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Rental stock could plummet 20% if Section 21 is scrapped

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Written by: Shekina Tuahene
30/09/2019
A swathe of landlords said they would leave the sector if the Governement abolishes 'no fault' evictions
Rental stock could plummet 20% if Section 21 is scrapped

Some 16 per cent of landlords are likely to exit the private rental sector while a further 10 per cent would decrease their portfolio if Section 21 was to be abolished.

According the National Landlords Association’s (NLA) survey of more than 2,800 landlords, if respondents and the sector as a whole acted in line with these responses, it would result in a 20 per cent reduction in private dwelling stock or 960,000 fewer places.

The South West would be the most affected were this to happen, with a 25 per cent fall in the number of dwellings.

The smallest declines across the regions would be in the North East with a 16 per cent decrease and the North West and West Midlands both with a 17 per cent drop in dwellings.

The NLA asked respondents what they were most likely to do versus what they would consider. If those who would consider exiting the market actually did so, this would result in a more severe loss of over 1.3 million dwellings in the sector or a reduction of 28 per cent.

Small portfolios most vulnerable

In terms of portfolio size, it was those with smaller portfolios who were more likely to leave the sector completely as 20 per cent of landlords with one property would exit if Section 21 was scrapped in comparison to 12 per cent of those with five or more properties.

Some 14 per cent of landlords with five or more properties said they would reduce their portfolio in such an event.

As for other responses to the government’s proposal, 43 per cent of landlords would be more selective about which tenants they would accept while 11 per cent said they would increase rent for new tenancies.

This could potentially lead to a 59 per cent reduction in the number of private rented dwellings available to households which claim local housing allowance or universal credit (770,000 fewer dwellings) and around 600,000 homes facing rent increases, accounting for 13 per cent of the sector.

Section 8 improvements

The NLA also asked how landlords would react if the court process for Section 8 was reformed to make cases faster and cheaper, thus addressing concerns about the removal of Section 21.

If Section 8 were to be reformed as stated, according to the responses it would reduce the private rented sector supply by between four to eight per cent – or 180,000 and 390,000 dwellings, and reduce the number of dwellings available to benefit claimants by between 10 and 23 per cent or 130,000 and 300,000 dwellings.

If landlords were to act according to their responses, with a Section 8 reformation, rents for between 110,000 and 240,000 homes would increase, accounting for between two and five per cent of the sector.

Chris Norris, director of policy and practice at the NLA, said: “The government has clearly failed to recognise the realities of the private rented sector by proposing the abolition of Section 21.
“Any government which thinks it appropriate to risk the loss of nearly one million rental homes at a time of housing crisis needs to reassess its priorities as a matter of urgency.

“Rather than playing to the gallery, the government should be looking to support and incentivise good landlords to remain active and provide homes to those who need them, rather than making it harder and causing these landlords to exit the market,” he added.

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