The UK government is playing a very dangerous game with private landlords in England and Wales. This week’s announcement regarding the abolition of Section 21 eviction notices is headline news in the private rental sector. While the blow to private landlords has been softened a little amid promises to reduce the property repossession process for legitimate reasons, there is anger and confusion as to why private landlords are yet again in the firing line.
Overhauling the private rental sector
In an ongoing overhaul of the private rental sector, the UK government is to consult on effectively creating open-ended tenancies for all private renters in England and Wales. The idea is that open-ended tenancies would give individuals and families peace of mind and a degree of long-term security. Section 21 eviction notices are commonly referred to as “no fault” evictions. These notices allow landlords to reclaim property by giving as little as eight weeks’ notice even to law-abiding reliable tenants.
In a passing gesture towards private landlords, the UK government is also looking to amend Section 8 eviction notices. These involve a more complicated legal process by which landlords look to regain their properties. Legitimate reasons to reclaim a property will be amended to include a sale of the property or a landlord wishing to move into the property. However, without going any further we can see a potential loophole here already!
The government has promised to expedite the current legal eviction route which involves issues such as antisocial behaviour and rent arrears. As the average Section 8 action takes on average five months to complete it is not difficult to see why private landlords and landlord associations are concerned. However, the government may well be creating a further problem for private landlords and buy to let lenders.
Repossession of property
Successful property repossessions via a Section 8 notice currently take on average five months to complete compared to anything from eight weeks for a Section 21 notice. We know that some landlords have used Section 21 notices to effectively end the tenancies of troublesome tenants rather than going via the prolonged section 8 route. So, what would happen if Section 21 notices were removed and focus moved to Section 8 notices?
In the event a tenant is damaging a property or in rental arrears, under the current system it would take upwards of 8 weeks to evict by the Section 21 route and an average of five months by the Section 8 route. By removing the Section 21 option this could, and probably will, lead to a prolonged period of reduced or zero rental income from the property. This will put pressure on a landlord’s ability to cover their mortgage payments and significantly enhance the risk for buy to let lenders.
Is the current system simply out of touch?
There is a growing suspicion that announcements from the Labour Party with regards to the private rental market may have forced the Conservative government into its recent attack on the private landlords. Let’s not forget, the Conservative government is renowned as a supporter of capitalism but for some reason seems intent on attacking private landlords. Or, is the current private rental system simply out of touch and out of date?
It is perhaps telling that the authorities appear keen to remove Section 21 notices as soon as possible before they refine and expedite the section 8 process. If this is the case, and this is currently only at the consultation stage, this could leave a vacuum as the current unacceptable Section 8 process continues without the reasonable support of the Section 21 option.
Will this impact the buy to let sector?
Taking a step back and looking at the sector from a distance, it does look as though this attack is more focused on private landlords as opposed to private rental companies. After all, it is only private landlords who would consider moving into of their properties and possibly more likely to sell than private rental companies who take a more long-term approach. This is not the first move by the UK government which has prompted concerns that private landlords are being squeezed out of the market to make way for large corporations. However, to be fair the regulations covering the private rental sector have been out of date and out of touch for some time.
Whether or not the UK government has gone too far in favour of tenants remains to be seen. There are arguments supporting both sides but when the dust settles the direction of property investment monies will provide the answer. In some cases buy to let lenders may force the hand of private landlords by recognising the greater risk and increasing buy to let mortgage rates.
On a final note, it is ironic that the UK government in 1980s began the housing boom which has swept the UK ever since. This led to the chronic shortage of social housing across the UK, the expansion of the private rental market and number of private landlords. As ever, when the government of the day sees a sector/group of investors doing well they always seem to “want a larger slice of the pie”. They’ve reduced the tax allowances for private landlords, increased taxes on second homes and now they appear to be making major changes to the way in which landlords can quite legitimately regain possession of their own properties.
If previous UK government’s had invested as much time, money and effort in tackling the chronic social housing shortage we would not be in the situation we find ourselves today. Yes, it is all good and well giving tenants increased protection and recourse for legal action but what about landlords?