Landlords are worried about the impact the new Labour government will have on the private rented sector, and it’s easy to see why.
Labour is traditionally the party of the tenant and the Conservatives the party of the landlord, and the Renters Rights Bill is arguably a demonstration.
The bill will introduce the Decent Homes Standard to the private rented sector and abolish Section 21 evictions likely by next summer, meaning landlords would have to rely on the broken Section 8 evictions process.
So what should the government do? In my view, it’s not politically viable to avoid getting rid of Section 21, and improving the quality of stock is a worthy aim – even if it’s inconvenient for some.
Section 21
The courts need to be reformed to go alongside the abolition of Section 21, while Labour could also review the process of getting a court-appointed bailiff to turf a bad tenant out.
As it stands with Section 8 eviction cases landlords are having to escalate their cases to the high court to evict tenants, which takes months and isn’t a cheap process.
Some landlords have been burnt and sold up – I’ve had conversations with a few – and it’s allowing criminal renters who never had any intention of paying to flourish.
Either more cases need to be handled out of court, or the courts need money to push through cases faster.
This could be expensive but it’s worth it, as housing will be a primary issue when it comes to how this new government will be judged in a few years’ time.
We know housing secretary Angela Rayner is aware of this issue, but the question is will Labour find a solution?
Angela Rayner mindful of court system in scrapping Section 21
Mortgage Income Tax Relief
One change Labour could make overnight that would shift landlord sentiment is revert the elimination of Mortgage Income Tax Relief.
This was a policy during the David Cameron George Osborne government in 2015 that replaced Mortgage Income Tax Relief with a 20% tax credit, which in essence meant landlords started being taxed on their profits rather than their income.
Now mortgage rates are so much higher than in 2015 it’s hurting landlord profits considerably. This is already driving many out the sector, who aren’t making strong returns or much in the way of capital growth.
If you’re getting neither there’s little reason to stick around as a landlord, as managing a property and dealing with renters takes time, and contains the risk of having to manage a situation with a bad tenant that ruins a property or won’t pay the rent.
Give and take
My message to Keir Starmer and Labour is to give and take, to retain the support of tenants while also appeasing landlords.
Pro-tenant policies that improve the quality of rental stock is long overdue, as I also back the move to improve the EPC levels of homes.
Labour to bring minimum EPCs to private rental sector by 2030
However, unless Labour plays its cards right we could end up being in a world where there’s a limited amount of high quality stock that’s very expensive to rent.
Increasingly this is the situation we’re getting to. RICS research shows that a net +39 of firms reckon rents will increase in the coming months, due to tenant demand rising and supply falling.
Autumn Budget
On October 30th Labour will introduce its Autumn Budget, where it seems likely the party could alter Capital Gains Tax (CGT) and Inheritance Tax.
It’s rumoured that Labour will equalise CGT in line with current income tax thresholds, which would increase it from 28% to 45%.
I hope it doesn’t go that far, as it could be the final straw for some landlords, and drive them out of the sector.
Instead, I would favour some smaller increases, which would help the government raise vital money without causing a landlord exodus.
Encouraging landlords to stick around is vital to the health of the sector, so Labour needs to throw them a bone and not just focus on tenants.
