Government Admits Renters’ Rights Bill May Lead to Rent Increases

In an article in the Telegraph, the UK government has acknowledged that the Renters’ Rights Bill, which includes significant regulatory changes, may force some landlords to raise rents to cover additional costs. However, officials maintain that the impact will be limited for long-term tenants and estimate relatively low additional costs per property.

The article can be read here (subscription may be necessary)

Key Changes Under the Renters’ Rights Bill

1. Abolition of Section 21:
   Landlords will lose the ability to evict tenants without giving a reason, effective immediately, rather than after addressing the court backlog.
2. Application of Awaab’s Law:
   This law, focused on tackling damp and mould issues, will extend to the private rented sector, increasing landlords’ responsibilities for property maintenance.
3. Annual Rent Increase Limitations:
   Landlords can only raise rents once a year, using the Section 13 process, and tenants will have the right to challenge increases they deem unfair at a tribunal.

Government Impact Assessment Highlights

• Cost to Landlords:
  The government estimates the additional cost at £12 per property annually, claiming this is unlikely to significantly disrupt the rental market.
• Potential for Increased Rents:
  

  “It is likely that landlords will pass through some costs of new policies to tenants in the form of higher rents.”

• Possible Market Exit:
  Some landlords may leave the private rented sector if they are unable to offset costs through rent increases.

Landlord Concerns

A recent Landbay report highlights widespread unease among landlords:

• 42% of landlords with portfolios of 4-10 properties plan to raise rents due to rising interest rates and increased operational costs.
• Many landlords argue that additional regulation reduces profitability, leaving them little choice but to adjust rents.

One industry professional remarked:

“It is considered good practice to increase rents annually to account for inflation and stay in line with market rates.”

Government Response

The Ministry of Housing, Communities, and Local Government argues that long-term tenants are less likely to face rent hikes:

“Landlords value good tenants and are therefore less likely to raise rents for sitting tenants.”

The government believes that empowering tenants to challenge rent increases through the first-tier tribunal will ensure fair practices.