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The proposed scrappage of Section 21 could result in the loss of 20 per cent of dwellings in the English private rental market, according to a new report on the proposed policy, by the National Landlords Association (NLA).

Such a decrease in supply was estimated to be equivalent to 960,000 dwellings.

The report, written by Capital Economics, having been commissioned by the NLA, detailed how government plans to scrap no-fault evictions could potentially result in a decline in available rental properties, as landlords move out of the private rental sector (PRS).

National Landlord Investment Show – MPU

Another potential unintended consequence of Section 21 being scrapped is a 59 per cent reduction in the supply of housing available to those who rely on housing benefits or Universal Credit, as well as a possible rise in rents for 13 per cent of properties in the PRS. This potential rise in rents across the PRS would affect as many as 600,000 homes as a result, the NLA revealed.

The government has been intending to scrap Section 21 since an announcement to do so in April. All three of the UK’s main parties now support the idea, after the Liberal Democrats voted on a motion to scrap Section 21 in September. No matter who forms the next government, following any upcoming election, the political climate is decisively moving against no-fault evictions.

Increasing rental pressure

The NLA’s report identified rising pressures faced by landlords over the past few years, as the government has sought to re-engineer the workings of the housing market. Removal of Section 21 would simply add to these pressures, according to the NLA.

In 2017, the number of dwellings in the PRS declined by 46,000, the first fall recorded since 1999. Landlords have been expecting subdued increases in house prices for rental and for sale, the NLA claimed, which has led to rising mortgage costs and modest returns for landlords overall.

With the potential scrappage of Section 21, landlords would be required to turn to Section 8 instead, something the NLA identified as costly, time-consuming and potentially inconsistent. The NLA recommended that the government should reform the court process, ensuring that Section 8 cases could be dealt with faster, and address the concerns landlords have about the removal of Section 21.

Consequences of Section 21 removal

If the government was able to follow the NLA’s own recommendations, the NLA claimed that private rented sector supply would fall by no more than 180,000 to 390,000, and rents would increase for a smaller proportion of the PRS, between 110,000 to 240,000 homes instead.

Chris Norris, director of policy at the NLA, commented on the report: “The government has clearly failed to recognise the realities of the PRS by proposing the abolition of Section 21. Any government which thinks it is appropriate to risk the loss of nearly one million rental homes at a time of housing crisis needs to reassess its priorities as a matter of urgency.”

Mr Norris concluded: “Rather than playing to the gallery, the government should be looking to support and incentivise good landlords to remain active and provide homes to those who need them, rather than making it harder and causing these landlords to exit the market.”

A government-led consultation on Section 21’s proposed scrappage has been open for a number of weeks, and is expected to close on 12th October.

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Steven Taylor
Steven reports on the daily churn of the property news cycle, often reporting on the stories you may have missed during the week. He covers a range of topics, including market sentiment, new findings and announcements by policy-makers.

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    4 Comments

    1. What is really happening is abolition of Assurred Shorthold Tenancies dressed up by pressure groups to show as unfair evictions and our government are too silly to see this and are playing for votes by the major parties. The fact that millions of landlords made their investment into the rental market based entirely on the fact they could at any point sell thier properties and realise their capital. This is the first major step in reverting back the the dreaded Rent Act of 1977 which pretty much eliminated virtually any form of rental property. By just suggesting it is removing unfair evictions fools everyone into believing it should be supported if you don’t understand what is really happening. The Government are conning all those investors who think they can easily sell their investments at full open market values. First it will be you need a court order. Next it will be fighting smart rs’d lawyers who will give a million good reasons why you should not be allowed to sell you property and that tenants have a greater right to your property than you have when you have invested £100,000’s in buying it.

      Given the proposed John McDonnell “STEALING FROM THE CITIZENS BILL” aka tenant right to buy at a Government determined discount will further kill off rental properties. His proposed Rent Controls will be the kiss of death when combined with the above. This Country has lost its way. All politicians have become totally self serving, interested only in staying in power at all costs. The liberals do not even believe in the previous referendum and seek to automatically over-ride the referendum vote and impose their authority – a dangerous course of action for democracy.

      The Brexit party are yet to say when they stand on Abolition of S21 or Abolition of AST’s as it really is. All rentals will give tenants security of tenure so landlords are left with little choice if they don’t want to loose 40% of the value in their investments (based on the history of the effects the Rent Act 1977 had on the property market).

    2. Yep S21 abolition will be the final nail in the PRS coffin..
      S24 was bad enough but now S21 and the even more bonkers rent controls and RTB policies by Labour has effectively destroyed the PRS.
      You would have to be a very mad LL to risk staying in the PRS when there is the risk of a Labour Govt ………..soon or at least every 5 years.
      Staying in and hoping for a benign Tory Govt is just too much of a gamble.
      You might as well gamble on stocks and shares……..at least no nutty Govt will come along and expropriate your shares.
      It makes no economic sense letting on AST.
      Why risk expropriation!?
      Rent control will devalue the property and would require a massive deposit from any future LL buyer as rental cover could only ever be the controlled rent amount.
      As long as there is the threat of a bonkers Marxist Labour Govt it makes little business sense remains an AST LL.
      Most of the mortgaged rental property is based on BTL mortgages.
      It now makes little economic sense to have these types of mortgages.. Switch investment to FHL; SA even AirBnB.
      FHL is not subject to S24 or rent controls.
      Sourcing mortgage products for SA and AirBnB is almost impossible.
      Personally I am selling up.
      I am not prepared to have all my efforts stolen from me by dopey Marxists.
      I can easily convert from a LL to a lodger LL where I will pay no S24 Taxes nor tax on the RFRA.
      I will be making 14 occupiers homeless.
      WITHOUT the ridiculous Labour threats and bonkers Tory policies those Tenants could have stayed for the next 15 years had they wished.
      Instead I will be forced to make perfectly good tenants homeless.
      For what!!?
      None of them want to not could they afford to buy my properties.
      Am actually not that bothered as I can manage lodgers in my home a lot easier.
      But I cannot be the only LL who is realised the game is up.
      Time to get out of AST lettings!

      1. Labour plan to make firms give at least 10% of shares in the company to employees so stocks and shares aren’t safe either.

      2. I agree with Paul Barrett, everything is as he has identified. I remember the ‘bad old days’ of renting whereby the landlord had no rights. Becoming a private landlord was never meant to be a provider of social housing; that is the job of government. Governments should build more council houses if they are short of property to fill that need. But of course they don’t want to do that because they too remember the ‘bad old days’ of renting whereby council estates became slums, tenants made unreasonable demands because they knew they had a home for life even if they had never tried working for a living; so they sold off their stock at discounted prices only to find a high proportion of those who chose to buy complained bitterly afterwards when they found that buying was a lot more expensive than renting because they had ‘maintenance’ to fund themselves, and there was no assistance if they could not pay the mortgage. The private rental sector is and was meant to be a business, not a charity. Never before have tenants had such a great choice of good quality homes to rent and if you are from the North, as I am, they are not overly expensive (unless you compare to former council house rents!). People have been able to rent property they could never have afforded such as renovated farmhouses, barn conversions, luxury apartments, brand new development homes – the choice has been huge. As a Landlord supplying quality homes only, and in quality areas, I have seen an exodus of landlords – whose properties I also manage in a niche market – who had formerly agreed to rent their beautiful homes to people who would take good care of them, rather than sell in the past and present economic and housing climate. Half of my housing stock, from the managed part of my business, has gone as the properties have been sold off and those ‘accidental landlords’ – as they are called – have already invested their money elsewhere. Unfortunately the new, big ideas, for the protection of tenants, that each political party is hoping to win them favour for, in the lead up to the next general election, is a failed policy in my view, as I, too, am considering where to now re-invest my money, having invested in good quality housing for the rented sector for over 35 years. All that will be left to choose from, when renting, will be the millions of terraced houses in areas that may well not suit all – in other words ‘back to the bad old days of renting’, as good landlords, who are and have been providing an excellent service, have diminished. Of course, there is one consolation for the government, present or future, and that is the tax revenue which they will benefit from, the final sting in the tail for landlords if ‘they dare to leave the market’, when they take their massive cut of tax from our hard-earned achievements and leave us with a pittance for our retirement, which we have all worked hard to provide, for ourselves, at great sacrifice and sometimes even hardship. What happened to the conservative party who we all thought was the encourager of small businesses – perhaps, after all, once again, the only people to prosper in the PRS will be the big boys.

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