Professor warns Renters’ Rights Act has backfired on tenants

A professor has warned the Renters’ Rights Act has caused changes in the private rented sector which are proving “ineffective or have perverse outcomes”.

Writing in the Telegraph, Tim Leunig, professor of economic history at the London School of Economics, has warned the act has backfired on tenants.

The news comes as a report in the Daily Mail reveals the Act has caused unintended consequences, with tenants struggling to find affordable places to live as landlords sell up.

Stress and uncertainty

Mr Leunig points out the government’s ban on offering more than the asking price for rental properties has been “ineffective”.

Mr Leunig writes in The Telegraph: “Landlords used to advertise flats at a low rent, find a lot of would-be renters, and then force them to bid for it. That was stressful, and people felt pressured into bidding high. That is now banned, and you can see why.

“Unfortunately, as a recent investigation by London Centric has shown, landlords are instead advertising flats at exceptionally high prices. Estate agents then encourage renters to view such flats with the assurance that the landlord will take a lower bid, and then all potential tenants are forced to bid, with a cap at the essentially false advertised price.

“That, it turns out, is legal. The effect, of course, is the same as the previous system: would-be tenants have to bid, with all the stress and uncertainty that entails”.

Finding it harder to rent a home

Under the act, landlords and agents can no longer require several months’ rent upfront.

Once a tenancy agreement has been signed, they may require no more than the initial month’s rent before occupation, although a tenant can voluntarily choose to pay rent early once the tenancy has begun.

Mr Leunig points out that international students and the self-employed have been hardest hit by the changes.

He told The Telegraph: “The self-employed often pay themselves via dividends. This means that they fail credit checks. To overcome that, and to reassure landlords, they often offered to pay a year’s rent in advance. That is no longer legal, and so this group now finds it harder to rent a home.

“The second group is international students, who obviously fail credit checks. Many have parents who have saved in advance, and could and traditionally did, pay for a whole year’s rent in advance. Once more, that is no longer possible, and landlords are shunning such tenants.

“Harming these groups is bad not only for the individuals concerned, but for the country as a whole. Some of those self-employed people will go on to create decent businesses, employing others and creating good jobs”.

The news comes as industry body Propertymark has urged the government to invest in the private rented sector.