In a bid to underscore the overwhelming demand for rental properties, the UK government plans to introduce mandatory minimum three-year tenancies, drawing the ire of landlords in the UK. With 80% of tenants in England and Wales currently on short-term contracts spanning six months to a year, the new initiative aims to give renters security that comes with more permanent living conditions.

Communities Secretary James Brokenshire defended the government’s stance, saying it was vital for tenants to view their rental property in a more stable light in order to establish roots and build stronger communities. He further stated: “It is deeply unfair when renters are forced to uproot their lives or find new schools for their children at short notice due to the terms of their rental contract.”

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The initiative comes at a time when changing generational attitudes towards homeownership, as well as affordability are increasingly tipping the scales in favor of renting as a long-term housing solution.  Almost 46% of 25-34-year-olds take advantage of private rentals compared to just 27% in 2006-07 according to the English Housing Survey, published in January. Moreover, another research published in June found that 70% of UK tenants have no plans to buy a property in the future. Consequently, the government proposal aims to address the need for greater reform in the country’s rental market as well as improve standards for renters.

The new development may, however, not bode well for landlords, by rendering their property investments difficult to finance. With assured shorthold tenancies of up to 12 months being the most common type of tenancy in England and Wales, it would make it difficult for landlords to accommodate the new proposal without breaking their mortgage terms. At present, few lenders are amenable to lengthier tenancies as these can make repossession of a property in the case of mortgage defaults challenging. As a result, many view this as another setback for a sector already contending against the twin pressures of tax relief changes and higher rates of stamp duty on purchases of additional residential properties.

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The proposals on long-term tenancies will form a key part of an eight-week consultation. “The three-year model is one of a range of options and the consultation seeks views on longer minimum tenancies, which are used in other countries, as well as ideas on how to implement the model agreement,” the government said.

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