What will happen to the Private Rented Sector in 2021?

8th January 2021 Commercial Litigation

2020 has been a busy year for the Private Rented Sector which has been grappling with near-constant change as the government tries to react to the Covid-19 pandemic. 2021 will be no less busy with the ongoing effects of Covid being supplemented by further expected legislation.

Covid

There are several key dates in terms of the changes to the possession process made in response to the Covid-19 pandemic. 11 January sees the end of the Christmas stay on bailiff evictions created by the Public Health (Coronavirus) (Protection from Eviction and Taking Control of Goods) (England) Regulations 2020. At that point bailiff warrants can be applied for provided a court order for possession has been obtained. It is possible that the 11 January will be extended and there has already been pressure from the Labour party and others to do this. Frustratingly, an extension is almost inevitably going to be last minute or even after a short period where bailiff warrants will be executable which may give landlords false hope that they can enforce court orders. There is also the risk that the government will again behave unlawfully by seeking to prevent evictions despite the lack of appropriate legislation. If the regulations are extended the government may risk a challenge to their lawfulness at all and should also consider the change as a chance to clear up the very untidy position of non-Housing Act tenancies and residential licences which are given blanket protection by the regulations.

The second key date in 2021 is the end of March. At that point the extended notice periods on section 8 and 21 notices created by the Coronavirus Act 2020 will end and they will all revert to their original notice periods. At the same point the altered arrangements for operation in the county courts will also both come to an end. The court processes could be continued fairly easily but an extension to the notice periods will require new regulations to be passed. Again, there is a risk this will be at relatively short notice and again the government will be under pressure to keep the longer notice periods in place but will also be under pressure to allow exemptions for specific cases.

Naturally, how things proceed is likely to be highly dependent on what the status of the vaccine roll-out and the virus spread is like at the time so it remains fairly uncertain.

Courts

The courts will continue to be a problem. I have already encountered problems with judges and court staff mis-applying the new court procedures and these are likely to continue. The substantial backlog of cases will not improve any time soon either and the effects of this are likely to be felt throughout 2021 and into 2022.

End of s21

One of the key expectations for 2021 is the publication of the Renter’s Reform Bill. It should be noted that this is a working title and may not be the name under which it appears before Parliament. The big ticket item in this bill is the ending of s21 notices within Housing Act 1988 tenancies, thereby giving most residential tenants long-term security of tenure. However, there are a lot of questions which will arise and which the Bill will need to address. These will include:

  • Whether there will be exemptions, for students for example, and how these will operate;
  • How the enforcement element of s21 for items such as tenancy deposits or HMO licensing will be carried forward or if this will drop away;
  • What grounds will landlords have to possess properties in the future.

These are only a few of the issues. Such a large change will inevitably be complex, have a range of unexpected further effects, and is likely to make many landlords reconsider their future in the PRS.

Other issues in the Renter’s Reform Bill

While s21 is occupying the minds of many people the Renter’s Reform Bill it will not be the only matter in there. The policy paper mentioned the concept of lifetime deposits. While this may not survive into the Bill it is the case that the government is likely to look at further deposit reform. Some form of landlord registration is likely to be pushed in amendments to the Bill as well and there is likely to be other amendments such as efforts to impose some form of rent control. More likely to be in the original Bill and make it into law are further provisions around property standards. A property MOT or some other clear certification that a property meets the appropriate standards was a key recommendation of the second Rugg review in 2018 and it is an idea which has some traction in policy circles.

AML

For high-value tenancies, the 5th Money Laundering Directive is already in effect but 2021 will see the publication of official guidance into the practical operation of the Directive. I have written about this elsewhere.

Welsh divergence

2021 will also see big changes in Wales with the Renting Homes (Wales) Act 2016 finally promised to come into effect prior to the Welsh Assembly elections in May. The Act will completely reshape the PRS in Wales, replacing the Housing Act 1988 altogether with an entirely new letting regime.

Local issues

Local authorities have more licensing schemes coming into effect in 2021. Some of these have been stalled during Covid-19 but they will likely come to fruition in the next year. This will create more challenges for landlords and agents as they adapt to these schemes. However, local authorities will face challenges as well. There are a number of interesting cases in the Tribunals at the moment which may put pressure on local authorities who are not processing licences quickly enough. The increasing number of Rent Repayment Orders being sought may also lead to rapid development in the law surrounding HMOs.

Brexit

In legal terms, Brexit has a limited effect on the PRS as EU members states had substantial latitude in how they dealt with their own residential letting sectors with minimal EU interference. The effects will be more likely to be economic and I deal with these below.

Economic effects

The other changes to the PRS will be driven more by the nature of the market. It is uncertain what Brexit will mean for the UK economy and for the willingness, or ability, of overseas workers to come here. The PRS is a key housing provider to those temporary workers, especially in the South-East so changes in demand from that group may have substantial effects.

The position on taxation will also be important. It is clear that the government is going to need to recoup the money it has spent to underpin the economy during Covid-19. In the past, landlords have been seen as an easy tax target and the current Chancellor may also take the same view. The current dissatisfaction of some landlords with the loss of parts of their tax relief on mortgage interest may fade into insignificance if it is removed altogether. The SDLT uplift on second property purchases may also see a further increase as it has provided substantial income to the Treasury in the past.

Foreign investment will also be hugely relevant, especially in larger developments. What Brexit will mean for this in a generally depressed post-Covid world economy is uncertain. The UK government will be seeking to make the UK an attractive investment in future but so will many other countries and investors may simply prefer to hold back and wait for a more stable economic environment.

The only certainty for the PRS as we move into 2021 is that it will continue to be uncertain. This appears to have been the case for several years and the constant change is undoubtedly a problem for landlords and tenants alike. 2021 is unlikely to see much in the way of respite from that.​​​​​​

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David Smith is a Partner located in Londonin our Commercial Litigation department

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