New law protects UK renters without scaring off landlords

Stronger Protections for Renters Will Not Drive Landlords Out of the Market

Fears that stricter regulations will reduce the supply of rental properties are overblown, according to new research from the Social Market Foundation (SMF) think tank.

In an international study published today, the SMF argues that England is an outlier in terms of the insecurity of its tenants. Compared to similar countries, English rental contracts tend to be relatively short, and most comparable countries have ditched ‘no-fault’ evictions if they ever had them.

The SMF states that measures contained in the original draft Renters (Reform) Bill, which promised to end no-fault evictions, would have improved the situation. However, after a rebellion from Conservative backbenchers, it emerged last week that housing secretary Michael Gove intends to dilute many of the Bill’s policies which might have protected renters, and delayed plans to end no-fault evictions.

Opponents of the bill argued that the measures are counterproductive because they would lead landlords to exit the market. Yet the SMF’s analysis suggests that such worries are overblown:

• Scotland, which banned no-fault evictions in 2017, has not seen a significant drop-off in rental supply and has seen an increase in the number of households in the private rented sector.
• Research from Australia has shown that the introduction of greater regulation of tenancies and protections for renters has not impacted total supply levels.

Outside England, longer tenancies are more common, and both Scotland and the Republic of Ireland have adopted indefinite tenancies. In Ireland, the policy has not affected housing supply. Since the initial legislation was passed in 2004, the private rented sector has doubled in size. The Government’s continued support for rolling tenancies is a step in the right direction.

The SMF’s report, Let down, is the third in an ongoing series comparing housing policies across English-speaking countries, funded by the Nuffield Foundation. The paper also addresses the controversial issue of rent controls, temporarily introduced by the Scottish Government amidst the cost of living crisis and favoured by London Mayor Sadiq Khan.

Economic theory suggests that rent caps should discourage landlord investment, leading to a shrinking supply and reduced property quality. However, the SMF found that such policies are widespread across Europe and have more mixed results than expected.

Rent price regulations generally reduce costs for tenants already in housing, but their impact on property availability varies by context:

• Cities like Berlin (rent freeze) and San Francisco (rent capped at 60% of inflation rate) have experienced property shortages due to rent regulations.
• Ireland’s rules, which limit rent increases within ‘rent pressure zones’, have not demonstrably negatively affected supply, although more research is needed.

In addition to abolishing no-fault evictions and moving towards rolling tenancies, the SMF recommends strengthening the rent dispute system to make it more user-friendly. Unlike in England, where responsibility may lie with various bodies depending on the complaint, other countries have lead agencies that serve as the first port of call. The SMF also recommends licensing and registering landlords, as is standard in the rest of the UK and Ireland, or creating a non-compliance register, as in Victoria, Australia.

Niamh O Regan, researcher at the Social Market Foundation and co-author of the report, stated, “English renters receive a poor deal compared to their counterparts in other countries. Fixed-term tenancies are too short, and no-fault evictions make periodic tenancies too risky. Moreover, cash-strapped councils and fragmented dispute resolution services fail to consistently guarantee minimum standards, allowing bad landlords to operate unchecked.

“Longer tenancies and stronger protections for tenants would alleviate some of the pressures they face and make long-term renting a more attractive proposition – which is essential as many of us are likely to rent for longer in the future.”

Dr Catherine Dennison, programme head at the Nuffield Foundation, remarked, “The next UK government will face a long list of challenges in housing. The SMF’s analysis demonstrates that many potential policy solutions have been tried internationally, and there is much to gain from learning from these experiences. The Foundation is funding this project before the general election to ensure that political promises are grounded in robust evidence and subject to expert and voter scrutiny.