Inside Michael Gove's war on landlords

·6-min read
Michael Gove - Lee Thomas
Michael Gove - Lee Thomas

Michael Gove has never shied away from a fight.

Having been at the centre of Government for over a decade, in half a dozen roles, the Housing Secretary has built a reputation from colleagues as polite yet somewhat ruthless when it comes to campaigning.

As Chancellor of the Duchy of Lancaster, the second highest ranking minister in the Cabinet Office, Gove threatened to impose a no-deal Brexit - viewed by some as a bulldozering approach to try to secure the UK’s exit from the European Union.

Prior to that, as Education Secretary, in his first Cabinet role from 2010 to 2014, he fought the teaching unions and coined the phrase "the blob" to describe the establishment interests against him.

But much of Gove’s more recent work has won support from his former critics on the political Left.

As Environment Secretary, activists were thrilled by his embrace of regulation to force through changes they agreed with. His latest role seems to be continuing on much the same theme.

Gove has once again pushed himself to the front of the news agenda with an overhaul of Britain’s property industry.

The new focus is buy-to-let, with Gove planning to launch new rights for renters - much to the distaste of landlords.

It follows a year of battles with developers over the ongoing cladding crisis, in which he labelled major house builders a “cartel” in comments to Conservative activists. The war of words prompted some developers to label his approach to cladding remediation as “Marxist”.

A new white paper around housing regulations for the rented market is expected in the next few weeks. Gove has told the sector he supports a high level of regulation with exemption based schemes, which would create detailed requirements for different sectors.

Industry sources say he views regulation of the rental properties as a key project and is keen to bring forward legislation to enshrine new rights and standards.

While some charities and campaign groups back the bill, landlords have raised concerns it will include arbitrary targets such as mandatory refitting of kitchens and bathrooms after a set period, regardless of current conditions.

This would come on top of new environmental regulation and additional taxations that have already cooled sentiment in the sector, piled extra costs on landlords and diminished the supply of rental properties.

A spokesman for the Department of Levelling Up did not say whether mandatory refitting was being considered by Gove, but said the bill would ban “no fault evictions” which allow private landlords to easily evict problem tenants.

They added: “Private renters, like those in the social sector, should have the legal right to secure, quality homes. We're delivering a new deal for renters, with the biggest change to renters law in a generation.

“The Renters Reform Bill will extend the Decent Homes Standard to the private rented sector for the first time, giving all renters the legal right to a safe and warm home and banning no fault evictions."

The use of Section 21 to evict a tenant - a no fault eviction - has spiked as landlords grow increasingly concerned about how their rights may be eroded as part of the bill.

According to the housing charity Shelter, no fault evictions have increased by 41pc this year compared to pre-pandemic levels.

Shelter has, of course, welcomed Gove's proposals. So has Priced Out, a campaign group for tenants, which claims that reform will end chronic low standards in the market.

However, there are concerns within the Government and wider property industry that the reforms, twinned with existing costs to landlords, could make things worse.

With diminishing rental yields, the costs of being a landlord have surged in recent years. Increases in taxation, alongside environmental and energy regulations, have placed the industry under greater turbulence.

Mortgage interest relief on residential properties, which allowed landlords to deduct expenses from their rental income to reduce tax bills, has been restricted to the basic rate of income tax.

Residential properties are charged a higher rate of capital gains tax, in addition to the 3pc stamp duty levy on purchasing buy-to-let properties.

Meanwhile, impact assessments estimate the cost of implementing energy efficiency changes for landlords could cost the sector £10bn in total.

Increased interest rates are also piling on pressure, with the average landlord having to pay an extra £100 a month for their mortgage, according to a study by brokers Property Master.

Ben Beadle, chief executive of the National Residential Landlord Association, argues the Government needs to combat these issues to help solve the shortage of supply in the rental market - as opposed to piling on regulation.

“The Government wanted to call the market and raise more money, the increases in taxation were a deliberate ploy to raise revenues. These decisions are coming home to roost, which is causing landlords to call in their chips and sell properties,” he says.

“We’ve got to stop robbing Peter to pay Paul – there’s a dearth of supply which is making rents unaffordable.”

Recent data from Rightmove highlights Beadle’s claims, with the national average asking rents outside of London hitting a new record of £1,088 per month (pcm), up from £982 pcm last year and some 15pc higher than the same period two years ago. The 11pc rise in asking rents since 2021 is the first time annual growth has topped 10pc.

Timothy Bannister, director of data services at the estate agent, said in the report: “In the first three months of this year, we’ve seen tenant demand exceed the high levels set last year, which when coupled with the fewer available homes for rent, has resulted in the most competitive rental market we’ve ever recorded.”

According to sources, the Prime Minister’s office also has reservations about some elements of the bill. While Gove is focused on new regulation, they say Number 10 favours a slimmed down bill aimed at cutting red tape.

With 168 different regulatory provisions for landlords, key aides in Johnson’s office believe that the scale of regulation is off putting to landlords and could restrict housing supply.

They add that number 10 shares landlords' concerns that many of the issues are arbitrary, and has voiced sympathy amid “horsetrading” over the bill between Gove and the rest of the Government.

With the politics of housing supply high on the Government’s agenda, Gove’s next move could prove crucial not only to the sustainability of the rental market but also his populist credentials ahead of a potential leadership election.