Plans for longer tenancies revealed – what could this mean for agents?

In an attempt to give people renting homes in England more security, the government recently proposed the idea of a minimum tenancy term of three years – bringing the UK more in line with other European nations.

Figures suggest that around 80% of tenants currently have contracts of six or 12 months, with ministers insisting that longer tenancies would allow renters to put down better roots in an area.

The government says tenants will be able to leave tenancies earlier under the new plans, but also said landlords would get more financial security with longer-term agreements in place.

What was the reaction to the announcement?

Labour argued the plans didn't go far enough in offering tenants stability and security, and called for rent increases to be capped.

“Any fresh help for renters is welcome but this latest promise is meaningless if landlords can still force tenants out by hiking up the rent,” shadow housing secretary John Healey commented.

Labour's plans, he said, included protection against substandard properties, an end to no-fault evictions and controls on rents.

Meanwhile, the chief executive of housing charity Shelter said the main cause of homelessness was loss of tenancy and called on the government to 'go beyond three years'.

“This is an important step forward,” said Polly Neate. “Losing a tenancy is the main driver of homelessness and also causes huge instability for renting families so everyone who rents will be very pleased to see a move towards longer tenancies.”

But she said if the government really wanted to stand up and provide stability for renters, it 'can and should' go beyond three years to provide real protection from eviction, plus the upheaval of having to move home, jobs and schools at short notice.

Unsurprisingly, landlords were more anxious about the prospect of longer tenancies, with worries that one property or smaller landlords could be forced out of the market by the possible issues caused by long-term agreements.

There are concerns that issues with difficult or problem tenants could be very tricky to resolve, and that evicting bad tenants or those not paying their rent could prove a lot of hassle if they are tied in to a three-year tenancy.

The CLA, meanwhile, slammed the government's longer tenancy proposals, saying they would damage the lettings market in the countryside. But Build to Rent operators – a part of the market where longer tenancies are already commonplace – welcomed the plans, saying landlords should be pleased with the prospect of less voids and not incurring the cost of finding new tenants.

Another government consultation

When the proposals were announced in early July, the government revealed a consultation on longer tenancies would run until the end of August.

The government indicated that there could be some exemptions to the new longer tenancy rules, including for those tenants in student accommodation who generally require short-term, flexible tenancies.

The full consultation can be viewed here.

More security for tenants

The government says many tenants want longer tenancies for the extra security this provides. While most tenants already stay in a property for an average of four years, according to official figures, the majority exist on shorter contracts.

For some, though, the flexibility provided by shorter contracts is part of the appeal. Tenants who don't want to commit to a three-year tenancy could find it much harder to secure a property if the proposals are introduced.

Housing Secretary James Brokenshire, however, said the proposals were an important step forward for tenants.

“It is deeply unfair when renters are forced to uproot their lives or find new schools for their children at short notice due to the terms of their rental contract,” he argued.

“Being able to call your rental property your home is vital to putting down roots and building stronger communities.”

A middle ground approach

Many will welcome the extra security of tenure provided by longer tenancies, particularly given the rising number of people now renting, which includes a growing pool of family renters.

However, there are possible downsides, with landlords having less flexibility to finance their rental properties and forced to pay higher interest rates to lenders. These extra costs could be passed on to tenants, in much the same way the ban on letting agent fees could end up ultimately hurting those it is supposed to help.

Some tenants, too, may not like the idea of being locked into long-term agreements if they plan to purchase their own home in the next few years or move at short notice. A middle ground – which helps tenants while also ensuring landlords aren't hit too hard – will be difficult to achieve, but we'll know more once the consultation has ended and the responses come to light.

Reacting to change

As an agent, it will be your job to reassure landlords about yet another proposed change to the private rented sector. In recent years there has been stamp duty alterations, new PRA regulations, the phasing out of mortgage interest tax relief, the prospect of the letting agent fees ban and new minimum energy efficient standards to cope with.

Most landlords have taken a business as normal approach, adapting to the new landscape and finding ways to remain profitable.

Given the rise in the number of people renting, landlords are still able to achieve excellent rental yields if they invest in the right type of property in the right area. But there may be some concerns about the government's latest intervention, which is where a good, reliable letting agent can step in to offer reassurance.

To keep on top of all the recent changes, you need a property software system that allows you to run all parts of your business seamlessly. At Gnomen we can provide that, and modern, well-designed websites to help you stand above the competition.

For more information about what we can do for you, please get in touch with us on 0208 123 9019 or book a free demo here.