A new law could stop landlords from demanding several months’ rent up-front payments from new tenants.
A proposal, which would make it unlawful for a landlord to request or accept more than a month’s rent in advance, has unsurprisingly been welcomed by campaigners – but not proved popular with agents and landlords.
The Renters’ Reform Coalition has condemned what it describes as “extortionate” upfront costs traditionally required from renters prior to taking on a new lease, saying this has discriminated against less wealthy tenants.
But the National Residential Landlords Association (NRLA) is among those to voiced concerns that such restrictions could pose a risk to landlords if tenants cannot show other means of ensuring they can pay rent regularly.
Tom Darling, director of the Renters’ Reform Coalition, said: “For too long, extortionate rent-in-advance demands have allowed landlords to discriminate against poorer renters – it’s great the Government have acted on this and listened to renter groups by setting out clearly that this practice will be prohibited.”
Responding, Chris Norris, policy director for the NRLA, commented: “Restricting rent in advance, combined with freezing housing benefit rates and not enough rental housing to meet demand is creating significant barriers for those with poor or no credit histories needing to access the sector. This includes international students and those employed on a short-term or variable basis with an income that fluctuates.
“The government is cutting off any assurance responsible landlords might seek when renting to those who cannot easily prove their ability to sustain tenancies and pay their rents. In the end those who will suffer most are those the Government most wants to help.
“Ministers must provide clarity on how tenants unable to easily demonstrate their ability to afford and sustain their tenancies should do so. Expecting landlords to take on high levels of risk without practical assurances is not a sustainable solution and risks further exacerbating the challenges in an already constrained market.”
Also reflecting on the government’s plans to ban landlords from demanding several month’s rent in advance in the upcoming Renters’ Rights Bill, Timothy Douglas, head of policy and campaigns at Propertymark, said: “Whilst the UK government want to transform the experience of private renting, by banning the taking of rent in advance they are potentially reducing options for tenants to access private rented property.
“There are a wide range of circumstances and scenarios that impact how people pay their rent, for instance some renters are on fixed incomes, not all tenants pass referencing and affordability checks, and some have insecure incomes due to their work arrangements.
“The UK government must do more to understand why rent in advance is used by both landlords and tenants and avoid one size fits all policies that mean some tenants may no longer be able to access private rented property.”
Data from The Lettings Hub today reveals that 15% of tenants paying the highest rental amounts – £5,000 and above – rely on paying rent in advance. It is likely that this trend is driven by overseas students, where the tenant may be unable to secure a UK-based guarantor. Additionally, self-employed tenants with fluctuating incomes often use advance payments to demonstrate their financial reliability and secure a home.
Meanwhile, just 6% of tenants paying £1,000 or less per month in rent choose to make their rental payments in advance. The revelation suggests, therefore, that this is not a widespread practice which is being forced upon tenants. Instead, it appears to be valuable option used by a minority to secure a property which is suitable for their unique circumstances.
Across all rental price bands, just 7% of tenancies begin with an upfront rental payment of more than four months’ rent. This figure has not changed significantly in the three years that The Lettings Hub has been tracking the data.
Heidi Shackell, CEO of The Lettings Hub, commented: “The government must not underestimate the potential impact to tenants if rent in advance is banned. As can be seen in the data, the majority of tenants do not use this option, but for those who do, it could be the difference between securing a home or being excluded from the private rental sector altogether. We urge those on the committee making these vital decisions to study the data to ensure this option remains for tenants who benefit from this practice.”
The Renters’ Rights Bill will return to the House of Commons for its Report Stage and Third Reading in the House of Commons on 14th January, before moving to the House of Lords for further scrutiny.
The Lettings Hub is urging MPs on the committee in these final days before the bill returns, to carefully consider the implications of banning rent in advance without proper clarification. While it is important to prevent any exploitative practices taking place in the sector, an all-out ban of advance rental payments could lead to people who rely on this option being prevented from renting a home, The Lettings Hub argues.
