Build to Rent developers angered by plans to scrap three-year tenancies

September 6, 2018 / Isla MacFarlane
Build to Rent developers angered by plans to scrap three-year tenancies

Longer tenancies are a cornerstone of the Build to Rent proposition; however, recent reports suggest that Downing Street is planning to scrap its proposals to implement mandatory three-year tenancies.

James Brokenshire, Secretary of State for Communities, published proposals to introduce three-year minimum tenancies with a six month break clause option in July, along with a consultation on the plan. The results of the consultation are yet to be published; however, recent media reports suggest that the government is being pressured to shelve the plans.

“We have consulted on options for making longer-term tenancies the norm, including seeking views on three year tenancies, which tenants could end with two months’ notice,” a spokesperson for the Ministry of Housing, Communities and Local Government said. “Ministers are now considering responses ahead of announcing next steps.”

While the Prime Minister Theresa May claimed she is keen to make sure tenants are secure while ensuring landlords are protected during PMQs on 5 September, rumours that Number 10 is getting cold feet over longer tenancies has angered Build to Rent developers and opposing MPs.

“This government’s free market dogma means Tory Ministers are incapable of fixing the housing crisis. Labour will back private renters with longer tenancies and controls on rents,” said Labour’s Shadow Housing Secretary, John Healey MP.

A recent survey suggested that three quarters of MPs back the Build to Rent sector, however developers have argued that any more away from longer tenancies would discourage investment into the sector.

Jean-Marc Vandevivere, chief executive at PLATFORM_ , said, “It is disappointing to see the government backing away from what would have been a very welcome move. Far from discouraging property development, many build-to-rent investors are already committed to providing family-friendly tenancies of three to year five years, including PLATFORM_, as part of a wider a move towards professionalising the rental market, and new government policy would help all renters benefit from that security.”

Johnny Caddick, managing director at Moda, added, “We’re investing over £2 billion building rental-only developments in seven British cities and I can guarantee you that offering three-year tenancies would be no burden for us whatsoever.

“What we need to do is professionalise the rental market; allowing renters to get the same level of quality and service they would get in any other industry where they spent thousands of pounds. On many levels, flexibility is crucial – particularly as people are far less tied to any one location anymore, largely because of increased mobility driven by tech and general liquidity of the labour market.

“But it’s crucial that for those who want it – particularly families – security of tenure is offered. It makes sense not only to consumers but to long-term investors like Moda. We have a vested interest in filling buildings and keeping people happy. This could be a win-win for build to rent developers and whichever politicians push it through.”

However, a recent study from MakeUrMove has revealed that flexibility is more important to renters, with only 7.2 per cent stating that they would prefer a tenancy lasting three years.

The research found that instead, 30% of tenants want tenancies to last 12 months, and a further 20% want tenancies to last for no more than two years. 31% said flexibility was the most important factor when looking at the length of their tenancy.

However, 29% of tenants stated that they’d actually like a tenancy to last significantly longer than three years, and nearly half (43%) of the tenants questioned had spent more than five years in their current rental property.

MakeUrMove managing director, Alexandra Morris, said, “Many tenancy agreements are currently set at twelve months with a six months break clause and we’ve found nearly a third of tenants are happy with this length. Our findings reinforce that the majority of people want either the flexibility of a shorter rental, or the security of a much, much longer term.

“The Secretary of State for Housing, Communities and Local Government stated that ‘being able to call your rental property your home is vital to putting down roots and building stronger communities’, yet our research shows that 87% of tenants already think of their rental property as a home under the current regulations.”

The government’s proposals are designed to protect tenants from eviction, however the survey revealed that 59% of tenants surveyed had been the ones to give notice on their last tenancy, with just 3% being evicted by the landlord.

Alexandra added, “While we don’t yet know the outcome of the consultation, our study suggests three-year minimum tenancies aren’t going to address tenants key concerns around their rental properties.

“The government has once again looked at an issue in isolation with no regard for other related issues and proposed regulations. We believe that in order to make the rental market work for everyone, someone needs to take a step back and look at the cumulative effect of all changes to the market.”

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