Private Landlord Survey: be careful what you wish for

The 2018 English Private Landlord Survey (EPLS) commissioned by the Ministry of Housing, Communities and Local Government reported that the number of households in the private rented sector (PRS) now stands at 4.5m. It is the second-largest tenure in England, and stands as a critical provider of accommodation at a time when outright ownership is beyond the budgets of many people. The EPLS also reported that 94% of landlords in the sector rent out property as an individual, while 45% of them have just one rental property. It is clearly a very personal business. It is also one with high rates of turnover. This is not because landlords enjoy ending tenancies: very few (7%) end in eviction. In most cases, tenants simply move on because of their private circumstances (change of job or family size). Landlords who evict their tenants face a void and administrative costs, which most will be keen to avoid. The most common reasons for eviction, asking a tenant to leave, or not renewing a tenancy, were said to be rent arrears (58%) or the tenant not caring for the property (45%). In those circumstances, it is puzzling to note the existence of a vocal campaign to make it more difficult for landlords to terminate such tenancies; and odder still to find a Conservative government now backing the campaign, with the communities minister announcing on 15 April 2019 the government’s proposal to abolish the right of landlords to recover possession of their properties at will. Odd, because it was another Conservative government that reformed the PRS through the Housing Act 1988, introducing assured shorthold tenancies (ASTs), under which landlords could recover possession as of right, provided that they gave the tenant two months’ prior notice (a section 21 notice) that they required possession. The background The situation which led to this change in the law was explained by the Supreme Court in McDonald v McDonald [2016] UKSC 28; [2016] PLSCS 169. As the court noted, by reference to the White Paper, Housing: The Government’s Proposals (Cm 214, 1987), one of the government’s principal aims was to “reverse the decline of rented housing and to improve its quality”. An important part of the government’s thesis was that the protection afforded to tenants by the Rent Act 1977 and similar predecessor legislation, not least because of the security of tenure thereby afforded to tenants, had greatly reduced both the supply and the quality of housing in the private rented sector, which was to the disadvantage of residential tenants as a group. The 1987 White Paper therefore made proposals which were intended to ensure that “the letting of private property will again become an economic proposition”. And thus was born the AST, under which the tenant would have very limited security of tenure, and either party could have an appropriate rent determined (which would be substantially less restricted than the rent fixed under the Rent Act 1977). In 1995, the Conservative government published another White Paper, Our Future Homes: Opportunity, Choice and Responsibility (Cm 2901, 1995). This noted the increase in the number of private sector tenancies in the residential sector between 1988 and 1994, and ascribed it largely to the 1988 Act, which had “made renting out property a much more attractive alternative for owners”. It also emphasised the need to reduce unnecessary regulation and control. This led to the Housing Act 1996, which deregulated the PRS to a greater extent. At the same time, an accelerated procedure was introduced whereby landlords could obtain possession against tenants under ASTs which had been the subject of notice of determination (see CPR 55.11 to 55.19 and CPR PD55A). Around the same time, the so-called buy-to-let sector “began in earnest”, and it subsequently underwent an “expansion, reflecting the structural and demographic trends towards a larger PRS”, according to a Treasury consultation paper, Financial Policy Committee powers of direction in the buy-to-let market, published in December 2015. Following the general election in 1997, the Labour government stated that it did not intend to reverse the reforms affected by the 1988 and 1996 Acts, but “rather to build on them by promoting choice in both the public and private sectors”, according to Law Commission Consultation Paper No 162 Renting Homes 1: Status and Security, citing a paper published by the Department for Transport, Local Government and the Regions, Quality and Choice: A Decent Home for All, The Way Forward for Housing (December 2000). That policy was continued by the coalition government in 2010, and until very recently there was no reason to think that the current government, elected in 2015, would have different ideas. Part of the reason for this is that successive reports emanating from government departments have claimed that the decrease in statutory protection effected by the 1988 and 1996 Acts has been at least one of the factors which has served to reinvigorate the PRS in England and Wales over the past 25 years. So why the call for change? In large part, (according to the thoughtful and thorough 2018 report by Julie Rugg and David Rhodes, The Evolving Private Rented Sector: Its Contribution and Potential) this seems to be because of the perceived prevalence of “retaliatory eviction”. Landlords whose tenants complain of disrepair are said to react not by remedying the fault, but rather by evicting them, without any fault on the tenants’ part (so-called “no fault eviction”). Nicola Muir has written recently of the sheer number of obstacles landlords have to negotiate before they can serve section 21 notices. The apparent legislative desire to take this process further needs very careful study if it is not to lead to precisely the housing problems that led to the introduction of the reforming Housing Act 1988. As Rugg and Rhodes show, a substantial proportion of the landlord market comprises individuals who might be quite unlikely to risk renting out their properties if they could not be certain of recovering possession without difficulty. The dent in the housing market should that transpire will be likely to cause rather more grief than that suffered by the tiny minority facing eviction. As Rugg and Rhodes conclude, “overtly ‘pro’ or ‘anti’ PRS measures always distort the market”. Guy Fetherstonhaugh QC is a barrister at Falcon Chambers