The Renters’ Reform Bill aims to improve tenant security in the private rental sector by scrapping no-fault evictions, but it’s won’t solve Britain’s housing crisis. The Bill, which returns to Parliament this week for a second reading, was originally dreamt up in the dying days of Theresa May’s government. It could still just about make it in time for the next general election, as the government’s main electoral offer to ‘generation rent’. Yet the reality is that it fails to tackle the main cause of our housing woes: a lack of supply.
The Bill’s main component is a ban on so-called ‘Section 21‘ or ‘No-Fault Evictions’. At the moment, the most common arrangement in Britain’s private rental market is a fixed-term tenancy agreement, that is, a rental contract with a fixed duration of six, 12 or 18 months. When such an agreement expires, it can be replaced by an updated one with a new expiry date, or it can just automatically convert into an open-ended agreement. However, at or after the expiry date, a landlord can end the agreement at will, without having to provide a reason for it.
A landlord might be permanently stuck with a tenant whom they have a bad relationship with
This is, we could say, the equivalent of a hire-and-fire labour market, where, subject to minimum durations and notice periods, employers can terminate employment contracts almost as flexibly as their employees can. Under the Renters Reform Bill, that will no longer be possible. The Bill specifies a set list of legitimate grounds for terminating a rental contract. If none of those grounds apply, then a landlord cannot terminate it.
In effect, this would mark the end of fixed-term rental contracts. Tenancy agreements may still have a notional end date, but it will be largely meaningless, because nothing happens on that date.
The Renters’ Reform Bill also contains a soft version of ‘second-generation rent controls’, or within-tenancy rent controls. Landlords can still freely set rent levels at the outset of a tenancy, but once an agreement has been concluded, they can only raise them in line with market rents in their local area. This is not an unrelated additional measure of the Bill, but a logical corollary of the ban on No-Fault Evictions. Without it, landlords could still terminate tenancies via ‘economic evictions’, thus getting around the ban.
The Bill also makes it easier for landlords to evict ‘bad’ tenants, and specifies in greater detail what exactly that means. Again, this is not an unrelated measure, but a logical corollary of the above. Extreme cases aside, in the current system, landlords do not need extensive rights to remove bad tenants, nor do we need a precise definition of what exactly makes a ‘bad’ tenant bad. Landlords can simply use No-Fault Evictions to remove tenants they consider bad, and that is that. But once the government takes that tool away from them, it has to offer some alternative. Regulation begets more regulation, bureaucracy begets more bureaucracy.
We should not exaggerate the impact the Bill will have. The British rental market will still remain more flexible than many of its European counterparts. The Bill does not give every tenant an automatic right to turn a six-month rental contract into a lifelong one. Landlords will still be able to reclaim a property if they want to, for example, use it for themselves, give it to an immediate family member, or sell it.
But it does mean that a landlord might be permanently stuck with a tenant whom, for whatever reason, they have a bad relationship with. If you have an underused property, and you have previously considered becoming an amateur landlord, you will now be thinking twice. The Bill could easily end up making a bad situation worse.
The Renters’ Reform Bill does not come out of nowhere. There are landlords who use No-Fault Evictions to get rid of demanding tenants, and replace them with undemanding ones. The broader problem here, however, is simply that we have a situation in which too many tenants are chasing too few rental properties. That fundamental imbalance cannot be sorted out with regulation. It can only be fixed with an expansion in housing supply. This would give tenants greater choice: choice between competing landlords, but also the choice to exit the private rental sector altogether. Supply constraints have created a beggars-can’t-be-choosers market. Easing them would create a market in which choosers won’t be beggars.
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