Isle of Wight mulls EVEN bigger crackdown on rogue landlords and PRS

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The Isle of Wight Council is mulling proposals to crack down on rogue landlords and introduced much strong regulation of the private rented sector overall.

During a sometimes fractious meeting, councillor Richard Quigley highlighted the current housing emergency and asked whether it should investigate new measures including a private renters’ association and private renters’ charter, voluntary landlords’ register so private tenants can choose to rent from responsible landlords, and tougher enforcement against rogue landlords.

He also suggested using Section 106 powers to ensure all new builds are the buyer’s principal residence – rather than second or holiday homes – and a limit on the number of Airbnbs that offer an entire property for rent.

The crackdown comes despite the IoW council agreeing to bring in tough new civil penalties of up to £30,000 to use within its 17,000 household-strong rental sector just four weeks ago.

These will be applicable when landlords fail to comply with improvement notices, for offences in relation to HMO licensing and also contravening an overcrowding notice.

Deputy leader, councillor Ian Stephens (pictured), promised: “We are going to work together on [Councillor Quigley’s proposals] and I can definitely say that we’re taking all those elements forward in a positive way…which we will do because we want to build housing, we want to rent housing, we want to house our Island homeless.”

However, chairman of the council, councillor Geoff Brodie, said he had received a similar response to a question and added: “It doesn’t mean anything until you deliver, and I suggest you give a written reply to councillor Quigley and share it with the rest of the council.”

One unusual observation made during the meeting was that Secretary of State for housing Michael Gove has a relative living on the island, working and living there as a GP.

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Tenant refusing to leave and give electrician access?

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A difficult family is refusing to leave after a S21 and issued court proceedings and waiting for their response to see if they file a defence.

I need the EICR certificate, and they won’t let the electrician upgrade the rewire as this is inconvenience for them.

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BREAKING: New Welsh alliance to force through rent controls

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Rent controls have become a step nearer in Wales following the country’s two main political parties revealed plans to form a ‘lite’ coalition, it has been reported.

Labour and Plaid Cymru are expected to reveal their new alliance today after discussions over the summer on key policies they would like to collaborate on, including rent controls.

Other policies they will work on jointly include free childcare, free school meals for all primary school pupils, the creation of a national care service, replacing council tax and measures to tackle second homes.

Labour’s deal with the nationalists, which does not go as far as a full-blown coalition, will give the Welsh Labour government headed up by First Minister Mark Drakeford (pictured) more voting power to push through these measures.

Labour is the largest party within the Senedd but does not have an operating majority, a problem that the Plaid Cymru deal helps solve.

ITV has reported that the deal is strongly opposed by the Conserverative party in Wales, who have claimed it will lead to ‘constitutional chaos’.

The NRLA has been campaigning to head off the rent controls proposals, which pre-date today’s announcement, saying: “Evidence from across the world shows rent controls do not work.

“They make it harder for renters to find an affordable home, encourage rent rises, see housing conditions deteriorate and can lead to a reduction in the overall number of homes to let as landlords leave the market.

“We would encourage the Welsh Government to resist any moves to introduce them.”

During the last election in England, the Labour party backed rent controls, as does London mayor Sadiq Khan.

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Housing charity blames homelessness on landlords despite lower evictions

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Homeless charity Crisis has continued attacking landlords around the country for ‘rising evictions’ despite government data showing that recent repossessions are much lower than in 2019.

Crisis put out its national statement with the headline ‘207% increase in landlord possessions’ on 11^th November following the government’s announcement but is still sending out press releases to local newspapers and websites, putting the blame squarely on landlords.

Ministry of Justice statistics for July to September show there were 4,853 landlord possessions across England and Wales, a 207% increase compared to the previous quarter when there were 1,582 possessions, but 35% lower compared with the equivalent quarter in 2019.

Damaging

However, Crisis chief executive Jon Sparkes says the figures make clear how damaging it was for the UK government to end the eviction ban without providing sufficient support for renters who had built up arrears in the pandemic. 

He adds: “More and more people who lost their jobs and had their lives turned upside down are now being forced into homelessness.”

Meanwhile, the National Residential Landlords Association has analysed the latest data which shows that the number of cases brought to county courts in England and Wales in the third quarter of the year – off the back of a Section 21 notice – fell by 55% compared to the same quarter in 2019, a downward trend that started in 2015.

A government spokesman says: “These statistics show a considerable decrease in repossessions compared to pre-pandemic levels, with a 64% decrease in landlord claims and a 59% decrease in mortgage claims compared to the same quarter in 2019.

“The action we’ve taken since the start of the pandemic helped keep renters in their homes – over 8 million households were protected by the pause in court possession proceedings.”

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Lockdown legacy: Belvoir reports on the impact of the pandemic on the rental market

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Belvoir asked property expert Kate Faulkner to review data from its rental index and quarterly branch surveys both during the pandemic and beyond.

Her subsequent ‘Belvoir pandemic report’ gives a unique insight into market trends during this traumatic period – and beyond.

“Belvoir’s data confirms that offices generally saw a dip in average rents during the pandemic, which has so far been reversed in 2021,” reveals Kate.

“But there is significant regional variation in rents – not just by area, but also whether the let was a flat, house or an HMO. This resulted in different experiences for landlords and tenants.

“During lockdown, rents for flats mostly stayed the same, or fell in value when compared to pre-lockdown. When the market re-opened in May 2020, this impacted on the second half of the year results, and most flat rents increased.

“In contrast, and similar to the sales market, house rents have been consistently increasing in most areas and continued to do so even during the first lockdown.

“Belvoir’s survey analysis shows that although the pandemic has had some impact, overall, this has been much less than would have been expected.

“In fact, the lettings’ market has been incredibly robust for those renting and letting through Belvoir. Unsurprisingly, many tenants stayed put during the pandemic, but coming out of lockdown during the second quarter of 2021, tenant trends appear to be returning to normal.

Rental arrears

“Belvoir offices reference tenants extraordinarily carefully, so rent arrears are few and far between. Pre lockdown, most offices had either zero or no more than three tenants who were more than one week in arrears. This figure jumped during the pandemic, but the trend had already started in Q1 2020 where most offices were dealing with 4-10 tenants in arrears.

“This trend continued through to Q1 2021, but in Q2 2021 we are seeing trends of less than three tenants in arrears, suggesting this was just a ‘blip’ throughout the pandemic.

“The data shows that from 2019 most offices rarely evicted anyone, and these trends changed little during the pandemic.

“There was an increase in Q4 of the percentage of offices reporting zero evictions, but now that evictions are able to proceed more easily, we are seeing a ‘catch up’ in Q2’s data.

“This shows that offices not evicting anyone has fallen from around 80% to just over 60%. But most offices are still only evicting two-three tenants, with a fraction evicting four or more.

Offloading properties

“Interestingly, Belvoir’s data shows an increase in the number of landlords selling properties from Q4 2020 versus pre-pandemic trends, but this is probably due to the lack of landlords selling in the first lockdown.

“During this period, 90% of offices saw fewer than three landlords selling up and the highest proportion of zero sales for nearly 40% of offices.

Comparing Q1 2019 to Q2 2021 when the country re-opened more, the proportions of landlords selling up seems to have returned to normal. Overall, it does not look like Belvoir landlords sold up due to the pandemic.

Pandemic purchasing

“Unsurprisingly, the number of landlords buying properties dipped during the first lockdown. As the market reopens, landlords have strongly returned to the market.

“During the first half of the year few Belvoir offices reported zero landlords buying, most saw 6-10 purchasing new stock, and in the latest quarter, for the first time in a while, a small proportion of offices saw 11+ landlords buying new tenant stock.

“Overall, from a lettings’ metrics basis, it appears that although there were some changes during the pandemic, in the main, long-term trends have returned to normal.

“The pandemic changed how Belvoir offices ran their businesses, with communication, problems doing inspections, and difficulties getting reputable contractors to carry out maintenance work cited as the main problems.

“But offices were quick to respond employing advanced technology with virtual viewings, and teams pulling together to provide as effective a service as possible.

“Despite the government’s efforts to encourage more people to buy, many tenants prefer to rent properties to achieve a much more flexible lifestyle.

“It is clear that the lettings market survived the impact of the pandemic incredibly well, which is good news for investors.”

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These figures dispel the myth peddled

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The number of repossession cases in the courts involving landlords using Section 21, ‘no explanation’ notices have plummeted over the past two years. A new analysis of government data shows that in the third quarter of this year, the number of cases brought to County Courts in England and Wales off the back of a Section 21 notice fell by 55% compared to the same quarter in 2019.

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Is the Tax Man taking a huge bite out of your rental income?

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Are you one of those people who is now wishing that you had sought professional tax advice from us several years ago?

Maybe you’ve just received your 2020/21 accounts and tax returns back from your Accountant and you’re stressed about how much tax you need to pay in January and July next year?

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LATEST: Scots government to consider more help for Covid-hit tenants still in arrears

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Scottish First Minister Nicola Sturgeon has promised to look at giving Covid-hit tenants who are struggling financially more help other than the £10 million grant fund announced in June and ‘tenant hardship loan fund’ announced in December last year.

Both were directly and indirectly intended to help tenants who had fallen into rent arrears clear their debts or pay their rent, but Labour MSP Mark Griffin pointed out to Sturgeon during a debate yesterday in the Scottish Parliament that only £42,000 of the £10 million hardship loan fund had been paid out so far.

Griffin described the fund as ‘completely useless’ and that it was small beer compared to the £9 million increase in rent arrears during the third quarter of this year alone.

Tenant hardship

Sturgeon replied that: “We are very much aware that rising rent costs cause hardship for tenants. Although that has been the case for many years, the pandemic has further exacerbated the financial situation for many people.

“In the course of the budget process, we will of course consider what more we can do to help not just tenants but others who are dealing with difficult financial circumstances right now.”

Sturgeon also told Griffin that her government planned to plough on with its plans for rent control pressure zones which are expected to become law by 2025, but that earlier implementation was unlikely given that these “reforms will be contentious” she said.

But Sturgeon would not be drawn on calls from landlords in recent months to return most notice periods to 28 days after its June announcement that they would remain at six months and three months (depending on the grounds) until March or even September next year.

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ANALYSIS: Does buy-to-let still beat the stock market?

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If you had £50k to invest right now, where would you put it, buy-to-let property or stocks and shares?

Certainly leaving it in a traditional savings account, with interest rates as they are at rock bottom, that’s out of the question. And with the threat of rising inflation eating away your cash pot, you need to think seriously about what you are going to do about it – where does that money go?

Property has traditionally been a very good hedge against inflation. During the 1970s, when inflation peaked at around 27%, those who were asset rich and cash poor – houses, commercial property, farms, land and to some extent equities – did very well out of inflation, while those with fixed interest investments were losing money hand over fist. At inflation’s peak, people were losing money at the rate of over a quarter of their savings every year.

But the stock market has its advantages too; it’s far more liquid that property assets, meaning you can get your money out at the click of a mouse, as compared to the prolonged process of selling a rental property.

More recently house prices have been rising at a fair old lick. Could rising house prices far surpass the gains you can achieve in stocks, even if you are lucky or skilled enough to pick the winners? The stock market can be volatile, with setbacks or corrections as much as a 50% drop in values, so you will need strong nerves.

If your savings in stocks dropped in value by 50%, would you have the nerve to stick it out and wait for a recovery? Or would you, like a lot of people, just panic and sell out, and thereby turning your paper losses into realised ones? Investing in the stock market is not for everyone.

Red tape and more and more regulations

Over the past few years the Government has subjected buy-to-let landlords to a punishing regime of increasing taxes and more and more rigorous regulations. You have got to be a very diligent landlord today to be sure of being on the right side of the law. There are literally hundreds of rules and regulations to be followed.

This mountain of Government imposed red tape, a punishing regime that is enough to make any landlord despair, is responsible for driving many out of the business. At the same time it is exacerbating a housing crisis and pushing up rents. There’s a severe shortage of properties to let in many areas, with demand often far outstripping supply.

Unexpected revival

Covid on the other hand has brought about a revival in investment in the buy-to-let market that nobody really expected. Rishi Sunak’s stamp duty holiday, steadily rising average rents levels, steadily increasing property values and ultra low mortgage interest rates have acted together to spur on buy-to-let landlords’ interest.

With the older experienced end leaving the market, many new entrants have been tempted to have-a-go, full of the expectation that they can reap the rewards of putting their savings into a buy-to-let.

Most regions in England have seen landlords’ incomes rising, with prospects looking better than they have done for some time. According to Hamptons the estate agents, up to July 2021 the North, the East of England, the South West and the South East have all recorded double-digit growth in rents. Across England rents have risen by 6.2% year-to-date.

It’s labour intensive

Buying, renovating and renting out a property can be a lot of hard work, especially if you manage the tenancy yourself. Even when an agent does the letting, the process is never completely hands off.

As is intimated above, its a complicated process involving a fair amount of management skill, and high costs such as refurbishing, maintenance and repairs, stamp duty, legal fees, insurance and maybe agent’s fees. Wouldn’t it be a lot easier and more lucrative to invest in the stock market?

To help us with that question, conveniently Telegraph Money recently crunched the numbers to help us see whether say a £50,000 investment would perform better, invested either in properties or in companies on the stock market, over a typical 10-year period.

1 – Investing in property

Soaring house prices mean landlords with £50,000 to invest would need to be savvy when choosing where to buy because they would be priced out of the most expensive parts of the country, typically London and the South East.

But, there are parts of the country where values are much lower and the prospects for buy-to-let returns are excellent. For example, Telegraph Money took a town like Sheffield.

On the Telegraph’s behalf, Private Finance, a mortgage broker, analysed the potential returns in Sheffield, with the best and worst scenarios for a buy-to-let property. The town has a lot going for it. Its a popular location for landlord investors as it has modest house prices, a large student population and strong employment prospects.

Taking £50,000, according to Telegraph Money, a landlord would need to set aside £2,500 for fees and would need to borrow around £147,500 to purchase a four-bedroom property with a market value of £190,000.

Taking the best-case, the property would be let for about £850 per month, rising every year in-line with inflation and a full 10-year investment period. Mortgage costs would be around £297 per month, and assuming they would stay the same for the full decade on a long-term fixed deal, currently are available at 2.5pc.

First year profit is calculated at £4,638, rising to £6,225 in the final year, giving an overall profit at £54,106.

That of course is best case. It does not allow for any void periods, expensive repairs or having a bad non-paying tenant. However, with skilful management and a bit of good luck, there’s no reason these returned could not be achieved.

What this does not take into account is the potential rise in the value of the property during this period. Historically property price rises have more than outpaced inflation and indeed if inflation takes off over the next few years there’s probably no better hedge against it than property.

Telegraph Money makes theassumption that house prices will grow at 2.1pc each year, so in a decade the example property would be worth £229,079 – a rise of £39,079. When this is factored in to the returns, it means a best-case scenario landlord will get £93,185 back on their £50,000 initial stake. They suggest a less successful scenario would still leave the landlord with a £74,485 return.

2. Investing in the stock market

Would you be better off investing in the stock market instead?

Here there’s no risks of getting a bad tenant or having a long void period, but your returns depend on how well you select your companies or funds, and the ups and downs of the stock market.

AJ Bell, an investment platform, told Telegraph Money the results of its analysis oftwo potential outcomes: In its first case scenario an investor places cash in company stocks, which have historically returned 5.3pc per year, that’s based on data from the past six decades.

A £50,000 sum invested this way would return £2,525 in the first year, and by the end of the decade, with compounding growth, this investor would have a pot worth £81,833.

But as AJ Bell argues, many people would “shy away” from investing directly in companies. More often they would be cautious and prefer gilts and bonds. AJ Bell said these investments have typically returned 2.7pc over the past six decades. If this were to continue for 10 more years the investor would have £63,693.

Both scenarios assume stockbroker charges of 0.25pc, and should the investor decide to invest in managed funds, management charges would also have to be deducted.

Avoiding risk altogether by keeping money in cash is hardly an option, with cash savings accounts paying on average around 0.6pc. Your cash investment would grow £50,000 to just £53,082 over the 10 years, well below the rise in inflation, which is currently running at 4.2pc.

So, which investment comes out best, stock market or buy-to-let?

In this analysis, taking the best case, the buy-to-let property gives by far the best returns overall. The landlord would have made a profit of £54,106 from rent, plus a further £39,079 from the growth in the value of the property, making a total return of £93,185.

The stock market by contrast, would, on average return a profit of just £31,833.

Take taxation into account as well

In each case taxation would need to be taken into account. These example profits are before tax, and both would be subject to capital gains tax, though is is possible to shelter stock market returns in an ISA, but with a maximum annual investment allowance of £20,000.

Bother investments will also be subsect to income tax at the taxpayer’s marginal rate, apart from any proportion in an ISA. Dividend tax is also deducted from shares that may have paid out to investors, again unless the proportion is sheltered in an ISA..

Stock market investors can shelter themselves in an ISA, but their ISA investment must be spread out over a number of years as the personal annual allowance is currently £20,000.

Both investment types are be subject to stamp duty but landlords pay more at three percentage points above the standard property banded rates. In the example, a property purchase of £190,000 would attract a £7,000 bill, something else for landlords to factor in.

Which one is the best option in practice depends on the prevailing circumstances and the skill and luck of the investor. And don’t forget. buy-to-let can require significant amounts of time and effort which should really be factored in as a cost.

Investing in the stock market depends on the skill and luck of the individual investor, but given the uncertainty and volatility of the markets, although it’s a hands-off affair, it’s not for the faint hearted. And as has been shown here, average returns can be lower than buy-to-let.

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EDITOR COMMENT: Why it’s important to help clean up the property education sector

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LandlordZONE has joined a ‘social council’ set up by the Property Investors Bureau (PIB) as part of its efforts to monitor and manage complaints about property educations and academies.

The initiative is part of PIB’s ongoing efforts to usher in self-regulation within the property education sector to address some of the ‘major issues facing the sector and the increasing number of ‘tragic events that have occurred within this industry’.

As we reported this week, PIB’s Property Educators Accreditation Scheme (PEAS) recently revealed its first members to complete the certification process, with a further 11 in the pipeline.

These are John Howard, Mark Lloyd of Property Master Academy, Ranjan Bhattacharya of Succeed in Property and property consultant David Temple.

Social council

LandlordZONE, as part of the overall initiative, will be joined on the Social Council by Property 118, Property Tribes and the Property Forum.

As well as promoting the aims of PEAS, all of these websites will update their readers on new members as well as those who are expelled from the scheme, and LandlordZONE will monitor comments on our stories and within our Forum for any complaints about PEAS members.

We are keen to back the PEAS initiative and PIB’s Social Council because property investors and private landlords starting out on their journey want greater guidance as to who the good guys are within the property education sector in order that they can make an informed choice – and these initiatives help achieve that.

“If a consumer attempts to complain about a member of PEAS on a Social Council member’s platform, the member will suspend the complaint for 30 days (from the date that the complainant supplies evidence to the PIB) in the first instant and advise the consumer to first contact the PIB to attempt to resolve the issue,” says PEAS founder Cyril Connolly (pictured).

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