Lawyer criticises Renters’ Rights Bill impact assessment for underestimating costs

A lawyer has slammed the Renters’ Rights Bill impact assessment, calling it “unreliable.”

David Smith, head of dispute resolution at JMW Solicitors, says the government’s assessment doesn’t “paint a true picture” of the financial impact on landlords.

The Renters’ Rights Bill is expected to cost £33 million a year, but the government insists it will not trigger a mass exodus of landlords.

Not the true picture

In a post on Linkedln, Mr Smith says impact assessments are “largely nonsense” as they are based on estimates that are “unreliable.”

Mr Smith says the government figures for the Renters’ Rights Bill impact assessment are not fully reflective of the actual costs landlords may face.

He said on Linkedln: “The impact assessment has estimated the cost to the sector of the new Bill as being £33 million. However, that is not the true picture as impact assessments ignore costs deriving from secondary legislation that does not exist yet.

“The cost when we add in the fees for the PRS Database and Landlord Ombudsman rise to £40.1 million and the cost of Awaab’s law and the widening of the Decent Homes Standard are not quantified.”

Mr Smith adds: “Looking into the detail further there are some more unusual numbers. For example, the cost to a tenant for a pet is estimated at £7, which is presumably the cost of the insurance the government is anticipating that landlords will buy and then charge back. I doubt it will be less than double that in practice, as the admin cost alone will be more than this figure.”

Gross underestimate

Mr Smith argues that the government’s £33 million figure underestimates the true costs involved.

He said: “On rents, the assessment says that they cannot see any impact on rents but admits that it is almost impossible to estimate.

“However, using the total cost of £33 million (which they know is too low) this leads to a maximum increase of 0.1% on rents. I find this very unlikely as the cost is greater and the way in which landlords set rent is likely to be far more important than the actual costs they face.”

Mr Smith challenges the claim that supposed benefits from the Renters’ Rights Bill, such as a £9 annual gain per property from reduced agent fees, are inaccurate.

He said: “The cost of learning about the changes, increased court costs in evicting tenants, providing more evidence to deal with cases, new Section 13 notices, considering pet requests etc is all costed at £22 per property per year over the ten-year impact assessment period, so a total of £220.

“I have no idea where this number comes from but I consider it to be a gross underestimate based on what I anticipate agents charging to prepare a S13 notice for a landlord.

“The cost of lost rental income caused by the Tribunal holding down rents has been ignored as it cannot be calculated. Apparently, landlords will also benefit by £9 a year due to tenants staying longer and having less void periods. I find this to be fanciful given that most tenants left property of their own accord already. The same longer tenancies are also expected to cost agents £1,719 per agent per year over the ten years.”

No substantial supply loss

Mr Smith argues that the government’s claim of no significant loss of supply is misleading, as the evidence cited is based on Scotland, where the government has since declared a housing crisis.

He said: “The government has suggested that there will be no significant loss of supply. As support for this, it has cited that the introduction of changes to the PRS in Scotland led to no substantial supply loss but this is a bit mealy-mouthed.

“Scotland made a number of changes over an extended period and the government has picked just one of them. It has ignored the more recent limits on rent levels for example, presumably on the basis that they are not comparable. But I suspect there are many who would take issue with the supply figures being quoted.”

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