Three-Year Tenancies Discourage Buy to Let Property Investment

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A third of buy to let property investors are less likely to buy property if three-year tenancies become compulsory under new government proposals.

New research from Paragon found that 32 per cent of landlords would be less likely to expand their portfolios if the government press on with compulsory or default three-year minimum tenancies.

The report was compiled after Paragon surveyed landlords in a bid to gain a fuller understanding of their views following the recent government consultation entitled: ‘Overcoming the barriers to longer tenancies in the PRS.’

When asked if the introduction of a compulsory three-year tenancy would make them more or less likely to consider certain tenant types, the majority of landlords, at 36 per cent, said that they would prioritise older couples. 29 per cent would prefer retired people, 25 per cent families and 25 per cent older singles.

In contrast, a compulsory three-year tenancy agreement would make landlords less likely to consider mobile groups such as students. 45 per cent would not wish to let to those still studying. It also meant that landlords were less likely to consider migrant workers, at 40 per cent, and young singles at 24 per cent.

Director of Mortgages at Paragon, John Heron, said: ‘Landlords are highlighting that the diversity of the tenant population calls for a diversity of tenancy arrangements. While some groups value greater security, many other tenants favour flexibility. Young professionals, for example, value the flexibility that the PRS brings to move to different areas and to different types or property.’

He continued: ‘ In light of these findings, rather than impose longer-term tenancies as the primary or default arrangement in law, it may be preferable to bolster tenants’ rights to choose from a range of different tenancy lengths and boost incentives to landlords to enter long term arrangements where requested.’