“In the pantheon of destructive, counterproductive laws of the last few centuries, Labour’s new Renters’ Rights Act, which starts today, must be up there with the worst. Perhaps alongside the Corn Laws of 1815, or the Trade Union Act of 1906 that allowed unchecked industrial unrest and economic decline, or the Town and Country Planning Act of 1947 that constrained housing supply. It is that bad. The Renters’ Rights Act is sold as a moral crusade: a bold attempt to drive rogue landlords out of England’s private rental sector and protect tenants from abuse. As with the soon-to-be-implemented Employment Rights Act 2025, it is a cure that worsens the disease. Just as higher unemployment will come from the Employment Rights Act, so higher rent and fewer tenancies will come from this Renters’ Rights Act. Employment rights creating more unemployed people, renters’ rights creating more people that cannot rent. Classic performative socialism.”
Tim Briggs. CapX.
One take-away from all this in my opinion is that this will seriously damage private landlords who own, say, one to five properties, and benefit larger, more institutional landlords, including corporations. Ownership of rental property will become concentrated into the hands of medium-sized and large companies, which I suspect is exactly what the existing government (and not just the existing one) wants. Such landlords will be more pliable when it comes to political pressure to adopt this or that new rule. Also, at the margins, it makes the rental sector less flexible, which also hampers the ability of people to move around in finding and obtaining new jobs. This adds to the baleful impact of the new employment legislation in the UK, which amongst its features is an attempt to re-unionise the workforce and shorten periods when an employee is on probation and can be let go. Even the BBC covers this aspect of such rules, referring to “unintended consequences”.
The point has to be made over and over that there is cause and effect. Make X more costly, or potentially risky (such as by making it harder to fire a person, evict a delinquent tenant) – there will be less of X. We impose speeding tickets on speeding motorists, so why should it be different if we somehow increase the cost of doing something, all else being equal? In fact, it would be honest if a politician said “yes, imposing these rules will reduce supply of X, so we will need to make up the difference in some other way”. But this hardly ever happens. There’s just this assumption that a new piece of law or tax will be absorbed. This is a species, in a way, of the magical thinking that we also get in areas such as around Net Zero.
That is certainly what the last government wanted. I presume this lot just want to hammer landlords who are unlikely to vote for them and boost renters, who are. It is early days yet for this legislation. If it does lead to a significant percentage of tenants choosing not to pay rent, because they reckon they can get a free year before eviction and maybe longer, then the leasing market could collapse, apart from protected areas like student housing.
A professional or institutional landlord won’t go under if, say 5-10% of the rent roll dries up, but it could destroy their returns. In which case they will get out of the leasing sector and into more hotel-style leases, serviced apartments rather than leased flats, if they continue to invest in property at all. The people most likely to thrive are the dodgy landlords who have ‘informal’ lease arrangements, the sort which involve sending a few big lads round to deal with disputes.
I do have a dog in this fight, as the owner of a flat in London (which I clearly should have sold a decade ago). I have rental insurance; it will be interesting to see if this pays out in the event of default. I can see a lot of insurers trying to wriggle out of their obligations if the market does begin to collapse under the weight of legislation.
None of these are unintended consequences.