Landlords face crisis as government reforms loom large

“The Renters (Reform) Bill looms over most landlords like the Sword of Damocles”, is how one legal expert describes the current situation in the rental market.

Gina Peters, head of landlord and tenant at law firm Dutton Gregory, says many landlords are on the verge of throwing in the towel as the Renters (Reform) Bill makes its way through Parliament.

She tells Property118 that landlords face a variety of challenges.

Many BTL landlords will struggle in the coming months

Mrs Peters says legislative changes are having a huge impact on the industry.

“I think the real challenge for landlords is staying put if they possibly can.” she said.

“Associated with that is making a reasonable profit because many landlords feel they have been beaten by the government through tax measures which have removed relief for landlords, such as Section 24.

“There’s the challenge of encouraging landlords to stay in the industry and to ride the regular economic storm, with markets going up and down and interest rates doing exactly the same.”

Mrs Peters adds many buy-to-let landlords will struggle in the coming months when mortgages come up for renewal.

“There are problems still ahead for landlords hoping to make any reasonable profit from being within the lettings industry.” she said.

“Many buy-to-let landlords with mortgages are going to have their mortgages coming up for renewal very shortly.

“That’s going to cause problems because they are going to be back on a variable rate that is much higher than they were used to, or perhaps they were even on a fixed rate.

“It’s not just about capital increase, either, because a lot of property just naturally increases in value but at some point, that bubble has to burst, and it has to stop.

“Most landlords do not simply want to cash in because there are tax implications for doing that.”

Rent controls will not be at all well received

Mrs Peters says introducing rent controls in England would be a huge mistake and claims many landlords would leave the sector as a result.

The Scottish government recently announced the end of its emergency rent cap.

Introduced in 2022, the Cost of Living (Tenant Protection) (Scotland) Act, aimed to protect tenants from rent increases and ban evictions.

She tells Property118: “It feels like interference from the government by the back door.

“We’re supposed to live in a free market, and I don’t think this will be at all well received by any landlord in the country.

“There are just other ways to stabilise the market, and I appreciate that there is always another side to something as significant as rent control.”

“And that, of course, is to bring stability to the tenant, to bring something that is seemingly unaffordable because of the rent increases to something that’s steady and affordable.”

Mrs Peters says it’s important to remember that the cost-of-living crisis also affects landlords not just tenants.

“Every one of us, whether we own a property or rent a property, is subject to the cost of living rises.” she said.

“So that still reflects on landlords who may be stifled in terms of being able to put their rents up to cover, for example, the huge increases that some of them are experiencing through their mortgage lenders, raising their interest rates.

“It’s a really difficult balance, but usually with rent controls they have pushed landlords out of the sector rather than stabilise the market.”

Abolition of Section 21 will cause huge problems for the courts

Mrs Peters says the million-dollar question is whether the Renters (Reform) Bill will pass into law before the next election.

“This has been like the Sword of Damocles hanging over most landlords for quite some time.” she said.

“Nobody quite knows why the Bill has stalled. Is it because of certain elements such as the abolition of fixed-term tenancies, a lot of backbenchers seem to be fighting that element at this moment in time?

“It’s going to be very tight, and nobody knows what is going to be in the Parliamentary business books at the moment, but it doesn’t seem to be the Renters (Reform) Bill.”

Mrs Peters adds the abolition of Section 21 will cause a huge problem for the courts.

She explains: “The judiciary system is such a mess at the moment. Any new government whether it be Labour, or the Conservatives will still have the same problem with the courts, especially with the huge court backlog.

“It’s going to be an interesting ride but Section 21 at the moment is still the preferred notice being used by most landlords.”

A difficult situation

Mrs Peters hopes the future of the private rented sector will continue to thrive and play a vital role.

She tells Property118: “I hope in the future the private rented sector will be as vital as it is now. It’s a massive part of our housing market and the economy as a whole. I don’t think it will ever diminish in its importance.

“What will happen, however, is that there will be landlords who have to seriously consider if it’s for them, unless the government can start supporting landlords with how they can conduct business.”

Mrs Peters adds: “It’s the difficult tenants and the small minority of bad landlords who are actually making the problem for the entire industry.”

“We have got a difficult situation, but we have to hope that landlords ride the storm and that they are in it for the longer term.”

Book for landlords and agents

Mrs Peters also tells Property118 about her book which she has published about lettings law for landlords and agents which includes some of the more unusual questions that come with renting out a property.

She said: “It was a really interesting process writing a book. It was more about just getting a message out there to as many people who are interested to just understand where their gaps might be in their learning and the understanding of the legal process associated with renting a house.”

To find out about the unusual questions that come with dealing with property and more on Gina’s analysis on the private rented sector including the Spring Budget then watch the video below.

If you would also like to win a copy of Gina’s book ‘Lettings Law for Property Professionals’, then answer this question by no later than the 5^th April 2024 when the draw will be made:

Which is the new Section 8 ground to be introduced to help student lets?

Send your answers to Nikki Wright (n.wright@duttongregory.co.uk) and be sure to provide your contact information to enable us to notify you if you are a winner!

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