Article about Renters Rights

The Renters' Rights Act was intended to make the process of finding a rented home fairer and more transparent. One of its most immediate reforms was a ban on rental bidding.
Since 1 May, landlords and letting agents have been required to advertise a property at a specific rent. They cannot ask for, encourage or accept an offer above that amount. A landlord who advertises a home at £1,500 a month cannot therefore accept £1,550, even where a prospective tenant voluntarily offers more.

The Aim of the Rental Bidding Ban

The objective is understandable. In highly competitive rental markets, bidding can leave tenants feeling pressured to offer more than they can afford, while making advertised rents a poor indication of what a property will ultimately cost.
However, when the legislation was introduced, we suspected this could have an unintended consequence: higher asking rents.

Could the Ban Lead to Higher Asking Rents?

Previously, a landlord might have advertised a property at a relatively cautious rent and allowed the level of tenant demand to determine the final figure. That is no longer possible.

As landlords cannot accept more than the advertised amount, they have a stronger incentive to set the initial asking rent at the highest level they believe the market might support.

Early evidence from my rental-market data suggests that this may now be happening. Since the Renters' Rights Act was introduced in May, average asking rents in 21 of the largest towns in England have increased by 5.6% on average.

This represents a marked change in direction. During the preceding six months, asking rents across the same markets fell by an average of 2%.

Achieved Rents Have Also Increased

Moreover, it appears that achieved rents have also edged up. They increased by 0.5% in the two months since May, which compares with 0.1% in the two months prior to May.

Of course, this does not prove that the ban caused the increase. Rental markets are influenced by several factors, including supply, seasonal demand, landlord costs and changes in the type of homes being advertised.

Moreover, two months of data are not enough to establish a trend. Nevertheless, the reversal is sufficiently clear to merit attention.

The Competitive Uplift May Be Moving Into Asking Prices

The legislation may have stopped tenants from bidding above the advertised rent, but it cannot prevent landlords from adjusting the advertised rent itself.

In effect, some of the competitive uplift that previously occurred after a property was marketed may now be incorporated into the asking price from the outset.

That matters because asking rents shape tenant expectations and market evidence. Even where a property ultimately lets below its advertised price, a general upward shift in asking rents can affect affordability, search behaviour and the pricing of comparable homes.

Transparency Does Not Necessarily Mean Lower Rents

The ban may still improve transparency. Tenants now know that they cannot be required to pay more than the published figure.

But greater transparency does not necessarily mean lower rents.

It is still early, and the data will need to be tracked over a longer period. However, the initial evidence indicates that policymakers should distinguish between preventing bidding and reducing rental pressures.

The first can be achieved through legislation. The second ultimately depends on the balance between the number of homes available and the number of people looking to rent them.