BLOG: Renters are collateral damage in their own Renters’ Rights Act
Goodlord boss Tom Goodman suggests that Labour's much-cherished rental legislation is producing the opposite Ministers hoped it would.
When the Renters’ Rights Act became law on 1st May, ministers billed it as “the biggest shake-up to renters’ rights in a generation.” Renting reform was urgently needed. But three months on, renters increasingly look like collateral damage in their own Rights Act.
None of this comes as a huge surprise. Before the new legislation took effect, commentators warned of “gazundering”, restricted supply, price hikes and other destabilising ripple effects.
At the time, much of this was dismissed as landlord scaremongering. And while it’s still too early to get a definitive picture from the data, the reality looks to be shaking out as many predicted.
We’re already starting to see the early signs of price rises in response to Section 13: the new mechanism that means landlords can only increase rents once a year.
While one swallow does not make a summer, Goodlord’s Rental Index – built on verified tenancy transactions, not advertised asking prices – shows annual rent inflation sitting at just 1.7% during April and May, before jumping to 6.5% in June: the sharpest rise in nearly two years.
That’s more than double May’s CPI figure and outpaces wage growth. Whatever the Act was meant to deliver for renters’ wallets, it isn’t yet visible in the data.
Crucially, pressures aren’t evenly distributed. The cap on advance rent payments, intended to protect vulnerable tenants, is excluding groups without UK guarantors or credit histories.
International students are clearly at risk – a cohort previously able to access housing by paying rent upfront could now be locked out of the rental market altogether.
At the same time, more sophisticated operators are testing the limitations of the legislation.
At the same time, more sophisticated operators are testing the limitations of the legislation.
Reports by Inside Housing show how tenancy restructures are being used to reset rents, despite the Act’s intent to curb increases. Left unchecked, these workarounds could become increasingly commonplace, further tilting the market away from the tenants the reforms were meant to protect.
Not every prediction is coming true. We’re yet to see the mass “landlord exodus” many feared. Yet it still stands that the legislation has left landlords in limbo. The reletting ban tied to Ground 1A means landlords attempting to sell now face a 12-month ban on re-letting if that sale falls through.
Estate agency Hamptons estimates that, had the rule applied last year, between 80,000 and 100,000 unsold rental homes would have been trapped – unable to be sold or re-let.
Faced with that risk, we’re seeing landlords holding onto properties in some regions, with landlords struggling to sell rental stock – particularly flats – where the market is slowest. This isn’t happy news for landlords: Goodlord data from April suggested half of landlords wanted to sell or reduce their stake in the market within twelve months.
Legislation costs
This is not a story of “tenants versus landlords”, but of a market yet to regain the confidence of both sides.
New Goodlord figures show that nearly half of tenants remain unaware or unsure about how their fixed-term agreements have now been moved to rolling contracts.
A further third of tenants have experienced rent increase attempts since 1st May, representing the most common landlord action in response to the policy changes. Estimates suggest the legislation has cost landlords £5,000 so far – costs which will ultimately be passed onto renters.
Andy Burnham’s arrival in Downing Street suggests more, not less, intervention.”
All of this lands against a shifting political backdrop. Andy Burnham’s arrival in Downing Street suggests more, not less, intervention. He has a track record of rent regulation, and an enforcement record in Greater Manchester that saw fines issued against landlords rise 43%.
The likelihood is that further measures will be layered onto a market already showing signs of stress, rather than a pause to assess what is and is not working.
None of this is an argument for a return to the status quo. Section 21 needed to go, and stronger protections against poor conditions and unfair practices were long overdue. But good policy is judged on outcomes, not intent. While it’s still early days, the direction so far points to a system far from fixed.
Author: Tom Goodman is Managing Director of Goodlord
