your property. It is not in a landlord’s interest to evict a tenant for absolutely no reason at all. In reality, no fault evictions are used by landlords to evict bad tenants without the legal headache of Section 8, take repossession of the property to move in themselves, or to rent the property to a relative or friend.
Banning ‘no fault evictions’ would, therefore, make it more difficult to evict a tenant when their tenancy is up without going through a lengthy legal process that they have to pay for.
Restricting a landlord’s ability to choose what to do with their property when an agreed tenancy comes to an end is an egregious attack on property rights. It used to be accepted that a property owner should be entitled to reclaim their property after an agreed period because it is their property. Why is the basic tenet of property rights now so controversial?
It will also have a number of other negative unintended consequences.
Firstly, the new legislation will likely decrease the supply of homes available to rent by discouraging landlords from renting out their properties altogether. There have already been reports of an increase in the number of landlords choosing to just sell up altogether, as they find the prospect of operating too challenging with the new legislation.
Secondly, has the Government thought about the consequences of making it more difficult for landlords to evict bad tenants? Landlords are, rather rationally, going to become much more picky about who they accept as tenants in the first place. For those landlords that do choose to stay in the rental market – many will not – they will inevitably implement stronger vetting to avoid a complex eviction process.
This incentivises discrimination against riskier tenants. This includes young people, freelancers with irregular incomes and migrants. This legislation would systematically gear the rental market towards older tenants with stable incomes, or those who have access to the Bank of Mum and Dad.
Is this not the inverse of what the Government intends to achieve?
Banning Section 21 without any thought of the real-world consequences is just one awful part of this terrible piece of legislation. Politicians of all stripes would benefit from the lessons of Bastiat, and should think about the dire impact of the Bill on the very group of people they are trying to protect.
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