The number of homeowners taking in lodgers triples over 10 years

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Research into the value of the tax relief claimed using the Rent a Room scheme shows huge take-up.

Since 2009, the total value of relief declared as a result of the government’s Rent-a-Room Scheme has increased by 187%, according to the latest available MHCLG data.

Launched by the Conservatives in 1992 the ”Rent a Room” scheme was intended to encourage people to utilise their otherwise unused spare rooms and provide much needed accommodation for workers and students, encouraging mobility of employment and education.

The original tax-free earnings allowance for lodger-earnings was £4250, increased to £7,500 in the 2016/17 tax year, and this amount is still the current allowance. The earnings must be declared to HMRC but there is no tax payable for annual earnings below the allowance.

Analysis of the data by property management service provider, Houst, has revealed the record amount of £140,500,000 was declared over the 2018/19 period, up from £48,800,000 in 2008/09.

The data demonstrates a considerable rise in the number of homeowners taking in lodgers over the last ten years, and those figures do not take into account anyone taking in lodgers and not declaring this to HMRC.

The increasing number of Rent-a-Room declarations to HMRC indicates that more people are recognising the benefits of earning extra income from taking in a lodger – as a live-in landlord, you are allowed up to two ‘non-family’ lodgers before your property can be classed as a HMO, with all the additional regulations that implies.  

Covid push

Houst speculates that this trend is likely to have intensified dramatically since the onset of the Coronavirus pandemic, the period of time for which MHCLG data is currently unavailable.

Taking in lodgers received a dramatic boost in numbers during the economic crash and great recession of 2008 and has since continued with the popularity of letting out spare rooms with the advent of Airbnb type renters. Utilising spare rooms as a simple means using new technology to provide an additional income stream has now become a major industry in itself.

Tom Jones, Co-Founder and Chief Commercial Officer of Houst, says: “Thanks to the digital solutions of the last decade, homeowners are now able to fill their properties quickly and efficiently, whether that be a spare room or a second home, and generate a secure and regular source of income. Given the enormous economic uncertainty, people are increasingly viewing personal assets as a vehicle to drive up their incomes by turning their homes into money-making properties.

“The reality of the pandemic is that it has forced many to reconsider their living arrangements and look directly at how we occupy our homes and how exactly they could be used to stave off economic concerns. The pandemic has transformed how millions see and use their homes, leading many to reconsider its potential as a stable driver of income.”

Warning

Anyone considering renting out a room in their home should be aware that permissions may be necessary: from their landlord if they are a leaseholder, from a mortgage provider and from their insurer.

There could also be considerations for the impact this may have on council tax liability, and any benefits the lodger landlord is claiming.

In addition, the property must be safe, free from and hazards that could cause injury. Also, the landlord must be letting out his or her own residence and share facilities such as bathroom and kitchen with the lodger. The property must meet certain general letting requirements including annual gas checks and five yearlyelectrical system checks, and all the furniture must meet the general letting safety standards.

Finally, lodgers come under the Right-to-Rent regulations, where the landlord must check the immigration status of their lodgers. It goes without saying that the income from the lodger arrangement must be declared on the next available tax return.  

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Leading lender says landlords must be given more time to complete EPC upgrades

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A major mortgage lender has backed calls for landlords to be given more time to upgrade properties to the new EPC minimum standard.

Richard Rowntree, MD of mortgages at Paragon Bank, says the proposal that all new tenancies must have an energy rating of at least C by 2025, and all tenancies by 2028, puts too much pressure on landlords, particularly following coronavirus, and could threaten already strained stock levels. 

Last November, The Lettings Industry Council (TLIC) wrote to the Ministry of Housing, Communities and Local Government, urging a more staggered approach to improving energy standards in the private rented sector than those put forward by the Department for Business, Energy and Industrial Strategy (BEIS).

Says Rowntree: “Under TLIC’s proposals, all tenancies would have an EPC rating of C by 2030 – only two years later than the BEIS proposals – and improvements would be phased. This a sensible approach that recognises the need to improve the carbon footprint of the sector, whilst acknowledging the damage that inflexible proposals could cause.”

TLIC chair Theresa Wallace (pictured) tells LandlordZONE that she hasn’t had a response to its proposal but says: “I an email BEIS recently to ask what their next steps were following their consultation of this.

They responded to say that they will publish a government response in due course, which would set out more details on next steps.” She adds: “I have also asked BEIS to look into electric heating which apparently doesn’t score so well on EPCs yet it’s meant to be more energy efficient.”

Rowntree adds that landlords will need finance and innovative solutions to cope with the changes. “We have made a start in this area with the launch of our 80% LTV rates for properties with an EPC rating of A to C, encouraging landlords to invest in more energy efficient stock.”

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Landlord loses appeal over £10k fine for HMO run via ‘sham tenancy’

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A rogue landlord who created a sham tenancy agreement to dodge HMO rules has been fined £10,000.

Tanvir Hussain had appealed the original fine from Islington Council but this has been thrown out by a First Tier Tribunal which ruled that he had named only four of the six tenants on the tenancy agreement to circumvent HMO regulatory provisions.

The house in Stroud Green Road, London, had been let under a 12-month assured shorthold agreement in 2015 to Mr Millen, Miss Johnston, Miss Harvey and Miss Morris.

The freehold was owned by Hussain’s brother, Jangeer Hussain, and managed at the time by Liberty Estate Agents.

During an Islington Council inspection in 2019, it found there were six occupiers and discovered breaches including blocked escape routes, poorly maintained fire alarm and no notices displayed for escape routes.

Unlawfully

Hussain told them that except for Mr Millen and (possibly) Miss Curd who lived with him as a single household, the other occupants of the property were there unlawfully.

He admitted he operated a “light touch” in relation to his duties as the landlord – despite operating a commercial business from the ground floor premises. He said that except for receiving the rent from Liberty, he did not visit or inspect the property.

The tenants said the tenancy had originally been granted to six people and that there were five bedrooms.

They said Liberty had insisted that only four tenants were named on the agreement and it advised them that there was no limit on the number of people who could live there. The Tribunal agreed that Liberty was acting on Hussain’s authority, aimed at circumventing HMO rules.

It reduced the original £14,999 fine because seven of the eight breaches were resolved.

Read the tribunal decision in full.

Read more about HMOs.

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Sheriff Rides in to Tackle Transfer Times of Orders for Possession

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As Sheriffs, we are continuing to monitor transfer times of Orders for Possession from the County Court to the High Court for landlords, and other claimants who want a faster and more effective transfer system.  So, we will be sharing our research with the Property 118 community

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Compensation of 60 years regulated tenant?

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I have inherited a property with a regulated tenant of over 60 years standing. I am aware that to gain an EICR the property will require a complete rewire. The property is immaculately maintained and decorated by the tenant.

How do I stand regarding making good the damage this will cause and the cost of uplifting carpets

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LATEST: Investors battle PRS developer over plan to change Loan Note terms

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Several investors in PRS residential developer The High Street Group who are part of a larger group owed an estimated £43 million are resisting an attempt by the company to suspend an early redemption clause within their Loan Note agreements.

The Newcastle-based firm is holding a special resolution meeting at its HQ on 1^st June at which, it is expected, a decision will be made to remove the clause, which enables investors to be repaid within 30 days upon request.

A spokesperson for The High Street Group tells LandlordZONE: “The vote will continue on the planned timetable and we encourage all eligible parties to take part.

“Our investor proposal is a pragmatic, viable and responsible course of action to support the company’s successful corralling of resources to continue its investment programme.”

But some of the 2,000 investors who hold Loan Notes with The High Street Group – which is one of the largest PRS developers in the UK – say the company should instead be placed into administration and ultimately liquidation so that its assets, which include 15 sites worth some £100m, can be sold to pay off its creditors.

Patience is running thin among the group, LandlordZONE has been told, who are unhappy that if the vote goes through, they will have to wait until 2025 to find out if they will get their money back.

Difficult period

It’s been a difficult 12 months for The High Street Group. One of its subsidiaries has been wound up following a battle with a creditor, other companies within the group have struggled to post their accounts on time and auditor PwC recently resigned after revealing it was unable to access company information.

But the Loan Note holders, who say they fear the company could be making moves to protect its assets in case of a potential move to administration or liquidation, are divided on what to do. Some believe it should be given the extra time while others say ‘enough is enough’ and want their money back.

100% of investment

A spokesperson from The High Street Group, which developed the Hadrian’s Tower in Newcastle (main pic) adds: “Investors will receive 100% of their investment plus the agreed interest, but without the ability for early redemption.

“This measure is not unusual, in fact during the pandemic the FCA gave permission for investment firms to pause redemptions to maintain the viability of the sector.”

The company says its proposal have been met with strong levels of support with 50% of investors already agreeing to the new terms.

“New funding has been agreed for all our projects, which are now remobilising. The investor proposal is the final element of our fight back from the pandemic to take advantage of a newly emerging buoyant market,” the spokesperson adds.

Read more about the PRS developer sector.

Pic credit: The High Street Group.

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New national design code being tested across 14 areas in England

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A new national design code meaning areas are beautiful, well-designed and locally-led is being tested across 14 areas in England, Housing Minister Christopher Pincher has announced. The code will ensure future developments are beautiful and fit in with local character.

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Sad death but no agreement with daughter who was resident?

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Very sadly a long term tenant has died. The contract was an AST started in May 2005 and rolled ever since. As no new fixed-term tenancy or ‘renewal’ has ever been signed, and as the fixed term tenancy ended (in Oct 2005) I assume it is now a new ‘periodic’ tenancy that has been created.

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Minister rejects claims of mounting rent arrears, homelessness and struggling courts

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Housing Minister Lord Greenhalgh has roundly dismissed fears about rising rent debt, homelessness and an overwhelmed court system.

During a debate on rent arrears, Lord Carrington asked him to consider an affordable short-term credit scheme to support tenants in arrears who weren’t claiming benefits, and pointed to the recent housing resilience survey which suggested that the proportion of private renters in arrears had risen from 3% in 2019 to 9% in 2020.

However, Greenhalgh told peers: “We are aware of the exhortations from many organisations, but we consider that the increase in rent arrears is not statistically significant between the two surveys. It went from 7% to 9%.”

Lord Kennedy of Southwark (pictured) asked: “Is it not time for the government to accept the need for a Covid rent debt fund to clear Covid arrears for the most financially destitute renters, who are at severe risk of homelessness?”

Lord Greenhalgh said two-thirds of the tenants in the survey had two months or less of rent arrears.

“My officials carefully studied the Scottish and Welsh schemes to support tenants with rent arrears.

“I understand that a relatively small number of loans have been made by these schemes. Indeed, the government continue to believe that it is right to provide non-repayable financial support rather than encouraging further debt.”

He said that there had not been the massive spike in homelessness that has been alluded to.

Pile up

“I am not aware of a pile-up in the courts. Indeed, we have seen a massive drop in the number of repossession cases. It decreased to 262 repossessions in January to March 2021 – a reduction of some 96% – and 214 local authorities had no landlord repossessions at all.”

Lord Greenhalgh added that to support landlords, mortgage lenders had agreed to offer payment holidays of up to six months, with since April, “forbearance options tailored to the individual landlord”.

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