Subject: Urgent Concerns Regarding the Renters Rights Bill & its implications
Summary
As a mortgage broker who helps first time buyers buy homes, landlords buy & finance private rental properties, a private landlord and a board member of the Eastern Landlords Association I have a working view of several areas concerned and I have serious concerns about the Renters Rights Bill's potential consequences for renters and homelessness.
Recent government policies have destabilised the private rental sector (PRS). Tax changes in 2017, impacting mortgage interest relief, significantly reduced landlord profitability and in some cases, access to buy-to-let mortgages. The pandemic exacerbated this, delaying landlords from selling, leading to a backlog and subsequent mass exodus from the market. Rising interest rates and inflation in 2022 further squeezed landlords & combined with high inflation led to increased rents. The current Renters Rights Bill has amplified uncertainty, prompting more landlords to sell, further reducing supply and driving up rents. It's projected that up to 41% of landlords plan to sell or reduce their property holdings, with only 6% intending to buy or increase.
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This dwindling supply directly fuels further rising rents, exacerbating the housing crisis. A recent House of Commons report highlights record homelessness levels & competing government departments trying to find housing for migrants competing with local authorities trying to source housing for homeless families are exasperating the chronic shortage of rental properties. The inadequacy of Local Housing Allowance (LHA) rates, the cost-of-living crisis, and the financial strain on local authorities is all adding to the crisis we now face. The report also points out that rent arrears, often leading to evictions, are directly linked to tenants' ability to pay rent.
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Contrary to the belief that landlord sales will increase homeownership, many private renters cannot buy even with lower prices. Reasons include: credit history issues, lack of permanent residency status, unstable income (gig economy, etc.), age (over 55), and reliance on housing benefits (which are incompatible with mortgage affordability). 5.5 million households rely on housing benefit (or UC housing element) support, making homeownership unrealistic for them. Where will these people go if the PRS continues to shrink?
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The proposed renters rights bill risks a surge in homelessness and unsustainable rent increases. The bill's imbalance, lack of transparency, and inadequate supporting infrastructure (courts, ombudsman, systems) will disproportionately harm the most vulnerable. While corporate landlords and council-linked entities may acquire some properties, they often operate with similar market-rate rents and sometimes even more aggressive eviction practices.
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While renter protection is vital, the current bill is flawed. It must balance the interests of both the tenant and landlord. Landlords are often unfairly criticised for profit, while other essential sectors (water, supermarkets & large construction companies) face no such scrutiny despite increased costs affecting the cost of living and gigantic profits of recent years. Data shows a stable average rental income, and recent tax changes have actually reduced Treasury revenue, contradicting the narrative of excessive landlord profits. The NRLA's research demonstrates the negative impact of the earlier tax changes on the rental market.
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The narrative that renters can't buy homes is often misleading. Many can buy with the right guidance. We need to empower young people with financial literacy and clearer pathways to homeownership.
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The current approach risks adding to the housing crisis, and whilst a balanced, evidence-based solution to the PRS & tenant security is essential, the RRB in its current form is not it.
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Detail & supporting information:
I write with deep concern regarding the Renters Rights Bill. I share this concern as a private landlord & as a person who works in mortgage broking (I help first time buyers purchase their own homes as well as helping landlords obtain buy to let mortgages & insurances), I am a board member of the Eastern Landlords Association (which helps & supports landlords) this professional experience gives me a unique insight to some of the difficulties this bill could create in its current form.
What I believe are contributing factors which led us here.
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2017 the government introduced an amended taxation regime for private landlords. This had the effect of pushing many landlords into higher rate taxpayer brackets (falsely, affecting Child benefit and taxation levels for other incomes) and removing the traditional ability of a business, to offset mortgage/debt interest costs against profit for taxation. A consequence of this was that higher rate tax paying landlords found it more difficult to obtain BTL mortgages for their properties as the rents became insufficient to support the loans in some circumstances – In many cases landlords were given no choice but to raise any below market rents to enable them to remain in the market. As a result of restrictions in obtaining finance and an extraordinary tax burden (no other business is tax treated in this way) over the 4-year implementation period, profitability was significantly reduced for landlords. Full implementation was achieved in 2020.
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2020 - We then had the pandemic which removed the ability of landlords to end tenancies to sell, and at one point with estate agents closed and the country in lockdown leading a backlog of landlords looking to sell and leave the market. Over the following years, many issued section 21 notices and sold their stock. This has resulted in a reduction of supply, phased in over time due to circumstances.
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2022 – The courts were catching up and those who wanted to sell as a result of the taxation regime on the most part had done so, but then we have the startling rises in interest rates & inflation seen in the later part of 2022 seriously impacting again, landlords profitability and increasing the costs of letting property, Inflation rocketed and rents had to rise.
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2023 - The PRS began to level out again over 2023/2024 and landlords adapted albeit with diminished profitability & increased rents however as we have seen from the Committee of public accounts 4th report Tackling Homelessness report CPA - homelessness is at the highest recorded level
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2024 – The renters reform act was presented and later was adjusted to the RRB, and the renters rights bill came to parliament – the uncertainty and headlines led more landlords to either sell or increase rents.
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It is now expected that up to 41% of landlords are now planning to sell and only 6% intend to buy
The further removal of supply is simply disastrous
Furthermore - The recent report from the House of Commons Public Accounts committee on Tackling homelessness advises:
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We are greatly concerned that homelessness levels are at their highest since records began. The latest data show that 123,000 households in England were being housed in temporary accommodation as of June 2024. Providing temporary accommodation cost local authorities over £1.6 billion in 2022–23. Data published after our evidence session suggest that the cost in 2023–24 rose to around £2.1 billion. Faced with a crisis, local authorities are less and less able to spend funding on homelessness prevention–even funding that is nominally intended for this purpose.
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That failure to uprate LHA rates in line with local rental prices means that tenants receiving the LHA face significant affordability gaps, which could lead to arrears, evictions and homelessness
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It its written submission, Shelter made the case for permanently linking LHA rates to the real cost of renting. It suggested that freezing the LHA rate at a time of record rent increases would trap families in homelessness and make it impossible for local authorities to prevent or relieve homelessness by finding private rented homes which people on low incomes can afford. Reapit made a similar point, citing its 2023 report which found that almost 70% of property professionals issued Section 21 eviction notices due to rent arrears, highlighting the critical link between the ability of a tenant to pay the rent and the risk of eviction
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LHA rates also impact the amount that local authorities can reclaim as a subsidy from DWP for temporary accommodation costs. The amount that can be reclaimed depends on a number of factors, including the January 2011 LHA rate appropriate to the size of the property. Given that the subsidy is based on an historic rate rather than being aligned with local authorities’ rising temporary accommodation costs, they experience a gap in funding, commonly known as ‘Temporary Accommodation Subsidy loss’. This is having a significant and increasing impact on their financial pressures. In 2022–23, local authorities in England experienced a subsidy loss of £204.5 million, compared with £41.4 million in 2012–13 (both expressed in 2022–23 prices).
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Competition for asylum accommodation is said to be complicating the problem, with two government departments driving up local rents
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As it currently stands, private landlords have already exited the PRS in record numbers and more are following: Many landlords are set to exit the PRS or switch to short-term lets when the Renters’ Rights Bill becomes law, Timothy Douglas of Propertymark has warned.
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82% of renters are happy with their homes – 8% points higher than social housing tenants (NRLA)
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Less properties are being purchase by private Landlords than are being sold (NRLA)
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18% of properties for sale in September 2024 were previously let by a private landlord. (Chanel 4 news)
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Almost half of UK landlords have already sold off some stock (Property 118)
This has the effect of reducing private rental property availability (supply) and creates rent rises to cover the additional costs to landlords, please see below from 15 January 2025: Rents Lift 9% BY 9.1% TO Nov 2024 - ONS
Rising rents, lack of supply, and woefully inadequate LHA rates can only exacerbate the current crisis in homelessness & poverty.
There also seems to be a misconception, that if Landlords sell, more people could buy their homes, and whilst this is true for some, this is scarily misleading for the most vulnerable in our society who appear to have been completely forgotten buy this bill. Many people are privately renting because they don’t meet criteria for social housing (or simply can’t wait several years to be allocated a home). Many of those people wouldn’t be able to buy, even if the properties were available and half todays prices, because they don’t have tens of thousands of pounds sitting around in the bank to buy a property with cash, and can’t have a mortgage for many reasons, for example:
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Most high street lenders will never lend if an applicant has a conviction for fraud or even in some cases, suspected, unproven concerns raised (This is going to rise over the years as our youth are not aware of the horrendous consequences of not providing exact information to things like car insurance, banks, loan companies etc). In addition, unspent convictions will often preclude an applicant from a successful, affordable mortgage application in many cases.
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Many people can’t get a mortgage because at the time, their credit file simply isn’t good enough for many reasons, not least the pandemic. Non-financially associated, guarantor mortgages are not widely available to people buying homes, but non-financially associated guarantors are available to tenants. (If I had an adult child with adverse credit, I can’t join them on a mortgage application to help without affecting my own good credit rating, but I can be a guarantor on their tenancy agreement without me needing to be financially associated on my credit file).
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When a private tenant falls into rent arrears and is evicted, the local authorities are, in some cases advising tenants to stay put in their private rental homes until bailiffs forcibly remove them. This forces an eviction through court with fees and arrears as part of the judgement, leading to CCJ’s and other credit matters recorded on a credit file, severely impacting a tenant’s possible future mortgage options – Often leaving those people in a perpetual cycle of debt and renting and suffering the impact of rents increasing due to rising costs.
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Many lenders will not lend where no applicant has permanent rights to reside in the UK. Lenders are innovating on this matter and changes are happening, but many still have very hight income &/or deposit requirements in this case.
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The newly self-employed and new entrants to work in the ‘gig’ economy/fixed term contractors/0 hours contracts find it particularly difficult to obtain mortgages due to the varying and non-contracted income – many need at least a year of evidence history of this type of income to show before a lender will consider a mortgage application and then, the requirements for mortgage affordability still need to be met (where will they live whilst creating this history without the PRS or with more increases in rents?).
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Nearly 867,000 households privately renting are over 55 years old and will struggle to obtain an affordable mortgage due to the term they have to repay the debt - so simply can’t now buy. These people will be affected significantly by rising rents and PRS landlords leaving the sector.
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Devastatingly Millions of people are in receipt of housing benefit or the housing element of universal credit. As of November 2023 (Data here) there were 2.3 million households receiving housing benefit and a further 3.2 million households in receipt of a housing element of Universal credit. That’s a total of 5.5 million households considered to have such low incomes, they need support for housing costs. Lenders will not accept income from housing benefit or housing element of Universal credit to support mortgage affordability, because as soon as you buy your own home you are no longer eligible for housing benefit and lenders must be able to see that income used for mortgage affordability is sustainable through the mortgage term. The very nature of these benefits suggests these people are on low incomes with little to no savings and need support, which would end if they purchased their homes.
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The local Authority Housing rates were un-frozen by Jeremy Hunt in 2024 (Con) bringing relief to many renters, however despite being aware of the RRB, the consequential rising rents and the reduction in supply, Liz Kendal (Work & Pensions secretary) has confirmed in Dec 2024 that the LHA rates will be frozen again until 2026. This can only spell absolute disaster for those in receipt of housing related benefits and further exacerbate homelessness & poverty.
So Imagine more landlords exit the PRS and more homes come up for sale and this creates an over stock of properties for sale and may reduce house prices, but the 5.5 million households in receipt of financial support for housing costs, in almost all cases still can’t buy their homes, even if they were half the price they are now, and they can’t afford their rent because the LHA is too low. The social system simply can’t house them as there is nowhere near enough social housing – Where do they go? What about older renters – where do they go.
I don’t want to see an explosion of homelessness. I don’t want to see an explosion of people paying such high rents for the reduced number of private rented properties that are left, they end up in an endless spiral of debt and misery with no way out and no hope.
The consequence of this bill, because of its imbalance, lack of transparency in costs & implications, and lack of infrastructure (courts systems & ombudsman, clear information about the landlord register and how it will be implements and funded), if rents rise significantly; less private rental properties are available, and the lives of the poorest are further, disproportionately, adversely affected. Private companies linked to councils may buy up the properties, but they rent at market value and behave in and extraordinarily offensive way – this is real, no fault evictions & wrongly contribute to the quoted statistics and bad name private landlords been tarred with over the last few years despite being council led - https://www.telegraph.co.uk/money/property/labour-run-council-evicts-200-tenants-cut-housing-waiting. WHERE are these families going to go?
The government believes this will increase renters’ rights and security – There can’t be security for tenants if there are not enough private rental properties for them to live in. And free up homes for tenants to buy – Hopefully some will, but many, including the five and a half million households in receipt of financial support for housing needs and older renters (our most vulnerable) will not – What about them?
I believe much of the underlying problems faced comes down to affordability. The cost-of-living crisis, the cost of buying a home, and the costs of maintaining a home all directly affect people’s ability to purchase their own homes or afford their rents, and have the stability and security that comes with homeownership:
It should be noted that whilst private landlords are regularly demonised for making a profit at all & outright blamed for the inability of people to get on the housing ladder, research suggests that the 9 largest housebuilders in the UK experienced extraordinary pretax profit growth over recent years:
https://housingevidence.ac.uk/wp-content/uploads/2024/01/CaCHE-housebuilding-report-v9-25.09.pdf - This report is astonishing.
The cost of feeding a family spiralling: Unite Investigates: Food Profiteering Update - June 2023 https://www.unitetheunion.org/what-we-do/unite-investigates/new-analysis-rips-apart-dodgy-claims-of-squeezed-supermarket-profits/unite-investigates-food-profiteering-update-june-2023
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In our March report, we saw how the Big 3 supermarkets made massive profits last year. Their combined net profits in 2021/2 were £3.2 billion: double the £1.6 billion they’d made before the pandemic in 2019.[3]
Whilst landlords profits have been reasonably stable suggesting landlords generally, are not profiteering & harmful to society as some appear to suggest, questions must be asked regarding how the cost of living, and the costs of new homes both directly affect people’s ability to afford housing - https://www.gov.uk/government/statistics/property-rental-income-statistics/property-rental-income-statistics-2024b
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average income from UK property remained relatively stable at around £16,800 between 2018 to 2019 and 2022 to 2023
Finally, as a mortgage broker I see that in so many cases young people believe they can’t buy a home but don’t know that is the case. The narrative that renters can't buy homes is often misleading. Many can buy with the right guidance & access to the right lenders. We need to empower young people with improved financial literacy, access to the right lenders and clearer pathways to affordable homeownership. We need to address the cost of living and ensure that homeownership is achievable, for those where it is realistic, but also ensure we have the support necessary for the millions for whom homeownership is not, at this time possible and we MUST recognise the differences between those groups and ensure we are looking for strategies relevant to their real needs. We can’t ignore & further impoverish those with no choices.
Renters should be protected, and councils do already have powers to enforce standards, but from what I understand are understaffed and underfunded to carry out this enforcement – The Renters Right Bill make no notable changes to this current inability/inaction in enforcement.
The current, proposed legislation is simply dangerous, being rushed through
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Without consideration that homelessness is already at record levels,
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Without consideration to the millions of people dependent on financial housing support and the impact increased rents and reduced supply will have on them
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Without consideration that there is already a shortage of private rented homes for those who simply cannot buy due to circumstances,
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Without consideration that courts are already terribly overwhelmed,
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Without consideration that the ombudsman is taking more than a year to review/address complaints,
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Without consideration that the LHA rates are woefully short of actual market rents leading to shortfalls for the most vulnerable which will only get worse and likely increase homelessness
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Without a real view of the Landlord register and its costs
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Without consideration of other sectors contributing to the crisis of affordability
The Bill need so much more work. It must have the infrastructure in place, and it must properly balance the relationship between the landlord and tenant to ensure that tenants are secure and in safe, affordable homes, and private landlords are able and willing to provide this.
Sincerely
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Charlotte Baker
Mortgage broker
Eastern Landlords Association Board Member
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