With the Government now committed to scrapping Section 21, we review the impact on landlords, tenants, and the UK private rental sector as a whole.
So it is welcome news to many that the Government has committed to scrapping Section 21 ‘no fault evictions’ as part of its Levelling Up White Paper, published in February.
The plan to scrap Section 21 has been on the table for more than two years – delayed by the pandemic – and it’s still unclear how long it will be before the practice is banned. Definitive timelines will only be confirmed when the Renters’ Reform Bill is published (expected this spring) and in the meantime hundreds of families could be forced out of their homes.
As a specialist in acquiring and regenerating UK residential property, GM2 is pressing for decisive and quick action to ensure every British family has the right to stay in the home they’ve made their own. The UK’s millions of tenants are also naturally keenly awaiting this change.
But not everyone is welcoming the imminent exit of Section 21. For smaller landlords, it’s a challenging time.
The two sides of Section 21
Until Section 21 is definitively removed from the statute books, tenants in the UK cannot feel truly secure in their own homes. Many live in properties owned by Britain’s army of smaller landlords, whose personal situations mean they often cannot take a long-term view of the properties they own.
Some of these property owners are so-called ‘accidental landlords’ who have amassed a small portfolio of flats or houses through inheritance, relationships or relocation. Others are retirees who bought a portfolio of buy-to-let flats as a way of financing retirement.
Landlords in either of these situations have, by necessity, a short-term view. At any time they may need to liquidate their assets to pay for care, pass money to dependent children or deal with unexpected costs. They currently rely on Section 21 to evict tenants so they can sell up: a startling one in 10 tenants is forced to move out so that landlords can sell a property.
Before Section 21 is scrapped, we may see an avalanche of no-fault evictions as more small landlords exit the market as this, and other changes, threaten their financial position.
A greater burden on today’s landlords
The Government’s Levelling Up White Paper also includes plans to enforce a minimum standard, called the Decent Homes Standard, on all homes. At present this only applies to landlords who own social housing, and it could increase the burden on smaller landlords as they work to bring their properties up to scratch.
The UK’s rental properties also need to be raised to higher environmental standards. Britain has some of the oldest housing stock in the world, so commitment to a new level of regeneration is vital to ensure our homes are ready for a lower-carbon future. But there’s a very real concern that many landlords will be unable to afford the required upgrades to meet new rules.
It’s small wonder that many have opposed the scrapping of Section 21, especially as, according to the National Residential Landlords Association (NRLA), 70 per cent of landlords issuing Section 21 notices only do so because they feel they have to, due to rent arrears.
Many want to do their best by their tenants but, understandably, it’s likely their tenants’ need for security will always be overshadowed by the landlord’s own need for financial stability and flexibility.
Understanding the issues
As professional landlords in the UK, G2M is in the very fortunate position that its priorities are able to be aligned with those of its tenants. We’re in the market for the long term, and our tenants can stay in the properties for as long as they want. We also have the benefit of deeper pockets and economies of scale that make it easier to make any necessary upgrades.
We’ve been campaigning for a rental market more like that in Germany, where most of the landlords are professional businesses with long-term outlooks and strong financial resources.
We believe that scrapping Section 21 will give UK tenants a similar security of tenure to those in Germany. They know they will not be evicted from their homes unless they do something wrong, such as causing a public nuisance or not paying their rent. They can truly feel ‘safe as houses’ in their rented properties, and their landlords can afford to upgrade and maintain them as necessary.
Now that Michael Gove, Secretary of State for Levelling Up, Housing and Communities, has reiterated the scrapping of Section 21, we’re urging the UK to move fast to make this law. With homeownership out of reach for so many, it’s vital for our communities that the rental market is reformed.
But what of the mass of smaller landlords who rely on the financial flexibility that no-fault eviction gives them? Their lives are about to become harder in other ways, too, due to increasing regulations on energy efficiency in homes increasing their maintenance costs.
For many, now is a time to take stock of an uncertain future, and the decision to sell may be foremost to mind. But it needn’t be at the cost of their tenants’ security. In a fast-changing and unpredictable world, selling at the right time to a company that can take on tenancy oblcan be a win-win situation for all concerned.
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