How would Labour's rent reforms affect tenants and landlords?

http://www.theguardian.com/money/2014/may/01/question-answer-ed-miliband-labour-rent-reform

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Ed Miliband has announced proposals he says would stop the millions of families that rent their home being "ripped off" and help them plan for the future.

In a policy that will be a centrepiece of his campaign to tackle the "cost of living crisis", the Labour leader is pledging to make three-year tenancy agreements the norm for those in the private rented sector.

He says if it wins the general election, Labour will also limit the amount by which rents can rise each year, and ban letting agents from charging tenants fees that can be as much as £500.

What exactly is he proposing?

Three major things. First, he says Labour would legislate to make longer-term tenancies the standard in the private rented sector. At the moment many tenancies last just six months, though up to a year is more usual. Most mortgage lenders restrict buy-to-let landlords by requiring them to offer their tenants a maximum contract of 12 months.

Housing charity Shelter has said six and 12-month agreements "just aren't working" for the country's millions of renters, with many renting privately for longer because of the time needed to save a deposit to buy a home.

Second, Miliband says tenants "won't face the shock of rents that go through the roof" because Labour would introduce legislation to place an upper ceiling on rent increases to prevent excessive hikes.

Third, he would ban letting agents fees for tenants. Landlords would continue to pay charges, but letting agents would be banned from charging tenants fees, thereby saving people entering into a new tenancy an average of £350, says Labour.

How would these longer-term tenancies work?

The new three-year tenancy agreements would start with a six-month probationary period, at the end of which the landlord would be able to terminate the contract if the tenant was deemed to have failed the probation – for example, if there were rent arrears or there had been anti-social behaviour. This would then be followed by a two-and-a-half-year term during which tenants would be able, as they are now, to terminate the contract with one month's notice.

Landlords would only be able to terminate contracts with two months' notice if:

• The tenant was behind with their rent, was guilty of anti-social behaviour or breached their tenancy agreement

• The landlord wanted to sell the property, needed it for their own use, or required it for their family

• The landlord planned to refurbish or change the use of the property

"Landlords would not be able to terminate tenancies simply to put rents up," says Labour.

Would there be any exceptions or strings attached?

There would be some exemptions under this regime. Miliband's plans allow landlords with buy-to-let mortgages taken out prior to the legislation taking effect to continue using shorter agreements where the mortgage small print does not cater for longer tenancies.

There would also be provision for new tenants such as students or workers on temporary contracts to request shorter-term tenancies, subject to the landlord agreeing to this.

How long does the average tenancy last for at the moment?

According to the government's latest English Housing Survey (pdf), published in February 2014, the average length of time a private renter had lived at their current address was 3.8 years (for social renters it was 11.3 years, and for owner-occupiers, 17.3 years). However, it also found that a third (34%) of private renters had been in their home for less than a year, and 80% had lived in their home for less than five years.

Critics might argue the official average undermines Miliband's claim that there is an urgent need for three-year tenancies. However, Labour says Britain's renters "are getting a bad deal", while there has been no shortage of surveys and reports illustrating the precariousness of renting: Shelter claimed in March 2014 that in the past year alone, more than 200,000 people had faced eviction because they asked their landlord to fix a problem in their home.

Is it possible to get a three-year tenancy agreement now?

Yes. In June 2013, The Mortgage Works, part of the Nationwide group, declared it had become the first mainstream buy-to-let lender to enable its borrowers to offer their tenants the option of a longer-term contract – up to three years. Shelter said it hoped other mortgage lenders would follow suit, though it is understood that few have taken the opportunity to do so.

The ceiling on rent increases sounds a bit vague – how would that work?

The details are a bit sketchy. The legislation would place an upper ceiling on rent increases. Labour says this would be based on a benchmark such as average market rents. It may or may not also be linked to inflation.

Labour said the Royal Institution of Chartered Surveyors (Rics) "is already examining what an appropriate benchmark might be". But, somewhat embarrassingly, Rics issued a statement saying it "is not developing proposals on rent benchmarks for the private rented sector, and we do not recommend that a government introduce a ceiling on rent increases". It added: "Labour is right to talk about 'generation rent', but arbitrary caps are not a solution."

Landlords with buy-to-let mortgages might argue that any limit should also take mortgage rates into account.

Do we need a ceiling on rent increases? I'm sure I read somewhere that they weren't rising that fast.

It depends who you talk to. Labour says that since 2010 rents have increased more than twice as fast as wages, with renters now paying on average £1,020 more a year than they were four years ago. Surveys which look at newly marketed rental properties have been showing strong increases.

However, statistics issued by the Office for National Statistics in April 2014 show rents in the private rented sector have been rising by less than inflation – by 1% for Britain as a whole in the 12 months to March 2014. This annual figure has been steadily falling – in February 2013 it was running at 1.4%.

The latest 1% figure for Britain masks wide regional differences, ranging from 0.2% in north-east England to 1.4% in London.