Section 21 Abolition – Problem solver or problem creator?
Assured Shorthold Tenancies were created in 1988 to address the lack of available houses to rent, due in part to statutory protection that made it virtually impossible to regain possession unless a tenant chose to leave. As a result, people became less and less willing to let their properties, exacerbated by the Government’s decision to give council tenants the right to buy. Will this Government’s plans see landlords withdrawing from the private rental sector thus fuelling the housing shortages?
The removal of Section 21 is intended to protect tenants from apparent unsolicited eviction, ultimately reducing the number made homeless. The reality is while it may solve problems, it will generate others for the market.
Section 21 is usually evoked for one of three reasons; rent arrears, anti-social behaviour, or property damage, with landlords occasionally using the clause to reclaim their house for refurbishment or occupancy. In the main however, 90% of tenancies are ended by the tenant.
Without Section 21, providing landlords give a concrete evidenced reason specified in law, tenants can still be evicted if they fall into arrears or damage the property. It is currently a relatively lengthy process taking an average of five months via the court, but commitment has been made to expediate the process; although it is unlikely to achieve the eight weeks timeframe of Section 21 notices.
It is suggested the new legislation will be supported by amendments to Section 8, which will enable landlords to evict tenants if they wish to sell or move in to their property, potentially negating the protection the new laws are designed to offer to tenants.
Opinion on the potential abolition of Section 21 is divided, particularly when considered in the context of other reforms that have recently been introduced or are awaiting introduction including; caps on deposits, removal of tenant fees, The Home (Fitness for Human Habitation) Act 2018, Minimum Energy Efficiency Standards, the Ministry of Housing, Communities and Local Government announcement that mandatory five year electrical checks will be introduced as a phased approach, and the income tax changes introduced by the Chancellor in April 2017.
The above changes have already encouraged a 2.7% UK increase in rents (excluding London which stands at 8.2%) over the past twelve months. Additionally, with the perceived reduction in landlord control and increased costs, there has been a clear decline in properties offered for rent. With an average of 13% less stock available from last year, (33% less in London), rents are likely to increase further as supply cannot meet demand.
In conclusion, the jury is still out as to how the market will react to the reforms and who, if anyone, will be the winners and losers. Potentially the UK’s 11 million renters may have fewer properties to choose from and will need to pay higher rents. Landlords will have to comply with the additional legislation and costs, but if rents keep on increasing due to demand outstripping supply the landlords eventually may end up better off.
The legislation being brought in is clearly there to protect those tenants being mistreated by rogue landlords. We fully support this concept, but do wonder if the protection could be delivered more effectively, with less of an impact on tenants and landlords involved in the rental sector.
If you have any questions on how this may impact you, please contact the GSC Grays Residential Lettings team.