“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 on 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.
I fail to see how large corporate landlords will fare any better than small private ones. The tenants rights and the court delays will be the same for both. They will both face the problems of tenants not paying the rent, trashing properties and long delays to get evictions. And the corporates will probably have a higher cost base than most private landlords (because all of a private landlord’s personal management work will have to be performed by paid employees, and also because they will have debts to pay and shareholders to make a return for). Their only economy of scale will be to spread the bad debts and property repairs over an ever larger portfolio of properties, but even that means the paying tenants will just be forced to pay higher rent to cover the non-paying ones. All in I foresee a) corporates piling in, thinking they can make a killing, b) them discovering its a bit harder than it looks, c) them driving rents ever higher to try to make a profit, and d) eventually piling out of the sector en masse when the losses get too bad.
This. Far from driving out the bad landlords, these new rules will in fact bring them back in. Really bad landlords in fact, Rachman style. If you’re facing fines for just wanting your house back in one piece, why bother with abiding by any of the rules? Big Baz with a pickaxe handle will be your bailiff today. Get out now if you want to keep your knees bending the way they should. Or perhaps more accurately given the makeup of the inner cities these days, probably Big Abdul instead.
A very good point.
As I understand it, the usual way large corporate entities use regulations to their advantage is compliance costs. That is, they’d already have the bureaucracy in place to file all the forms, keep the records, schedule the inspections, etc. whereas smaller firms would have to hire staff. Of course, there’s already plenty of paperwork involved in renting properties, but there’s still a big difference between having to hire your tenth staffer and having to hire your hundredth.
Well, that and possibly having enough resources for bribery and the like. Sort of the compliment to the landlords who just hire Big Abdul.
Then again, the new regulations could turn out so onerous that not even the largest corporation can comply.
The large corporations know how to apply pressure (and pleasure) to government to sway regulatory enforcement. The small landlord can’t make a campaign contribution large enough to make a difference.
Some USA cities have tried variations on this new “you can sign them in, but they’ll never leave” scheme.
Now, in those cities, you cannot get past the landlord’s qualifying baselines without a blemish-free past – both financial and renting-history – and a generous income.
They only take the cream of the crop as tenants. And who can blame them?
So, next I imagine you’ll see the government taking over the tenant-qualifying function. “You’ll take who we send to you!”
@bobby b
The large corporations know how to apply pressure (and pleasure) to government to sway regulatory enforcement. The small landlord can’t make a campaign contribution large enough to make a difference.
The other big advantage large landlords have is dilution. Most people are decent and behave reasonably. Most don’t trash the place, or let their dog crap on the carpet, or refuse to move if asked, or take the landlord to court over a reasonable rent increase. However, it is that 2% or 5% that piss in the soup and ruin it for everyone. If you are a small landlord that small number have a huge impact, but if you are a big corporation, it is just diluted into the whole. If one guy in 5,000 doesn’t pay their rent for 12 months, it barely registers, if one guy in 5 doesn’t pay their rent it can easily head you toward bankruptcy.
And as CayleyGraph2015 alluded to, the actual costs of dealing with this shit can be diluted too. If they are big enough they can have a staff attorney and some paralegals just as part of basic costs, where the small landlord has to get one for specific engagements. They can have a maintenance staff to deal with the crap whereas a small landlord cannot justify it. And so forth.
I wonder if there is a small business opportunity here? Where small renters get together as a sort of “union” to pool resources, paying a fixed fee, kind of like an insurance pool, to deal with this crap. Possibly one can imagine a situation where if they really need some renters out they can sell the house to this organization in a way customized to reduce the transaction cost, and have a sort of like kind exchange program. They you go, all you enterprising Brits, sounds like a golden opportunity to me.
So, next I imagine you’ll see the government taking over the tenant-qualifying function. “You’ll take who we send to you!”
Isn’t using a credit report discrimination against the poor?
And, of course, no mention in the media that there are bad tenants out there. If there’s one bad landlord, then all landlords are evil and need to be made to suffer, but how dare you argue there are any dishonest renters!
Or how dare you go further and point out it’s those dishonest tenants that are causing landlords to institute policies to protect themselves that the Goodthinkful Class in the state-service media get apoplectic about.
Not one I would rush into. No one knows the effect of this bill yet. At present, in the UK, 3-5% of private renters are reckoned to be in arrears. If this bill drove that to double and the time/costs of recovery to rise substantially, then it’s a mug’s game, even if you collectively own 1,000 units.
Institutional ownership of single or multi-family rental properties is fairly low in Britain. Those investors with a toe in the water all have return targets and a damaging rise in delinquent tenants means they won’t hit them.
When we were renting a place out (we live in it now) we had a similar arrangement but with slightly different enforcement arrangements. The lease was formal, the basic one downloaded from the government website, and we waived the bond. My diminutive Filipino mother in law selected the tenants from the local community, kept an eye on them, and administered a tongue lashing if they did anything wrong. One dope let her find out he was a few weeks behind on the rent. Oops, he copped it for that one. I told him to just let me know next time and we can work something out, no need to involve Minda 😂
Following up on my comments above, I saw an article in the Terriblegraph about the Canary Wharf Group, which owns five residential towers as well as office space (its main business). The group said the Renters Rights Bill meant it would start shifting those resi units into short-term, serviced apartment-style lets. They won’t be the last to do this. Of course you can live long-term in a serviced apartment, but at a price.
“And, of course, no mention in the media that there are bad tenants out there. ”
Strangely enough thats not true. The BBC of all people have had fairly balanced articles recently over the recent changes to rent laws. For example there was one which featured a woman who was an ‘accidental landlord’ (she’d had health problems and moved in with her family and rented her house out) and had a tenant who ran up big rent arrears and it was costing a fortune to get them out. It may have helped she wasn’t white, so the BBC felt safe feeling sorry for her.
https://www.bbc.co.uk/news/articles/c30r5z3vdydo
Other articles have featured landlords being critical of the changes and explaining how they have lost significant amount due to dodgy tenants, as well as tenants welcoming the changes. I’m not sure what has brought on this sudden bout of even handedness at the BBC.
Tom Briggs and Johnathan Pearce are correct about the terrible consequences of ignoring basic economics with these insane edicts.
And I agree with jdh – it is hard to believe these are “unintended consequences”, for example the same “Liberal” government that passed the 1906 Trade Union Act denying that it would increase unemployment (create Institutional Unemployment) as the 1875 (Disraeli) Act had done – set up “Labour Exchanges” in an effort to deal with the increase in unemployment that it denied would happen, the dishonesty of these “Liberals” is obvious – in truth they knew well that the 1906 Act would increase unemployment, but passed the Act anyway as an effort to win union political support (they failed even in that – the unions went over to the new Labour Party).
As for housing – as bobby b points out, these regulations are an effort to destroy small independent property owners, who rent out houses and flats they own, in order to turn everything over to government and to vast Corporations joined at the hip with government (such as BlackRock – which President Trump recently acted against, getting attacked by “free market” supporters who do not understand that political Corporations such as BlackRock have nothing to do with a free market).
The plan is, eventually, for everyone to live in properties owned by by government institutions or owned by organizations linked to the government.
No more small landlords – and, eventually, no more owner occupiers either.
It is an international agenda.
Yeah. We’re selling our (rented-out) flat in Bristol.
Too much hassle, return is too low and now it’s about to get truly awful.
People are definitely going to start complaining about the lack of rental housing available.
My heart will bleed.
I live in building which has been divided into 3 rental properties. Two out of the three are selling up. As a good little libertarian should I have informed my landlady that I won’t be setting the law on her. We’ll have to see how that goes.