Calls for major reform of business rates ahead of Cop26

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The CBI and 40 industry trade associations have issued a statement calling on the Chancellor to consider sweeping reforms of the business rates system in the forthcoming Budget later this month, emphasising the urgency of reform.

Combined, the statement represents the views of employers of around 261,000 businesses and nine million employees, including British Retail Consortium, UK Hospitality and SMMT. They are arguing that reform of the long derided business rates system is essential if the Government is to reach its green investment targets.

Autumn Budget

The autumn Budget will take place on 27 October and these trade associations think this is an ideal time to reform what they collectively see as an outdated and outmoded business rate regime which acts as a drag on the Government’s goal of a high wage, high productivity and high investment economy. They think that reform of the system could unleash a wave of business investment which will lend support to the key Government priorities of working towards net zero and levelling up.

Currently, as the system operates, 50 per cent of business investment is potentially subject to business rates. The system thereby actively acts as a disincentive to new business investment and to decarbonisation. Without new investment there will be no improvement in the all-important productivity rates, the only sustainable route to higher wages, the statement argues.

CBI Chief Economist, Rain Newton-Smith, says:

“Action to get investment flowing into and around the UK is sorely needed to reinforce our recovery. The Government deserves credit for convening the supply chain advisory group to unblock temporary challenges, but as we’re seeing with energy prices, there is no substitute for longer-term planning and investment.

“The Chancellor has an opportunity to fix this, starting with fundamental business rates reform at the Budget and Comprehensive Spending Review. By setting out an approach which attracts investment, he can equip the UK with the tools it needs to secure the high wage, high productivity and high skill economy of the future.

“With up to half of business investment potentially subject to business rates, it has literally become a tax on investment. Action to stimulate investment, starting with business rates reform, unites firms spanning the whole economy. If the government is serious about achieving its net zero ambitions, kicking reforms further into the long grass cannot be the answer.”

Helen Dickinson OBE, Chief Executive of the British Retail Consortium, says:

“Sky high business rates are closing stores up and down the country and preventing new ones from opening. A recent BRC survey found that four-in-five retailers will be forced to close shops unless the rates burden falls following the Government’s upcoming Fundamental Review. Without change, the areas most in need of levelling will be hit hardest, and the Government’s levelling up agenda will fail. The choice is clear – cut rates and boost investment and jobs, or leave them unchanged and see more shops closed and jobs lost.”

Business Rates Consultation

Following a recent business rates consultation and review the Government has confirmed that policy announcements on business rates are to be made this autumn. The statement reminds Government that UK business need to see “fundamental reform of the system” if it is to address these long-standing barriers to investment.

The forthcoming business rates revaluation is coming two years later than planned and seven years after the last revaluation, a delay that has made worse an already dysfunctional system.

Major shocks to the system

The statement argues that the current system creates “major shocks” to businesses and local government revenue streams, and the system is not responsive to economic conditions. The current five-year revaluation cycle means that “over time businesses are often paying rates based on out of-date valuations.”

The system involves a “long and technical process of valuation, and a lack of correlation between the rates and businesses’ ability to pay”, plus the annual changes in the business rate multipliers, all combine to make the system opaque and hard for businesses to navigate, says the statement.

The business rates appeals system also creates financial uncertainty for local authorities. There is constantly a large volume of appeals to the Valuation Office Agency and the delays in solving these cases creates uncertainty for authorities, meaning they may have to refund several years’ worth of rates to businesses, playing havoc with their budgets.

Finally, the current system can reward perverse behaviour as it rewards large “space-hungry developments” often out of town, often to the detriment of town and city centres.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Calls for major reform of business rates ahead of Cop26 | LandlordZONE.

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Eco Clampdown on landlords and fines of up to £5,000

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New support for councils to raise awareness and enforce rules banning landlords renting homes with worst-performing energy efficiency ratings has been announced by the Department for Business, Energy & Industrial Strategy.

Along with a campaign to fund local radio ads

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Was this landlord right to be fined over his ‘agricultural tenancy’ repair failures?

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A landlord who failed to repair his tenant’s property, arguing that it was not his responsibility under an agricultural tenancy, has been fined £8,500 despite a leading property law expert questioning the veracity of his enforcement notice.

Jonathan Clough Williams-Ellis, 62, who owns Parc Glasfryn near Pwllheli and other properties, was found guilty of ignoring an improvement notice to repair damp and other issues at his 220-year-old farmhouse.

He has been fined £2,250 and ordered to pay £6,250 towards costs and a £190 victim surcharge by Caernarfon Magistrates Court.

A previous hearing heard that the businessman “buried his head in the sand” when ordered to tackle damp and other issues at his tenants.

Williams-Ellis, 62, insisted it was his tenant’s responsibility to deal with problems inside the property because they had a tenancy agreement under the Agricultural Holdings Act 1986, while he looked after the outer walls and roof.

Magistrates disagreed, saying responsibility for the property lies with the landlord regardless of any contractual arrangements.

The court heard the authority had sent out an Improvement Notice in 2019 to do the work on the five bedroom, two-storey, detached building, including repairing damp, installing a mains-operated fire alarm and other issues.

Wilful blindness

Chairman of the bench Elfed ap Gomer said Williams-Ellis had shown “wilful blindness” in not complying with the improvement notice over the damp.

However, David Smith, property solicitor at JMW, says the landlord should have appealed the notice at a tribunal as it shouldn’t have been served on him.

He tells LandlordZONE: “It wasn’t the most appropriate penalty. The local authority should have taken the type of tenancy into account and replaced it with a Hazard Awareness Notice.”

Under an agricultural tenancy, landlords usually have to repair and maintain the outside of the property, the heating system, gas water and electricity.

They can claim compensation at the end from tenants for disrepair such as not repairing the farmhouse in line with the obligations in the agreement.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Was this landlord right to be fined over his ‘agricultural tenancy’ repair failures? | LandlordZONE.

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Student HMO market in ‘rude health’ as pandemic weakens PBSA rivals

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The fast growth in purpose-built student accommodation (PBSA) is unlikely to displace HMO stock, which continues to attract the bulk of the student market, according to new research.

StuRents, which manages some 160,000 properties nationwide, estimates that there are 870,000 HMO beds in the UK, making up 70% of all private stock or 55% of all accommodation, which has proved particularly resilient during Covid.

It reports that enquiries from domestic students for HMOs followed the usual seasonal trend, while uncertainty around international travel, proposed teaching methods, and the pandemic resulted in a slow lettings cycle for PBSA – which tends to attract more international students.

StuRents’ annual report on the sector shows that the average weekly cost of an HMO bed increased by 3.4% year-on-year to £104 compared with a PBSA bed which increased by 0.2% to £158.

Calum MacInnes (pictured), founder of Student Tribe, says it doesn’t foresee PBSA stealing significant market share.

“Even if the PBSA players were to cut their prices, the desire of the domestic student to live with their mates in an environment which resembles the security of home life but with the excitement of being with your friends, who either live with you or near you, is an intoxicating mix,” says MacInnes.

The most important driver for investment into PBSA has been the unrelenting growth in Chinese students.

StuRent believes the biggest risk for PBSA operators is a decline in demand and notes the slowing annual rate of growth; in 2019 the number of Chinese students studying abroad grew by 6.3% compared to sustained double-digit growth a decade earlier.

Planning application activity across the UK has also slowed since 2016. In the first seven months of 2021, fewer than 15,000 PBSA beds were put forward compared with 32,000 for the same period in 2017. Activity in Coventry and Cardiff for example, has all but dried up, a sign that investors have moved on from these locations.

Read more: Ultimate guide to student landlording.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Student HMO market in ‘rude health’ as pandemic weakens PBSA rivals | LandlordZONE.

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Tenants – It’s getting worse unless you see both sides and write your MP

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Tenants, your rents are getting more expensive. It’s getting worse for you unless you see both sides of the story and write to the MP’s.

The Green Party wants a 1% tax on All Landlords property. Because they say we’ve had rent increases of 6.6%.

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Landlords ARE quitting as regulation ramps up, says insurance giant AXA

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More than a third of landlords (37%) are considering offloading their rental portfolio in the next few years, with 30% citing the pressure and cost of too much regulation.

New research by AXA UK reveals that 15% are thinking about reducing their portfolio, with younger landlords most likely to consider this (24%).

Its poll of 1,000 landlords found that 48% name red tape as the biggest challenge – with electrical safety measure checks (34%) and tax changes (30%) seen as the biggest concerns – closely followed by increased maintenance costs (42%).

But despite a tricky year, two thirds (66%) of landlords still think the role is profitable, and more than half (56%) enjoy it, while 49% feel positive about the future and 31% feel neutral, leaving only 20% feeling negative.

For 43%, steady income and having a long-term investment for the future are considered the top benefits of being a landlord.

Female landlords are more likely to view their rental portfolio as a long-term investment (49% compared with 40% of men), while those aged 55 and over are more interested in the steady income than younger landlords (54% compared to 24% of those aged 18-34).

When it comes to the most common disputes landlords have with their tenants, 29% put damage to property at the top of the list, matched only by paying rent on time.

Deepak Soni (pictured), director of commercial at AXA UK, says: “It’s encouraging to learn that despite these challenges, landlords are still reaping the rewards of a profitable business and will continue to grow their portfolios.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Landlords ARE quitting as regulation ramps up, says insurance giant AXA | LandlordZONE.

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Evictions to jump by 40,000 this year, expert tells industry panel

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The number of evictions is likely to jump by up to 40,000 to 150,000 this year, a leading expert has predicted as landlords catch up after months of restrictions.

Speaking at the recent Property Investor Show in London during a panel debate led by Russell Quirk, Paul Shamplina told the audience that his company had employed three additional solicitors in recent months as the number of landlords seeking to evict tenants has ramped up.

He also revealed that companies like his and their landlord clients also face two other principle challenges – an ongoing shortage in the number of bailiffs and many potential candidates shun the low pay and high stresses of the sector, and that many tenants are still ‘playing the Covid card’ to delay convictions.

“We had one tenant who delayed his eviction five times by claiming he had Covid before the judge eventually granted a warrant to evict,” said Shamplina.

But nevertheless more and more landlords are moving to both evict tenants and chase them for rent repayment via money orders.

“We received 20 instructions on a single day last week,” said Shamplina, who predicted that England will see 150,000 possession claims going through the already clogged court system, up from 110,000 in 2019.

“The courts are getting better at processing possession cases, but even now the eviction restrictions have been lifted, it will take a landlord the best part of six months to get their property back.”

Russell Quirk (pictured) adds: “Despite headwinds for landlords around regulation, slightly leaner yields and uncertainties deriving from Covid and not to mention the spectre of rising interest rates, the upshot of our panel debate was that landlords should stick with property investing because on balance, they’re still pretty well off.

“Capital appreciation on their portfolios has added over £200bn in value in the last five years and given the that the FTSE 100 and other asset classes have fallen in value recently, property remains, well, ‘safe as houses’ as they say’.”

The panel included Eddie Hooker, CEO of Hamilton Fraser, Marc von Grundherr from Benham & Reeves, Chris Norris from the NRLA and David Cox of Rightmove.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Evictions to jump by 40,000 this year, expert tells industry panel | LandlordZONE.

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How we’re tripling the value of shop & uppers with Serviced Accommodation

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Today I’m in Henley On Themes for a property investment tour with past course delegate, Satnam Bhuller, as he plans to convert a shop and uppers into serviced accommodation which in turn transforms his pound per square foot from £200 to £600.

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UK’s build-to-rent industry continues to attract more institutional investors

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With property prices continuing to rise unabated, home ownership levels are beginning to fall, creating a demand – supply unbalance. The renting market sees a steady increase in the number of renters chasing fewer rental.

A nationwide shortage of housing stock has seen U.K. house prices rise at their fastest rate for 15 years, up 10% in the year to September that’s according to the building society, Nationwide. First-time buyers have struggled, with mortgage approvals for these buyers down 6% in the year to March, according to Savills.

Meanwhile, private landlords who rent out buy-to-let properties with mortgages have been leaving the market in droves after tax changes have made buy-to-let a less attractive option. According to Savills, over 180,000 BTL mortgages have been redeemed since early 2017.

Mass migration

Lockdown’s effects on work and home lives caused a mass migration of residents looking to move from cities to the suburbs, looking for more space to work in and with outdoor space as well.

Now, as renters drift back to the cities, along with students returning to universities, demand is such that even tenants are getting gazumped. Rental properties in some city locations are being snapped up in minutes, and prices soaring – the rental market’s seldom been so hot.

The build-to-rent drive

Build-to-rent is seen as one solution to this problem, a major issue for the Government. It’s a fast way to provide new rental housing on a mass scale both for city centre living and to satisfy the market’s newfound desire for suburban living, and strongly encouraged by Government.

According to one report build-to-rent investment has led to rapid growth in the number of planning applications submitted, with an increase of over 50% during the Covid pandemic. Tenants have been increasingly happy to move from smaller city centre accommodation to larger suburban homes, and this demand continues even as there is new demand for those city centre locations.

Institutional Investment

Build-to-rent institutional investors such as Lloyds bank, L&G and Goldman Sacks are committing to large investments in an industry they now see as providing perfect inflation-proof returns with strong dependable cash flow incomes.

The Lloyds Banking Group has published its strategy of branching out into rental housing provision with a plan to build 50,000 homes within the next ten years. That sort of growth could turn the bank into one of Britain’s largest residential landlords.

Goldman Sachs along with others in the build-to-rent drive such as The Legal & General Insurance Group are surging ahead with new investments as Britain’s limited amount of housing stock continues to spur on rental demand.

According property agents Savills, these financial investors could end up owning one-third of the nation’s rental housing stock as the currently ultra low interest rates enhance the appeal of these housing assets, assets that are able to generate rising income over many years to come, while maintaining and growing capital valuations.

Large potential market

Dan Batterton, head of build-to-rent at Legal & General’s LGIM Real Assets arm has said of their buy-to-let strategy:

“Similarly to banks like Lloyds, we’re looking at really long-term stable cash flows. Ultimately, we want income that we can match against pension fund liability and, in the U.K. rental market, over the long term, the rents go up by something similar to inflation.”

Batterton said that so far, financial institutional investors own only just over 1% of Britain’s rental housing stock.

William Chalmers CFO at Lloyds has said the institution plans to build 10,000 properties by the end of 2025 and sees the controversial move into the rental sector as complementing its existing housing market skills as well as it’s insurance business. Low interest rates are forcing all banks to consider alternative income sources as they continue to face pressure on their profits from their core lending activities.

Another bank, the Australian Macquarie Group, intends to invest £1 billion in the build-to-rent sector, teaming up with developers in a new vehicle, Goodstone Living, planning to build 1,000 build-to-rent homes in the north west of England.

Simon Hampton, real assets leader and partner at PwC has said there is “an enormous amount of capital” now chasing the residential housing market.

For these institutions build-to-rent could provide an ideal hedge for their mortgage books when over the long term mortgage applications are likely to fall as people cannot afford to get on the housing ladder. Other traditional property investments for these institutional investors such as offices and shopping centres now look too risky.

Some caution the banks however that key to their success lies in providing high quality housing in what is traditionally a market notorious for poor quality, and that there is considerable reputational risk involved with this abrupt change of direction.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – UK’s build-to-rent industry continues to attract more institutional investors | LandlordZONE.

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mydeposits – Rent to Rent Guide

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Guaranteed rent, or rent to rent, is becoming more and more common in the private rented sector as it offers a lower barrier to entry into the property market for would-be investors and a guaranteed rent with no hassle for landlords.

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