Renters Rights Act pressure points – Unintended Consequences or Foregone Conclusions?
Renters Rights Act pressure points – Unintended Consequences or Foregone Conclusions?
A professor has warned that the Renters’ Rights Act has caused changes in the private rented sector which are proving “ineffective or have perverse outcomes”. Writing in the Telegraph, Tim Leunig, professor of economic history at the London School of Economics, has warned that the act has backfired on tenants. A report in the Daily Mail also reveals that the Act has caused unintended consequences, with tenants struggling to find affordable places to live as landlords sell up.
Mr Leunig points out the government’s ban on offering more than the asking price for rental properties has been “ineffective”. Now that any form of bidding war has been banned, an investigation by London Centric has shown that city landlords are instead advertising flats at exceptionally high prices and tenants are then encouraged to view such flats with the assurance that the landlord will take a lower offer which is forcing all potential tenants to bid up to an artificially false advertised price.
“That, it turns out, is legal. The effect, of course, is the same as the previous system: would-be tenants having to bid, with all the stress and uncertainty that entails”.
Also, under the act, landlords and agents can no longer require several months’ rent upfront. Once a tenancy agreement has been signed, they may require no more than the initial month’s rent before occupation, although a tenant can voluntarily choose to pay rent early once the tenancy has begun.
Three notable groups have been hardest hit by the changes that have come in – international students, overseas workers and the self-employed.
International students and overseas workers will obviously fail credit checks. Many students have parents who have saved in advance, and could and traditionally did, pay for a whole year’s rent in advance; but that is no longer possible. Overseas workers either coming in for short term contracts or ex pats returning home are similarly unable to be referenced, whilst the self-employed often pay themselves via dividends. This means that they also fail credit checks. To overcome these problems, and to reassure landlords, both groups often offered to pay a year’s rent in advance. As this is now no longer legal, all of these groups now find it a lot harder to rent a home, and landlords are shunning such tenants.
Mr Leunig comments: “Harming these groups is bad not only for the individuals concerned, but for the country as a whole. Some of those self-employed people will go on to create decent businesses, employing others and creating good jobs”.
If this direction in the PRS (Private Rented Sector) continues to carry on, as it looks likely to, the governments good intentions to help the poor and homeless will totally backfire. Foreigners and expats returning who often intend to take up a well-paid job or a much needed placement in a role where there is a shortage of employees will struggle to get a home to rent, often rendering their job position untenable! Similarly, those on lower incomes are now not be able to afford the current high rents and those receiving benefit will struggle to pay the growing difference between the Local Housing Allowance and the rent to be paid – the gap is getting too large. There is also a growing risk of possible unintentional discrimination against these groups who have relied on renting and are suddenly finding it a closed door to entry!
Ultimately, the PRS will become more the preserve of those tenants who choose not to buy, rather than a sector that helps house people who cannot afford or who are unable to buy. The gap between market rents and affordable rents will continue to grow too large and the unthinkable will happen for this government – Less overseas tenants will be able to gain access to this country and more and more domestic tenants will be made homeless through no fault of their own but rather by the persistence of the government`s belief that they are making a system fairer!!
Some parts of the Act may be seen to be working well, but there are other vital areas that need a radical rethink, because almost six months on, they are not working as intended!