Property News

Reforming the private rental sector

Em Morley - May 6, 2014

The leader of the opposition Ed Milliband has launched a series of proposals aimed at reforming the private rented sector, should the Labour Party win the 2015 general election.

Mr Milliband’s proposed reforms are sure to be far reaching if enforced. However, critics have argued that the planned changes will cause more negativity than positivity and will cause rents to increase.

Three key planned Labour reforms are:

Fixed three-year tenancies

If elected, Labour plan to give tenants more security more providing longer-term tenancy agreements. A three-year fixed agreement would see the tenant still able to give notice after a six-month period, whereas landlords would only be able to break the agreement if they are selling or moving back into the property.

A similar clause included is one covering ‘breach of tenancy,’ where landlords could break agreements in the case of problem tenants. However, opponents have argued that the current system for tackling anti-social tenants is long-winded, expensive and time-consuming. Landlords are unlikely to be put at ease by this proposed protection.

Capped-Rent

Reforming the private rental sector

Reforming the private rental sector

Despite many economies across the globe abolishing rent caps, Labour is proposing their reintroduction in the UK. This move has caused consternation from experts, who believe that the privately rented sector needs improvement and replenishment in rental stock. Capping, it is argued, would discourage landlords from reinvesting, therefore lowering the quality of properties available to tenants.

Blocking letting agent application fees.

At present, legislation permits letting agents to be clear on fees that will be charged to potential tenants. These fees cover features including agency costs, referencing and securely registering tenants’ deposits. In addition, recent changes have led agents to need to confirm tenants’ immigration status, which again results in a charge.

Under his proposed reforms, Mr Millband plans to block letting agents from charging these additional fees. Critics say that this will lead to falling services, or lead to the landlord having to cover the fees, with rent prices increasing as a result.

Dan Channer, Managing Director of letting agents Finders Keepers, is strongly opposed to Milliband’s proposals. Channer said that, ‘As ever, the true problem is not the fees or tenancy duration but the lack of supply for tenants ‘forced into’ the private rental sector.  Labour’s proposals will do little to encourage people to invest in property and boost the rental supply.  Instead, Labour has failed to address the real problems in the sector while trying to create new ones.’[1]

[1] http://www.landlordexpert.co.uk/2014/05/06/understand-the-pressures-on-the-private-rental-sector-2/