Not All Renters Want Three-Year Tenancy Periods

News had barely broken of the Government’s proposal to implement three-year tenancy periods before arguments started on all sides of the industry. The proposal, which is going to a consultation period, is to introduce a minimum term of three-years on assured shorthold tenancies. Potentially with a mandatory six-month break clause.

The intention (from the government) is to give renters greater security. Because under current rules, where 80% of tenancies are either six months or twelve months, tenants can be evicted at relatively short notice. The housing, communities and local government secretary, James Brokenshire said, “Being able to call your rental property your home is vital to putting down roots and building stronger communities. That’s why I am determined to act, bringing in longer tenancies which will bring benefits to tenants and landlords alike.”

For many tenants, a minimum tenancy of three years is completely unnecessary.

But for many landlords, the proposed measures present a threat. On the most basic level, the six months and twelve month tenancies provide some level of limitation on losses when tenants do not pay their rent or cause other problems/damage to the property. Even more concerning for some is the fact that buy to let mortgages are based on a six-month or twelve month assured shorthold tenancy agreements. So that lenders know they can repossess the property quickly if necessary. Extending the minimum to three-years is likely to make it harder to borrow, and/or push up borrowing costs. At a time when landlords are still reeling from section 24 and increased licensing costs, this feels like yet another attack on landlords.

For most tenants, a minimum tenancy of three years is completely unhelpful. A survey by the National Landlords Association found that more than 50% of renters are happy with the tenancy period they have been offered, and many said that when they asked for a longer tenancy, they got it.

In your 20’s particularly, three years can be a long time. Who knows if in 12 months you’ll want to move in with your boy/girlfriend, move to a new city or even leave the UK entirely for a while.

The average tenancy of a flat-sharer in London is about twelve to thirteen months. We all know what it is like when you move to London or move in with friends. In your 20’s particularly, three years can be a long time. Who knows if in 12 months you’ll want to move in with your boy/girlfriend, move to a new city or even leave the UK entirely for a while. Further, the age-old concept of “one job for life” is well and truly dead; another reason people need to move more often. The average person changes job 12 times in their career today, with switches more common in the younger years (when you are most likely to be renting). For all of these reasons, the flexibility of the current structure allowing six-month and twelve-month tenancies is attractive to many tenants, and so it is important this positive aspect is retained for landlords and tenants who prefer it.

The government have indicated they may include a mandatory six-month break clause in the proposal, however, the details of this are yet to be released. And it is crucial that tenants and landlords are not forced to sign long-term agreements they simply do not want. 

In addition, we must not accidentally stiff landlords in the process of trying to make things better for tenants.

There is no doubt that a three-year minimum tenancy period would be great for families or individuals and couples who want to put down roots. To give them longer-term security and ensure they can arrange schools, jobs etc. without fear of there not being a roof over their heads in a few years. The proportion of 35 to 54-year olds living as private tenants has nearly doubled in the last decade, and regulatory changes have not kept pace to protect this part of our society. So it is understandable the government wants to do something to help. Any measures which give families greater stability are to be welcomed. And the government proposal is clearly well-meaning. However, there are many different types of renters, including highly mobile professionals who often do not need or want three-year tenancies. In addition, we must not accidentally stiff landlords in the process of trying to make things better for tenants. That will simply lead to lower housing stock and more expensive rents. The government must tread very carefully now to cultivate and improve the private rented sector, not destroy it.