Base Rate Changes, the Renters Rights Bill debated in The Lords – it has been a busy week in the property world. But how does it impact you here in Richmond?

‍

There has been plenty in the news over the past few days to get our teeth into – and that is without even addressing the announcement by the Halifax on Friday that property prices increased by 0.7% in January. This was opposed to the 0.2% that had been forecast. 

‘0.5% higher’ doesn’t sound a lot… but say ‘250% more than expected in just one month’; that paints a different picture.

This week, though, two major property news items stand out: the Bank of England's base rate cut to 4.5% and the Renters Rights Bill's Second Reading in the House of Lords.

The Base Rate Change is welcome but was expected— not just by estate agents but by the money markets. 

The reason this matters is because banks, lenders and other financial institutions had already factored in a 0.25% drop, and had already started to reflect that expectation in the mortgage rates on offer. 

Positive news, of course. As local Richmond Borough Estate Agents, we expect this to positively impact the property market—greasing the rails for increased sales, both in volume and price.

Or at least, it might do, if it were news in isolation. That second piece of news mentioned, however, that lettings market news regarding the Renters Rights Bill, might just be a counterweight to that. It might yet conspire to hamper the sales market locally and nationally. But how?

The Renters Rights Bill had its Second Reading in the House of Lords this week, followed by several hours of what was described in parliamentary terms as ‘debate’ – but which really amounted to individual Lords, Ladies, Bishops, and Baronesses being able to stand up and have their say on the matter. And lots of them did (trust me, I sat through it, so you don’t have to…).

So, what is a ‘Second Reading’, why does it matter, and what does it mean for market here in Richmond?

Let’s take a deeper dive into these points to explore what’s going on:

‍

What does ‘Second Reading’ mean?

The Second Reading is the stage where a Bill—essentially a proposed law—is debated in Parliament. For the Renters Rights Bill, this meant a review in the House of Lords, following its two readings in the House of Commons. 

After its Second Reading in the Commons on October 9, 2024, MPs voted in favour by 424 to 104. Now, in the Lords, the Bill faces further scrutiny before moving to the next stage.

In the Lords, a Bill is debated after its Second Reading, but not the first – and that is the same for The Commons; then, unlike a Second Reading in The Commons, it is normally passed without a formal vote. 

That was the case here, when it came to the Renters Rights Bill being read a second time. After passing this stage, it moves to a Committee Stage, where the Bill is scrutinised in detail by members of The House of Lords. 

The Committee Stage is different in The Lords compared to The Commons, as it is normally a ‘Committee of the Whole House’ – meaning that any member of The Lords can take part. It is at this stage that amendments can be proposed, debated, and voted upon.

‍

‍

Why does it matter?

If you are a Landlord in Richmond, letting out a property or an HMO here, you are probably familiar with the proposals set out in the Renters Rights Bill, but if you are not then you might not yet have paid it much attention – and so for completeness, some of the highlights include:

• Abolition of Section 21 ('No-Fault' Evictions): Landlords will no longer be able to evict tenants without providing a valid reason.
• Ending Fixed Term Tenancies: All tenancies will become what we currently call ‘periodic’ – meaning month by month and, in theory, indefinite. Tenants can end a tenancy by providing two months' notice, but landlords will need to provide specific grounds for possession.
• Expanded Grounds for Possession: Landlords can gain possession in certain circumstances, for example, in order to sell the property, occupy it as a home, or move in a family member. Landlords will be required to provide four months' notice, with restrictions on doing so within the first 12 months of a tenancy.
• Limiting Rent Increases: Rent increases will be limited to once per year, and tenants will be able to challenge increases by taking their case to a tribunal.
• Ban on Bidding Wars: Landlords and agents will be forbidden from accepting offers above an advertised rent price.
• No more ‘Rent in Advance’: Landlords and Agents will no longer be permitted to ask for any more than one month’s rent at a time.
• Right to Request Pets: Tenants will have the right to request permission to have pets, and landlords will not be able to unreasonably refuse. However, landlords may require pet insurance.
• New PRS Ombudsman: A new ombudsman will be created to handle disputes between landlords and tenants, avoiding the need for court proceedings.
• PRS Database: A database will be created to provide a register of landlords and agents, including their details, and any penalties, convictions, and offences. Local authorities and regulatory bodies will be able to access it.
• Decent Homes Standard: The Decent Homes Standard, previously applicable only to social housing, will now cover private rentals to ensure properties meet minimum standards.
• Implementation of Awaab’s Law: Landlords will be required to address and rectify serious health hazards, such as damp and mould, within a specified period or face penalties.
• Discriminatory Practices Forbidden: Landlords must not show bias or prejudice toward tenants, such as those with children or receiving benefits.

These proposals aim to enhance tenant security, ensure fair treatment, and improve rental property quality. These are noble aims, but the question remains: is this Bill a sledgehammer to crack a nut, and will it create more problems than it solves?

‍

The Lords' Debate and Key Concerns

Despite the overwhelming approval in the Commons, the Lords appear much more divided, and that will inevitably slow the progress of the Bill down. Few Peers fully support the Bill in its current shape, that much is clear. Most raised concerns, and many opposed it in principle; indeed, some in its entirety.

A disproportionate amount of the ‘debate’ centred on the student market—particularly the scrapping of fixed-term tenancies. Another issue for both students and international tenants is the removal of ‘rent in advance.’ Many Lords expressed concerns about other aspects of the Bill, and it seems inevitable that amendments will be proposed at the forthcoming Committee Stage.

‍

‍

How does the Renters Rights Bill affect me in Richmond?

As professional Property Agents in Richmond, we are closely watching this Bill because if (or more likely, when) it is passed, it is inevitably going to have an impact on the property landscape here.

According to 2021 Cenus data, around one-quarter of properties in Richmond are rented – less than the rest of London, which is around 30%, but nevertheless a significant number. 

Any change in lettings legislation has an impact therefore on the lives of Richmond renters, who occupy 1 in every 4 properties here, and this Bill in particular is set to bring sweeping changes.

Nobody denies the need for addressing substandard homes, rogue landlords, and exploitative practices. However, two key questions arise:

1. Is this legislation overkill, and could these concerns not be addressed by enforcing existing legislation?
2. Could the effects on landlords be so severe that we see many leave the market? If they do – and surveys suggest 30% of landlords are considering it – should ex rental properties come up for sale at once and in numbers, will this have an impact on property values here in Richmond?

‍

Last year, as mentioned, a survey suggested that 30% or more landlords would sell up. However, data from a study conducted by Hamptons suggested a much smaller percentage have done so – perhaps as little as 3% in fact, when figures are finally revised. Around 150,000 properties altogether, out of more than 4,500,000 let properties in this country. Given that over 110,000 buy-to-let purchases were also likely to have been made, according to Hamptons’ study, the net loss – perhaps only around 40,000 homes coming out of the private rented sector – equates to something less than a 1% drop. Not ideal of course, and a trend we certainly don’t wish to see continue, but nevertheless not the catastrophe forecast in the earlier landlord survey. 

Nevertheless, given the significant number of people in Richmond living in rented accommodation, the impact of reduced rental supply could be significant in a town where the demand for quality rental homes continues to rise.

‍

Final Thoughts

Our expectation is that a strongly voiced debate will be had at this next Committee Stage, largely reflecting industry concerns, even if not pandering to them. A number of amendments will be proposed – and some will be adopted. The Bill itself will likely become an Act of Parliament by summer.

A sledgehammer to crack a nut? More like a sledgehammer smashing a nut into several nuts (if you will forgive me the odd analogy) – i.e. creating several problems in the act of trying to solve one. 

Some problems will be solved though, no doubt, and for tenants there will be a sense of greater fairness and better protections; on the other hand, new problems will be created, and in some cases old problems will be exacerbated.

And yet, the market will prevail. In Richmond, as elsewhere, there will always be demand for rental properties. Whether through existing landlords adapting or new investors entering the market, the private rented sector will evolve and continue to be an essential part of the town's housing landscape.

Because after all, what really is safer than bricks and mortar?

And, with that in mind, we feel that property values are likely to remain safe and stable here in The London Borough of Richmond, growing steadily throughout this year without racing up.

But are there areas in the Borough where we may see prices rise ahead of the curve? We think so. Want to know more? Stay tuned to our blog and to our socials for Darren and Kristian’s expert insights.

Until then: that’s a cut.

‍