Landlords face a £33 million hit from the Renters' Rights Bill

The Renters' Rights Bill is set to cost landlords £33 million annually, the government’s impact assessment reveals.  

Critics argue the true cost will be much higher with one lawyer calling the assessment "unreliable". 

The impact assessment has been published by the Ministry of Housing, Communities and Local Government with a claim that it will cost landlords £12 for each rental property annually. 

For letting agents, the cost will be £1,700 a year.  

Landlords leaving the sector 

The assessment states: "There is a risk that costs from the legislation may result in some landlords leaving the sector. This is difficult to estimate precisely, though we would expect it to be substantially mitigated by the additional cost per rented property being a very small fraction of average annual rent and asset value. 

"The available evidence to date does not suggest that similar reforms to abolish section 21 in Scotland have negatively impacted supply, nor changes introduced by the 2019 Tenant Fees Act, despite concerns they would. 

"The most recent English Housing Survey data shows the proportion of PRS households has remained relatively stable since 2013 – 14, suggesting that there have been no significant impacts on supply to the sector from various reforms." 

Mass exodus of landlords 

While the assessment makes the bold claim that the Bill will not lead to a landlord exodus - despite being the biggest shake-up in the sector for more than 30 years – it also warns that landlords facing the greatest costs will be those providing the poorest service to their tenants. 

However, a study by the Scottish Association of Landlords (SAL) revealed that Scotland's PRS saw a reduction of 22,000 rental properties in one year because of government policies - and the anti-landlord rhetoric. 

Also, a National Residential Landlords Association (NRLA) survey found that 41% of landlords are planning to sell rented properties in the next year - compared to 6% who say they will invest. 

Assessment doesn't 'paint a true picture' 

David Smith heads dispute resolution at JMW Solicitors and he says the assessment doesn't 'paint a true picture' of what the costs will be for landlords. 

He argues the government's £33 million undervalues the costs involved, including secondary legislation, fees for the Landlord Ombudsman and the PRS database. 

The costs of implementing the Decent Homes Standard and Awaab’s Law are also undervalued. 

He also challenges whether the Bill’s benefits, such as a £9 gain per property annually from lower letting agent costs, are accurate. 

'Cannot see any impact on rents' 

In a LinkedIn post, Mr Smith said: "On rents, the assessment says that they cannot see any impact on rents but admits that it is almost impossible to estimate. 

"However, using the total cost of £33 million (which they know is too low) this leads to a maximum increase of 0.1% on rents.  

"I find this very unlikely as the cost is greater and the way in which landlords set rent is likely to be far more important than the actual costs they face." 

He added: "The cost of learning about the changes, increased court costs in evicting tenants, providing more evidence to deal with cases, new Section 13 notices, considering pet requests etc is all costed at £22 per property per year over the 10-year impact assessment period, so a total of £220. 

"I have no idea where this number comes from, but I consider it to be a gross underestimate based on what I anticipate agents charging to prepare a S13 notice for a landlord." 

UK's private rented sector 

Simon Thompson, the managing director of Accommodation for Students, said: "The Renters' Rights Bill is poised to significantly reshape the UK's private rented sector.  

"While the aim is to create a fairer and more secure environment for tenants, the legislation also presents challenges for landlords." 

He added: "Along with the proposed introduction of periodic tenancies which could lead to increased uncertainty and difficulty in re-letting properties for student landlords, we also see these figures for the PRS. 

"It's one thing stating that there won't be a landlord exodus but to claim rents won't go up and to calculate a cost of £12 per year for each rental property is ludicrous." 

Here's a link to a PDF document of the government's Renters' Rights Bill impact assessment.