The Association of Residential Letting Agents (ARLA) have revealed in their March Report that three quarters of all ARLA Letting Agents are concerned that Labour’s three year tenancy proposal will see landlords exit the market and reduce supply. Over a third of ARLA agents agree that the Conservative’s pledge to build 200,000 new starter homes will benefit the PRS the most. The Report found that landlords in the North West and East Midlands would be most likely to pull out of the private rented sector with 84% of ARLA agents in these areas expressing concern.

In addition to seeing a reduction in landlords and therefore a reduced supply of rental housing, 74% of ARLA members believe the proposed three year tenancy agreement combined with rent controls and strict rules to make it more difficult to evict tenants will not actually benefit tenants at all.

Two fifths of ARLA agents agree that the Conservatives’ pledge to build 200,000 new starter homes offered at 20% discount to first time buyers would be best for the private rented sector. This will enable a segment of the current renting population to get on the housing market. In turn, this will free up more properties for renting which will ease supply and demand.

David Cox, Managing Director of ARLA, says “The third ARLA Private Rented Sector Report identifies which those at the heart of the sector are most concerned with ….. in regard to the upcoming General Election. A vast majority of ARLA agents are worried that Labour’s proposed three year tenancies with strict caps on rents will only cause the gap between supply and demand to widen. Flexible tenancies are what makes the sector work. If this changes, some landlords will be forced to exit the market and tenants are likely to automatically incur rent hikes and feel driven to stay in agreements for longer before getting on the housing ladder, thus not freeing up rental properties for other tenants.

The proposals are aimed at reducing opportunities for landlords to raise rents and to create stability for tenants, as Ed Miliband outlined. However, Labour’s proposals aren’t necessarily the solution. If you put a cap on rent increases above inflation, tenants are likely to experience automatic annual hikes. Whereas in reality, landlords appreciate good tenants and would avoid raising rents to retain them. Our March report shows that the average time tenants stay in a property is 17 months and a third of agents reported that they had successfully negotiated a rent reduction for tenants. So, if this law comes into play, instead of tenants getting a potential reduction, they may be more vulnerable to automatic increases.”