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TODAY'S OTHER NEWS

Abolishing Section 21 means rent up, stock down, tenant insecurity

The Lettings Industry Council has published a report outlining why Section 21 should not be abolished, despite the government’s commitment to do so.

The most shocking suggestion is that its abolition may lead to a 20 per cent collapse in the number of properties available to let, combined with soaring rents. 

The report’s findings suggest suddenly ending Section 21 will have the following unintended consequences:

- A tougher screening process for tenants, impacting those on housing benefits, lower income families and insecure employment the most;

- A fall in the private rented dwelling stock in England by 20 per cent, with the impact falling heaviest on vulnerable tenants claiming benefits, as landlords seek to either leave the private rental sector or move towards other market segments such as short-term lets;

- Upward pressure on rents as a result of the negative impact on the numbers of homes available. Around 600,000 homes could see rent increases, equivalent to 13 percent of the sector;

- Increased pressure on the justice system by tripling the court caseload with an additional 45,000 possession hearings and court capacity severely challenged.

“It is vital to strike a balance between the needs of tenants for long-term security and legal certainty, restoring landlord confidence to ensure an adequate supply of private rented homes” explains Theresa Wallace, chair of the Lettings Industry Council. 

“The social cost of abolishing Section 21 lies in the economic effects it will release and how the market will react to it. That is why the government must not proceed with its proposal to do so without careful consideration of the impacts and implementation of measures to mitigate such negative consequences.”

Instead, the council suggests implementing the following measures to balance the impact of abolishing Section 21:

1. Strengthening the grounds of section 8 for which it can be used and to allow an accelerated process;

2. The use of meaningful mediation to reduce the number of disputes resulting in court proceedings before they commence and save both sides substantial legal costs;

3. Court reform including a modernised, specialist housing court for all housing related hearings, ensuring timescales for repossession can be reduced and a viable route for tenant claims against landlords for disrepair, poor conditions and management; and

4. Bailiff reform because securing the services of county court bailiffs is one of the longest delays for landlords, following the grant of a warrant for possession.

 

Paul Shamplina, founder of Landlord Action and head of property at Hamilton Fraser, says the implementation of these measures would not only prevent the negative impacts of the abolition of Section 21 on both landlords and tenants, but also help both parties to build greater trust in the PRS. 

“These four measures make sure that the tenants’ need for long-term security regarding their tenancies is met while at the same time respecting the landlords’ right to use their property economically and according to their needs” says Shamplina.

“Some of the measures, such as the mediation process and the bailiff process reform can be introduced on relatively short-term planning.  Whilst we acknowledge that court reform and a review of Section 8 requires longer-term preparation, if the government were to adopt the step-by-step implementation of measures outlined in this report, it would not only prevent a short peak increase in serving Section 21 notices, but also give all relevant parties enough time to adapt to the change in legislation” he continues.

“We are confident that with faster and easier access to justice, banning both criminal landlords and anti-social tenants from the PRS, as well as the improved communication between landlords and tenants through mediation, both parties trust in the PRS will increase.

“Providing greater legal certainty will lead to further growth within the PRS, as more private landlords will be willing to rent out their properties and tenants will be provided with a broader range of properties they can choose from.”

You can see the highlights presentation of the report here and the full report here.

  • icon

    That is actually a very reasonable proposal fair practical from the lettings industry council and exactly what we have found. Shelter, GR, Acorn etcs actions will and already have created massive problems for vulnerable and benefit claimants. Where are these people going to live?
    If 20% of rental housing stock went and you had the choice of working tenant compared to higher management vulnerable/benefit tenant.
    Who would you prefer to let to?

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    Agreed, vulnerable / benefits tenants are best left to councils and housing associations to home.

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    Has anyone ever heard of the 'Lettings Industry Council' who have written this report? Who are they?

  • Neil Moores

    Everyone is ignoring the Elephant in the room....that being that Banks and other lenders who will NOT want to lend on properties where there is no right of possession. They certainly didn't want to prior to the introduction of Assured Shorthold Tenancies, which were brought in in order to encourage investment in the domestic rental market because of a shortage of properties available to rent. Indeed, when I considered the option of offering 5 year tenancies myself, my Bank advised that it would be in breach of their covenants and that they would not alter them to accommodate such a change. As I understand things it would appear that my Bank is not unique in this regard.

    Matthew Payne

    Lenders would run a mile. LTVs would reduce dramatically, some would pull themselves out of the market altogther. Those that remained would be offering the best fixed rates at about 10%. A 20% exit is massively understating the impact.

     
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    Mediation has almost certainly been tried in the vast majority of cases which end in eviction.

    It's nothing personal. Landlords just want paid what is due to them and tenants can then usually stay as long as they like. If a tenant's circumstances change, then they may need to change where they live, just like owner occupiers who can no longer afford mortgage payments if their circumstances change.

    Public sector needs to take responsibility for the more "vulnerable", or get the so called charities to provide proper help instead of just counter productive agitation. Landlords can't be expected to subsidise tenants no longer able or willing to pay their way.

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    Mediation doesn't work, it a tenant isn't paying there is only one thing to do, evict ASAP.

     
  • PossessionFriendUK PossessionFriend

    Govt & Tenant support groups ( who Only represent the minority of bad tenants ) just don't get it.
    Unless there is a reliable method of evicting bad tenants, the whole of Tenancies, particularly in the lower end of the market will suffer from Less rental properties, higher rents and less willingness to rent to those that are in the most need.
    Talk about shooting themselves in the foot !

  • icon

    Neil, exactly right you seem to be one of the only few to raise the issue why it was introduced in the first place, that we gave years campaigning for prior to 1988 / s21, only for politicians like Sir George Young it might not have happened and millions would not have got housed at no cost to Government the way they did, if Government decided to give themselves a Statutory duty house all claimants for free its up to them and not our fault. We provide the Property to the market at no cost to anyone but ourselves at our own risk and always did even before residential b2l loans carry on with Commercial loans before Woolwich Building Society started all this nonsense buy to let (gone bust out of business long ago), where some ended up with dozens of properties and nothing paid off, totally tax efficient making a monkey out of traditional LL, no wonder the government clamped down on the industry with a hammer.

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    • 20 October 2020 13:09 PM

    Absolute twaddle.
    Nothing wrong with BTL.
    Lenders came into the market due to S21; S8 and the AST.

    Leveraged LL have housed millions of otherwise homeless tenants.

    Why should rich people be the only ones who could be LL!?

    The problem with BTL is the dysfunctional eviction process which makes letting without RGI very risky.

    Lenders imposed their criteria.
    You seem to be suggesting that it is perfectly acceptable for other businesses to borrow to invest but not LL.

    Plus OK for resi borrowers to do so at 95% LTV but with LL restricted to 75% LTV.

    The LL is the far less riskier borrower here.
    Abolishing S21 and the AST will see BTL lenders desert the market.

    BTL supports values in the UK property market.

    Without the purchasing power of LL the UK property market will plummet in value.

    Govt actions would cause negative equity of massive proportions.

    Shrewd LL will be selling up or converting to lodgers in resi homes.
    Most short-term letting is fraudulent so can't really be risked.
    If I could I'd sell up tomorrow but for various reasons I'm trapped into remaining a LL.

    It has been lenders facilitating loans based on rental income along with S21 and the AST that has effectively housed millions.

    Believe me as Neil has suggested Lenders will abandon the BTL sector if they are unable to repossess quickly in the event of mortgage default.
    What Govt should do is retain S21 but only for rent defaulting.
    Every other reason should go through the S8 process.

    Ultimately most evictions would still be S21 ones as most tenants when being evicted stop paying rent.
    This would then facilitate S21 being used.
    Abolishing the AST and S21 will be an unmitigated disaster for the UK economy.

     
    icon

    I remember those years well, just married and having to move for a job. The country was awash with small letting properties that no one wanted, owners not being able to sell them and tenants with no where to live. Every where there were dozens of empty houses. After a day house hunting we were given well over a hundred estate agent sheets and refused as many again. The stupidity of that Labour government was unbelievable.

    Section 21 was like summer coming after winter without a spring thaw. Did I mention inflation at about 12% a month and a pay rise every 2-3 months for the very lucky in government linked jobs? We did manage to get a new house and the valuation of our new house was flying upwards to match inflation. Section 21 stopped that as well.

    This comment is not make believe, it was real but there was never that much reported in the press or the BBC.

     
  • George Dawes

    Probably explains why the tories are behind it - their paymasters want a financial reset , what better way than to destroy the housing market completely

    Labour as proven by the coronavirus con are just as bad and puppets too

    They all live in a public sector bubble so have no idea about the real world

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    • 20 October 2020 15:13 PM

    The problem for Govt is that property values provide an illusory concept of wealth.
    Remove the illusion and fewer will wish to vote Tory.
    Rising property values always cause more Tory voters.

    Can't see that destroying the property market will gain Tory votes.

    GR who are tiny portion of the electorate really aren't worth pandering to.

    If Govt does pursue these property market destroying policies then they will be out next GE.

    It will have been the biggest political miscalculation by the Tories bar none!

     
  • icon

    must be a slow news day...

    icon

    Yes...... Hundreds more dying of Covid. No Deal Brexit looming. Possible vaccine for Covid around Christmas. US Election in 2 weeks.

    Nothing else happening?

    Wrong again Seb!

     
  • icon

    Abolishing Section 21 will have little affect on professional companies letting out properties.

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    Echis I doubt you have any idea what you are talking about, landlords big and small need to evict non paying tenants, and that includes social housing landlords

     
  • icon

    Professional Companies will be little affected by abolishing S21. The are currently our biggest problem parading as Corporate Companies taking over LL's Property and sub-letting the room making a killing breaching every regulation that we are supposed to comply, (huge numbers doing it haven't seen any Press report on this yet, we always hit the head-line) but that's fine with the Authorities all Graduates rubbing shoulders together as long as they making a monkey out of the LL that's great they wont be in any trouble they'll be the pillar of society.

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