The government has acknowledged that extending Awaab’s Law to the private rented sector (PRS) could increase costs for landlords, with some potentially choosing to leave the market as a result.
A consultation is now underway to gather views on how the legislation should apply to private rentals and when the new requirements should take effect. The government has also published an impact assessment outlining the potential financial consequences for landlords and other property providers.
Landlords Could Face Higher Costs
The government’s impact assessment estimates that extending Awaab’s Law would cost businesses £422.4 million in net present value, equivalent to an annual net direct cost of £42.2 million.
The estimated average cost is £8.17 per property each year, although this could range from £5.64 to £10.69. These figures cover familiarising themselves with the new rules, completing repairs within the required timescales and keeping tenants informed about repair work. Additional expenses could arise if landlords need to carry out repairs more quickly.
The assessment also recognises that some landlords may respond to the changes by leaving the private rented sector. The government suggests that this could create opportunities for more professional landlords to take over properties and potentially improve housing standards.
The impact assessment states that the main costs are expected to fall on private landlords and providers of licensed accommodation. It also notes that some landlords may attempt to recover part of the additional expenditure through rent increases.
However, the government does not expect landlords to pass all these costs on to tenants, as the extent of any increase would depend on local market conditions and housing affordability.
The assessment adds that landlords most affected by the requirements are likely to be those providing the poorest-quality accommodation. Their departure could allow more professional operators to enter the market or expand their portfolios.
Government Highlights Tenant Protection Concerns
The government argues that extending Awaab’s Law is necessary because tenants and landlords do not have equal bargaining power when it comes to the condition of rental properties.
Although many landlords take their responsibilities seriously, the impact assessment suggests that the market does not always discourage the provision of substandard homes. Government intervention is therefore considered necessary to ensure tenants can live in safe and suitable accommodation.
The assessment also highlights the information gap between landlords, tenants and letting agents. Landlords will generally know more about a property’s condition than prospective tenants, who may not discover hazards until after moving in. Tenants may also have limited knowledge of how a landlord will respond when repair problems arise.
This can make it difficult for renters to judge the condition of a property before signing a tenancy agreement or to negotiate rent that reflects the risks involved.
Rental Market Conditions May Limit Tenants’ Choices
The government believes that the imbalance between landlords and tenants is made worse by competition in the rental market.
Wider PRS reforms, including the removal of Section 21 no-fault evictions and the introduction of a new private rented sector Ombudsman, are intended to make it easier for tenants to raise concerns about issues such as damp and mould.
These measures should also help tenants seek repairs without fearing retaliatory eviction or unfair rent increases.
However, the impact assessment points out that fewer rental properties are being advertised than before the pandemic. It estimates that each available rental property receives an average of 5.6 enquiries.
With many prospective tenants competing for a limited number of homes, renters may have less bargaining power when asking landlords to carry out improvements.
The government believes that extending Awaab’s Law could help address these issues by setting clearer requirements for landlords to investigate and resolve qualifying hazards within specified timeframes.
For landlords, the final impact will depend on how the rules are designed, the deadlines introduced and the work required to bring properties into compliance. The consultation will help determine how the legislation is applied across the private rented sector.
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