Government to do away with short-term tenancies
Chris Hogan, 1st October 2018, Landlords
The Government's Communities Secretary James Brokenshire has announced plans to introduce a minimum three-year tenancy in England to help stabilise society and reduce homelessness. Good news or bad for landlords?
With 80% of tenants on short term contracts (either six or twelve months) and loss of tenancy, a major reason for people becoming homeless, it would seem sensible to insist on longer tenancies (according to housing charity Shelter).
The Government believes this will allow tenants to put down proper roots, with children being able to attend schools consistently instead of constantly shifting and a whole host of other benefits that will create stronger communities.
Implications for tenants
Although longer tenancies give landlords more security with good tenants, they are worried about the risks they face with bad tenants. The thought of being stuck with bad tenants for three years could make a lot of single-property landlords sell up.
There are concerns that the measure will mean landlords have less flexibility in the financing of their properties. This could lead to higher interest rates and charges by lenders, which would be passed on to tenants in the form of higher rents.
Do tenants want longer tenancies?
Research by the National Landlords Association (NLA) indicated that while 40% of tenants were in favour of longer tenancies, an equal proportion were not. Interestingly, 20% said that when they had wanted a longer tenancy, their landlords had agreed to it. That would indicate that longer tenancies aren't a problem when both parties are in harmony.
A better move might be to allow initial six month tenancies, followed by a three year minimum once tenants have proved they are suitable tenants. But there's no mention of anything like that in the current proposals.
Students would be exempt from the three-year minimum, for obvious reasons. A possible side-effect is that professional landlords might be more prepared to invest in purpose-built student accommodation, as the shorter contracts would give landlords more flexibility.
What happens next?
The proposals were announced at the beginning of July with a consultancy period that finished in August, so we're waiting to see if the Government announces any findings.
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