As we know, significant changes to the buy to let system started in 2015, when the former Conservative chancellor, George Osborne, introduced a three per cent surcharge on stamp duty land tax for each additional property bought and placed restrictions on mortgage interest tax relief.
In June this year, the Government published its 'Fairer Private Rented Sector' White Paper. This signalled the biggest shake-up in private renting in 30 years. It outlined proposals, some of which include:
- extending the ‘Decent Homes Standard’ from the social rented sector to private tenancies;
- moving all tenancies to ‘periodic’ tenancies, essentially scrapping ASTs and enabling tenants to give two months’ notice at any point;
- abolishing Section 21 and requiring Section 8 notices for all evictions;
- only allowing landlords to raise rents once a year, which tenants can challenge if they feel the rise is excessive.
Just as tenants are struggling with the increase to the cost of living, so too are landlords.
Some coming off ultra-low mortgage rates are seeing their payments double or even triple. Just as businesses are being forced to put prices up, landlords are being forced to raise rents, not to make more money but just to cover costs.
Historically, despite opposing views, landlords do not want to evict tenants, particularly those who are reliable with payments, respectful of the property and grant their landlord access when necessary.
Most of the landlords we work with have opted to keep their tenants on below market value rents in favour of having someone they trust living in their property. The consequence now is that good, reliable tenants are losing their long-term home. Many cannot afford the deposit to buy the property from their landlord, nor can they afford the costs associated with moving to a new rental property with higher rents. Many face having to move to a property of a lesser standard than they have been living in.
As just one example, I spoke to a landlord last week who, for the first time in 12 years, has had to contact his tenants and raise their rents. It wasn’t something he wanted to do, as he has good reliable tenants, but like many other buy-to-let landlords, feels under siege after years of tax and legislative changes, and now mortgage rate rises, mean that letting out a property in some cases no longer generates a profit.
Having spoken to him at length about his personal circumstances, it was clear that his only option is to raise the rent or sell up. He said if costs keep going up, he may still be forced to sell.
This landlord is just one example of thousands around the country. Government figures show that almost 260,000 private rentals have disappeared from the rental market in the past four years and 230,000 more properties a year are required to keep up with rising demand.
The fallout, of course, is a lack of choice for existing renters needing to move, and also new renters entering the market. This is not a situation which is likely to improve next year either, showing the desperate need for high-quality, affordable rental properties. The private rented sector is a sinking ship which has been created by a government which has not considered the wider consequences of forcing private landlords out.
2023
So, as we head into a New Year, is it really all doom gloom? And what can or should landlords do?
It would seem that recession is a given, but much of what happens next will be determined by global factors, such as how long the war in Ukraine lasts, the impact that has on the economy and of course the energy market.
What we do know is interest rates are likely to rise further in the coming year. Those who need or want to sell would be advised to do sooner rather than later. With rising interest rates, demand in the sales market is dipping and prices are likely to drop, in the short to medium term at least. In addition, some may want to sell prior to the CGT reductions.
I also know of landlords looking at selling up to buy in a cheaper, more profitable part of the country, which typically means a move away from London and the South East towards northern towns and cities which tend to offer higher yields. In fact, those looking to buy in 2023 could be best placed to bag a bargain, as long as the figures stack up, even on higher interest rates.
Those who don’t need to sell and are locked into a good rate are in the most favourable position as demand has never been so high. However, even if your fixed rate doesn’t end for another year, it is worth speaking to a mortgage expert to speculatively look at what rents you would need to achieve if your mortgage was to increase.
Ultimately, no one has a crystal ball, and every landlord’s circumstances are different, depending on their property, its location, whether its mortgaged, how much rent is received etc. The imbalance between supply and demand is not likely to change anytime soon, the UK is not building enough properties. Therefore, focusing on the long term, UK property remains one of the more secure investments.
* Paul Shamplina is founder of Landlord Action, Chief Commercial Officer at Hamilton Fraser, and is on Channel 5's 'Nightmare Tenants, Slum Landlords' *
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Well done a well balanced view of the situation facing LL - lets hope Gen Rent read this and see what we are up against. Its not greedy LLs ripping tenants off but simple economics of running a business. The Govt needs to wake up to and realise that the squeeze they have inflicted on LL has directly impacted the dire situation for tenants.
Gen Rant won't read, accept or believe such a balanced point of view.
But when the evicted tenants ( largely their fault) are lying in the gutter, at least they'll be looking at the stars!
PRS landlords hear you Paul but why is the Government not listening?
People don't listen when you are saying something they don't want to hear, heads buried in the sand
A very good Article by Paul whom I usually disagree with.
A sinking ship is right but not from natural cases but by legislation but not completely sunk yet a massive Iceberg awaits in the form of THE WHITE PAPER. The same reason that has contributed to 260k Private Landlords exiting the Market and hence creating homelessness to a large extent.
So homelessness has been deliberately caused by THE WHITE PAPER and Removal of Section 21 the very Foundation of all Private letting’s and before Paul’s time.
So all in all a very good Article by Paul hats off for that but just at odds with thy last 7 lines.
M Foley 42 years a landlord.
Well said Michael - you've added the main reason that Landlords are giving notice to quit and selling up i.e. the White Paper, and in particular, the abolition of Section 21.
Agree. It’s selling up due to the White Paper ( all of it) and loss of S21.
Agree with others, a good critique of where we are…. Will this tone deaf government listen ? We all know they won’t…. More homeless tenants, the council’s had better be ready.
Perhaps those of us in the business should be sending this article to all our MP's!
The government, Shelter, Generation rent etc don't seem to comprehend that many landlords were around pre section 21 back in the 1970/80s and are still scarred by their experiences, whereas most of those pushing through the renters' reform bill, were back then little more than a twinkle in their daddies eye. Issuing of section 21s has now gone from a trickle to a stream and the closer it gets to being outlawed the stream will be a tsunami. To save face the government will likely have to freeze all evictions overnight else homeless figures will go into orbit.
David. Well said and your name sake Mr David Saunders rip I believe was head of the NLA for years before they amalgamated
with RLA worse luck he used to stand up for fair play and not 100% one sided like now.
There is nothing fair about lies hate propaganda discrimination and injustice, why aren't we screaming liar every time these monsters of hate spew out their fairer renting lie
Agreed Anthony, but's what's the point ? these people hate us for what ever reason, I get on well with my tenants and I fully expect you and other landlords on here get on well with their tenants, the problems generally arise when we get a non payer, we take action as we should and they don't like it
Yes Andrew but they have done enormous damage to Tenants as well, driving up Rents through the roof with Regulatory Compliance, costs, licensing Schemes, penalties, Criminalisation changed especially for landlords instead of Civil Law the way it used to be, the Deposit Schemes, the 3% extra Stamp Duty Land Tax, the 2015 DeRegulation Act, so much more. Then they pretend to be the Tenants Friends, they can do without Friends like that, making Renting unaffordable creating homelessness. I understand its a necessary ploy for the Council’s to be successful divide and conquer, otherwise they’d never get away with it.
As said above in a post… I really can see the government bringing in an evictions ban if the number of s21’s goes higher, I doubt there will be enough emergency accommodation rooms 😬😬
THE WHITE PAPER is an absolute blatant lie by the Housing Secretary who was involved in writing it before, its not a fairer Renting System but completely one sided causing 260’000 private landlords to quit at a time they were never more needed. It also includes removing Section 21 before which there was no private lettings. I know I was a Tenant to for 9 years and Rented in various Towns around the UK before I managed to save enough to buy the plot in Ealing, which enabled me to use it as security to borrow the money @ 13% to self- build my house, so I didn’t have help from anyone & Dad RIP, now too many expect everything go nothing.
Mr Michael Gove scrap your WHITE PAPER now so much damage that you have caused if you had kept your nose out property prices and rents wouldn’t have increased in a Recession and instead of 260’000 throwing in the towel
another 260’000 landlords would more likely have joined the Sector steading the market easing financial pressure on rents and homelessness.
Those lies about Renting would give Kate lake Cities midterm elections a run for their money.
It is a joke. Very few people including those who are supposed to be supporting us stand up for landlords yet there are thousands of bad tenants to every bad landlord. Bad landlords are very rare - why would a tenant stay with a bad landlord? Most of the so-called bad landlords depicted on these television programmes, when you scratch the surface it’s the tenant who has caused the problem usually to enables them to get rehoused in the subsidised housing the council provide. The worst is mould they say it’s the landlords fault when it’s clear the tenant has not ventilated the property and cleaned up.
Jim Haliburton
The HMODaddy
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