Renters’ Rights Act: what’s changing for landlords and tenants today

James Rowe: Today marks a big day for both renters and private landlords as the Renters’ Rights Act comes into force, a bill designed by the Labour Party to "secure a fairer future for 11 million private renters in England". So is it just good news for tenants or are there any wins for landlords? Let’s find out on this episode of Which? Money.

Hello, it’s James in the Which? studio and joining us this week we’ve got Which? Money's property expert Sam Wilson.

Sam Wilson: Hi, thanks for having me.

James Rowe: No bother at all. How are you?

Sam Wilson: I’m good. How are you?

James Rowe: Very good thanks, very good. And alongside Sam we’ve got property expert and developer Marta de Sousa. Marta, hello.

Marta de Sousa: Hello.

James Rowe: How are you?

Marta de Sousa: I’m good, thank you for having me.

James Rowe: Nice to have you here. Now we’re talking about the Renters’ Rights Act. Now this was proposed by the Labour government to strengthen rights for private renters. Sam, do you want to just take us through some of the big headline changes?

Sam Wilson: The big headline changes are that the first set – the first parts of the bill are coming in from the 1st of May. And what we’re going to see from the 1st of May is we’re going to see changes to the way in which the contract between landlords and tenants is set. So there’s going to be assured tenancy agreements. This means that we’re going to have rolling contracts. Previously tenants in the private rented sector would normally have a 12 month contract or a 24 month contract. From the 1st of May all of those contracts will be rolling.

So it means you will not have a set end date to your contract – instead you will need to give notice if you want to leave that contract. What we will also see is that landlords will only be able to increase rent once per year. And we’re also going to see tenants not be able to bid on rental properties anymore. So what that means is that when you go for a viewing and you see that a flat is £2,000 per month, if you were going to look at that flat in April, you might go and you might say, "I’m going to bid £2,400". And the estate agent would be able to choose and they might choose the highest offer. From this point on from the 1st of May, if it is advertised as £2,000, that means that it is going to be let at £2,000. And that’s a really big change.

James Rowe: There’s a lot of big changes there. How did we get here Marta? Because it looks like a lot of these changes are going to benefit tenants, right?

Marta de Sousa: 100%. And I think a big one is the abolition of a Section 21. Let’s be honest, we’ve been talking about that for years. What that means is that landlords had a lot of power to get rid of tenants and anyone that they were unhappy with, but even at their own whim. And with the abolition of Section 21 and the replacement of that with Section 8, that means that they’ll need a legal cause to get rid of the tenant, so tenants have a lot more rights.

We got to this point because landlords have had a lot of power up until now. They’ve had very restrained contracts where tenants can’t get out of them. Tenants feel like they can’t complain about any damages to property – they actually can’t feel like they can complain about property increases of rental rises. Landlords will not be able to raise rents on a whim as well – it’ll have to be once a year and tenants can complain if they feel like it’s unreasonable. It’s something that we’ve been waiting for for a long time because if you think about it, in the property market, most people could not afford to buy. House prices are an average of £262,000 to £266,000 and also in London around the £500,000 to the £600,000 mark. People are spending 41% of their income on rent and we are moving to be tenants. Tenancies and rental used to be a short-term thing before you were able to buy, you would save until you could buy, but now it’s what 20% of the population are doing and that figure is just going to rise more and more.

James Rowe: You mentioned Section 21. I had no idea where Section 21 came from. It was the Housing Act of 1988 if we want some facts in there, which originally set out the rules for renters. How big of a problem has Section 21 been for renters to this point? Has it been a big problem?

Marta de Sousa: It’s actually been one of the leading causes of homelessness. People have actually been evicted from properties with no notice. We’ve seen tens of thousands of notices issued per year. 11,000 households have been evicted by bailiffs in a 12 month period. This is people being left on the street with nowhere to live and it’s not something that can be done. On top of that, we’ve had landlords being able to not have people in their property that are on benefits, for example, that have pets, that have children. They’ve been able to have discriminatory tenancies and I think that is all stopping now and it’s much needed to be honest.

James Rowe: Obviously this sounds like great news for tenants, and it is great news for tenants. But Sam, for landlords, they are naturally going to be disappointed by these changes?

Sam Wilson: I think we’ve seen a real mix in the way in which landlords have reacted to these changes. We’ve seen some landlords who yes, they’re worried by the increased regulation and they’re worried about the potential cost in admin. But we’ve also seen landlords who welcome the changes. They welcome increased rights, they welcome tenants needing these rights and they also want to see good-quality landlords in the space and they don’t want to see bad-quality landlords who are ripping off tenants or creating a position where tenants don’t feel like they can report issues or they’re worried about being evicted.

There is a real mix and it’ll be very interesting to see whether – there’s been a lot of talk of landlords leaving and selling up and it’ll be interesting to see the extent to which this happens and we’ll only really start to see the figures post the 1st of May. We start to see how many landlords are actually selling up as a result of these new regulations.

Marta de Sousa: It’s been quite a difficult journey for landlords and I’m not here sat here defending landlords in any way, but if you think about it, we’ve had tax changes where landlords are now paying extra 5% stamp duty. We’ve also had changes where they can’t deduct their mortgage from the rental income they’re receiving. And this was very deliberate by many governments because we have a housing shortage and a housing crisis and as more people are forced to rent, more of the tenants should have more rights.

Also the government wants more landlords to sell up. They do want landlords to sell their portfolios to flood the market with a few more affordable houses. I mean we need 200,000 per year being built per year and available to the public to actually meet demand. So I’m not saying that this will meet demand, but this is what the government’s been doing – a successive tactic to try and get landlords to shape up.

And one of the things that’s quite interesting is 45% of all landlords are solo landlords that have their own property and then have one other property that they rent. The market is actually mainly dominated by these big landlords that have five-plus properties. So yes, it will hit the ones that have the one-off property harder. The ones that have five-plus properties, we’re talking about professional landlords here and they should be happy with these changes because Section 21 is going to be replaced by Section 8. If we make sure that Section 8 is correct, landlords are still going to be able to evict anyone that doesn’t pay rent and they’re going to be able to evict someone when they want to move into their own property or sell their property anyway, so they have legal cause. The problem landlords are thinking right now is that courts are slow – so if Section 8 isn’t correctly implemented, that’s where the problems will lie. However, saying that, if we make sure that Section 8 works, then these are welcome changes.

Sam Wilson: Just leaning on from the Section 8 for landlords thinking about what is the difference between Section 21 and Section 8. So for Section 21, you don’t need to give a reason, it’s two months’ notice. For Section 8, firstly it can’t be within the first 12 months of the tenancy. So the government says this is designed to make sure that tenants have a bit more security – they know that when they sign a lease they definitely get that 12 months. The next part is that now for Section 8 there are a few different reasons that you might give a Section 8 – so this will change depending on the reason – but typically you’re looking at four months’ notice. So there’s also a bit of a longer notice period for the landlord. So like you say, there is still a way in which if a landlord would like to sell a property, they can evict the tenant, they can sell the property, but it can’t be within those first 12 months and they would need to wait the four month period rather the two month period that it previously was.

James Rowe: Marta, you mentioned the Labour Party before, this is obviously the party who’s brought this in as they’re in government. But Sam, it’s not just Labour who have tried to get this into law, it came from the Conservatives originally, right?

Sam Wilson: Renting reform is not a new thing at all. So in 2019 the Conservatives had it in their manifesto that they were going to do a rental bill, they were going to reform the sector and they were actually going to abolish Section 21. That was later scrapped as part of their bill and ultimately the Conservative bill which was called the Renters’ Reform Bill – confusing given how similar it is to the Renters’ Rights Act. But the Renters’ Reform Bill, it did make its way through Parliament but with the general election it didn’t make its way all the way through so they weren’t able to pass it. Renting reform has been coming for a long time. It’s not just Labour. Tenants and landlords have known something is coming for a long time, but this is a massive change that is now coming on the 1st of May.

James Rowe: Do you think it’s been a bit of a political hot potato in a way where it’s a big topic for people but no government has actually got on with getting it into force?

Marta de Sousa: I think the each successive government, especially a Conservative government where their main policy for years has been home ownership – they’ve brought in Right to Buy of your council home and they’ve brought in Help to Buy schemes where you could put down 5% deposit and they’d guarantee the rest. Now the problem we have is that nobody can afford to buy. So it’s become unavoidable that one government has had to deal with it and it has been the Labour government now.

But as you said, this has been a problem that’s carried on through many years now. The thing is, we’re stuck in a little bit of what I call a rental trap. Because if you’re putting around 40% of your income into rent, then you can’t save to put money down for a deposit. Property prices have grown seven times faster than wages over the past 20 years. So who can afford to buy? No one. And ideally you would all own a home and we would as a country – the home ownership’s a very important policy for Conservative government, but they’ve realised that actually that can’t happen. And because that can’t happen, they need to think of an alternative and that’s rental reform.

But let’s be honest, the rental market needed to be reformed for years. It’s quite archaic really if you think about it that people can be evicted on the whim of a landlord. And the fact of the matter is, we’ve heard also of a lot of tenants struggling with damaged property, properties that are dangerous. We’ve had Grenfell where we’ve had a lot of tenants there with cladding issues. This can’t continue. They brought in EPCs, which were the energy-performance-certificate integrity. They’ve brought in registration and I think this is the next step. Will it strip a lot of properties from the rental market? I’m seeing a lot of landlords that I know and I’m speaking to in terms of my contacts across the country selling entire portfolios. But this is something that’s been happening already for years, including with those tax changes, because it’s really no longer affordable to be a landlord if you’re a small landlord that’s not a professional landlord. But it’s also no bad thing that that’s the case because those properties should really be out there for people to buy. So the changes are welcome. Will it mean that we need more rental properties? That’s for sure.

James Rowe: That’s the thing isn’t it, because if there’s going to be landlords in swaths selling their properties and they become available for people to buy, then we’re going to lose some rental stock aren’t we? So then is it then in a curious way going to drive up costs for other renters because there isn’t as much property for to meet the demand?

Marta de Sousa: Well it’s a basic economic principle of supply and demand. Yes, 100%. And we’ve seen that as well with all the schemes that governments put in – there’s a lot of political election-fuelling schemes like Right to Buy, Help to Buy, all of those. They’ve only had minimal impact in terms of people being able to buy, but they’ve had a lot of impact for politics and for election years. But what they have done is they’ve driven up prices in those areas. We’ve seen for example lower-end properties up to £500,000 prices being pushed up because of those schemes. So you’re right, in a weird way, it kind of flips the market. If we’re stripping the market from rental properties, yes, rental prices may go up. But what will happen really is there’ll be an adjustment in the long run and what it will mean really is that people that are renting at the moment will be protected, and that I think is what’s key.

James Rowe: Sam, you mentioned assured periodic tenancies before. This is something – it’s not necessarily new but it’s going to become standard. Just remind us what this is all about because this is another big change for renters isn’t it?

Sam Wilson: It definitely is. And just to be specific, it’s for private renters. So for social renting, this isn’t going to come in yet. There’s going to be further consultations on that. And also the other small asterisk is for students in university halls – understandably it still makes sense for that to run during the academic year, so that will still be on a fixed-term basis.

But for everyone else, for the private renters, it’s going to be a big change. Previously you would normally sign a 12 month, a 24 month, maybe even a 36 month fixed-term contract and then at the end you would move out or you would sign another contract. Everyone is either going to be moved – so if you previously had that you will automatically be moved onto a rolling contract – and anyone who signs a rental agreement from the 1st of May will automatically have this rolling contract.

What that means for renters is there isn’t this deadline that you have to work towards – it means you don’t have to make sure that you’ve got your next place set up or if you’re buying you don’t have to make sure that that’s ready to go at that fixed deadline. Instead there’s flexibility. Maybe you might say in the autumn I’d like to think about moving, your situation changes, maybe interest rates go up – you then think, "I’m going to give it a few months", and that’s fine because the rolling contract allows you to do it. If you would like to get out of your rolling contract, you simply give two months’ notice and then it will end. So it’s not like tenants can’t get out of these, it’s just a two month period that they’d need to wait and then they’re able to leave the contract.

James Rowe: There’s a lot more freedom there I guess isn’t there for renters. And psychologically I guess it puts them in a better position as well doesn’t it?

Marta de Sousa: I think knowing that you have a home to go to at the end of the day – if you’re a nurse and you’re caring for people and you go home and you know you have a safe space, that will make you much better worker, much better carer. And it’s just quite sad that we see that a lot of people are having that real stress about "Where am I going to live? What am I going to do?". And they’re also being lumped with astronomical deposits that they were having to put down.

One of the other changes is that landlords can’t ask for upfront rental payments for a couple of months or three months or four months. They can only ask for the one month I think it is. And this means that people are not paying out these huge lump sums and they can actually use their salaries to pay for the monthly rent rather than having to save to be able to move, which is quite terrifying at times I would say. And if you think about it, people in the private rented sector – the amount of people has doubled since the early 2000s. So we’re seeing people that were buying around the 70% mark go down to the 60% of the amount of people that are looking to buy. So this is a welcome change because I think renting is no longer just for students, just for younger people. People are actually thinking that they’re going to rent for life and never going to buy, so we need to change it into a system that protects everything. If you have a family and you have children, the thought of being evicted the next month or not being able to move and if something falls through not having somewhere to set your children to – that’s utterly terrifying and this will change everything.

Sam Wilson: I think also for landlords, if they’ve got a good tenant that they have a good relationship with, pays the rent on time, it’s good for them. It means that when the year comes up they might not think "I need to change". There’s this big ticking time bomb of the tenancy ends, whereas now it just continues. It means they might actually have their good tenants for longer – so hopefully for landlords there’ll be that benefit there as well.

James Rowe: As somebody who has not rented before, when I was looking through some of these changes I was almost shocked by some of the rules that were in place before the Renters’ Rights Act. For example, a landlord could refuse a tenant if they had kids or if they were on benefits. Was this really happening?

Marta de Sousa: Yes, 100%. It’s been quite controversial actually landlords banning people that are on benefit and refusing if that is the way to pay for the rent. And they’ve actually put it on advertisement. So when they’re advertising for their properties, it was being listed on all the property search sites, "We do not allow for people with children, or with pets, or on benefits". And if you think about that, that’s really actually inhuman I would say. It’s extraordinarily discriminatory and ultimately it’s purely wrong I would say. I think this change just kind of brings us more into the 21st century – something we should have been in for the past 26 years which we haven’t been to be honest.

James Rowe: How will this work in practice? How could a landlord reject somebody’s proposal to move in? What excuses can they actually lead with now then?

Marta de Sousa: Before landlords were king – so that was ultimately there’s no other way to describe it, landlords were king. But since the tax changes, now with the renters’ reform, it’s going to be completely different. Now I think they can refuse tenants if they can’t afford the rent. So they can run affordability checks and also it depends – they can run criminal checks as well. So anything to do with background, but not to do with how you pay for your rent and what kind of social situation you’re in, if you’re family if you have kids. And also they will have reduced rights over pets and they will be forced to accept pets more.

James Rowe: Any other changes the two of you would like to mention because we’ve gone through some of the big headlines, but is there anything we haven’t touched on yet that we think we should mention Marta, go on.

Marta de Sousa: I think what’s quite interesting is not in terms of this, but we’ve also seen a change with HMOs, which are the multiple-occupant homes across the country. So if you had a house, had five bedrooms, you could rent each bedroom out to separate people. And there’s been a change with HMOs as well because the government’s now getting these multiple-occupancy landlords to get planning permission to put in fire-safety changes and to be registered HMO providers. They’re cracking down on landlords treating renters badly. And I think that is where we need to think what is the main benefit of this policy – protecting the tenant. And if we’re all going to become tenants and continue to do so and grow more and more, we need to be protected and essentially our human rights in a way protected.

James Rowe: And Sam, there’s obviously a lot of changes this month, but there’s also a lot of changes coming down the line. Even into the 2030s as well there’s some changes that we still have to wait a few more years for?

Sam Wilson: There’s a lot in this act and there’s a lot coming in from the 1st of May, but as you say it’s not everything. So we’ve got a change to the way in which there’s a database for landlords, a new ombudsman – that’s coming at the end of 2026. And then like you say, there’s stuff planned for the 2030s as well and this is – everything in the 2030s is around structural change. So we’re thinking about making sure that the homes themselves are safe for tenants and are of a proper quality for tenants. So that means bringing in minimum energy-efficient standards of a EPC rating of C or equivalent by 2030. Now as someone who has rented in London and I think I rented an EPC rating of F, it will be good to see it going up to C.

Marta de Sousa: Just on that point there, you know the thing is with London, we’re living in an area where Victorian properties and Georgian properties happen – they need to be upgraded. But yes, it’s when you’re freezing and your energy bills are skyrocketing. And now we’re talking about the war and the oil prices going up and our energy prices still going up further and more than they had already – let’s be honest. So that is absolutely key that they bring that in as well to protect tenants.

Sam Wilson: But it sounds ambitious for them to you know for a target of C on an EPC. It’s going to be a massive change and hence why there’s going to be further talks with landlords and landlord associations about how this is brought in and further consultations. But it’s going to be a really really big change hence that extra period of time. There’s also going to be a few other changes for landlords further down the track around making sure that homes are safe and serious hazards are dealt with effectively.

Also just kind of touching on what’s included in the bill, what’s not included in the bill – so we talked before that landlords will only be allowed to increase rents once in a 12 month period. One thing that’s not included in the bill is any sort of rental freeze or caps or anything like that. The Green Party have called for it, the Renters’ Reform Coalition have called for it, but that is not something that is included in this act.

Marta de Sousa: It’s very popular in New York. We’ve always heard of rental caps being very widespread in America and things like that. We’ve never heard of rental caps here in the UK. I think it’s been a policy that’s been avoided like the plague. Rachel Reeves trying to bring it in – it does appear that way doesn’t it? It does appear that way and so that’s where we’re seeing a huge shift in the mentality of politicians. They know that who’s going to vote for them in the election are going to be the majority of renters because now we are the majority. So being that, then yes.

I do think – but rental caps mean that you can’t – it’s not just about not being able to increase the rent in the long term, but it’s protecting the rent for a very very long time, many years. And so that people can stay within properties. But again, will that mean that less landlords will come to the market? I think so because that happens a lot in the US where people have these tenancies where the rent is so low for 20 years and it keeps getting passed down that actually landlords get to the end of those tenancies and just sell those properties, so they’re a little bit historic. They notoriously don’t work very well, rental caps I must say, because the markets keep moving unfortunately and we can get government subsidies in, that might help. But rental caps is not something that I personally think would work in the long run.

James Rowe: It was the Guardian earlier this week who reported that Rachel Reeves is considering imposing a one-year rent freeze on private sector homes. Where are we with rental prices at the moment? Because we often do talk about how much it costs per month and for a lot of people it ends up being more than what you would pay for a mortgage, for example. So where are we with prices at the moment?

Sam Wilson: The Rightmove Rental Index, they released their figures for the first quarter of the year and they said that the advertised rent of homes outside of London has been flat for the first quarter. It’s actually the first time since 2017 that there’s been no change between the final quarter and the first quarter of the year. And that makes the advertised the average advertised rent outside of London £1,370 per calendar month. For London there was a small rise of 0.7% this quarter to a much larger figure of £2,736. So you can see there the big difference just between inside of London and outside of London, and it’s a big figure so if it continues to rise it’s you know.

Marta de Sousa: In London it’s 48% of your salary that you’re spending on your mortgage – and if you think about it, if you’re single and you’re living alone, that’s actually really unaffordable and that’s I think why a lot of people are going into shared accommodation even in a in a later age. There’s a lot of people sharing households because of that, because they simply can’t afford to live where they work. And we’ve obviously been promised Crossrail and all of that for us to live – the idea was that we’d live in these commuter towns and commute in and it seems that’s not very appealing to people and I complete understand why because you should be able to live and work in the same place. But I think and also the train prices as well skyrocketing – that’s another huge amount.

But I think though that I ultimately, we haven’t really seen rental increases in this first quarter because a lot of the factored-in idea that this rental reform was coming in was already put in last year. I think landlords were already preparing, everyone was ready for it, it had been announced and it had been factored in before. And now just before these changes come in usually we get a period where everything doesn’t move because I think everyone’s in expectation to see what’s going to happen. Are landlords coming out? People are actually not moving as much because they think "what’s going to happen to landlords? what’s going to happen to my tenancy?". And I think a lot of tenants probably if they could hold out moving, they probably did until after the rental reform because now they have so many more favourable contracts. And we’re going to see a lot of the contract changes coming in as well in the next coming months.

James Rowe: Should we do some short-term and long-term predictions for the rental market? It’s a tricky one, but given it’s so unpredictable isn’t it because the raft of changes are so different to what was what led beforehand. So short-term will we see volatility and then long-term it’ll settle down? What do you two think?

Sam Wilson: I think short-term we probably will see advertised prices go up. "Advertised" is the very important word there because with the previous system of bidding it was often quite difficult to know what properties actually went for. So I think it is likely that there will be that adjustment and you will see a little bump up. The only benefit for tenants there is they will know what they can afford whereas previously they might have thought they could afford something but actually it was never going to go for that price. So I think short-term you are going to see a little bump. Long-term I don’t know if I’d want to make any long-term predictions. What about you Marta?

Marta de Sousa: I’d like to be Mystic Meg and get out my crystal ball. I mean I think the property market nobody can bet against it, but also nobody can bet on it because let’s be honest, it is completely changeable and changing at all times. I do think however that a lot of landlords will leave the market. They’ve already come out in droves so we’re not going to see this huge amount of properties being pulled off the market. But I do think quite a few. It’s just too difficult to be a landlord.

But a lot of people, especially who bought 30, 40 years ago, have properties that are mortgage-free that they’re sort of using as their little pension pots that they were going to rent instead of having a pension or to add to their pension. And I think those you’ll see coming back onto the market. So you’ll see, I would say potentially in the short run, like you said, a rents going up for a bit to try and attract. In the long run maybe they’ll stabilise around that slightly higher higher mode. But really what you will see is happier tenants. And I hope you’ll also see properties on the rental market that are higher quality because landlords will still always want to make money off their property. So they’ll provide better quality properties, more amenities and be more amenable to the requests of tenants. And I think that is the most important thing about this reform.

James Rowe: Well let’s watch this space shall we? I’m going to pop a date in your diaries for a year’s time and then we can come back into the studio and review that first year of these changes and then we can see what’s happened to the rental market. Are you both up for that, a year’s time?

Marta de Sousa: 100%. And I think we need to come in and see from the experience of a tenant and see how they’ve experienced the changes. Someone who was renting before for a good four years and after for a year and see what happens. We can come back in four as well and see where they are at as well. It would be interesting to see their experience.

James Rowe: I’ll stick that in your calendar. I’ll see you in a year’s time. Sam, thanks very much.

Sam Wilson: Thank you very much.

James Rowe: And Marta, thank you.

Marta de Sousa: Thank you.