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TODAY'S OTHER NEWS

Older renters and retirees now the fastest-growing tenant groups

A new report from respected specialist mortgage provider Paragon Bank shows that retiree renters and those in the upper-middle age category are the fastest growing tenant groups.

The number of English households in the 55 to 64 year old age category in the private rented sector with an assured tenancy has risen 118 per cent over the past decade, with those aged over 65 growing 93 per cent. 

This rate of growth is nearly double the rate of the next fastest growing segment – 35 to 44 year-olds.

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Paragon’s research also reveals that later life tenants are generally happier in private rented accommodation than other age groups and have lived in the rented sector for longer. 

Some 68 per cent of over 55s said renting suited their needs or they enjoyed renting, compared with 49 per cent in the under 55 group. A strong majority - 63 per cent - said they were pleased they don’t have to worry about repairs.

At 576,000, those aged over 55 represent 16.2 per cent of privately rented households and this has steadily grown since the turn of the last decade, when only 11.3 per cent of the sector was made up of over-55s.

Paragon’s research showed landlords appear to be responding to this change in demand, with 21 per cent of landlords expecting to let more to older singles in the future and 20 per cent expecting to let to retirees. 

This was second only to letting to professionals or executives/companies.

“There are a number of factors that may have contributed to the increase in over 55s in the PRS over the past 10 years, such as rising divorce amongst older people, poorer pension returns and men living longer” explains Richard Rowntree, Paragon Bank ’s managing director of mortgages.

“With the number of over 55s forecast to rise from 30 per cent of the population to 36 per cent by 2043 and new household formation predicted to be driven by older, single person households, the private rented sector will have an increasingly important role to play in providing a home for older tenants” he adds.

Other key trends unveiled by the research include the fact that almost a quarter of older renters did not want to own a home, are much more likely to live in single-person households, and to have lived in rented property for substantial periods - often 10 years or more.

 

Population forecasts show that by 2043, the proportion of the UK population aged over 55 will increase from 30 per cent today to 36 per cent.

The number of households in England is expected to grow from 23.2m today to 24.8m by 2028 and 26.3m by 2038, and it will be people in the 55-plus age bracket driving that growth, with those aged 75 or over recording the strongest increase. 

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    It's logical if you think about it. A retiree with a 4 bedroom property, with a wife and kids that have left home can rent their house for £1500 a month, move into smaller one or two bed property with a rent of say £600-£700 a month. Freeing up cash for themselves. No large house to heat and clean. Spend the surplus cash on holidays. They will no be tempted into expensive equity release for their home and so can leave it to their kids, minus a bit of CGT for any value increase whilst it was rented. Their landlord also gets tenants who will take care of their property as if it was their own. Win win win!

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    The CGT start point applies to the purchase price and not the value at the point of renting it out. The CGT liability could be huge. However if you have departed this life it's not your problem.

     
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    Retired

    I don't think you're right. If you have 30 years of owner occupation and 10 years of renting it out, then you would only pay CGT on a maximum of 25% of the gain on selling. If you don't ever sell, but leave the house in your will then it will be added to your estate and could potentially be left to your family free of all CGT or IHT - depending on the value of the estate.

    Another option (but potentially expensive in stamp duty etc.) is to sell the property to a company you set up when you rent it out - so no CGT payable at all then - and the stamp duty is potentially much less than the eventual CGT might be.

    I bought most of my portfolio in my grown up children's names on day 1, with the understanding that I managed them and kept the profits (after tax etc.) as my "management fee" - given by them to me as gifts so no further tax due.

    The main reason was to avoid any CGT or IHT issues (after surviving 7 years) and this also ensures the value of these properties is not taken into account if I ever end up in care.

     
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    Yep I have 3 lots of older people 70s and there fantastic. Clean well looked after property always paid up to date and no bother. They think generation rent is an electric company and Shelter something that you have at a bus stop.

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    I have some older renters as well, sold their properties and using the money to enjoy themselves while they still can, all makes perfect sense, their money and their's to do with as they wish, spend it before it's all taken in care home fees.

     
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    • 05 November 2020 10:11 AM

    No what a logical LL would do is take in lodgers for their family home so avoiding all tenant issues and go and rent elsewhere but with their family home still being visited and occupied once per month by them.

    With lodgers no tax to report as no live-in LL will ever earn more than £7500 per tax year even if they do!

    No S24
    No AST
    No eviction laws to bother with etc etc


    Yes it means unrelated individual lodgers which can mean a lot of churn but still better than a single household AST.

    £600 per room fully inclusive per lodger in a 4 bed house brings in a lot more income than an AST.

    However there is another reason why it might actually be worthwhile selling off the family home and renting.

    Care home fees will take all the value of the family home

    Yes it means losing the income generation potential but it ensures the Council has to pay the care home fees rather than robbing the assets of homeowners.

    If the property is sold 5 years before there was any inkling that a care home might be required then the Council won't be able to prove intentional deprivation and of course the sale proceeds will have all been spent...............allegedly!!
    Certainly won't be in any savings account.

    Then we come to another reason for renting.
    A great way to pass on capital under the table in cash to siblings.
    This is what Ronnie Corbett did.
    Sold off his pile and disbursed funds and rented until death.
    That's the way to do it!!



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    Paul

    I agree with most of what you say - although £600 per room per month seems like a lot more than £7500 per annum to me! I have always been (almost) squeeky clean as far a HMRC goes and have seen landlords who do cash deals for rent etc. get severely burned when the tenant relationship turns sour - so best not to give them any potential ammunition.

    Your further points are in line with my own thinking - and actions - even to the extent of potentially moving into one of "my" rented properties and selling up my own home when the time is right and dividing out the cash among children and grandchildren.

     
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    • 05 November 2020 13:54 PM

    @robertbrown

    HMRC have no hope of ever detecting how much rent a live-in LL receives in rent from lodgers.

    Why they even bother with a tax free £7500 per tax year beats me.
    No LL declares more than £7500 because no LL earns more than £7500.
    HMRC can't prove LL do.

    It would greatly assist the UK in these desperate times if Govt announced that ALL lodger income would now be tax free.
    Many more homeowners would then be incentivised to take on lodgers.

    As LL won't declare any amount above £750 Govt should just recognise this simple fact and at least get OO to take on lodgers which would considerably reduce the need for LL to have so many rental properties.

    There are reckoned to be 25 million empty rooms in OO properties.

    Making lodger income tax free would greatly assist the housing issues in the UK.

    It has to be made worthwhile for OO to give up their privacy.
    All tax free lodger income could do it.
    It would be a headline Govt policy which would be supported by most people.
    There would be much reduced demand for rental property which would mean LL sell off unneeded property.

    That is what the Govt wants isn't it!!!?

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    Paul

    What you describe would remove the housing shortage overnight and market rents would plummet. Please delete this post immediately!

    Seriously though I think HMRC are prepared to investigate rent a room tax fraud when it's reported and don't expect lodgers to lie to protect you.

    I know that HMRC raised a healthy 7 figure sum a few years ago when checking up on rent a room profits in a well known Open Golf location. Affluent home owners were given offers they couldn't refuse to pay up plus reduced penalties for early settlement.

     
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    • 07 November 2020 21:19 PM

    @robertbrown.

    If indeed what I suggest would cause a collapse in rents etc then so be it.

    As a LL I am not interested
    in feathering my own nest.
    If that means I can no longer continue in business then so be it.

    I would far prefer the UK population were suitably housed.
    Tax free lodger income could go a great way to facilitate this.

    HMRC have no way of tracking down who has lodgers.

    Spareroom which is the major room portal service couldn't even confirm which of their LL advertisers took on lodgers.

    I use spareroom all the time.
    HMRC could never prove whether I took on a lodger or not.

    That is why they should just allow lodger income to be tax free.

    If that meant the emasculation of the PRS to the advantage of lodgers and tenants then so be it.

    The PRS only exists as a market the way it is because Govt refuses to make lodger income tax free.

    It would cause a mass sell off of rental property.
    Good. No LL has the right to expect the market to remain as it does.

    But even with all lodger income tax free many OO would still refuse to take on lodgers.

    It means giving up privacy and to many OO privacy is worth more than money.

    Though in the current climate I would suggest many OO would be only too willing to take on lodgers.

    It would ve a headline grabbing Tory policy that would be greatly applauded by the electorate.
    Govt would also advise that for benefit purposes ALL lodger income would be disregarded as part of any income for an OO.
    Now of course anyone may have as many homes as they like.

    So what many LL would do is sell off BTL properties and convert to a few residential properties taking in no fewer than 4 lodgers to avoid mandatory HMO licensing.

    Expanding lodger capacity would greatly assist the Tories to reduce the size of the PRS.
    Many LL would find that their yields are far more than with BTL properties.

    If I had just 2 4 bed houses I could make gross about £4800pcm
    Net that would be about £4200.
    Far more than I receive from my existing properties.
    I would just stay once per month in each property to maintain residential status.

    Of course by reducing the rental stock that would mean reduced CG.
    But I'll take tax free yield over possible CG any day.

    But this Govt is so myopic they simply couldn't comprehend the efficacy of tax free lodger income in bringing about a massive reduction in rental properties.

    So it will never happen but shrewd LL will keep on taking lodger income NEVER in excess of the RFRA




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