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.