What exactly is happening?
The Coalition is pressing ahead with reforms to the rental market approved last June, which will come into force from March 1st.
What will they do?
A great deal of things - so it’s hard to sum up briefly. But the biggest changes relate to security of tenure, rent reviews and the classification of landlords.
Ok, go slowly …
A couple of things to bear in mind: local authority tenants or renters who rent a room in the landlord’s home aren’t affected by this, and if you’re in an existing lease already, your terms and conditions are not affected.
New tenancies created in the private rental sector are what’s concerned here. From March 1st, these tenancies will have a standard six-year time frame attached to them. They also create two new categories of landlord: small (three or fewer tenancies) and large (more than that).
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What will change in a new tenancy agreement?
From March 1st, landlords will be able to match the rent to the market value of comparable units nearby. This is a change from the previous regime, where rent increases were constrained in Rent Pressure Zones even when a tenant changed over. For small and large landlords, rent increases can rise by the rate of inflation year-on-year, capped at two per cent annually (new apartments can rise by more than this, if inflation is higher). At the end of a six-year tenancy, it can be matched to the market again.
Have tenant rights improved?
The grounds for eviction are narrower for both smaller and larger landlords. On the smaller end of the scale, the grounds for in-lease evictions will be more restrictive than is currently the case. They are a little wider at the end of a lease. A larger landlord will not be allowed to end tenancies for any reason other than a tenant not meeting their obligations or a property not suiting the tenants needs. So, overall, the grounds for eviction have been narrowed and notices of termination are expected to go down.
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How will rents react?
Almost everyone expects them to keep going up. In fact, allowing for more frequent resets to a market rate is almost the point: the Government wants more big money investors piling into apartment building in particular, and the inability to “mark to market” had been pinpointed by the industry as a major reason for stagnating investment.
So, wait, rents are going to go up?
Looks like it. The political play here is the hope that supply will also go up, and therefore bring rents down in the medium term. That is a risky position though. Much like everything else in the government’s housing policy, if it works, the risk will be worth it - but if it fails, they are likely to face a whirlwind of pushback.
