Longer rental contracts: how would they work? FAQs
16 Feb 2017
Everyone needs a stable home. It gives you security and the chance to plan for the future. Yet, if you’re living on six to 12 month contracts – which are the norm for renters – life can be uncertain and unpredictable. In order to end this insecurity and make sure renting families have a stable home, Shelter is calling on the government to increase the legal minimum for a rental contract to five years.
Since we first launched our campaign for longer rental contracts, we’ve had lots of questions from supporters about how the policy would work, and this blog answers them.
Why are you campaigning on this?
The reason we’re calling for tenancies with five years of security is simple: they have the power to reduce homelessness and to make life more stable for renters, especially families. It would be a big improvement on the current status quo of 6-12 month contracts, and it’s been proven possible by the number of European countries with five-year, nine-year and indefinite rental agreements.
So how would it work?
Renters would have the opportunity to stay in their home for a minimum of five years, but they wouldn’t be locked in. Renters with five year contracts would be able to leave their home at any time by giving two months’ notice. If their family grows or a new job opportunity comes up, they may well want to move. But if they don’t, they can be certain about where they’ll be living for the foreseeable future.
What about landlords?
Five-year tenancies would also give landlords more security, reducing periods of vacancy and lost rent. It also gives them the opportunity to build a relationship with their tenants. A number of landlords have been in touch with us to express their support for the campaign:
“Having long term tenants provides me with security. Knowing that my property will be occupied for the foreseeable future means I don’t risk any chances of sitting on a costly empty property.” – Hugo, who has been a landlord for three years
“…there’s a mutual interest in the upkeep of the property… Tenants who can feel the property is their proper home for a long time, and that the some of the rent they pay will go towards repairs and maintenance are far more likely to look after it well.” – Maureen, who has been a landlord for twelve years.
“It also means you can develop a relationship and build trust with your tenants, not having to start again and thinking “are they going to be okay?”” – Ruby, who has been a landlord for seventeen years
Landlords would still be able to sell their home if they needed to, but they would need to provide evidence to a court to prove that they were genuinely selling the property. At present, we hear from tenants who have lost their home because the landlord says they want to sell, but who then rent the property out to another tenant. Requiring landlords to provide evidence would mean they would only be able to get the property back if they were serious about selling.
What about people who damage the property or don’t pay rent?
Five year contracts wouldn’t mean that landlords couldn’t evict “bad tenants”. There will still be some important reasons that landlords can evict renters – like anti-social behaviour or rent arrears. If a renter breaks the terms of their contract, then the landlord can evict them. Increasing the length of a rental contract would give security to good tenants who follow every rule but can currently be evicted for no reason.
What if someone wants a shorter contract?
Five years of security for tenants would become the new standard and they would be able to leave the property at any time within that by giving two months’ notice. This gives tenants more control over how long they stay in their home: the flexibility to leave early, and the security to stay longer.
What about students?
Lots of our neighbouring countries which already give private renters more secure tenancies make a small number of exceptions. We anticipate that there would be an exception for student halls, which are often only let to first year students during term-time. However, we don’t see any reason that there should be a general exception for students who rent ordinary private rented homes – they can give notice to leave early if the home no longer meets their needs.
Where is the proof that this will work?
We have lots of evidence that shows that private renters want more security. 7 in 10 say that this change ‘would improve renting for them’.
The regulations we’re calling for have been working in practice across Europe for decades. For example, in Ireland private renters get more security from eviction and in Scotland they have just changed the law to give renters more security too. Furthermore, we have commissioned additional research that found it wouldn’t pose a risk to the market in England.
Do renters actually want this?
Yes, national polling for Shelter by YouGov shows clearly that 7 in 10 renters want this. They say it would improve renting for them and even make them feel more in control of their lives.
Do landlords want this?
According to Shelter’s recent landlords survey – about a third of landlords say they like the idea of longer contracts and would try them. Another third are undecided and would like to see them work in practice. Since launching the campaign we’ve received support from a number of landlords who are keen to bring this change into law, for the sake of their own stability too.
Would rents still go up over the course of the contract?
Our proposal is that within a five-year tenancy, rents couldn’t go up by more than inflation each year. This would give renting families more of the certainty that they need to plan their finances and would protect them from being evicted through the backdoor by a massive rent hike.
The real problem is that LHA rates aren’t covering people’s rent. Shouldn’t Shelter be campaigning about LHA?
We agree that the LHA freeze is a huge problem and are calling on government to make sure housing benefit genuinely meets the cost of renting. The LHA, or Local Housing Allowance, determines the amount of housing benefit that private renters can claim, if they need it. Local Housing Allowance has been subject to a number of cuts since 2011, which have been compounded by rising private rents. This means that increasing numbers of low income private renters have been forced to top up the amount of housing benefit they receive to cover their rent. By definition, people who receive housing benefit are on a low income, so this has pushed large numbers of private renters into serious financial difficulty and in the worst cases has caused homelessness when people are unable to find any home they can afford.
As bad as this situation is now, it is set to get much worse in the future as Local Housing Allowance rates are now frozen until 2020 and rents are projected to rise. We have been and will continue to campaign for a change in welfare policy so that housing benefit meets the true cost of renting for those who need it.
A big problem is affordability. Why don’t we call for rents to be capped?
The unaffordability of private renting is a huge problem – it’s something we see every day through our services and in our research. Our recent ‘Living Home Standard’ research found that 1 in 4 homes home fail the Living Home Standard for affordability. At its worst it is forcing families to cut back on food and worsening homelessness. To tackle the unaffordability of renting we need to do a few things. First, we need to make sure that housing benefit meets the true cost of private renting. In recent years, benefits have not kept up with rising rents and this has pushed growing numbers of low income renters into serious financial difficulty. Second, we need to build more genuinely affordable homes, including social rented homes, so that families on low incomes have a more affordable option than private renting. And we need to give private renters more security from eviction and limit the amount their rent can be increased over the course of their tenancies.
Our research suggests that the problem with harder forms of rent regulation, like capping rents, is that they could lead to serious negative unintended consequences that could hit those on low incomes hardest. For example, if large numbers of private landlords sold their properties in response to the introduction of new rent caps, this might benefit some wealthier private tenants who would be able to buy, but those living on low incomes may be evicted and not be able to find a new rented home. Ultimately, this could lead to an increase in homelessness.
Are there any other charities or people in government that are supporting this campaign?
There is a growing consensus about the need for longer, more secure tenancies in the private rented sector. An increasing number of charities and think tanks are concerned about the problem of insecure tenancies, including Civitas, The Centre for Social Justice and Citizens Advice. The government also increasingly recognises the need for more secure, longer tenancies, but still needs to be persuaded to make a change in the law.
If you haven’t already, please join our campaign for longer rental contracts.