Labour plans are catastrophic for Landlords
Critics say plans will push landlords to seek inflated rents from the outset
Sir Keir Starmer has hinted Labour could prohibit landlords and estate agents from accepting offers on rental properties in a clampdown on ‘bidding wars’.
The plans mirror amendments the shadow minister for housing and planning Matthew Pennycook tabled for the Conservative Government’s now defunct Rental Reform Bill, and are modelled on similar legislation enacted in New Zealand.
During a Question Time leaders’ special on Thursday evening, Sir Keir said: “We have to stop the landlords ripping off tenants who are doing this bidding war: who’ll pay more until people are paying through the nose. We have to end that.
“We can pass legislation to say you can’t do it because it’s driving rents through the roof and it’s not fair. It’s taking advantage.”
However, experts have cautioned that the policy could backfire – and drive up rents instead.
Mr Pennycook in April said that if enacted, the measures would require landlords or agents acting on their behalf to state the proposed rent, based on an estimate of the property’s market rate in a property advertisement.
The policy, he said, would prevent landlords from inviting bids over the advertised amount.
In 2021, under former prime minister Jacinda Ardern, New Zealand banned bidding wars and rental properties from being listed without a price.
Rents in Britain have spiralled in recent years due to rising demand and a shortage of properties.
Official government figures show average rents rose by 8.7% in the 12 months to May this year.
Around 40% of those who moved in the past year ended up in contracts that were an average £1,200 a year above the advertised rate, according to think tank the New Economics Foundation.
Scotland, which has rent controls, saw the biggest percentage increase in rent in the same period, with costs rising 9.3%.
The National Residential Landlords Association, an industry body, agreed with the proposals.
Policy director, Chris Norris, said: “Reports that some letting agents are encouraging payments above this are concerning. Whilst we agree with the principle of ending ‘bidding wars’ to tackle the actions of those who do promote such practices, more detail is needed about how this would work and be enforced.”
But others accused Labour of misunderstanding the rental crisis.
Chief executive of trade body Propertymark, Nathan Emerson, said: “Because you have such pressure on stock it [a bidding war] does not come from landlords, it comes from tenants offering above the price or saying they can pay a year up front.
“Agents are legally obliged to pass on all offers to the landlord. The property can only go to one person, those who lose out feel frustrated and bid higher for the next property and it goes on.”
“There is a longer term picture here so let’s see the details but I don’t believe it will solve the problem and my experience is landlords aren’t out there to get every penny they can, they just want consistency and security.”
Partner at law firm Gowling WLG Senay Nihat warned a ban on bids could push up listing prices instead.
“Clearly for renters this is a positive step, especially with an overheated market where rents are consistently rising, particularly in the midst of a cost of living crisis.
“For landlords of course this is an intervention in the market. If a tenant is willing to pay more, arguably they should be allowed to do so. You might therefore see landlords starting listings with higher rents to begin with.”
The proposals come in addition to rental reforms detailed in Labour’s manifesto.
The party has said it plans to reinstate costly energy efficiency targets and abolish no-fault evictions “immediately”.
Labour said it would give landlords until 2030 to comply with new “minimum energy efficiency standards” – a plan previously shelved by the Tories.
The targets, which included measures such as installing eco boilers and solar panels, would have cost homeowners thousands of pounds each.
Summary
British landlords are quitting the private rented sector en masse and putting their properties on the market ahead of Labour’s first King’s Speech. The private rented sector fears Labour will introduce a raft of measures it talked up in opposition, including a total ban on no-fault evictions. Labour said it would ban Section 21 evictions on “day one”…
Some of the potential Labour measures identified by Guido include:
Total ban on no-fault evictions.
Introduce rent caps – Rachel Reeves is on record supporting them.
Ban landlords from selling their properties in the first two years of a new tenancy – extending the current limit by 18 months.
Force landlords to move in a family member for at least the first two years of a tenancy – currently they only have to wait six months.
Landlords could be forced to offer their property for sale to a tenant instead of evicting them.
Apply the highly controversial “hardship test” allowing courts to refuse a possession order if it will cause greater ‘hardship’ to tenant than the landlord. No surprise who usually benefits from that one…
Abolish “persistent rent arrears” as a reason for eviction – which is currently used when a tenant falls into two months of arrears at least three times.
There’s no prize for guessing what all of this is likely to do for the housing supply. One in five UK homes is a private rental…