Friday 5th October 2018

Three-year tenancy plans could deter a third of BTL landlords

One third of landlords say they would be less likely to acquire property if three-year tenancies are made compulsory, according to Paragon’s latest PRS Trends research based on interviews with 200 landlords during the third quarter of 2018.

The research found that 32% of landlords would be put off the idea of investing in the buy-to-let property market if the government presses ahead with its proposal to give tenants a minimum three year contract – but allow them to walk away earlier if they wish.

The longer tenancies, proposed by the Secretary of State for Housing, Communities and Local Government, James Brokenshire, in a consultation paper published in July, would stop landlords forcing tenants out at short notice.

It is estimated that around 80% of tenancies in England and Wales are set at six months or 12 months.

The existing contracts leave tenants at risk of eviction at short notice, without the landlord having to offer an explanation.

Paragon surveyed landlords on the issue to gain a deeper understanding of their views following the government’s recent consultation, ‘Overcoming the barriers to longer tenancies in the PRS’.

Asked if the introduction of a compulsory three-year tenancy would make them more or less likely to consider certain tenant types, the highest proportion of landlords said they would be more likely to consider older couples (36%), retired people (29%), families (25%) and older singles (25%).

Interestingly, landlords felt a compulsory three-year agreement could potentially make them less likely to consider mobile and itinerant groups, including students (45%), migrant workers (40%) and young singles (24%).

John Heron, director of mortgages at Paragon, said: “Landlords are highlighting that the diversity of the tenant population calls for a diversity of tenancy arrangements.

“While some groups value greater security, many other tenants favour flexibility. Young professionals, for example, value the flexibility that the PRS brings to move to different areas and to different types or property.

“In light of these findings, rather than impose longer-term tenancies as the primary or default arrangement in law, it may be preferable to bolster tenants’ rights to choose from a range of different tenancy lengths and boost incentives to landlords to enter long term arrangements where requested.”

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