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

With renters in popular areas facing intense competition for homes, many are increasingly finding themselves pitted against each other in bidding wars.

Housing campaigners have welcomed plans for new laws to ban the practice in England – but are warning more action will be needed to tackle unaffordable rents.

Jason Phillips had been living in his flat in Crouch End, north London, for 10 years when his landlady decided to sell up.

He spent more than a year looking for somewhere new to rent in the area. But despite going to around 40 viewings and having a good salary as a business analyst, he kept losing out to other applicants.

In one case he was told a two-bed flat on the market for £1,800 month had gone for £2,500, after someone offered £700 over the asking price.

“It’s frustrating,” he says. “It made it not only unaffordable for me, but if I’d known that was going to be the price range I probably wouldn’t have even gone to see it in the first place.”

With at least a dozen prospective tenants viewing some of the properties, Jason said several estate agents had actively encouraged him to bid higher than the advertised price to give him the best chance.

Eventually Jason, 60, gave up and reluctantly moved to Stevenage, Hertfordshire, where it was easier to find somewhere within his budget and he was closer to work.

“I’d got to know my neighbours and I’d build up a lot of friends,” he says. “I miss [Crouch End] and I would love to go back.”

The government has set out plans to end bidding wars as part of a wider Renters’ Rights Bill, which was published on Wednesday.

Under the legislation, which still needs to be approved by MPs and peers, landlords and letting agents would be legally required to publish an asking rent for their property and banned from encouraging or accepting any bids above this price.

This goes further than proposals Labour set out when it was in opposition, which would have prevented landlords and agents from encouraging bids but would still have allowed prospective tenants to offer more than the advertised rent.

Campaign group Generation Rent’s Conor O’Shea says they are pleased the government has listened to the evidence from countries like Australia, where legislation has already been introduced to tackle bidding wars, and decided on a “total ban”.

He argues allowing “voluntary” bids would have been “open to abuse”, as tenants may still feel pressurised to offer above the asking price.

In Australia, all states now restrict rental bidding in some form – but only Queensland and the Northern Territory have banned landlords and agents from accepting offers above the asking price completely.

Three years after first introducing legislation to ban the encouraging of bids, Victoria is also planning to go further and make it an offence to accept rental bids, as the UK government is proposing.

The government there says with vacancy rates at record lows prospective tenants are under “an incredible amount of pressure” and people are increasingly making “unsolicited bids” to give them an edge over other applicants.

Joel Dignam, executive director of Australian campaign group Better Renting, says this suggests banning landlords from accepting as well as just encouraging bids is necessary to stop bidding wars.

He says enforcement is also an issue.

Generally, landlords or agents breaking the rules can be fined, but Mr Dignam says it is more likely they only get “a slap on the wrist”.

Mr O’Shea says this is also a problem in the UK, where overstretched councils struggle to go after all landlords who break the rules.

Under the planned legislation, landlords or agents could be fined up to £7,000 if they encourage or accept bids.

But Mr O’Shea says any new laws must be properly enforced to be effective.

He argues tenants should also be incentivised to report when bidding is being encouraged, for example they could be given a rebate on their rent if their landlord is found to have broken the law.

There are also questions over how effective banning rental bidding can be in curbing rising rents, with campaigners saying this does not address the root cause of the issue.

In Australia, rents have continued to increase in popular areas, where demand outstrips supply.

But Mr Dignam argues banning the practice is not just about affordability but also transparency.

“I think what’s tricky for renters is just not knowing what the real price of the property is,” he says.

“Is it even worth going to this [viewing] if actually it’s out of my price range?”

In the UK, the National Residential Landlords Association (NRLA) also agrees with the principle of ending bidding wars, saying neither landlords nor agents should be encouraging tenants to offer above the asking rent.

However, it is calling for more detail on how the policy would work in practice.

More broadly, the NRLA says there needs to be action to boost the supply of privately rented homes.

Mr O’Shea says ultimately banning bidding wars is “not going to be the silver bullet that will deal with the affordability crisis for tenants”.

He says there are concerns that some landlords may simply list their property at an inflated price and accept lower offers if needed.

Generation Rent also wants to see tighter controls on how much landlords can increase rents by within tenancies and an increase in the supply of homes, he adds.

“We don’t have enough homes in the places that people want to live, at rates they can afford to rent.”