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TODAY'S OTHER NEWS

Coronavirus could cost BTL landlords almost £15bn in lost rental income

The devastating impact of the Coronavirus could cost buy-to-let landlords nearly £14.9bn should tenants be unable to pay rent during the three month support period announced by the government last week, new research shows.

The government has announced that they will suspend new evictions and halt new possessions proceedings to the court in light of the COVID-19 pandemic. 

If tenants are unable to pay their rent, Ome calculates that this would leave landlords £14.9bn out of pocket over a three-month period. 

The deposit replacement scheme’s findings are based on the fact that there are 5.2m households currently within the private rental sector alone and without the ability to work and pay their rent, the buy to let sector could see a loss of £4.97bn every month based on the average monthly rent of £955 alone. 

Nationally, this lost income is highest in England with potentially £11.6bn lost in rental income, while London is home to the biggest sum regionally with a potential £4.9bn lost in three months alone.

There are some 2.6m landlords operating within the UK buy to let sector meaning the average landlord has a portfolio of two rental properties. With an average rent of £955 and a loss of three months’ rental revenue across both properties, they could be facing an individual £5,730 shortfall in rental income.

With a ratio of 2.1 properties per landlord in Scotland, the loss is at its greatest at £6,146 over three months with Northern Ireland also high at £6,083.

Co-founder of Ome, Matthew Hooker, commented: “It’s great news that the government are providing some financial respite for the nation’s landlords, however, it’s more of a weekend away than a holiday and once expired, UK landlords are still facing the cost of a buy to let mortgage without the rental income to pay it.

“It’s by no means the fault of the tenant if they are unable to pay but there is a very real chance that landlords will turn to the rental deposits at the end of a tenancy in order to recoup this lost rent. While this would be unfair on a tenant who has otherwise kept the property in good order, it may well be the case that landlords are simply left with no choice.  

“The silver lining at least is that hopefully, not all tenants will be unable to pay their rent and so this sum of lost rental income should reduce, but whichever way you look at it, the UK rental sector is in for a tough few months.”

  • Mark Wilson

    And from there, isn't it likely that wages will fall and so will rents. Lower interest rates do not signify higher returns they explain lower returns.

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    No not at all. The PRS has been shrinking at a rate of around 1000 properties a week for some time. When we start emerging from this mess it's extremely likely, well a certainty really that the rate will increase. That will sustain rents and may even cause rental inflation.

     
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    Next years headline for you Marc

    “Tenants paying £14.9 Billion more in rent in 2021”

  • David Lester

    If unable to work they get 80%, therefore can agree 80% of rent!

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    That would seem like a fair compromise, but I'm not holding my breath on that one.

     
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    most landlords have an interest rate set in the tenancy agreement for unpaid rent in arrears.

     G romit

    The Tenant Fee Ban legislation sets the maximum rate of interest & is pathetically low.

     
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    Well its not just a few tough months is it ? The powers that be and other outsiders with no housing input have been making laws and chipping away at us in recent years particularly.
    They are so naive they think it only affects private rental LL's, has it not occurred to them that many of them own their own residential property whether a house or flat where they live. Its true that when they want to up-size or down-size its very often the private LL that has bought their old property ensuring that they got a good price. When you collapse private rental sector 2.5m LL's housing 20m people, bang goes the value of property as well can you not see that.
    The idea that rents or house prices will increase is madness, this was well on the cards ever before Corona, affordability you forget this little fact, then building thousands of subsidized flats clearly not required, over priced by a country mile, for Developer buyers Zero SDLT & Small Deposit just to rope them-in obviously a millstone around their necks for rest of their lives. There is no Zero SDLT exemption for us regular LL's who have supplied quality affordable housing to the market for decades but a huge tax penalty of additional 3% on top , plus taxed on income instead of profit, so anyone that thinks all will be fine good luck to you.

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    No doubt landlords with take some pain (with govt rubbing its hands in glee at the thought). However, it will obviously not be as much as £15bn:

    A certain proportion of rents are direct payments from UC even if fewer than used to be the case.

    It is likely that most tenants will continue to be paid once the government have sorted out a suitable support package, so they will have no reason to need a payment holiday. In any case, the rent is just deferred rather than cancelled.

    As they won't be spending a substantial chunk of their income on non-essentials like eating out and other entertainment like most people do, a fair few may actually find themselves better off until things return to normal.

    So when it comes to it, this is yet more irresponsible scaremongering.

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    Yes the rent is deferred not cancelled. If the government steps in and pays everyone then there will be no issues going forward other than 1970’s tax bills

     
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    I have a vested interest in a healthy housing market so I wouldn't scaremonger. I just tell it how it is and might save a few people from getting burned, if you were eluding to me.

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    Any help at all for mortgage free landlords who's rental property is their pension when tenant unable to pay rent?

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    Of course not Jean, I'm 66, and after 30 yrs as a landlord am mortgage free, I think I'm lucky though, all but one of my tenants are good honest hard working people who I feel I can trust, the one who is not will likely find herself homeless next winter

     
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    What about landlords who have empty properties which cant rent at the moment but still have to pay council tax,also tenants who are sub metered but cant pay their bills,also landlords who dont have mortgages but dont get any help,i hate to say but thats me,im sick of being penalised for everybodys problems and nobody gives a damn about landlords,when this is over im going to sell them,i advise you to do the same maybe they will appreciate landlords when theres a housing crisis and the tax payers and government can pay out to house all the homeless.

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    I am a landlady whose rental income is her only income and although I don't have mortgage payments more than half of what I receive goes to high expenses of the building where my flat is, few loans, regular bills and my own rent payment with living expenses. There is no provision or help for people like me. Is there any effort to get help from the government for landlords in my situation?

  • PossessionFriendUK PossessionFriend

    @Gromit,
    if Landlords had decent representation - the Govt would have been taken to task over the Tenant Fee Ban and a Judicial review to challenge why outstanding interest on only Rent ( as distinct from any other business loan,) is different to the Civil procedure rules of 8%

    Of course if there were a stronger Landlord representatiive body, its likely the Government wouldn't have pulled as many 'strokes' on landlords and might have thought twice before withdrawing their access to Justice over outstanding rent during Covid.
    Rent in excess of current Civil law and tenancy contract is the responsibility of the welfare state, should it choose to intervene. - If it doesn't wish to, the burden shouldn't be laid at Private landlords door.

    Any organisation that applauds the way this govt has treated landlords can't be said to be genuinely representing their best interests.

  • Paul Barrett

    Just think of the tax loss to Govt caused by LL not receiving rent.
    You can't pay tax on income you've NEVER received...................................whoops silly me I was forgetting S24 which does indeed charge tax on fictitious income but now without rent the LL can't even pay the tax.

    Wonder if HMRC will offer forbearance on S24 taxes because of the eviction ban preventing LL from sourcing tenants who will pay rent so that the LL is able to pay the S24 taxes...................what do you think!?

    Will HMRC not bankrupt those LL unable to service S24 tax bills!!

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    We can only be taxed on profits, no or low profits = no tax income for HMRC

     
  • Paul Barrett

    Unfortunately Andrew you couldn't be more wrong.

    S24 states exactly the opposite to what you have stated.

    Of course what you states makes complete sense.

    Unfortunately for mortgaged sole trader LL S24 is COMPLETELY NONSENSICAL!!!!

    But that won't stop HMRC demanding S24 taxes.

    Where LL are supposed to find the monies needed beats me?

    Get down the garden centre they might be selling magic money tress!!

    So according to the BBC only LL were able to avail themselves of and I quote

    'GENEROUS TAX RELIEFS';

    as opposed to EVERY other business in the UK that is allowed to offset finance costs against income to hopefully produce a profit to tax!!

    S24 requires no profit.
    But it does require tax to be paid on fictitious income.

    Perhaps mortgaged sole trader LL will at last realise how ludicrous is their position.

    By their actions Govt prevents tenants from being evicted.
    LL need rent but can't evict to source rent paying tenants.

    How pray tell are such LL supposed to pay such S24 taxes!!!!!?????

    NOBODY especially the useless NRLA has even mentioned this ridiculous situation.

    HMRC will find that many LL cease trading having sold off their properties.
    They will put their own home in another name.
    They will hide any cash proceeds and they won't be paying any S24 taxes.
    HMRC can bankrupt the LL.
    In about 1 year the former LL now potless ..................allegedly will be discharged.

    So Govt loses out on S24 taxes.
    You really couldn't make all this up but this is the reality.
    I pointed this out 5 years ago.
    What I stated then has now come to pass.

    Haven't seen any signs of Govt logically abolishing S24.

    Of Govt won't because S24 is a principal tool to eradicate mortgaged sole trader LL.

    I'd say Govt is well on it's way to succeeding.
    The eviction ban just hastens LL destruction.

    Welcome to the brave new world of the PRS.
    Please let there be some numpty newbie LL that I can flog my properties to.
    You are welcome to the brave new PRS.........NOT!!!

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    I take your point on s24, but if rent isn't coming in there is less to be taxed on.

     
  • Paul Barrett

    Absolutely correct on less or no rent means less tax to be paid.

    I have seen figures quoted of £14.5 billion in rent has been defaulted on and that is so far this year!!

    How much of that would have gone to the Treasury?

    I'm sure we are talking at least £4 billion.

    That means every other taxpayer has to contribute more to pay for feckless tenants living rent free.
    Yet it is Govt itself which is causing these tax losses.

    At least if they forced all rent defaulting tenants to take a Govt loan then a lot of that loan would be returned to Govt in tax on the LL rental income plus the Govt would have feckless tenants on the hook for years to come paying off those loans via the PAYE system.
    Of course recovery from certain groups would be difficult but Govt should mostly succeed where most LL fail in civil recovery actions.

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    The ''certain groups'' you refer to could have part of their generious benefits stopped until the loan is repaid, or would that be against their human rights.

     
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    Mark comment 24th Mar' for once I agree with him lower wages means lower rent or as has what happened now no rent but Sadiq Khan is so much out of touch he's on about not allowing rent rises for 2 years at a time its not achievable anyway. I see some has gas compliance access problem just like me. I recently notified the Tenant what day I would be coming with the Gas Engineer, they wanted to know what exact time which is not possible to give even the Engineer didn't know how long last job would take. We arrived at the property no reply for several minutes but was evident someone was there. I tried my key didn't work in Euro lock because a key was already in place from inside. However eventually a mature woman answered the door & said you can't come-in, but I said it has to be done, no she says you can't come-in, then the gas Engineer told her its a legal requirement eventually she relented. I didn't not know this woman, hadn't meet her before, not a Tenant, so is this what Government wants to be refused entry to your own House by a blank stranger, is it no wonder there is so much over crowding, sub-letting and property damage, just keep LL's out very important ?.

  • Paul Barrett

    Yes your point is well made.
    We then have the unintended consequences of with rent loan deductions if working it becomes pointless working as they are no worse off NOT working.
    Bit like students mostly never paying off their loans as the useless jobs they get never earn sufficient to pay off student loans.

    I just can't see Govt being able to recover any loans.
    Politically far better to have the taxpayer lose out taxes than make taxpayers aware that they are effectively subsidising feckless tenants.

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    Some yrs ago I had a guy and 2 girls in a house, totally unbeknown to me they moved out and 3 differant girls moved in, the first I knew about it was when they paid their rent into my bank account I didn't reconise the names, I've even had agents ask me for a referance for people that have never been tenants of mine, the things some people get up to and they think it's okay.

    Paul Barrett

    I have my addresses used for fraud mostly car insurance.
    I always open the mail and contact the organisations to report fraud.
    I have also been subject to fraud such that I had a CIFAS entry.

     
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