Labour is introducing new plans to improve conditions for tenants in the private rental sector. They are calling for landlords to allow tenants to have pets as a default option – as long as they don’t cause a nuisance. Labour says this will improve the lives of tenants, many of whom are in the private rental sector because they can’t afford to buy a home. This policy is part of a 50-point animal welfare draft policy, which also includes a ban on fox hunting, a ban on foie gras, and a ban on exporting animals for slaughter.
The Cost of Pets in Rental Homes
The Residential Landlords Association has already raised concerns about the policy of allowing pets by default. They say landlords may have to charge higher deposits to cover the cost of potential damage to rental homes. There are also questions related to keeping pets in HMOs, especially when another tenant is allergic to animals, and tenants living in high-rise buildings, which might not be suitable for larger
NLA Expresses Concerns
The National Landlords Association has also expressed concerns about the policy.
“You can’t take a blanket approach to keeping or refusing pets. The NLA has consistently supported schemes that encourage landlords to take on pet owners,” says Richard Lambert.
The issue of allowing pets is a tricky one. Whilst some landlords are happy to let a well-behaved cat or dog into their properties, many of them adopt a “no pets” policy as standard.
Which side of the fence are you on? Let us know!
The days of high gearing are long gone. Data published in the latest Private Rental Sector report by Paragon indicates that landlords are reducing their mortgage borrowing to accommodate the latest buy to let changes. Paragon figures indicate that the average loan to value for investment portfolios was 35% at the end of 2017. This is significantly lower than previous years, so it’s clear that the loss of mortgage interest tax relief is having an effect on how landlords finance their investment portfolios.
Interest Rates Predicted to Rise
Many experts are predicting that mortgage interest rates will rise in the next 2-3 years. When questioned, 51% of landlords said mortgage interest rates did not influence their decision on whether to sell any of their properties. However, 49% of landlords said they would sell up if interest rates hit.
John Heron from Paragon Mortgages says: “There is no evidence to suggest lending to landlords has been anything other than sustainable. With low levels of gearing, landlords appear well positioned to withstand the higher interest rates that the markets are anticipating, which is good news for buy-to-let and the wider private rented sector.
High Gearing Obsolete
High gearing has enabled some landlords to build huge investment portfolios, but the practice is no longer as attractive. Not only are interest rates predicted to rise, but it is now much harder to obtain mortgage finance and some landlords could be in for a rude shock when their current mortgage deals come to an end in the next few months.
Data released by the English Housing Survey reveals that the number of people renting property in London has now risen to 30%, an increase of 1.9% in 12 months. These figures reflect the housing crisis facing Londoners, who are suffering from years of underinvestment in affordable housing. Young people, in particular, are finding it increasingly unaffordable to live in the capital. Many are being forced to move away from London, in a bid to find somewhere they can afford to rent.
The private rental sector has grown in recent years. The number of people living in rental accommodation has increased by 74% in the last decade. Renters pay, on average, 41% of their income on rent. This is far higher than homeowners, who typically pay 19% of their income on mortgage costs.
As many housing analysts point out, it is first time buyers who are the worst affected. People aged 45 and under are finding it very difficult to get on to the housing ladder, so they are forced to rent. The number of homeowners aged 45 and under has fallen by one million in the last seven years. Young people aged 25-34 are now the largest group in the private rental sector.
Changes to Buy to Let
“Due to the changes to the buy-to-let market, we believe the cost of renting is likely to increase,” says Charles McDowell from Aldermore, a leading mortgage provider.
Rents in London have certainly increased in the last few years. In fact, London is now the most expensive place to rent in the UK.
Void periods are a landlord’s worst nightmare. A rental void is that awkward period when a tenant moves out and there is nobody to take their place. Having a property empty for a month is not such a bad thing if it needs a makeover or there are some seriously messy jobs to be done. But when one-month rolls into two months, and so on, it will hit you where it hurts: in your pocket.
Airbnb Short-Term Lets
An increasing number of landlords are using short-term letting websites such as Airbnb to plug the gaps in a tenancy. Research carried out by the Residential Landlord Association has revealed that the number of buy-to-let landlords using Airbnb shot up by 54% between 2016 and 2016.
Boosting Rental Yields
When you do the maths, it isn’t difficult to see why many landlords are opting to let out their properties on sites like Airbnb. A one-bed flat in London can easily attract £100 per night from eager travellers; and even more, if it is well-located near popular attractions. The same flat would earn a landlord around £1700 per month, so there is more profit to be made via short-term lets and the property doesn’t need to be occupied all month.
It is precisely this flexibility that makes short-term lets such a convenient way to fill voids. So if you have an empty property in a scenic part of the country, list it on Airbnb to make up the shortfall.
Data released by the National Landlords Association has revealed that 20% of landlords are planning to offload properties from their portfolios because of recent government tax changes. The number of landlords selling up has now reached a ten-year high.
Government Policies to Curb Buy to Let
Experts believe this trend is largely down to the loss of mortgage interest tax relief, which is being phased out over a five-year period. Previously, landlords could claim any mortgage interest they paid as a business expense, but not any longer. The government also introduced a 3% Stamp Duty rate on landlords and anyone else with a second or subsequent property. There has also been a ban on tenant fees, so whereas previously tenants had to foot the bill for letting agreements and credit checks, letting agents are being forced are pass the cost on to landlords.
“It is our view that these policies are undermining the viability of many landlords’ businesses and removing the incentives to invest in residential property for business purposes,” says Richard Lambert from the NLA.
Vulnerable People Rely on Landlords
He points out that there is a huge number of people in the UK who rely on the private rental sector to give them a home. If increasing numbers of landlords leave the sector, it creates an even greater housing shortage. Unless the government changes its policies and begins to incentivize the private rental sector, even more landlords will reconsider their property investment portfolios.
A landlord finally gained access to his flat, only to discover it had been trashed by the tenant and a starving cat was in residence. The landlord was horrified to find pet faeces all over the flat, a very neglected cat, and no tenant in sight. He described the conditions the cat had been left in as “horrific”.
Neighbours Reported a Distressed Cat
The landlord had been alerted to problems by concerned neighbours, who had reported the sound of a distressed cat calling all hours of the day and night. The animal had been left with no food and water and had tried foraging in rubbish bags and drinking water from the toilet bowl in a desperate bid to stay alive. He immediately took the cat home and gave it food and water before calling the tenant to tell him he was not handing the cat back.
Cat Theft – Allegedly
The tenant was unhappy, despite clearly being incapable of looking after the young cat. He threatened his former landlord with police action, saying he would report him for stealing the cat.
The landlord, who has since named the cat “Bob” says he has absolutely no intention of giving the cat back.
“Bob is a lovely cat and we can’t let him down, so we want to make sure he goes to the right home.” He has since posted on Facebook in a bid to find a loving forever home for Bob.
Tenant campaign group, Acorn, is helping tenants fight back against bad landlords. The group, launched in Bristol three years ago, is a union for tenants renting in the private sector. The founders of Acorn are keen to help tenants who are affected by poor housing – they claim many tenants do not know their rights and are reluctant to tackle bad landlords when things go wrong. Activists from Acorn act as advocates for tenants, talking to landlords and encouraging them to sort out problems. Acorn campaigns against poor conditions, rising rents, and wrongful evictions. They operate in the community, for the community.
Acorn Speaks to the BBC
The BBC spoke to one tenant who had contacted Acorn when his landlord refused to address serious problems with the rental flat he was sharing with his girlfriend.
The one-bed flat had no lock on the front door, black mould everywhere, and there was no electricity in the bedroom, so the pair were forced to go to bed using a torch. Then, to make matters worse, the landlord stopped paying the electricity bill, so the power supply was disconnected.
Acorn Steps In
Bristol council ordered the landlord to pay the bill, but he was given 28-days to act. Acorn activists visited the landlord and the power was back in within three days.
Some landlords have accused Acorn of acting as vigilantes, but the group denies the allegations. They told the BBC they were simply solving problems on behalf of individuals who needed their help.
One of the biggest headlines from this budget was that stamp duty would be abolished for first-time buyers, but how does Chancellor Philip Hammond’s much-awaited budget affect landlords?
Chancellor Wants to Kickstart the Housing Market
Unlike previous budgets, Philip Hammond hasn’t made landlords the target of his big cannons. Instead, the Chancellor has decided to focus on repairing the ailing property market by making it easier for first-time buyers to get a foot on the ladder.
Cut in Stamp Duty for First-Time Buyers
The immediate cut in stamp duty should make it easier for first-time buyers to afford a property, although it won’t help them save up a 20% deposit, which is often the biggest barrier to homeownership.
No More Council Tax Relief for Empty Properties
Mr Hammond has given local councils the authority to charge 100% council tax for empty properties, to dissuade investors from snapping up homes and leaving them empty indefinitely. However, most experts believe this will do little to deter overseas investors from buying up real estate in prime areas.
Indexation Tax Relief to be Abolished from 2018
One area of this budget that will hit landlords with limited companies is the freezing of indexation relief. Previously, incorporated landlords could gain tax relief on properties owned for many years, but this is being frozen from next year. Many experts believe the move is paving the way for indexation tax relief to be abolished altogether. As such, landlords should plan accordingly.
Landlords get a lot of bad press. There are always stories about rogue landlords who do their best to rip off vulnerable tenants to line their own pockets. Indeed, the government seems to hold the same opinion, as it has been working hard to discourage landlords from investing in the private rental sector!
However, not all landlords are rogues or money-grabbing profiteers. Many do their best to help put tenants and provide homes for vulnerable people living in the local community. In a particularly inspiring story, a Wycombe landlord has pledged to lower the rent of a very desirable property in his extensive portfolio to help a low-paid NHS worker make ends meet.
The landlord, who has asked to remain anonymous, has decided to cap the rent on his flat at £650pcm, even though it could easily attract tenants willing to pay £725 per month. The landlord has also stated that he won’t increase the rent after a year, which he customarily would do with his other properties.
The landlord’s kind gesture is motivated by a recent good experience of the NHS. He told reporters that his mother had recently been admitted to hospital for a few days and she had received wonderful care from a dedicated team of doctors and nurses.
He describes the staff as the “unsung heroes of the NHS”.
The landlord’s letting agent said it was the first time he had encountered a landlord who was willing to lower rent for a charitable cause. Hopefully, it won’t be the last!
The latest Your Move Buy to Let price index shows that rents are still rising, following the pattern of the last twelve months. In September, tenants in England and Wales paid an average rent (seasonally adjusted) of £843 per calendar month. The figure for the previous month was £841. These statistics indicate a 3.2% rent rise on the same period last year.
Rents in the North West are rising faster than anywhere else in the UK. Prices there have gone up by 3.6%. Second on the list was the East Midlands, which registered an increase of 3.4%, closely followed by the East of England, where prices rose by 2.9%.
Only two regions registered a decline in rental prices. The North East had previously shown a marked increase, but rents there have fallen by 0.3%. Rents in the South West also fell, by 2.2%.
It’s not all bad news for the North East, as landlords are there are enjoying excellent rental yields of 5.1% on their properties, mostly thanks to very low property prices. The other top place for landlords was the North West, where rental yields are 5%.
London Still Expensive for Tenants
Rents in London are still higher than anywhere else in England and Wales, although price growth is much slower than other areas. Tenants there pay, on average, £1,280. However, it is important to note that there are significant differences in rents across the different boroughs of London, with some areas far more expensive than others.
Experts report that rental yields are now stabilising after a turbulent year for landlords.