A report from leading landlord mortgage lender, Kent Reliance, has revealed that landlord confidence in the buy to let sector is falling. Three years ago, 67% of landlords were confident about their prospects, but in the intervening years, this has fallen to 41%.
Value of PRS Rising
The value of the buy to let sector has risen in the last three years and is now worth £1.3 trillion, but tenant demand is falling. Three years ago, 39% of landlords reported an increase in tenant demand, but this figure has fallen to 27%. More landlords are reporting plans to reduce their property portfolios and many amateur landlords have already quit the sector. Many landlords are also having problems securing buy to let finance, with 25% reporting difficulties in this area.
Tough Times for UK Landlords
The report highlights some of the difficulties facing UK landlords at the moment, which is a reflection of the uncertainty facing the wider economy as a whole. Recent changes to landlord taxes and a lack of political stability are all affecting landlord confidence in the sector.
The Residential Landlords Association has highlighted problems caused by the government’s ‘Right to Rent’ scheme. Nearly half of all landlords quizzed by a leading landlord insurance company categorically stated that they would not let a property to anyone without a UK passport. 22% of landlords questioned also expressed doubts about offering a tenancy to EU nationals.
With continued confusion surrounding Brexit and the status of EU citizens living in the UK, this makes it much harder for anyone without a UK passport to find somewhere to live. It is also a problem for 17% of citizens who don’t have a passport.
Landlords Afraid of Repercussions
When asked why they were so reluctant to let properties to non-UK passport holders, landlords explained that they feared the repercussions of allowing a bogus passport holder to slip through the net. Unfortunately, this is having an effect on UK citizens without a passport.
Any landlord who has “reasonable cause to believe” that the person letting their property does not have the correct immigration status is committing a criminal offence. Penalties for conviction range from fines to a prison offence, and possibly both.
Changes to Right to Rent Scheme
The new changes to the ‘Right to Rent’ scheme came into effect in December 2016. If a landlord finds out a tenant is disqualified from letting a property, they must issue a 28-day eviction notice. If the landlord submits a Section 8 notice and doesn’t refer to the Immigration Act 2016, it is invalid and the eviction will fail on technical grounds.
Calling a snap election was always a risky strategy, but until the exit poll came in at 10 pm, many still believed Theresa May would walk away with a majority. Sadly, this was not the case and now we are left with a hung parliament and no clear way forward.
Today, the property industry and landlords have reacted to the news. The general consensus of opinion appears to be that the next few months are going to be difficult for everyone.
Uncertain Times Ahead
A hung parliament signals uncertainty. An extended period of uncertainty is bad for the economy, bad for the property market, and definitely bad for landlords. Uncertainty leads to procrastination. Sellers are reluctant to sell because they are worried they might not achieve the right price for their property and buyers are reluctant to buy in case property prices fall in the interim.
The whole point of the snap election was so that Theresa May could have a mandate to take the UK forward into Brexit negotiations without too much interference. Unfortunately, she has now lost the majority she so badly needed.
A New Housing Minister is On the Cards
The Tory Housing Minister lost his seat in the election, so the post will need to be filled by someone new. This will have an effect on government housing policy going forward and housing is likely to take a back seat for a while.
In the short-term, a lack of confidence in government’s ability to make decisions is going to have a knock-on effect on the housing market. This is bad for landlords and the property market in general.
Research carried out by the UKs largest tenancy deposit schemes has revealed that 40% of students don’t get their deposit back when they leave their student accommodation at the end of an academic year. The mass exodus of students leaving their rental accommodation is about to begin. The university term finishes in June and most students won’t return until late September or early October. Many of them are hoping to have their deposits returned, but sadly this is not going to happen for a considerable number of them.
Cleanliness is an Issue
The biggest issue for landlords is cleanliness. Unfortunately, students are not known for their clean-living lifestyles and there are numerous shocking photos online of ghastly kitchens and mountains of empty pizza boxes next to several weeks’ worth of dirty dishes. It’s enough to make a landlord turn pale.
It’s also more than enough to persuade a landlord to hang on to a student’s deposit, as paying for professional cleaners to come in and deep clean a property is expensive.
The TDS is advising students to do a deep clean before they move out of their property. They also advise them to tidy any garden at the property. Property damage is another bone of contention, so students are advised to report damage to their landlord, preferably in writing.
Landlords cannot make unfair or unjustified deductions from the deposit. They are also not allowed to withhold deposits at the end of a tenancy.
When it comes to housing, Hong Kong is the most unaffordable place on earth. In fact, a lack of affordable homes is Hong Kong’s biggest social problem. Soaring rental prices have forced the poorest members of Hong Kong society into so-called ‘coffin homes’.
An Insult to Human Dignity
Some of these homes are so small that the inhabitants don’t even have enough room to stretch out their legs when lying down. In fact, the situation is so bad that the United Nations has condemned the coffin homes as an insult to human dignity.
Photos published online show residents living in horribly cramped conditions ranging from tiny – and illegal – rooftop shacks to metal cages and shoebox apartments. Often, dozens of people have to share a single toilet and sink.
One woman with two young children lives in a tiny windowless cubicle that is only 120-square feet. She pays £447 a month in rent, which is half her monthly income. The space is so small that her children don’t have enough room to do their homework.
An elderly man lives in a small coffin home that is only 1m x 2m. It is barely large enough for a sleeping bag, electric fan, and small colour TV.
Young People in Despair
The coffin homes are a far cry from the luxury apartments enjoyed by Hong Kong’s wealthy elite. One activist said the housing problem in Hong Kong was so bad that young people despaired of ever owning their own home.
An East London landlady has been fined a massive £235k and ordered to hand over the money within three months or face a two-year jail sentence. The landlady was caught out by housing officers from Barking council. After receiving an anonymous tip-off, housing officers raided an illegal bed-in-shed development built in the back garden owned by the landlady.
Illegal Extension in Landlady’s Back Garden
The illegal extension was only 37 feet long, so each room was very small. The conditions were described as “squalid”, yet the four rooms were being charged out at £2,850 a week. Indeed, conditions for the tenants were so bad housing officers described the rooms as more akin to a Rio favela than a legitimate rental accommodation.
A Victory for Tenants
‘This is a victory for tenants, decent landlords and the dogged determination of our diligent investigation and enforcement officers,” said Councillor Laila Butt, who also happens to be a Cabinet Member for Community Safety and Enforcement.
“Through our tough enforcement action they have been demolished so no one else has to suffer such bad living conditions,” she added.
The landlady has also been ordered by the court to pay an extra £2,000 fine for the illegal extension, which also must be paid within three months. She has an additional £11,649 in costs to pay, too.
Sadly, despite the huge fine, slum landlords continue to flout the law and rent out illegal beds in sheds, as in property hotspots like London, there is a lot of money to be made.
In a highly unusual move, Waltham Forest Council served an Interim Management Order on a landlord last week after he refused to make it safe for the 15 tenants living there. Four people were discovered living in beds in a shed in the garden and a further 12 people were living inside the property, which had been divided into five separate bedsits (contrary to planning regulations).
The landlord was raking in more than £4k per month in rent, but unfortunately he wasn’t spending any of the cash on essential repairs to the house and he hadn’t bothered paying any Council Tax for four years. Not surprisingly, council housing officials were not prepared to ignore such a blatant disregard for the system.
Essential Repairs to be Carried Out
Tenants living at the property will be allowed to continue staying there. Instead of paying rent to the landlord, however, they will pay rent directly to Waltham Forest Council. In the meantime, council housing officials will employ a contractor make essential building repairs and deduct the cost of repairs from any rent received.
“It’s obviously a last resort for us to have to take control of a property away from its owner, but we were given no choice due to this landlord’s poor attitude and lack of concern for the safety of his tenants,” said Councillor Limbajee.
Council officials have now changed the locks on the property. They say they hope the landlord will come forward to settle his debts and sort out the problems with his property.
A London landlord sought to take advantage of the housing shortage by squeezing 28 tenants into an unlicensed two-storey house in Stoke Newington. When officers raided the property early one morning, they were shocked to discover that each of the property’s bedrooms contained two bunk beds to maximise space.
Squalid Conditions in an Unlicensed HMO
Conditions in the property were described as “squalid” and the house only had one kitchen and one bathroom for all 28 tenants, which must have proven a challenge at busy times of the day. The landlord had also ignored basic fire safety legislation, as there were no fire alarms in the property. In addition, he had also carried out an illegal loft conversion to create extra living space.
Landlord Fined £20k
The landlord was prosecuted for managing an unlicensed HMO. Thames Magistrates Court fined him £20,000.
Councillor Philip Glanville, Cabinet Minister for Housing at Hackney Council, made this comment after the successful resolution of the case:
“The lack of any basic fire safety at this jam-packed property put lives at risk, and this maximum fine serves as a warning that we won’t stand by when we see unsafe conditions in Hackney’s homes.
“We’re determined to drive up standards for private renters in Hackney, and we won’t hesitate to take enforcement action and press for the strongest penalties for landlords who flout the rules.
“Those who seek to take advantage of London’s housing crisis for personal profit have no place in our borough.”
Sadiq Khan, Labour’s mayoral hopeful, has set out plans for a new referendum on the housing crisis. He plans to introduce a website where the capital’s rogue landlords will be named and shamed. He hopes that the website will help people looking for rental accommodation in London score a much better deal. He is also hoping to set up a non-profit letting agency in London, which would promote good landlords who offer their tenants stable rents.
A Database of Landlords in London
The new website is based on a similar scheme implemented by the New York mayor, Bill de Blasio. It would act as a comprehensive database of landlords who have previously been prosecuted for housing offences.
The Government is “Not Doing Enough” Says Khan
Mr Khan says the Tory government is not doing enough to help renters in the capital, although David Cameron has recently announced plans to crack down on rogue landlords and dodgy letting agents.
Speaking at the launch of his mayoral manifesto today in Canary Wharf, Mr Khan told his audience: “Most landlords treat their tenants well, but I’m determined to name and shame the rogue ones who break the rules.”
Mr Khan also plans to tackle a number of other issues, including freezing high fares, tackling extremism, improving air quality and cycling routes, dealing with skills shortages and low wages, and introducing better neighbourhood policing strategies.
Zac Goldsmith, Mr Khan’s main rival, remains sceptical. “Khan’s plans don’t survive even the gentlest scrutiny,” he said. “This isn’t a manifesto, it’s fantasy politics.”