The Government’s proposal to set a minimum three-year term for private rental agreements could benefit tenants and landlords, and trigger investment in the Build-to-Rent sector.
Government research has shown that the average tenant remains in a property for four years but that 81% of private tenancies are assured shorthold agreements lasting six to 12 months, offering very little security for landlords and tenants.
The current proposal would mean that there is greater security for tenants, allowing them to make long-term housing plans. At the same time, landlords could avoid potentially costly annual gaps whilst they find new tenants. This could be particularly beneficial for both landlords and investors operating in the Build-to-Rent world.
We are already seeing a demand for longer tenancies from investors in this sector, some of whom have granted three-year fixed-term assured shorthold tenancies in recent developments to help guarantee a fixed income.
As a result, the Government’s proposal is likely to encourage further investment in the Build-to-Rent sector. Not only will this help boost housing supply, but deliver different tenures and housing models to meet a wide spectrum of needs and which we believe, is a vital part of the housing solution.
A consultation on overcoming the barriers to longer tenancies in the private rented sector of the proposal is now underway and scheduled to end on 26 August 2018.
This hasn’t been met with universal approval with some in the industry believing that the reforms would make it exceptionally difficult for landlords to gain possession from problem tenants. Nevertheless, the Government has sent a clear message that it acknowledges the concerns raised and is committed to seeking views from landlords, tenants and related organisations about the most effective ways to tackle obstacles to introducing longer tenancies.
Although the devil will be in the detail once the proposal is formalised, this is a positive and welcome step forward which could have far reaching benefits.