Our Mortgages Managing Director, Richard Rowntree, shares his thoughts on the ‘Reforming the Private Rented Sector’ report and what it means for buy-to-let landlords in his latest Mortgage Solutions column.

Providing homes for tenants is a huge responsibility, so it is important that a framework exists to ensure high standards are met. But, with the private rented sector (PRS) subject to more than 100 pieces of regulation, we can see how this poses a challenge for landlords.

Recently, the Levelling Up, Housing and Communities Committee (LUHCC) published the ‘Reforming the Private Rented Sector’ report. This includes responses to the Government’s proposals, outlined in the ‘A Fairer Private Rented Sector’ White Paper, that primarily seek to improve security of tenure and housing quality.

Addressing concerns that existing rules leave tenants vulnerable to “no fault” eviction and afraid to challenge poor practice, proposals to abolish section 21 were welcomed.

It was encouraging to see acknowledgement that for the repeal of section 21 to work, the current court system requires improvement to provide landlords protection under section 8. But, with the Government already rejecting LUHCC’s suggestion of establishing a specialist housing court, it remains unclear how courts currently struggling to process repossession claims will effectively offer support to landlords experiencing issues such as antisocial behaviour or rent arrears.

Another measure aimed at providing tenants with security of tenure is the intention to replace fixed-term tenancies with a system of open-ended tenancies, something also endorsed by LUHCC. After working with partners such as the NRLA on this issue, I was pleased to see that this was recommended on the basis that student tenancies should be exempt. This follows recognition by the report’s authors that 12-month tenancies work for both landlords and students as they align with the academic year.

Proposals intended to rid the PRS of poor-quality property were also supported - namely the introduction of a Decent Homes Standard, mandatory landlord ombudsman and property information portal, in addition to identifying barriers to the effective enforcement of housing standards by local authorities.

These all seem like sensible suggestions and we’re fully supportive of efforts to drive up standards in the sector. However, with landlords potentially required to spend up to £10,000 to make each property compliant in terms of being in a reasonable state of repair, having reasonable facilities and providing a reasonable degree of thermal comfort, we see how the cost could present a sizeable challenge for landlords and that finance is an important consideration.  

For me, one of the most notable aspects of LUHCC’s review is the notion that the high cost of renting resulting from a shortage stock is a greater issue for tenants than security of tenure or housing conditions, something not addressed by the White Paper.

Highlighting how the reforms could be viewed as an extension of existing anti-landlord policy that has contributed to a reduction in the size of the PRS, I was surprised to read that a review of the buy-to-let tax regime is recommended.

Despite calls for the imminent Spring Budget to feature tax cuts, after a drop in energy prices and a higher-than-anticipated tax take effectively handed the Chancellor billions of pounds of unexpected funds, giving tax breaks to landlords would be a bold move for any government. Even so, the acknowledgement of the relationship between housing affordability and supply and tax and regulation is a step forward.

While still some way of being passed into law, the report does provide a clue as to the Government’s current thinking. We know that regulatory issues are a top priority for landlords so keeping up to date with them can help intermediaries offer valuable advice to clients.