Last week, Parliament debated the Renters’ Rights Bill, a piece of legislation aimed at rebalancing the power dynamics between tenants and landlords. Its introduction marks a bold step by the Labour government, but the bill has ignited intense debate, with critics warning of unintended consequences that could destabilize the rental market.
The bill proposes giving tenants more protection, allowing an independent tribunal to determine “market rents” and limiting landlords’ ability to increase rents unchecked. But critics argue this is misleading. “If state officials set the price, it’s not a market price,” opponents claim. They suggest the bill’s language disguises the reality: rent controls could limit landlords’ flexibility while pushing them out of the market, leading to housing shortages and driving up prices in the long run.
A poll from June highlights public support for rent controls, with 70% of respondents backing the idea of capping rent increases in line with inflation. This sentiment is unsurprising in a country where tenants far outnumber landlords and the cost of renting continues to soar. However, many experts and industry figures warn that the bill doesn’t go far enough—or, paradoxically, that it may cause more harm than good.
While the previous Conservative government also proposed changes to protect tenants, the current version of the bill has drawn fierce criticism from Conservative MPs. They argue that the proposed legislation undermines property rights and freedom of contract, key pillars of the party’s platform. The abolition of fixed-term tenancies, described as a measure to end ‘no-fault evictions,’ is particularly contentious.
Real estate professionals have also voiced their concerns. Gareth Atkins, Managing Director at Foxtons, criticized the removal of fixed-term tenancies, warning it could create uncertainty for renters rather than providing the stability it promises. Sam Reynolds, CEO of Zero Deposit, echoed these concerns, suggesting the bill could deter landlords from staying in the sector, ultimately shrinking the rental market and pushing rents even higher.
Marc von Grundherr of Benham and Reeves went so far as to predict a “potential rental market Doomsday,” warning of mass landlord exits and a worsening housing crisis.
The concerns are not limited to large property firms. Small landlords, without access to legal teams, may find the new regulations particularly daunting, driving even more to sell their properties. This, experts say, would exacerbate the very problem the bill seeks to solve—pushing up rents as the supply of available homes shrinks.
Proponents of the bill argue that tenants stand to gain from increased security and fairness in a market where some landlords have historically been unwilling to accept families with children or pets. However, critics counter that if these landlords leave the market, fewer properties will be available, making it harder for all tenants to find housing.
Labour MPs may brush off these concerns, believing that while some landlords may exit the market, their properties will be sold to first-time buyers, increasing homeownership opportunities. But local Labour councillors are likely to face the fallout as the private rental sector contracts, leaving them scrambling to find solutions for rising homelessness.
The strain on local councils is already evident. The Ministry of Housing’s latest statistics show that 26,320 households became homeless last year because their landlords sold their properties. With councils struggling to meet their legal obligations to house these families, many have resorted to temporary accommodations, including hotels, at a significant cost.
Recent Freedom of Information requests paint a stark picture: in the 2023/24 financial year, Birmingham spent £28.3 million on hotels for homeless families, Liverpool £20.6 million, and Westminster £19.23 million. Even outside major cities, councils such as Redbridge (£12.94 million) and Conwy (£5.65 million) have been forced to turn to hotel accommodation.
The cost of temporary housing is placing a growing burden on local budgets. In Hammersmith and Fulham, for example, the council spent £28.9 million on temporary housing last year, including £7.24 million on hotels. Central government covered part of the cost through grants, but £10.3 million had to be covered by Council Tax. With total Council Tax revenue at £73.9 million, a substantial portion of taxpayers’ money is being diverted from services like street cleaning and park maintenance to cover the cost of temporary housing.
The potential impact of the Renters’ Rights Bill on the housing market and local councils is now a key point of contention. Critics argue that, rather than solving the housing crisis, the bill risks exacerbating it by driving landlords out of the market and increasing the demand for public housing. As councils grapple with the soaring costs of homelessness, the burden on taxpayers is only likely to grow.
In conclusion, while the Renters’ Rights Bill seeks to address genuine concerns over high rents and tenant security, many fear that it will worsen the housing crisis. As the debate continues, the Labour government faces the challenge of balancing the need for tenant protections with the economic realities of a shrinking rental market and rising homelessness.