Landlords rush to the exits as Section 21 ban looms
Yesterday we told you all about the latest RICS data showing that there was a slump in the number of available rental properties – while at the same time there was a jump in the number of potential tenants.
Now legal data is confirming that as the UK government prepares to abolish Section 21 “no-fault” evictions, a significant number of landlords are opting to exit the rental business, leaving tenants increasingly vulnerable in the increasingly limited housing market. New data reveals that evictions have surged, with 8,425 households in England served Section 21 notices from July to September, marking the highest rate in eight years. This has raised concerns from buy-to-let mortgage specialists who can see that demand for their lending is fading.
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Labour’s pledge to ban Section 21 evictions, expected to be enacted by summer 2025, aims to eliminate landlords’ ability to evict without reason. Campaigners, including Shelter’s CEO Polly Neate, insist that this legislative change “can’t come soon enough,” as she says a substantial number of renters face the distress of losing their homes under current regulations. The pressure on the government to fast-track the Renters’ Rights Bill, which includes the Section 21 ban, continues to grow amid rising evictions and a general housing crisis.
Read more: Has Reeves killed buy-to-let?
The increasing number of landlords who have found the added restrictions to be the final straw and who are now selling off properties is also contributing to a decline in available rental housing. Recent research by Pegasus Insight, commissioned by the National Residential Landlords Association (NRLA), shows that demand for rental housing remains high across England, with 79% of landlords reporting strong tenant interest, particularly in the South East. Yet, despite the demand, nearly 19% of landlords sold properties over the last year, with only 8% adding to their portfolios. Over the next 12 months, an additional 41% of landlords are expected to sell, leaving only 6% planning to buy more properties. This trend highlights a significant shift in the BTL market, where landlords are increasingly stepping away, further tightening the supply of rental homes.
The imbalance of supply and demand is particularly impactful for those in need of housing assistance. According to data from the Royal Institution of Chartered Surveyors (RICS), tenant demand held steady at 19% over the past quarter, while new landlord instructions fell to a net balance of -29%, the lowest level in recent years. This imbalance has resulted in escalating rental prices, with rents predicted to rise as competition for available housing intensifies.
Moreover, higher mortgage rates and new stamp duty increases, introduced to redirect properties towards first-time homebuyers, have made the market even less favourable for landlords. For many small-scale property owners, rental income serves as part of their long-term retirement plans, yet rising costs and new regulations, such as proposed energy efficiency standards, have made staying in the market less viable. The NRLA has criticized the government’s policies, asserting that they have only exacerbated the mismatch between rental housing demand and supply.
Yorkshire Building Society (YBS) recently added to this critique, noting that, despite inflation and rising interest rates, only 43% of landlords raised rents over the past year, indicating that rent increases are often responses to rising costs rather than profit-seeking. The YBS has proposed policies to alleviate this pressure, such as reintroducing mortgage interest tax relief for landlords maintaining high property standards. Additionally, YBS advocates for a “decent homes charter” to ensure landlords can affordably meet regulatory demands without overburdening tenants.
The UK’s private rental sector is largely comprised of individual landlords—many managing only one property. According to the English Private Landlord Survey (EPLS), 94% of landlords are individual property owners who often rely on rental income as an investment for their retirement. However, they face a challenging landscape marked by government-mandated tenant protections and new regulations.
Ben Beadle, chief executive of the NRLA, emphasised the need for a policy shift to increase rental housing. “Whilst landlords selling up might benefit a minority of tenants able to afford a home, the vast majority will struggle even more to find affordable rentals.” He urges a “change of course” in housing policies to encourage landlords to remain in the market and support tenants’ access to stable, quality homes.
Understanding Section 21 evictions in England and Wales
Section 21 of the Housing Act 1988 is a legal mechanism in England and Wales that allows landlords to regain possession of properties let on assured shorthold tenancies (ASTs) without needing to provide a specific reason. Commonly referred to as a "no-fault eviction," a Section 21 notice initiates this process, though it does not, in itself, terminate the tenancy.
Key features of Section 21 notices
- Purpose:
- A Section 21 notice allows landlords to reclaim their property at the end of a tenancy or during a statutory periodic tenancy without proving tenant fault.
- Court involvement:
- Tenancies are not automatically terminated when a Section 21 notice expires. Landlords must obtain a possession order from the court. Enforcement, if required, is carried out by bailiffs or enforcement officers.
- Time restrictions:
- Possession orders cannot take effect within the first six months of the initial tenancy unless the tenancy is a special type (e.g., a demoted tenancy).
- Tenants may receive an extension of up to six weeks if the court deems eviction would cause exceptional hardship.
Accelerated possession procedure
If the tenancy terms are unchanged and no additional claims (e.g., rent arrears) accompany the possession claim, landlords can opt for an accelerated possession process. This process avoids court hearings and relies solely on documentation.
- Duration:
- The median time for eviction via the accelerated procedure in 2019 was 18.7 weeks.
- Delays can occur if tenants raise significant legal defences.
Background: Security of tenure and changes
Historically, tenants enjoyed extensive protections under earlier legislation, such as the Rent Act 1977, which required landlords to meet specific grounds for eviction. The Housing Act 1988 introduced ASTs, streamlining the eviction process for landlords through Section 21 notices.
- Timeline:
- ASTs became the default tenancy type after the Housing Act 1996.
Legal requirements for serving a Section 21 Notice
- Notice content:
- Must provide at least two months' notice.
- A fixed-term tenancy may include a break clause allowing early termination.
- Written notice:
- Notices must be in writing and signed by the landlord or authorised agents.
- Compliance with property and licensing laws:
- Landlords must adhere to property licensing requirements and meet obligations for energy performance, gas safety, and tenancy deposit protection.
- Tenancy deposits:
- Deposits must be placed in an authorised tenancy deposit scheme within the required timeframe. Failure to do so invalidates the notice.
- Restrictions during initial tenancy period:
- Notices cannot be served within the first four months of a new tenancy.
Impact of COVID-19 on Section 21 notices
During the pandemic, temporary regulations extended the required notice period:
- Initial changes:
- Notice periods increased from two to three months under the Coronavirus Act 2020.
- Further extensions:
- In England and Wales, notices required six months’ notice during specified periods in 2020 and 2021.
- Eviction suspension:
- Evictions were paused nationwide between March and September 2020.
Deregulation Act 2015: Additional rules for landlords
The Deregulation Act introduced measures to curb misuse of Section 21 notices and ensure tenant protections:
- Retaliatory evictions:
- Landlords cannot issue Section 21 notices for six months after a tenant complaint results in a formal improvement or emergency remedial action notice from the local authority.
- Prescribed information:
- Landlords must provide tenants with the "How to Rent" guide and meet energy performance and gas safety obligations.
Eviction timelines and expiry
- A Section 21 notice is valid for six months from the date it is issued.
- Tenants may receive reimbursement for prepaid rent covering periods they were not in occupation if evicted before the rent period ends.
