property investment

Following the Government’s announcement and subsequent consultation into repealing Section 21, which received in excess of 20,000 responses, The Lettings Industry Council (TLIC) commissioned a report ‘Beyond Section 21’ to look at the impacts of doing so.  The report, released today (19 October 2020), details the negative consequences of the abolition of Section 21, including a reduction in supply of rental properties by up 20 percent, rising rents and increased pressure on the justice system, as well as recommendations to balance the impact. 

The report’s findings suggest suddenly ending Section 21 will have the following impact: 

  • A tougher screening process for tenants, impacting those on housing benefits, lower income families and insecure employment the most 
  • A fall in the private rented dwelling stock in England by 20 percent, with the impact falling heaviest on vulnerable tenants claiming benefits, as landlords seek to either leave the PRS or move towards other market segments such as short-term lets 
  • Upward pressure on rents as a result of the negative impact on the numbers of homes available. Around 600,000 homes could see rent increases (13 percent of the sector) 
  • Increased pressure on the justice system by tripling the court caseload with an additional 45,000 possession hearings and court capacity severely challenged 

Commenting on the findings of the reports, Theresa Wallace, Chair of The Lettings Industry Council (TLIC), says: 

“The PRS has doubled in size over the last 20 years, which means any changes to the current regulations will have a huge impact on the life of millions of citizens. It is vital to strike a balance between the needs of tenants for long-term security and legal certainty, restoring landlord confidence to ensure an adequate supply of private rented homes. The social cost of abolishing Section 21 lies in the economic effects it will release and how the market will react to it. That is why the government must not proceed with its proposal to do so without careful consideration of the impacts and implementation of measures to mitigate such negative consequences.”

In the ‘Beyond Section 21’ report, The Lettings Industry Council suggests implementing the following set of four measures to balance the impact of abolishing Section 21:

  1. Strengthening the grounds of section 8 for which it can be used and to allow an accelerated process
  2. The use of meaningful mediation to reduce the number of disputes resulting in court proceedings before they commence and save both sides substantial legal costs
  3. Court reform including a modernised, specialist housing court for all housing related hearings, ensuring timescales for repossession can be reduced and a viable route for tenant claims against landlords for disrepair, poor conditions and management
  4. Bailiff reform because securing the services of county court bailiffs is one of the longest delays for landlords, following the grant of a warrant for possession

Paul Shamplina, founder of Landlord Action and head of property at Hamilton Fraser, says the implementation of these measures would not only prevent the negative impacts of the abolition of Section 21 on both landlords and tenants, but also help both parties to build greater trust in the PRS. He comments:

These four measures make sure that the tenants’ need for long-term security regarding their tenancies is met while at the same time respecting the landlords’ right to use their property economically and according to their needs.

“Some of the measures, such as the mediation process and the bailiff process reform can be introduced on relatively short-term planning.  Whilst we acknowledge that court reform and a review of Section 8 requires longer-term preparation, if the government were to adopt the step-by-step implementation of measures outlined in this report, it would not only prevent a short peak increase in serving Section 21 notices, but also give all relevant parties enough time to adapt to the change in legislation.

“We are confident that with faster and easier access to justice, banning both criminal landlords and anti-social tenants from the PRS, as well as the improved communication between landlords and tenants through mediation, both parties trust in the PRS will increase.

“Providing greater legal certainty will lead to further growth within the PRS, as more private landlords will be willing to rent out their properties and tenants will be provided with a broader range of properties they can choose from.”

You can see the highlights presentation of the report here and the full report here.

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