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The UK rental market has changed dramatically in recent decades, with the proportion of renters doubling to 30% since 2000. Over the same period, housing costs have increased much faster than wages.
Historically, rental area The UK has faced less regulation than many other European countries. But now new legislation aims to improve the safety of tenants in England and strengthen the protections tenants have against environmental hazards.
many elements of tenants bill of rights This is likely to improve the lives of tenants without hurting landlords. But some reforms for renters will make becoming a landlord more difficult or even undesirable for some. So far, we think the proposed measures fall into three groups – good, not so good and complicated.
Good
A 2023 government report estimated that 3.6% of private rented properties had serious levels of damp and mould. A section of the Bill will be “extended”law of awab(Named after two-year-old Awab Ishaq, who died after living in a mold-infested home) In the private rental sector, it offers protection to tenants in problem properties.
In addition, a new private rental sector Landlord Ombudsman will be able to help tenants resolve disputes without the need for slow and costly legal proceedings. The creation of a database of the private rented sector will improve transparency for the tenant and compliance with the laws already in place by landlords.
not so good
The Bill seeks to end the practice of “rent bidding”, where landlords can effectively maximize the rent received. Landlords and letting agents will not be allowed to accept more than the advertised starting rent.
In practice, many landlords can increase their starting rents, so the new rule has little real impact on tenants’ prices. Additionally, evidence from other marketplaces such as eBay shows that auction-style pricing results in lower prices in many cases than simply posting the price.
Thus, it is not clear that this policy will have the desired impact. But the bill also seeks to regulate rent increases for existing tenants.
One of the most important parts of the bill is the abolition ofSection 21 eviction” (So-called “no fault” evictions). Eliminating Section 21 would force landlords to rely on what is known as a “Section 8 Notice,” a written document used when a tenant has broken the rules of their rental agreement.
And while Section 8 allows landlords to recover costs, it also requires a full court hearing. Yet evidence suggests that homeowners are often willing to sacrifice the possibility of recovering losses in order to get their property back quickly.
A major reason for this is the extended court system and the time it takes to obtain possession (often up to a year). The Bill missed an opportunity to tackle costly court delays by creating a specialist housing court – something that could have been easily funded by a small levy on Britain’s annual £55 billion rental income.
Complex
Overall, the reforms are likely to increase the cost of being a homeowner (and decrease incomes). This may lead some landlords to leave the area and change the composition of landlords active in the market. There is strong evidence of net market exit in terms of rent control from other countries, including the US and Spain.
UK landlords have seen a negative impact on profits from a number of recent policies, including the phasing out of mortgage interest tax deductions, stamp duty on second properties and the 2019 Tenant Fee Act, which banned rental fees in the private sector. Our own research into this found that landlords had to pay around 25% of the fees previously covered by tenants.
About the authors
Nikhil Dutta is Assistant Professor in Economics at the University of Warwick. Jan David Becker is Assistant Professor of Economics at Bocconi University. This article is republished from The Conversation under a Creative Commons license. read the Original article.
Homeowners leaving the area is not necessarily a major concern, but how it affects the functioning of the market could be.
When homeowners sell their properties, an important question is who buys them? Basic economics suggests that landlords moving out of the area reduces prices in the property market, making it possible for some tenants to buy.
But the realities of the UK housing market mean things are not that simple. The large deposits required and limited access to mortgages and loans will still prevent many tenants from being able to purchase a home.
In any case, this will only apply to a small portion of tenants. If improvements increase the cost of becoming a homeowner, it’s likely that some of that increase will be passed on to tenants.
The UK letting market is dominated by “mom-and-pop” landlords (those who own a small number of properties), while other countries such as the US have seen an increase in institutional investors. It is possible that this bill could contribute to a similar increase in the UK, causing rents to rise as those larger players are more able to exert market power.
The immediate effects of the bill may be minor. But there is a bigger concern than this. Will low home prices reduce construction activity and ultimately reduce housing supply? This is certainly possible, but the government has – and should – draw on other powers in relation to modernizing the planning system and making construction cheaper. These measures can boost supply and improve affordability for both tenants and buyers.