What Now For Landlords?

The British rental market turned into a nightmare for landlords, the biggest one within the last twenty years. The announcement of a Rental reform in June 2022 caused a bit of a stir among small landlords, who own between 1 to 5 properties. And the obscure ROI forecasts even added up to a general shake-up. The new blueprint proposed eliminating Section 21, the so-called 'no fault' section, and extending the Decent Homes Standard.

The Rental reform is looking to put an end to injustice in the private renting sector and protect the most vulnerable. The Standards are going to level up the opportunities for all the households meaning that landlords are supposed to keep rental houses in decent condition without any health and safety hazards. Section 21 used to give the landlords the right to terminate agreements with tenants for no reason. According to the new proposal, only tenants can terminate their tenancy. The landlord is allowed to terminate the contract only if he has valid reasons.

The elimination of Section 21 also means that tenants can request a pet in their home and the request cannot be unreasonably refused. It also doubles the notice period for contract termination and rate increases and puts a ban on fixed-term tenancies.

Section 21 has long been the pillar of landlord rights, so quite understandably, the news about scrapping this Section is a bit of a shock. The UK property market is already going through tough times due to soaring energy bills and the rough state of the economy. So, it is no surprise that landlords don’t have much choice but increase the rate to cover their costs.

The affordability of renting has become questionable for many households. More and more renters are leaving or about the leave London. In fact, 40% of tenants, who were about to move, opted for leaving London in favour of neighboring areas. And as the rate prices are going to rise even more, an even bigger number of tenants will leave the capital.

As a result, a widening imbalance between demand and supply makes landlords wonder if they should stay and go on playing that property game or leave. In 2022 the imbalance between sold and bought properties comprised 35,000 and it’s 17% more than the previous year. And the buy-to-let rate doubled as well over the past year. Not to mention soaring mortgage rates resulting from The UK Banks’ rates. So, probably it will result in more landlords exiting the property market.

However, the Rental Reform Bill is not a law yet. It means it will get a lot of amendments and revisions while passing all the stages of the legislative process. So the best thing the landlords can do is read the Bill and get ready for the upcoming changes since the BTL market is not going to disappear anywhere. The property market will just need some time to adjust to the changes.