Longer tenancies deter new rental property
The shock findings of a new survey suggest that 32 per cent of landlords would be less likely to buy new rental property if the government were to introduce compulsory three-year tenancies.
The latest PRS Trends survey by specialist buy to let lender Paragon – which was one of the first lenders to update its lending criteria to allow longer tenancies, back in 2014 – says the result comes from its interviews with 200 landlords during the third quarter of this year.
Asked if the introduction of a compulsory three-year tenancy would make them more or less likely to consider certain tenant types, the highest proportion of landlords said they would be more likely to consider older couples (36 per cent), retired people (29 per cent), families (25 per cent) and older singles (again, 25 per cent).
Landlords felt a compulsory three-year agreement could potentially make them less likely to consider more mobile groups such as students (45 per cent), migrant workers (40 per cent) and young singles (24 per cent).
“Landlords are highlighting that the diversity of the tenant population calls for a diversity of tenancy arrangements. While some groups value greater security, many other tenants favour flexibility. Young professionals, for example, value the flexibility that the PRS brings to move to different areas and to different types or property” explains Paragon’s mortgages director, John Heron.
“In light of these findings, rather than impose longer-term tenancies as the primary or default arrangement in law, it may be preferable to bolster tenants’ rights to choose from a range of different tenancy lengths and boost incentives to landlords to enter long term arrangements where requested” he suggests.
However, the survey’s findings come just as one lettings sector trade body calls on the government to back the idea of long-term tenancies.
The Residential Landlords Association, in its Budget submission to the Chancellor ahead of his October 29 statement, says longer tenancies would meet the needs of the growing numbers of families with children who rely on the sector for their home.
Almost 40 per cent of private rented homes have at least one child living in them, with such families seeking long term stability to settle into their communities and local schools.
However, the RLA says that rather than resorting to legislation to impose longer tenancies on the sector – where tenants have already been living in their rented homes for almost four years – it wants tax reforms to encourage and support more landlords to offer them.
The association wants tax relief on rental income which could increase each year a tenancy continues up to a maximum of five years if the tenancy is renewed. The relief would then remain at this level.
The RLA’s research exchange, PEARL, has found that 73 per cent of landlords would offer longer-term tenancies with a combination of financial incentives and court reform to ensure that they have the confidence that where they provide a longer tenancy they can swiftly regain possession in cases such as tenants failing to pay their rent or committing anti-social behaviour.