Comment: fears over the future of private rental market in the regions mount

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While in England the housing minister Eddie Hughes has just ruled out rent controls, in Scotland, Wales, Northern Ireland and the Irish Republic, the governments there are still pursuing a policies of rent controls with a vengeance, in one form or another.

The Irish experiment with rent controls

The Irish Republic was one of the first in the modern age to go back to the idea of rent controls, going by the technical name of “Rent Pressure Zones” (RPZs). The Residential Tenancies Act 2004 introduced a very challenging regulatory and taxation regime for private landlords in Ireland. The Irish Residential Tenancies Acts together imposed strict controls on rent increases so the system there has had longer to bed-in and take effect that anywhere else in the UK.

New research carried out in Ireland by economist Jim Power on behalf of the Institute of Professional Auctioneers and Valuers (IPAV) and the Irish Property Owners Association (IPOA) found that Rent Pressure Zones (RPZs), which limit the extent to which rental prices can be increased in specific areas, where rental property is in high demand, have created a two-tier rental market, with so far little effect on rising prices.

The study also found that contrary to the legislation’s intent, RPZs, the way they are applied, actually prevented rents from falling as well as rising beyond the set limits. Power’s report says that the share of private investor participation in the mortgage market in the Republic has fallen from 19.9% of total mortgage lending in 2006 to 1.4% in 2021.

The result it seems has been an Irish landlord exodus on a mass scale, with the result that the market begins to work against tenants: “If private landlords continue to exit the market, the situation is going to get worse,” the analysis warns.

The Scottish experience

In Scotland also, the tenancy system changes introduced in December 2017 with a new type of tenancy, the Scottish private residential tenancy replaced the assured and short assured tenancy agreements for all new tenancies.

The Scottish legislation placed more restrictions on private landlords: tenants were given greater protection from eviction, a landlord registration system was introduced and the legislation contained provisions that would allow local councils to apply to Scottish Ministers to have an area designated as a ‘rent pressure zone’ (RPZ), this is where they can show the rents are rising too much.

More recently, the pact between the Scottish National Party and the Scottish Green Party is destined to result in Holyrood legislation which would introduce greater tenant protections and serious rent controls north of the border.

The Fair Rents (Scotland) Bill currently progressing through the Scottish Parliament would change the law again in the private rented sector in an attempt to control rent levels, adding to and strengthening the law in the Private Housing (Tenancies) (Scotland) Act 2016.

So far, it would seem, the legislation introduced in Scotland in recent years affecting private renting does not appear to be having the desired affect. The number of properties available to rent through letting agents has halved in the last four years according to a recent article in The Scotsman newspaper, and landlords have continued to leave the market in large numbers, according to new figures.

The Scotsman article sites data compiled by Propertymark the letting agents’ body which also found that “94 per cent of all UK landlords who removed their property from the rental market between 2019 and 2022 did so to sell it. More than half of the rental properties sold in March this year alone did not return to the private rented market.”

Propertymark says that these figures illustrate the extent of the exodus of landlords from the UK private rented market. Nathan Emerson, Propertymark’s chief executive, is quoted as saying, the data “presents a worrying picture for private renters”.

So, as with the Irish Republic, which introduced rent controls well ahead of Scotland, the same picture is beginning to emerge: the number of properties available to rent is diminishing at an alarming rate, with a large proportion of landlords choosing to sell-up.

Far from the desired result of keeping rent rises in check and improving the tenants’ lot, legislation throughout the UK aimed at providing more tenant protection is resulting in increasing pressure on rents due to a severe lack of supply, and increasing numbers are joining the social housing lists.

“We know from our research that the most common reasons for landlords to choose to sell their properties and no longer provide homes are around risk, finances and viability, says Mr Emerson.

“Landlords and letting agents have been the subject of extreme legislation changes as the UK government tries to improve the sector. However, without a middle ground, these changes are actually proving detrimental to those they are supposed to protect.”

The Propertymark research was based on almost 18,000 members across the sector, it surveyed 443 agents working for businesses with a combined total of more than 4,000 branches across all four UK nations for its report.

What about Wales?

In Wales too, proposals for the introduction of rent controls were announced last November by the country’s Labour government and the Welsh nationalist party Plaid Cymru when it was revealed that they had entered a loose political alliance.

The two political parties are now working in partnership on more private renting issues including rent controls, but also some other radical measures including new longer ASTs and much longer notice periods.

The National Residential Landlords’ Association (NRLA) says that these measures are already beginning to bite in Wales, with its research showing that only 11 per cent of landlords polled said they planned to increase the number of properties they let out while 37 per cent of respondents planned to cut down on the number they rent out.

Ben Beadle, Chief Executive of the NRLA says:

“Our White Paper sets out what must be done in Wales to build a fairer, more inclusive PRS for both tenants and landlords and the damage that outmoded notions of rent control could have on the market.

“Ultimately, with affordability and supply issues continuing to dog the Welsh private rented sector, rent controls would exacerbate these ongoing problems and fail to provide a solution fit for the twenty-first.”

England an outlier

Although the private rented sector in England is already suffering a landlord exodus due to increased regulation, tax increases, energy efficiency costs and the plan to remove the “no fault” section 21 eviction process, it seems that England is an outlier as far as rent controls go, if the minister is to be believed.

Of that there is no guarantee of course as a future Labour government would likely join the other regions and the Irish Republic by introducing some form of rent controls.

Rents out of control

Rents getting out of control are creating severe problems for many tenants right across the UK and Ireland, in particular for those tenants on low incomes. But high rents also disproportionately affect the younger generation who make up the majority of private tenants. The lessons to be drawn from the Irish experience with rent controls, it would seem, are far from positive.

The irony is that rent controls, designed to help tenants by keeping rents at an affordable level, appear to do the exact opposite the longer they are in operation. Experience of them historically and from around the world has shown that long-term they create a two tier rental market, they reduce mobility because renters on lower rents won’t move, and they generally reduce the quality of housing when landlords with low returns do not refurbish.

More of the same?

When rent controls are seen not to be working, it’s an unfortunate tendency that many will argue that the system has been poorly implemented or there are policy difficulties, so even more controls are needed to make it work. Will it take many more years and attempts to do so before the lesson of history on rent controls is learned all over again?

Everyone agrees that the UK needs more housing, but are rent controls really the answer, or do they simply address the short-term symptoms of the problem, rather than its root cause? The question for policy-makers around the UK regions is whether rent controls are really the answer? Are they just a short term solution to relieve the symptoms, will they simply make things a whole lot worse?

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Comment: fears over the future of private rental market in the regions mount | LandlordZONE.

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Meet Mark Smith (Barrister-At-Law) Landlord tax planning strategies – pin Essex

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Our Hon. Legal Counsel, Mark Smith, Head of Chambers at Cotswold Barristers, will be presenting in person an overview of several landlord tax strategies at the pin Essex meeting Tuesday 21st June.

The Essex pin Meeting has returned to its physical venue The Thurrock Hotel

View Full Article: Meet Mark Smith (Barrister-At-Law) Landlord tax planning strategies – pin Essex

BREAKING: Minister confirms government will NOT consider rent controls in England

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Private rented sector figures have welcomed a commitment from housing minister Eddie Hughes that the government is not considering rent controls in England.

In a written reply to a question from Labour MP Rachael Maskell, the Minister agreed with Propertymark’s position that there was enough evidence available to show they would discourage investment in the private rented sector and lead to declining property standards.

But the announcement, which was prompted by commentary within the notes published alongside the recent Queen’s Speech suggesting the government would consider rent controls ‘via the back door’, doesn’t let agent and landlords outside England off the hook.

Rent controls

Ministers in Scotland, Wales and Northern Ireland are pursuing their own provisions for rent controls.

Hughes’ announcement is also a rebuff to London mayor Sadiq Khan, who on multiple occasions has asked for powers to introduce rent controls in the capital.

“Only last month we urged the Minister to study closely his department’s own statistics that show tenants are 40 times more likely to be made homeless because their landlord has become so disillusioned with the tax and legislative burden and wants to sell their property, than because they can’t afford the rent,” says Timothy Douglas (pictured), Head of Policy and Campaigns at Propertymark.

“His decision to publicly rule out rent controls in England suggests that he has taken our advice.

“The policy of rent controls may be popular among those looking for a short-term solution to rising market rents amid the cost-of-living crisis, but they will not solve the root cause of the problem, which is an undersupply of homes across all tenures.

“In a free market, where rents are allowed to flex in line with demand, investment in the private rented sector is incentivised. This provides a far more effective solution to the issue of affordability and encourages the long-term supply of good quality housing.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – BREAKING: Minister confirms government will NOT consider rent controls in England | LandlordZONE.

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Open Letter to the UK Buy-To-Let Mortgage Sector

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Most UK mortgage lenders and mortgage brokers do not fully understand the potentially disastrous implications of landlords taking on new mortgage finance at the point of incorporation of their property rental business.

At Property118 we feel we have a moral obligation to share the linked PowerPoint presentation below

View Full Article: Open Letter to the UK Buy-To-Let Mortgage Sector

Name on AST and DPS Certificate Spelt Incorrectly?

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I have a tenant who is subletting his room and is refusing to quit his tenancy and return keys. He pays his rent on time and in full every month. Its a single room with shared kitchen and bathroom facilities.

View Full Article: Name on AST and DPS Certificate Spelt Incorrectly?

This is how evictions will work after Section 21 goes, reveals NRLA

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LandlordZONE asked the National Residential Landlords Association to flesh out how it sees evictions working fairly in a post-Section 21 world once the government’s Renters’ Reform Bill gets Royal Ascent.

Here its policy chief Chris Norris replies.

Rent Arrears

“When it comes to rent arrears, we would much prefer to see every effort made to prevent them in the first place. To assist with this the Government should unfreeze the Local Housing Allowance. That said, it is vital that the new grounds for possession do not allow an impression to be given that paying rent is an optional extra.

“We propose a mandatory ground for possession where a tenant has at least 2 months of rent arrears at the time a notice to repossess a property is served, and in arrears of more than 1 month by the time of a court hearing.

“We are heartened by the Government’s commitment to develop new and stronger grounds for dealing with repeated incidences of rent arrears.”

Anti-Social Behaviour

“In situations of anti-social behaviour we are calling for a new process under which the courts would have discretion to allow a repossession to take place where tenants, neighbours and/or the landlord have raised concerns about certain behaviours. Importantly, where a tenant has been convicted of a related offence this should be a mandatory ground for eviction.

“There should be clear guidance for the judiciary about the types of antisocial

behaviour which would result in possession being granted under the discretionary elements. This should include case studies which would highlight the kind of antisocial behaviour which would need to be addressed in these circumstances. . Neighbours and fellow tenants should also feel able to come forward to provide evidence which the landlord can use in support of their claim, without fear of repercussions

“More generally, we welcome the Government’s move to reduce notice periods in cases of anti-social behaviour in order to protect those most affected.”

Landlords who sell up

“Clearly landlords should be able to repossess properties where they need to sell them. However, we recognise the need to prevent this ground being abused by individuals who wish to circumvent tenants’ security.

“Our proposed solution means that a landlord would need to demonstrate they have instructed a solicitor as part of the conveyancing process. They would also be obliged to provide a statutory declaration setting out their intention to sell, should their claim be challenged.”

In conclusion…

“The NRLA has worked extensively with the Government to develop a package which works for responsible landlords and tenants alike.

“We are heartened by the Government’s pledge to engage in further discussions with stakeholders to ensure the details of its White Paper are finalised before it is considered by Parliament but realise how vital it is that landlords’ voices continue to be heard.

“We will continue to represent the interests of all those landlords who already do the right thing.”

Visit the NRLA’s rental reform campaign page.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – This is how evictions will work after Section 21 goes, reveals NRLA | LandlordZONE.

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Flipping not renting is future of property investment, claims TV presenter duo

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‘Flipping’ houses can now be a more lucrative strategy for investors than renting them out, according to property experts and sibling TV presenting duo Scarlette and Stuart Douglas.

Their show, Flipping Fast, is currently airing on Channel 4 and they tell LandlordZONE how they’ve reduced their property portfolio to concentrate on buying, renovating and selling.

The show pits six teams against each other to do up a series of budget homes in the North of England, the winner being the one who makes the most profit and who will then bag a £100,000 prize at the end of the series.

“When the government changed the tax law we quickly realised that as a landlord, mortgage costs could no longer be deducted from rental income,” say co-presenters Scarlette & Stuart, who front the show alongside George Clarke.

Legislation has made it harder to be a successful property investor, but they add that their success is also down to hard graft.

“If you’re lazy and complacent you will fail. We would often see unprofessional property investors with that type of attitude and believe the recent changes have reduced the number.”

The siblings warn that without thorough research into the demographic of potential buyers in their chosen location, investors could also come a cropper.

Ceiling prices

“You have to buy at the right price and to do this you need to know ceiling prices in your chosen location.

“Once you’ve done that, work backwards as to how much you should spend on the renovation to make a healthy profit. If you overspend on the purchase price and subsequent renovations, the chance of making a positive return on your investment is greatly reduced,” they advise.

“And if you’re flipping and purchasing with a mortgage, try to get one that doesn’t have an early redemption fee.”

Both suggest that investors should be 100% committed to giving themselves the best chance of success.

“Do as much research as possible, build relationships with estate agents and auctioneers, devise clear strategies and budget accordingly. Take all emotion out of any decision process and think with your head, not your heart.”

Join the LandlordZONE forum on flipping properties.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Flipping not renting is future of property investment, claims TV presenter duo | LandlordZONE.

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