Jamie Johnson, CEO and Co-founder, FJP Investment
The abolition of Section 21 has been touted for a long time; but on 15 April, the government finally announced an end to unfair – or ‘no-fault’ – evictions.
Tenants and campaigners who have been fighting to boost renters’ security will no doubt be pleased with the move, but what does this change mean for UK landlords and tenants in practice? In the simplest of terms, the abolition of Section 21 means that private landlords will no longer be able to evict tenants from their homes without short notice, and without good reason.
However, many questions remain unanswered about what precedent this move sets for the UK property market as a whole, and what changes landlords and tenants both should expect in the coming months and years.
What should landlords be aware of?
Understandably, the government’s announcement generated some initial frustrations from landlords and buy-to-let property investors. Questions like‘will this create open-ended tenancies?’ were touted, as landlords feared this move could ultimately make it more difficult for them to repossess their properties from tenants on just grounds.
There are many cases, after all, where a landlord will be looking to serve a Section 21 notice. This includes instances when a tenant fails to pay their rent on time (a 2016 to 2017 English Housing Survey revealed that 9% of renters had been in arrears in the last 12 months), takes poor care of the property or engages in antisocial behaviour. However, Section 21 also empowers landlords to repossess a property should they wish to move in or sell the home.
The government has offered some assurances, acknowledging that responsible landlords will continue to have the confidence to end tenancies for these legitimate reasons. Meanwhile, court processes will also be expedited so that landlords have the security of knowing that any dispute raised will be resolved quickly.
All things considered, by encouraging longer tenancies, this change will also bring benefits to landlords who want to see their homes lived in and looked after. According to a survey by Shelter, one in three landlords hold a positive view towards longer tenancies, and there are some who believe that this proposed measure will encourage both tenants and landlords to consider long term leasing arrangements.
Will this solve all of tenants’ problems?
There is no doubt that the abolition of Section 21 will bring peace of mind to the millions of people who live in rented accommodation – figures suggest that by the end of 2021, almost 5.8 million households are expected to be privately rented.
The end of ‘no-fault’ evictions aims to bring an end to the practice of private landlords uprooting tenants from their homes with as little as 8 weeks’ notice after the fixed-term contract has come to an end. It also means that responsible tenants will be empowered to raise justifiable complaints about unsafe or substandard of living conditions – without fear of being turfed out of their accommodation as a result.
After all, sadly this practice is not uncommon – a survey of private renters by Citizens Advice suggested that tenants who made a formal complaint had a 46% chance of being evicted. Under proposed plans, however, landlords would have to provide concrete evidence when attempting to terminate tenancies.
While a positive step in the right direction towards offering tenants greater long-term security, this does not solve all of the problems currently facing renters. Most importantly, the abolition of Section 21 does little to address the obstacles standing in the way of renters looking to jump on the property ladder themselves and become homeowners.
Affordability constraints continue to keep many young people out of the property market – and this problem is continuing to grow. In 2016, only 34% of households led by a 16 to 34-year-old were owner-occupiers according to government figures; this is compared with almost half (54%) in 1996.
These shocking statistics suggest that there are underlying challenges facing ‘generation rent’ which urgently need to be addressed. Moreover, it’s not just millennials that are struggling to afford a home – the proportion of 35 to 54-year-olds who live as private tenants has nearly doubled since 2006-07.
Looking to the future
The abolition of Section 21 looks set to overhaul the private rented sector. Ultimately, it encourages greater transparency within the UK property market and aims to improve the relationship between tenants and landlords.
However, such a measure is not a solution in of itself, but part of a broader effort to address the systematic challenges facing the property market. There is still plenty more that can be done to help build great transparency between landlords and their tenants, not to mention the broader challenges concerning home affordability. Let’s hope the Government builds on this momentum over the coming months with similar progressive reforms.
Jamie Johnson is the CEO and Co-founder of FJP Investment, an introducer of UK and overseas property-based investments to a global audience of high net-worth and sophisticated investors, institutions as well as family offices. Founded in 2013, the business also partners with developers in order to provide them with a readily accessible source of funding for their development projects.