Why is the private rental market in Wales in crisis?

Coupled with soaring interest rates, the cost of living crisis and a shortfall in new homes being built, some landlords are exiting the market altogether. Credit: Sharp End

The property market in Wales has seen immense change over the past few years. It’s faced Covid lockdowns, changes to Land Transaction Tax, prices skyrocketing nearly as high as London - plus there will soon be the biggest change to housing legislation in decades coming into force.

The Renting Homes (Wales) Act legislation is intended to give tenants more security, and will begin on December 1.

Coupled with soaring interest rates, the cost of living crisis and a shortfall in new homes being built, some landlords are exiting the market altogether.

Monthly rent asking prices have increased by 20% over the last year in some parts of Wales. Credit: PA

What changes will come in with the Renting Homes (Wales) Act?

The legislation was due to come into force in July, but it was postponed to December 1 2022. Here's some of the main changes the legislation will bring:

  • All landlords being required to provide a written copy of the occupation contract to the tenant (called the ‘contract-holder’ in the legislation). This sets out the rights and responsibilities of both parties.

  • 'No-fault' notice periods increasing from two months to six months. It will no longer be possible to issue a notice in the first six months, meaning all contract-holders will have a minimum 12 months of security at the start of their tenancy.

  • A strengthened duty on landlords, to ensure the property they rent is fit for human habitation including the installation of smoke and carbon monoxide alarms, and regular electrical safety testing.

  • Addressing the practice of 'retaliatory eviction' (whereby a landlord serves notice on a tenant because they ask for repairs, or complain about poor conditions).

  • The introduction of a consistent approach across sectors to eviction where antisocial behaviour and domestic violence, occurs.

Landlord Chris Coates set up a Facebook group to help other rental homeowners navigate the changes, which he said has caused "anxiety".

He told ITV's Sharp End: "Everyone has just been trying to get to grips with it.

"A lot of people have already made decisions to sell because there's been such an anti-landlord agenda over the last five - seven years. The risk involved for landlords has just been getting greater and greater as time goes on.

"Yes there are some bad apples, as there are in every industry, but the majority are trying to provide good homes for people."

A landlord with properties in Wales says the Renting Homes (Wales) Act has caused "anxiety". Credit: Sharp End

Mr Coates said it feels like the Welsh Government is "moving against landlords" as there hasn't been consultations over the new legislation.

He said: "Landlords are considering options. Some are selling and we've already seen the impact of that.

"Some are switching to short term lets or holiday terms as they're not subject to the tenant legislation."There's a perception that all landlords are wealthy people with endless pockets - which is not the case. The vast majority of landlords are individuals trying to build a bit of a pension. They are normal people, good people, that are trying to do the right thing.

"It does feel like those people are being tarred with the brush of the minority."

Julie James MS, the minister responsible for housing, says that there are more or less the same number of landlords registering as deregistering, according to Rent Smart Wales.She says the Renting Homes (Wales) Act is about about getting the right measure between landlords and tenants.

She told Sharp End: "If you're a decent landlord you don't want your tenant suffering from carbon monoxide poisoning, for goodness sake, or have unsafe wiring or have appliances that might go on fire.

"We also have families renting in the private rented sector and if you have to leave your home through no fault of your own - your landlord wants to sell up for example - then you need to have enough time to find somewhere in your area to keep your children in the same schools and try and stay inside your family support system."

Landlord letting agent David Gould said tenants are facing bidding wars to secure a home to rent. Credit: Sharp End

David Gould, who owns a letting company for landlords, says they are facing "a perfect storm".

He told Sharp End: "In the last two years we've seen landlords selling up in their droves - yes the prices have been high, so it's a great time to sell for landlords, but now we're looking down the barrel of the legislation coming in on December 1 where there's a whole host of extra restrictions coming in for landlords."

The Renting Homes (Wales) Act comes into force on top of a UK-wide policy introduced in April 2020, which sees landlords no longer able to deduct any mortgage expenses from rental income to reduce their tax bill.

Instead, landlords receive a tax-credit, based on 20% of your mortgage interest payments.

Mr Gould added: "Unless something changes drastically, rents are going to continue to rise and more and more people are going to get frustrated trying to find properties.

"We already often get bidding wars on properties. We've had people offering 12 months rent upfront or an extra £200-£300 a month on top because they've been struggling for so long, they're getting desperate."

So what's the solution?

Mr Gould said: "There needs to be a sea change in landlords and agents mindset when it comes to exiting the industry.

"If everyone can start working with landlords and say 'let's sell that investment property to another investor so the tenant gets to remain', the investor gets rent from day one, the old investor gets rents up until the day it's sold and the tenants have got the opportunity of saving their home."

The Welsh Government says everybody has a right to a decent, affordable home.

A spokesperson said: "When it comes into force this December, the Renting Homes (Wales) Act 2016 will completely transform the rented sector in Wales. "It will bring much greater transparency and consistency to renting a home and protects the interests of both landlords and tenants. "We are also committed to delivering 20,000 new low carbon homes for rent in the social sector during this government term, and have also made £30m of capital funding over the next five years for Leasing Scheme Wales. "This will ensure local authorities can lease private rental sector properties from landlords, which will be rented at affordable levels to those who would otherwise be threatened with homelessness."

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