WARNING: Landlords face rental arrears ‘cliff-face’ as restrictions ease

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The Chartered Institute of Housing has warned landlords that a a cliff edge of evictions is very likely later this year as Ministers continue to ignore calls for financial measures to help clear the rent arrears backlog.

Its major annual look at the housing market covering all tenures praises the government for both its early move to halt evictions and housing minister Christopher Pincher’s promise to do ‘whatever it takes’ to stop people losing their homes during Covid.

But the CIH report is less kind about the government’s subsequent actions including its refusal to help landlords or tenants clear the rent arrears backlog, which were highlighted by the ‘Ride Out Recession Alliance’.

As LandlordZONE reported at the time, this was a coalition of homelessness charities, tenant lobbying groups and the NRLA – whose recommendations have so far been ignored.

“There is also considerable uncertainty about what will happen when the pandemic ends,” the CIH says.

Summer rebound?

“The government’s apparent expectation of a ‘return to normal’ in financial terms in the Summer is viewed sceptically by many who expect the crisis in household incomes and their ability to meet housing costs to be much longer lived and potentially to get worse before it gets better.”

“Unfortunately, none of these has happened and the pandemic is now continuing well into 2021, reinforcing the impression that a ‘cliff edge’ is very much in prospect later in the year.”

The report also says that although there is varying data and different views as to the extent of the pressures building up in the PRS regarding arrears and how landlords are handling them, the situation is getting ever more difficult as household incomes and savings continue to be eroded by the ongoing pandemic and its consequences.

“The options for delving into savings, cutting other expenses or borrowing privately to pay the rent become exhausted,” it says.

The full CIH report is available for £35 via its bookshop.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – WARNING: Landlords face rental arrears ‘cliff-face’ as restrictions ease | LandlordZONE.

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Student rental demand returning?

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As students look to secure a place to live ahead of the new academic year UniHomes researches which areas are showing the highest level of tenant demand. The Student Rental Hotspots Index looks at the UK’s top 100 universities

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Best for revaluation – vacant possession or sitting tenant?

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We need to revalue our properties as we are planning to change our business structure. So we are trying to plan ahead before a final decision is made on what to do next.

Should the properties be valued as vacant possession

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ANALYSIS: £50k cladding repair bills push flats into negative equity

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The average repair bill for those flat owners with fire risk cladding is in the region of £50,000 per flat.

This means that for those properties in the North and the Midlands, where property prices are lower, owners face repair bills which are a bigger in proportion of the flat’s value than is the case in the south.

It means that on any view of a flat’s valuation in these affected blocks, the prospective remediation costs could easily push the value into negative equity.

Fire safety repair bills will cost roughly the same whether the property is in Clapham or Clacton, but in proportion to property values the variation means a lot. It means that flat owners in the cheaper parts of the country face far higher bills in proportion to the value of their homes.

According to the managing agents’ trade body, The Association of Residential Managing Agents (ARMA), the average remediation bill is £49,500, so with a flat worth £100,000 in Newcastle, this represents half its value.

On the other hand, a typical London flat with a valuation of over £300,000 the remediation costs represent a much lower proportion, in this case just 17%.

Serious issue

It’s a serious issue for many flat owners, especially those in the cheaper areas where purchase prices initially looked like a bargain. Given the cost of remediation, a good proportion of landlords’ properties could be worth less than their outstanding mortgages. In this case, if forced to sell, some owners could easily be pushed into bankruptcy.

The Daily Telegraph puts 50% of flat owners in Manchester in negative equity if values were to fall by the same amount, and in Newcastle this figure could reach over 70%. However, in the East London, where the median flat price is £335,038, the share would be no more that around 3%.

These stark figures underline the North/South divide and the impact the tower block remediation and fire watch costs are having on flat owners. It also emphasises the mountain the government still has to climb with their “levelling up” agenda.  

Case study: Daniel Guirguis

Daniel Guirguis, 39, owner of two buy-to-let flats in Manchester, told The Daily Telegraph that he purchased them for £80,000 and £85,000. Unfortunately for him, both the blocks have been condemned because they failed the external wall safety (EWS1) assessments and will now require remediation works.

One of the blocks involved has just had its application to the Government’s building safety fund (BSF) rejected. It means that all the leaseholders are now facing repair bills of around £50,000 each, that’s equivalent to 60pc of Mr Guirguis’ purchase price.

His BSF application for the second flat is still underway, but he says: “If the application is approved, each leaseholder will still need to pay £10,000. If everything gets rejected, the cost will be £42,000,” he told The Telegraph.

Mr Guirguis’ total liability could potentially be around £92,000, whereas he paid less than that for each of his flats. Mr Guirguis speculates whether it would be cheaper to demolish and rebuild the flats altogether?

Turned down flat

Landlords are finding it impossible to re-mortgage flats subject to these charges and many are now trying to increase rents to cover some of these costs. Some are struggling even when they do get Government funding.

The cost of remediation does also vary according to the difficulty of carrying out the works. Site access and permission requirements, plus building heights are big factors which significantly affect costs.

In general, cheaper properties are the ones more likely to be affected by these complications, so again more likely to be disproportionately affected on costs. In addition, in many cases the initial applications to the building safety fund, based on surveyors’ calculations, do not take these complications and additional costs into account.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – ANALYSIS: £50k cladding repair bills push flats into negative equity | LandlordZONE.

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LATEST: Government axes ‘shambolic’ Green Homes Grant initiative

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The government’s much-maligned Green Homes Grant has been axed six months after it was launched, business minister Kwasi Kwarteng has announced.

His department’s flagship scheme, which was introduced to help give the nation’s private homes and rented accommodation a green upgrade and to create work for builders, will close to new applications from Thursday this week onwards.

As LandlordZONE reported three months after its September launch, the Green Homes Grant has been dogged by problems including the complicated nature of its approvals system, while its roll-out was described by Greenpeace as ‘shambolic’.

This has included a lack of tradespeople willing to go through the Trustmark approval process to join the scheme, Covid restrictions, confusion over which upgrades and improvements qualify under the scheme and in which order they must be completed, and also a lack of applications.

Only approximately 60,0000 of the 600,000 available vouchers have been taken up by the scheme, a situation not helped by the government’s decision to outsource the management of the grant scheme to a US-based company.

The BBC report that £300m of the unspent cash allocated to the Green Homes Grant scheme will now to redirected to a parallel green upgrade programme administered by councils that targets low-income households, called the Green Homes Grant Local Authority Delivery Scheme.

Meera Chindooroy (pictured), Deputy Director, Campaigns, Public Affairs & Policy says: “The government’s decision to scrap the Green Homes Grants, proves that a new, long-term plan for upgrading properties is needed. 

“The NRLA has consistently called for further funding to be made available to help landlords to go above and beyond the legal minimum of energy efficiency measures set out by the Government for the PRS. 

“One way for the government to ensure it avoids the pitfalls which have affected the Green Homes Grant scheme is to consider the Environmental Audit Committee’s (EAC) latest recommendations.  

“In our view the EAC’s report, which features several NRLA recommendations, can provide a useful starting point for a longer-term strategy to energy efficiency.” 

Kwarteng’s official announcement barely mentions the closure of the scheme, in which he says: “This latest announcement takes our total energy efficiency spending to over £1.3 billion in the next financial year, giving installers the certainty they need to plan ahead, create new jobs and train the next generation of builders, plumbers and tradespeople.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – LATEST: Government axes ‘shambolic’ Green Homes Grant initiative | LandlordZONE.

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Green Homes Grant applications canned after 31st March

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The troubled Green Homes Grant Scheme will be closed for new applications after the 31st March this year as announced quietly by the Department for Business, Energy & Industrial Strategy.

Following a review, the Green Homes Grant Voucher Scheme launched last year will close to new applications on 31 March at 5pm.

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Land Transaction Tax – Welsh Holiday Let?

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I’m interested in purchasing a B&B in Wales to turn into a Holiday Let. The process is wrought with complications I would be happy to share whilst I learn if anyone is interested. For now, I am hoping someone can advise me on the matter of Land Tax.

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