Industry reaction to PRS reform proposals

The Levelling Up, Housing and Communities Committee has submitted its proposals to the government on Private Rented Sector (PRS) reform. The National Residential Landlords Association (NRLA) and Propertymark give their reaction.

The PRS in England has doubled in size since the early 2000s and now accommodates 19% of households. It has evolved to house a wider range of tenants, including older adults and those on low income.

Concerns within the government arose about the security of tenure and housing quality in the PRS. The government is proposing to abolish Section 21 and replace fixed-term tenancies with open-ended tenancies, in a bid to address these issues. Some 21% of homes in the PRS are deemed non-decent and 12% contain serious hazards.

The government aims to introduce a legally binding decent homes standard for the PRS, improve housing standards and make the PRS fairer by making it easier for tenants to challenge unjustified rent increases and banning rent review clauses. The legislation will be introduced this Parliament.

What are the recommendations?

The following conclusions and recommendations have been extracted from the “Reforming the Private Rented Sector” House of Commons Committee report, published on 9th of February, 2023.

Should Section 21 be repealed?

The Committee accepts that the majority of private landlords are responsible and do not have any motive to unjustly evict tenants, and for these landlords the use of Section 21 is deemed necessary, in order to remove disruptive tenants.

However, the report concludes that the issue of unjust evictions and lack of security for tenants requires the repeal of Section 21. The reasons given for this are that there remains concern that the proposed sales and occupation grounds may be easily abused by unethical landlords and result in no-fault evictions.

The Levelling Up, Housing and Communities Committee propose the government should:

1. Increase the period at the beginning of a tenancy in which the landlord cannot use either ground from six months to one year;
2. Increase the notice period from two to four months to give tenants ample time to save up and find alternative housing;
3. Increase the period after the use of either ground in which the landlord cannot market or re-lease the property from three to six months;
4. Encourage landlords to sell properties with sitting tenants through advertising the property for sale with tenants for six months before serving an eviction notice.

The courts system has to change first

Before Section 21 can be abolished, landlords must feel confident in their ability to regain possession under Section 8, particularly in cases of rent arrears and antisocial behaviour.

The biggest hindrance to this is the current court system. The Committee continues to advocate a specialist housing court as the best way to improve the court process and believes the government has not provided a valid reason for rejecting this proposal.

They are concerned that the government may not understand the extent to which an ineffective court system could undermine their tenancy reforms.

The committee strongly recommends the government establish a specialist housing court to resolve the court process.

If this is not possible, it is crucial that the government increases the court's ability to process possession claims in a fair and efficient manner for both landlords and tenants. This must prioritise and fast-track claims for rent arrears and antisocial behaviour.

The government should consult with landlords to determine the required processing time for possession claims and commit to meeting this target before abolishing Section 21. Regular data on progress towards this target should also be published.

Minimum Energy Efficiency Standards and decent housing

In its report the Committee welcomes the introduction of a legally binding decent homes standard (DHS) to tackle accommodation that falls short.

It is acknowledged that Minimum Energy Efficiency Standards (MEES) are crucial to the government's net zero strategy and to improve health, cost and other benefits of warm homes.

The Committee recommends that the MEES be integrated into criterion D to simplify current regulations and that the government come up with financing solutions for landlords who may have costs exceeding the £10,000 cap.

Additionally, the government should determine the number of homes exempt from the MEES due to floor space of less than 50 square metres and consider revoking this exemption through legislation.

Landlord reaction

It is reassuring that the Levelling Up Committee is urging the government to focus on the PRS sector with the aim to restructure and revitalise the property market.

Certainly landlords have long been looking for support, where the minority of rogue individuals in the sector have been used as a stick to beat the entire community with.

The recommendations by the Committee that the courts system has to change and improve, before Section 21 is done away with, will undoubtedly be welcomed by landlords given how much cost, time and stress the existing process invokes. But, will this be listened to?

It may provide a reason to buy the government more time before imposing the end of Section 21, as changing the courts process or setting up a specific housing court will likely take time.

Timothy Douglas, head of policy and campaigns at Propertymark, shares his reaction:

“It is encouraging that the Levelling Up, Housing and Communities Committee shares our concerns that the private rented sector is shrinking. The Committee has joined us in recommending a review into the impact of recent tax changes in the buy-to-let market to help inform the UK Government of how we can make changes that will spur on investment and make it more financially attractive to smaller landlords.

“We are also pleased to see our evidence-based proposals are being listened to. This includes retaining fixed-term contracts in the student private rented sector, introducing a specialist housing court, fast-tracking all possession claims in respect of rent arrears and antisocial behaviour and the need for more social house building to improve investor confidence, tackle affordability and increase supply.”

Chris Norris, policy director at the NRLA gave the report a very positive reception:

“The NRLA has never been against reform of the sector, but it has to be fair and workable for both tenants and landlords. That is why the Committee is right to call for court reform to underpin the ending of Section 21, changes in plans for student tenancies and ensuring cases of anti-social behaviour are prioritised by the courts.

“As the committee rightly notes, the biggest challenge faced by many renters is that there are not enough homes to rent. All the protections in the world will mean nothing for tenants if the homes are not there in the first place. That’s why the government should accept the committee and the NRLA’s call for a full review of the impact of recent tax changes in the sector.”