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Shamplina Speaks: Rental Reform to dominate 2022

As I write, at home in bed recovering from Covid, I can’t fail to notice the irony of attempting to predict what is going to happen next in the lettings sector. This is not how I expected to spend the final days of 2021! 

But the reality is that we find ourselves facing a new variant and collectively wondering what the future holds. How will this new wave affect us all over the coming months? And what are the prospects for the private rented sector in 2022?

Since the beginning of the pandemic, the property market has been the focus of much speculation. Doom and gloom when the UK economy effectively shut down during the first lockdown in March 2020, with predictions that house prices would fall and rent arrears would rise. But the sector displayed remarkable resilience, as well as benefitting from a dose of good luck compared to other industries.

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It was one of the first to reopen in May 2020, and Christmas came early with Rishi Sunak’s announcement of stamp duty concessions in July. Designed to kickstart the economy by boosting the property market, the number of buy to let mortgages tripled. And once the economy opened in the summer, things continued to look up for many landlords, with property prices and rents rising rapidly into 2021.

But of course, the pandemic has also revealed the precarious nature of our lives in numerous ways, and with many tenants unable to pay rent, this had a knock on effect on landlords’ ability to pay mortgages. It has been a challenging 21 months, not least due to all the COVID related changes to lettings regulations.

As we look towards a new year, what might the future hold in these times of ongoing uncertainty?

I think landlords – particularly smaller ones – will exit the sector. This is the trend we are seeing across the Hamilton Fraser family of businesses. Especially at Landlord Action, where we are busier than ever - 35 per cent of the instructions we are getting are under Section 21, where landlords are serving notice for vacant possession in what are technically ‘no fault’ evictions. 

But there is always a fault and right now it is that landlords want to sell up. The main reason for this being that the capital growth on their property is at an all-time high and they want to cash in, particularly more mature landlords whose mortgages are coming to an end.

Of the remainder looking to sell, they want to get out while the market is good. Being a landlord has become work and time intensive and they rightly realise there’s no excuse these days for not being professional – if you don’t have time to be a hands on professional landlord the options are not to be a landlord at all, decide that you’re going to make time to fully manage your property, or use an agent.

The pandemic shone a light on the importance of our homes, and the need for long term strategies to secure safe, secure housing for all. 

With 19 per cent of all households in England renting from a private landlord, including families with children now living in the sector, naturally the Government’s focus is on how to provide a better deal for renters. But how will this impact landlords?

Although we don’t yet know the detail, we have an idea of what the Renters’ Reform Bill – dubbed ‘the biggest change to the private rented sector for a generation’ – will include.

Section 21 will be abolished. I predict that this will happen in approximately three years. For landlords, removing the option of using a Section 21 to evict a tenant who is in violation of their tenancy, risks the process taking longer and will certainly make it harder to regain possession. 

I hope the Government takes this on board and expands the grounds for possession currently laid out in Section 8.

There are also proposals to improve how landlords can be held to account, through landlord redress and establishing a landlord register. Tenants who are renting direct from landlords don’t currently have any come-back when things go wrong. But for me there is an argument that if you have landlord redress, why do you need landlord registration as well? If a mandatory landlord redress scheme was set up, this would provide sufficient recourse for tenants.

The Government has been looking at how to address issues tenants have at the end of tenancies where they must find extra funds to cover a second deposit on their new home when their previous deposit hasn’t been returned to them – the so called ‘double bubble’. There are proposals to address this gap through a ‘lifetime deposit’ system where a tenant’s deposit would transfer from one landlord to another as they move. The question is, how to bridge the gap if the deposit has been retained to cover damage or rent arrears and the tenant fails to make up the difference?

Potentially more challenging for landlords is the issue of future changes to minimum energy efficiency standards. The Government is consulting on requiring a minimum EPC C rating for new tenancies from 2025, with landlords facing up to £10,000 in costs per property under the proposed new cost cap. 

The cost of major upgrades to meet anticipated future requirements, such as installation of external wall insulation and heat pumps, have been estimated to be in the region of £17,000.

Regulation of Property Agents (RoPA) hasn’t been included in the proposed Renters’ Reform Bill, but is something that landlords should be aware of and would see the standards many agents already comply with voluntarily, expanded to become a legal requirement for all. This is good news for landlords.

Being a landlord in this day and age has changed dramatically in the last three years. But borrowing is at an all time low. Rents are still rising. Profits have still been strong. And tenant demand is incredibly high because of a housing shortage. I spoke to a lettings director of a leading London letting agent a month ago and he said, on average we have 11 tenants fighting over one property. Yes, that’s London. 

But as a whole, the rental market is strong.

*  Paul Shamplina is Chief Commercial Officer for Hamilton Fraser and founder of Landlord Action, and also the star of the Channel 5 show Nightmare Tenants, Slum Landlords *

Want to comment on this story? If so...if any post is considered to victimise, harass, degrade or intimidate an individual or group of individuals on any basis, then the post may be deleted and the individual immediately banned from posting in future.

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    Why is it that landlords feel they must sell the property with vacant possession and Paul does not question this? I’m not an expert in buying selling properties but I’ve thought that there is a lot of demand for tenanted properties by investors. I am regularly approached by people who want to buy my properties to let out.

    Jim Haliburton
    The HMO Daddy

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    Because Estate Agents advise them to.
    I had exactly this recently. I noticed that properties had gone up in my area and called the local Estate Agent for a valuation; more out of curiosity than a real intention to sell. Obviously I had to explain to the tenants why the estate agents were coming round but I also reassured them that I was only thinking of selling and would not force them to move out. The estate agent valued the property at £110k with tenants or £130K without. A few weeks later the tenants contacted me to say they had been thinking of moving anyway and had found somewhere else. I told the agents to advertise it and see what happened. Within days I had ten offers above the asking price and it sold for £140K. That's over twice what I paid for it eight years ago.

     
    Ferey Lavassani

    I guess the answer is, less demand. I recently called a local estate agent to value one of my properties in Stockport, with the tenant and without the tenant in it. The difference was 20K . The tenant has been in occupation of the property for the last 12 years. I jokingly told here that "she was only worth 20K". There are certainly less investors, out there, than those who want to be owner occupiers.

     
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    Ferey, not necessarily, as myself and Michael commented below we don't like buying properties with tenants in them because we are likely buying someone else's problem tenants.

     
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    Alison, nothing new about this its always been the case from where I am standing, why would you want to buy someone else’s trouble, you get your own Tenants and not dealing with historical issues. I know some portfolio hands off LL’s used buy properties (incl’ auctions) sometimes slums with Tenants in place usual benefit Tenants exempt from rules, Licensing & requirements so nothing to worry about just check the Bank to see if money is in.

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    My first few purchases going back to the 80s were tenanted, never again, as you rightly say you are buying other peoples trouble.

     
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    Paul, remove Sect 21 at your peril it will collapse the whole housing market & economy, anyone who think it will only affect one section is dreaming, the predicted fall will happen for sure all be it a bit later, many people are held to ransom by B of E who abolished savers leaving them with no alternative but forced into property all bidding against each other driving up prices false economy, your own article confirms the implications of removing S.21 hence the rush to get out before it goes as you say busier than ever - 35% of your instruction in this regard so is that not evidence enough just leave it alone. Forget about Renters Reform Bill white or green paper, no paper to help LL’s providing 1/5 of the rented accommodation to the market of their own back and financed by them at no cost to tax payers, how can Government by a better deal than that plus all the SDLT, tax on Rental huge maintenance costs, Regulation’s requirements, vat on everything thing we do even a new boiler can attract £400. VAT. Do they not know how soft they have it, why do we even bother or care.

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    Wouldn't it be nice if - just for once - there was some balanced thinking in the proposals being issued from Governments in regard to reforms.
    For some time now - even before the pandemic - the whole process in removing tenants from a property, regardless of whether serving a Section 21 or a Section 8 notice has been a long drawn out and inefficient, to say nothing of expensive process mainly because of the continued reduction/s in the number of courts within the UK.
    As is so often stated, in the norm, excepting for certain "personal reasons" or wishes, Landlords do not evict decent tenants, there is usually a reason, whether debt related - that is beyond what the Landlord is able to cope with, anti social behaviour etc.
    For any such cases it would be refreshing if, just for once, the proposals included an efficient, quick and reasonably priced option open for Landlords to gain possession of their properties in a timely manner.
    Additionally, I have seen proposals relating to the creation of a register of "rogue Landlords", how about creating such a register for "rogue Tenants". I would suggest that, if all tenants were made aware of the existence of such a register, then maybe - just maybe - its very existence may be sufficient to influence/modify the potentially rogue tenants behaviour.
    In regard to EPC's, well, I am aware that the energy measures in many if not all of my properties are on a par with or are better than those within adjacent properties and yet we have Governments issuing statements that the reason for the EPC rating for properties that are let by private Landlords is to bring them in line with the privately owned properties - which is absolute rubbish.
    I wonder if the proposals of the document also apply to the Social Landlords, Housing Associations, in the past there have been impositions on private Landlords, however Social Landlords have been exempt from these - why!.
    With regard to EPC ratings, one only has to take a quick look on Rightmove etc to verify the average EPC ratings at present.

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    The social landlords will not be included in any of this..... they never are, if they were then the end result would be that the govt have to stump up more cash for them to comply. The S21 disaster and the EPC C catastrophe will certainly see me heading for the exit, my properties are an E and are electrically heated so there is zero chance of me reaching a C this side of silly money..... not going to happen, i am close to retirement and have them all paid in full, why would i bother. I will sell them vacant as i have also been advised that this would be best, i would get more for them and given the way the market is going a lot of landlords would not wish to take them on as an already E rating, sensible really given this is one of the main reasons i will be selling !!!! Oh how i wished we had a govt that could think on multiple levels, just what have we done in a past life to deserve this.

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    Maybe I could become a ''not for profit social landlord'' and thereby avoid the EPC C catastrophe, just pay myself £300k a yr as the CEO, after all that's what these housing associations do, we could join forces and become Landlords Today Housing Association and award ourselves a £300k a yr wage each, now there's a thought for the new yr, happy new yr boys and girls

     
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    Not to worry its very easy to achieve that now, we are all becoming not for profit LL’s.

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    Johnson is a stooge. But Whose?

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    Anyone got any good ideas as to where to reinvest sales proceeds - over the years,the capital appreciation and income would be hard for me to match,safely,in any other form of investment,but I too am nearing the end of the road - you would think we had a Corbyn-type government in situ,these measures are the sort of rubbish I would then expect.

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    The EPC proposals, like the ones on compulsory EV chargers on every new home drafted by policymakers who live in large houses with their own parking provision, take no account of major practical realities.

    Out there in the country as it actually is, a disproportionate share of the rental stock is in flats and other larger buildings. These are going to be all but impossible to transform in the way the EPC proposals assume, either because of the nature of the structure or the grave difficulties in progressing any significant modifications in buildings which belong to numerous different people. For example, many flats have no outside space for a heat pump and many older properties would in any case not deliver the required energy efficiency without the entire building and roofspace being optimally insulated which would in turn need the financial participation of every flat's owner.

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