Huge loophole found in Labour's plan to ban tenant bidding wars

Despite claiming it will end tenant bidding wars if it wins the General Election, it appears that Labour's new rules will have a huge loophole.
Leader Sir Keir Starmer repeated the pledge in the Question Time leaders' special saying there would be legislation preventing bidding wars.
He said this would prevent landlords from 'ripping off tenants'.
However, there's a big loophole in the plan because a bidding war will be allowed IF it is started by tenants.
Critics say that landlords will simply inflate the rent price when advertising a property.
Clearly advertise rent prices
Shadow health secretary, Wes Streeting, clarified the party's position saying that landlords must clearly advertise rent prices to ensure transparency.
However, a senior Labour Party official told news outlets that if renters choose to bid above the advertised price, it would be 'voluntary'.
The underlying idea is to prevent agents from creating bidding wars on behalf of landlords.
Labour's approach draws inspiration from New Zealand, where similar policies ban landlords from encouraging bids above the asking price.
However, New Zealand allows renters to offer higher prices voluntarily, if they are not pressured or advised to do so.
Average rents rise faster
Critics argue that this approach creates a 'loophole' and in New Zealand, tenants have seen average rents rise faster since the policy's implementation.
Lucian Cook, the head of residential research at Savills, points out that the UK's private rented sector (PRS) faces a stock shortage, leading to a competitive bidding environment.
Labour's manifesto promises an overhaul of the PRS to make renting more affordable to help calm the red-hot market which is seeing rents rocket.
There are approximately 5.5 million private rented homes in the UK, with more than a third of households spending half their take-home pay on rent, one survey revealed.
Also, evictions due to rent arrears hit a record high in the first quarter of last year, according to Generation Rent's analysis of government data.
Worst area for tenant bidding wars
A survey by Cornerstone Tax also found that Southampton is the worst area for tenant bidding wars, with 28% of renters being forced into a 'war'.
Brighton was next with 27%, London with 26% and then Manchester with 20%.
On Twitter, campaign group Acorn criticised the plan, saying: "Labour's proposed ban on rental bidding wars will contain a gigantic loophole to allow 'voluntary' higher bids from tenants.
"A loophole of this size would render this otherwise sensible policy effectively useless. Expect pushback from the renters' movement."
Reports are concerning
The National Residential Landlords Association's policy director, Chris Norris, said: "Reports that some letting agents are encouraging payments above this are concerning.
"Whilst we agree with the principle of ending 'bidding wars' to tackle the actions of those who do promote such practices, more detail is needed about how this would work and be enforced."
Propertymark's chief executive Nathan Emerson told the Telegraph: "Because you have such pressure on stock it [a bidding war] does not come from landlords, it comes from tenants offering above the price or saying they can pay a year upfront.
"Agents are legally obliged to pass on all offers to the landlord.
"The property can only go to one person, those who lose out feel frustrated and bid higher for the next property and it goes on."
Rents are rising quickly
The managing director of Accommodation for Students, Simon Thompson, said: "There's no doubt rents are rising quickly and creating affordability issues.
"But a plan to ban bidding wars wouldn't solve that - and this loophole shows why."
He added: "Basically, if someone wants to rent a house and can afford to pay more rent, they will offer to do so.
"And they'll do that regardless of any law designed to stop them.
"This is one of the big issues when rent caps have been brought in in Europe - those that can afford to pay more will come to an 'agreement' with the landlord."