Starmer’s speech and what it means for the rental market

Over the weekend, Labour leader Keir Starmer made statements that have stirred conversations in the property sector, especially among landlords. He reaffirmed Labour's commitment to reforming the rental market, which, if Labour wins the next general election, would mean notable changes for both tenants and landlords. Starmer’s position reflects his party’s stance that more should be done to ensure fairer housing practices, especially in light of the UK's ongoing housing crisis.

In this blog, we’ll dive into what Starmer’s comments mean for landlords, the potential impact on the market, and how landlords might prepare for potential changes on the horizon.

Key Points from Starmer’s Remarks

1. A Renewed Commitment to Renters' Rights
   Starmer emphasized the importance of providing renters with more security and affordability. He stated that Labour is committed to abolishing Section 21 “no-fault” evictions, a pledge first made by the Conservative government but delayed. This would mean that landlords would no longer be able to evict tenants without providing a reason, making it harder to regain possession of properties when tenants comply with their rental agreements. Starmer also hinted at policies aimed at preventing unfair rent hikes, making the rental market more stable for tenants but potentially reducing flexibility for landlords.

2. Rent Caps and Controls Under Consideration
   Although Starmer did not outline specific policies, Labour has indicated that it may explore implementing rent caps or controls, similar to those in place in parts of Europe. While specific details are scarce, the party has highlighted the need to protect tenants from excessive rent increases. This policy would cap how much landlords could raise rents, likely linked to inflation or other economic metrics, to keep rent affordable for tenants. While popular among renters, rent controls tend to be controversial among landlords, who argue that they limit income potential and could affect property maintenance and investment.

3. Increased Property Standards
   Another anticipated reform focuses on improving the quality of rental housing. Starmer’s Labour wants to ensure that rental properties meet higher standards, addressing issues such as mold, dampness, and energy efficiency. While specifics were not outlined, Starmer’s stance suggests potential mandates for landlords to upgrade properties to meet these standards. For landlords, this could mean more upfront costs for compliance but would help bring a more sustainable and quality rental stock to the market.

What This Could Mean for the Rental Market

1. Increased Stability for Tenants Could Lead to Longer Tenancies
   Removing Section 21 would likely encourage longer tenancy agreements, as tenants gain more security. While this may seem restrictive, landlords could benefit from a more predictable income stream and reduced tenant turnover costs. Additionally, with fewer “no-fault” evictions, landlords will be motivated to select stable, long-term tenants, which could lead to a more consistent rental market.

2. Potential Pressure on Rents
   If Labour implements rent caps, landlords may find it harder to adjust rents to match inflation or rising property expenses. Over time, this could discourage some landlords from entering or remaining in the market, possibly reducing the supply of rental properties. However, if Labour allows for rent increases linked to inflation, landlords may still have some flexibility to cover costs, albeit with less ability to respond to high demand in certain areas.

3. Greater Regulatory Costs
   With higher property standards potentially on the horizon, landlords may face additional compliance costs. Upgrading properties to meet stricter environmental and quality standards could require a financial investment, particularly for landlords with older properties. Some may consider passing on these costs through allowable rent increases, though rent caps could limit this option. Landlords who plan for these potential expenses early may fare better if and when regulations tighten.

4. Shifts in Landlord Investment Strategy
   A more regulated rental market with potentially capped rents and longer tenancies could lead some landlords to rethink their investment strategies. Some may choose to diversify into different types of property investments, while others could prioritize high-quality properties in desirable areas where rental demand remains strong. Additionally, landlords may lean towards offering premium rentals or targeting high-income tenants who can afford properties outside the more regulated affordable sector.

How Landlords Can Prepare for Potential Changes

1. Focus on Quality
   Upgrading properties to high standards can ensure compliance if new regulations arise and also attract tenants willing to pay for quality. Energy-efficient, well-maintained homes are likely to become a premium asset in a regulated market, so investing in insulation, ventilation, and modern heating systems can pay off in both compliance and tenant retention.

2. Diversify Income Streams
   Consider diversification, either by exploring short-term lets, which may not fall under rent control policies, or investing in different regions with favorable market conditions. Many landlords also invest in property-related income streams like commercial properties or storage spaces, which may be less affected by residential rental regulations.

3. Stay Informed and Seek Legal Advice
   Keep an eye on upcoming legislation and consult with property experts to ensure full compliance. Organizations like the National Residential Landlords Association (NRLA) provide timely updates, and legal experts can advise on structuring leases and tenant agreements in ways that protect landlords’ interests within the law.

4. Budget for Potential Compliance Costs
   With the potential for increased standards, budgeting for potential upgrades could prevent any financial shocks if the rules change suddenly. Some landlords may also consider grants or subsidies available for property improvements, particularly those related to energy efficiency.

Final Thoughts

Keir Starmer’s statements over the weekend are part of an ongoing trend towards greater tenant protections and a more regulated rental market. For landlords, these potential changes might mean lower flexibility, some additional costs, and a push towards property quality improvements. However, with preparation and adaptation, landlords can navigate these changes while continuing to profitably manage their properties.

As we get closer to the next election, landlords should continue monitoring Labour's policy announcements to stay ahead of the curve. The landscape may shift, but an informed, proactive approach can help landlords thrive in a changing market.