Ban on rental bidding wars is on the way – but will it work?

As competition for rental properties intensifies in popular areas, many prospective tenants find themselves caught in bidding wars that drive up rental prices beyond their budgets. In response to this growing issue, the UK government has proposed new legislation aimed at banning such practices. However, housing campaigners argue that this measure alone may not be sufficient to tackle the broader problem of unaffordable rents.

Jason Phillips, who had been living in his flat in Crouch End, north London for a decade, faced a challenging search for a new rental after his landlord decided to sell. Despite having a stable job and viewing around 40 properties, Phillips repeatedly lost out to higher offers from other tenants. For instance, a two-bedroom flat advertised at £1,800 per month was eventually rented for £2,500, after a competitor bid £700 over the asking price. “It’s frustrating,” Phillips reflects. “It made it not only unaffordable for me, but I probably wouldn’t have viewed it if I’d known the final price.”

Phillips, now 60, was advised by several estate agents to increase his bids to be competitive. Eventually, he relocated to Stevenage, Hertfordshire, where he found a property within his budget but lamented leaving behind his community and friends in Crouch End.

The proposed legislation, part of the Renters’ Rights Bill published recently, aims to end such bidding wars. If approved by MPs and peers, it will require landlords and letting agents to advertise a fixed rent and prohibit them from encouraging or accepting higher offers. This approach goes beyond previous Labour proposals, which would have allowed tenants to make higher offers but prevented landlords from soliciting them.

Campaign group Generation Rent has praised the government’s move toward a complete ban on bidding wars, citing evidence from Australia where such measures have been implemented. In Australia, Queensland and the Northern Territory have fully banned above-asking-price offers, while other states like Victoria are moving in the same direction. Joel Dignam, executive director of Better Renting, supports this comprehensive approach, noting that banning both encouragement and acceptance of higher bids is crucial for addressing the issue.

However, Dignam highlights concerns about enforcement. While Australian legislation imposes fines for breaches, Dignam notes that penalties are often minimal, leading to inadequate deterrence. In the UK, the proposed fines for landlords or agents who break the rules could reach up to £7,000. Still, campaigners like Conor O’Shea argue that effective enforcement is critical. He suggests that tenants should be incentivized to report violations, perhaps through rent rebates if their landlord is found in breach.

Despite the potential benefits of banning bidding wars, there are doubts about its ability to solve the broader issue of rising rents. In Australia, rents have continued to climb in high-demand areas despite the ban. Dignam points out that transparency is a significant issue for renters who often do not know the true price of a property before viewing it.

The National Residential Landlords Association (NRLA) agrees with the goal of ending bidding wars but seeks further clarification on the implementation of the new policy. They also emphasize the need to increase the supply of rental homes to address the overall affordability crisis.

O’Shea acknowledges that while banning bidding wars is a step in the right direction, it will not fully resolve the affordability challenges faced by tenants. He argues that more comprehensive measures are needed, including stricter controls on rent increases and boosting the supply of affordable housing.

In summary, while the new legislation to ban rental bidding wars represents a significant policy shift, its effectiveness in curbing rental inflation and improving affordability remains uncertain. Addressing the root causes of high rents will require additional measures beyond simply ending bidding wars.