Rental reform – Section 21 abolition still a long way off

If a week is a long time in politics, five years seems like an eternity. This is particularly true of the five years since the 2019 general election. Almost as soon as the Conservative Party took power on 12th December 2019, we were hit by the COVID-19 pandemic. As a result, many pledges such as rental reform were put on the backburner as the government imposed lockdowns and hurriedly created economic support programmes such as the furlough scheme.

Rental reform – a long time in the planning

The Conservative Party has been committed to rental reform since April 2019. Back then, Theresa May announced a consultation on abolishing Section 21 ‘no fault’ evictions. This policy made its way into the party’s 2019 manifesto:

We will bring in a Better Deal for Renters, including abolishing ‘no fault’ evictions and only requiring one ‘lifetime’ deposit which moves with the tenant. This will create a fairer rental market: if you’re a tenant, you will be protected from revenge evictions and rogue landlords, and if you’re one of the many good landlords, we will strengthen your rights of possession.

Despite this commitment, progress on rental reform has been slow. Despite gaining a first reading in 2023, the Renters Reform Bill has only just cleared the House of Commons. It now passes to the House of Lords, where it will be scrutinised and amended. Any changes have to be approved by the Commons, which may make amendments and return the bill to the Lords. This parliamentary ‘ping pong’ may take some time.

Renters Reform Bill timetable

To say that the rental reform legislation is cutting it fine is an understatement. The latest that this parliament can be dissolved is 17th December 2023. A general election must be held no later that 28th January 2025. That said, Prime Minister Rishi Sunak has said that he expects to go to the polls in the second half of 2024. Indeed, he has not ruled out holding an election as early as July.

This means that there is precious little time for the Renters Reform Bill to pass through the House of Lords. Indeed, at the time of writing, no date had been set for its first reading.

Given this, there are now two likely scenarios. The bill will either become law before the next election, or it will be up to the next government to look afresh at rental reform.

Section 21 reform

Assuming that the bill does become law, it’s important to understand how it will affect Section 21 evictions. Currently, the bill remains committed to abolishing Section 21. However, it will not be abolished overnight. First, the government wants to reform the court system so it is able to cope.

It’s not difficult to see why court reform is necessary. With the abolition of Section 21, landlords will have to rely on a strengthened system of Section 8 evictions. Currently, most tenants don’t contest evictions in the courts. Contesting a Section 8 eviction is usually fairly pointless because a landlord can currently fall back on the ‘no-fault’ Section 21. Once the latter has been scrapped, it’s highly likely there will be significantly more cases brought before the courts.

Currently, the courts are struggling due a large backlog from the pandemic years coupled with a reduction in funding. For the system to cope with increased Section 8 cases, it needs to go beyond returning to the ‘normal’ of the pre-pandemic years. It needs extra capacity to deal with these cases.

Will rental reform eventually scrap Section 21?

At this juncture, it’s difficult to predict when or how Section 21 will be scrapped. Court reform isn’t going to be a simple process. It’s certainly something that’s not going to happen before the next general election.

This means that, even if the Renters Reform Bill does pass in this parliamentary session, the fate of Section 21 will be in the hands of whoever forms the next government. If the Conservative Party defies all expectations and wins, it will presumably press ahead with court reform. If the Labour Party wins, it could scrap Section 21 on its first day in office.

A lack of certainty

Unfortunately, the current situation creates uncertainty for landlords and tenants alike. Ironically, this uncertainty has led to a spike in Section 21 evictions as landlords seek to sell up.

That said, many landlords still think buy-to-let properties are still a sound investment. Certainly, given the recent spikes in inflation, money has generally retained more value when invested in bricks and mortar. At THP, our expert accountants help many landlords make the most from their portfolio. If you’d like to learn more, check out our Landlord Platinum Service with free cloud accounting software that’s designed especially for property management.