How have plans to abolish section 21 changed the lettings sector?
With more details on the Renters' Reform Bill imminent, how have the proposals to abolish section 21 affected the lettings market so far?
The decision to abolish section 21 came to light when the Renters' Reform Bill was originally revealed in the Queen's Speech 2019. The announcement sparked debate over the impact that this would have on the sector. With news pending on the next steps for the bill, here's an overview of how things stand.
Has the use of section 21 changed?
Back in 2019, Landlord Action surveyed landlords on the use of sections 21 and 8. The results showed that 73% of those landlords had served a section 21 eviction notice, with 56% using it for rent arrears.
That percentage dipped in 2022, with rent arrears the reason for 33% of section 21 evictions, followed by anti-social behaviour at 22%, in another Landlord Action survey.
Despite official figures showing that rental evictions are up 98% year on year between 2021 and 2022 - due to soaring mortgage rates and slim profit margins for landlords pushing them to sell up - recent research from Leaders Romans Group (LRG) showed that section 21 is not being abused. Its research found that 80% of landlords have never used section 21.
From those that had, six percent did so when the tenant was in breach of the lease. Only 3% used section 21 for when the tenant wasn't in breach of the lease.
Have plans to remove section 21 pushed landlords out of the market?
In the years since the abolition was announced, landlords have been frequently surveyed to understand how the planned abolition of section 21 has affected their intent to stay in the sector.
Goodlord's State of the Lettings Industry Survey 2022 found that 29% of agents and 54% of landlords cited the scrapping of section 21 as a reason that landlords could choose to leave.
Short-term lets have also proved an attractive alternative in preparation for when section 21 is abolished, according to Assist Inventories. Forty-five percent of landlords said that they plan to move away from long-term tenancies while 41% said they may consider it in its 2022 survey.
However, an NRLA report found that 70% of landlords felt that the abolition of section 21 alone wouldn't cause them to leave. It would all hinge on how reassured landlords felt based on the planned reforms to section 8.
How concerned are agents and landlords about the repeal of section 21?
Goodlord's State of the Lettings Industry 2021 showed that 55% of agents were concerned that abolishing section 21 would have a negative impact on the sector.
In 2022, that sentiment only decreased slightly - to 51% - despite having more clarity on the plans from the A Fairer Private Rented Sector white paper at the time the survey was taken. This suggests that there continues to be uncertainty around exactly how robust the changes to section 8 will be.
Will the strengthened section 8 grounds be enough?
Normally, for a breach of contract such as rent arrears, section 8 is the correct route. Yet its reputation for being an overly long and complex process has come under fire since the Renters' Reform Bill has been announced.
In a House of Commons report, one landlord even said the current section 8 mechanism is “ridiculously long winded and stupidly expensive”.
The Renters' Reform Bill white paper shared proposals to strengthen the grounds for section 8. However, an NRLA call for evidence response in 2022 found that 49% of landlords felt the proposed section 8 grounds weren't sufficient to offset the repeal of section 21 and the introduction of periodic tenancies.
Since then, the government has announced plans to give landlords more rights around evicting anti-social tenants - something that is expected to factor into the new section 8 process.
Until the final government plans are revealed, we won't know the full extent to which landlords will feel supported by these new rules - and therefore the full impact that the abolition of section 21 will have.