Uncertainty around Renters Reform Bill prompts landlords to call it a day

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Landlords are feeling gloomy about the future, with those selling up blaming economic pressures, the Renters Reform Bill and upcoming EPC rules.

Goodlord’s annual State of the Lettings Industry report reveals that nearly 60% of landlords are pessimistic, while 19% are ambivalent, compared with 47% of letting agents and 46% of tenants.

Over the last 12 months, 47% of landlords have either tried to offload a property or are considering doing so. Of the 30% of landlords who did sell, 40% sold one property, 33% sold two, and 3% sold more than five – and 10% of landlords turned one of their properties into a short-term let.

Significant amount

Goodlord’s poll of 1,168 private tenants and 861 property professionals found that 80% of letting agents expected more landlords to leave the sector in the next 12 months with 36% saying it would be a “significant amount”.

Almost half of all letting agents and landlords believe the introduction of new rolling contracts in the Renters Reform Bill will have a negative impact, while 17% of letting agents and 30% of landlords feel pessimistic about the property portal. Landlords have the strongest negative views about the introduction of the ombudsman, with 43% believing it will negatively impact the sector. Conversely, 42% of letting agents think otherwise.

Changes needed

Sean Hooker, head of redress at the Property Redress Scheme, tells LandlordZONE that the government needs to use expertise in the sector to deliver the changes needed quickly and efficiently. 

“The figures reflect the uncertainty surrounding the proposed legislation,” he adds. “I am not surprised that agents’ and landlords’ views differ as most agents have easier access to help and support through their professional network, so they can understand and adapt to the changes. A lot more help is needed to ensure landlords are prepared.”

View Full Article: Uncertainty around Renters Reform Bill prompts landlords to call it a day

Lib Dem boss: Distrust of red tape prevented Tories going green

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Liberal Democrat leader Ed Davey has revealed that the Conservatives dismissed his call for energy efficient regulations in the PRS as “communist”.

Speaking on The Rest is Politics podcast, Davey said that during the Tory/Lib Dem coalition, he had tried to regulate the private rented sector to require landlords to bring up their properties to a higher standard of energy efficiency.

Minimum standards

“The regulation I wanted to get through would say that you wouldn’t be allowed to rent your house out unless you met these minimum efficiency standards. My biggest opposition in the Tories was Eric Pickles – I had a few clashes with him – and he said to me at one stage: ‘Ed me old chum, regulations are communist. And I said to him, ‘Eric, thou shall not kill’ is a regulation and it came in before Karl Marx’.”

Climate change

Davey was Secretary of State for Energy and Climate Change from 2012 to 2015 while Pickles was Secretary of State for Communities and Local Government after the Cameron–Clegg coalition was formed in 2010.

Davey’s remarks illustrate how far Conservative policy has evolved, with the Renters Reform Bill and regulations for private landlords to meet EPC band C ready to impact the sector.

He told host Alastair Campbell he believed the case for regulations was really strong. Added Davey: “We could lead the world in offshore wind. If we had the right policies for net zero, you could not only make us a world leader, and innovative, you could use that as a vehicle to address some of the gross inequalities in our country.”

View Full Article: Lib Dem boss: Distrust of red tape prevented Tories going green

HMOs: the evolution of the market and current hotspots

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HMOs (Houses of Multiple Occupation) first came to prominence in the form of student digs: fairly tatty shared houses, where students could live in groups for a low monthly rent.

‘Professional’ HMOs really took off in the mid-2000s, when buy-to-let investors realised that if they made the effort to provide an attractive, well-maintained shared home, working adults were prepared to pay a relatively high all-inclusive rent for a private room. And although running costs were higher than if the property was let to a single household, the rent could be two to three times more.

The evolving legislation of HMOs

Legislation started to tighten up for the whole Private Rental Sector (PRS), with HMO landlords subject to additional regulation including carrying out risk assessments and installing fire safety measures (2005) and licensing brought in for HMOs housing 5 or more people (2006).

Nothing hit the HMO sector after this for around a decade. Many landlords continued to move into the ‘luxury HMO’ market, providing accommodation with a boutique hotel feel that appealed to tenants with professional jobs.

From 2018, more legislation was introduced including minimum room sizes being introduced for HMOs. Some landlords found that rooms they had been letting as single bedrooms could no longer be legally let, which instantly cut a significant amount from their profits.

Most recently, in January 2023, new fire safety regulations came into force, requiring a ‘responsible person’ to be appointed for every HMO, to ensure certain fire safety instructions and information is provided to all occupants.

All these legal changes are great in terms of improving standards and health and safety in shared houses. However, they have undoubtedly made setting up and managing HMOs more challenging.

How profitable are HMOs today?

Because rents have been increasing at a higher than usual rate over the past few years and energy costs are still high, tenants are snapping up all-inclusive room rentals. And while you must meet the legal standards for condition and health and safety, as long as your HMO is modern and well-maintained, it doesn’t have to be fancy to be profitable.

Although the relative cost of ensuring an HMO is legally compliant is higher than it was 15 years ago, rental yields are still strong. Paragon Banking Group’s PRS report for the first quarter of this year in England shows HMOs generate the best yields at 6%, versus 5.3% for houses and 5% for flats and bungalows. And their latest research shows HMO yields around the UK varying from around 6% to 9%.

What’s just starting to have an effect on the profitability of HMOs is the sharp rise in mortgage rates and of course utility bills. Those landlords who are having to remortgage in the current climate could find their monthly payment tripling, which will hit HMO landlords with high LTV mortgages particularly hard. If you already have a HMO or you’re thinking of investing, it’s never been more important to run the numbers – before you buy and then regularly once your HMO is let – so you don’t get any surprises.

Where are the current HMO hotspots?

You should be able to find a good HMO investment in most major towns and cities. But the widespread shortage of student accommodation over the last two years has created great opportunities for student HMO landlords in Manchester, Bristol, Durham and Glasgow.

Paragon’s research shows that Wales leads the way on returns, with the average HMO delivering a yield of just over 9%, followed by Yorkshire & Humber and the North West at 8.6%. The South East (7.18%) and London (6.13%) deliver the lowest yields, which is to be expected, given the high property values.

What is essential when investing or running an HMO is to work a qualified letting agent that understands the compliance minefield of an HMO and also understands the different target markets. Leaders understands the importance of making sure an HMO deal stacks up financially and meets health and safety criteria for tenants, so do contact us for help and support.

View Full Article: HMOs: the evolution of the market and current hotspots

Social and PRS landlords handed guidance on mould and damp in properties

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Landlords in the private rented sector (PRS) and social landlords have been given guidance from the government on how to deal with damp and mould in tenant homes.

The government stresses that mould in a property should not be seen as a tenant’s ‘lifestyle choice’.

View Full Article: Social and PRS landlords handed guidance on mould and damp in properties

Harnessing Share Classes and Trust Agreements in UK Property Investment for Effective Inheritance Tax Planning

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Within the sphere of UK property investment, astute investors are perpetually on the lookout for ways to optimise their financial strategies, especially when it pertains to safeguarding family wealth and mitigating Inheritance Tax (IHT). One sophisticated strategy that’s gaining traction is the utilisation of Family Investment Companies (FICs) in tandem with carefully structured share classes and Discretionary Trusts.

View Full Article: Harnessing Share Classes and Trust Agreements in UK Property Investment for Effective Inheritance Tax Planning

Timely annual reminder could be a tenant life-saver

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Gas Safety Week starts today by reminding landlords of their responsibilities when protecting and educating tenants.

The national safety campaign is now in its 13th year and promotes awareness of the dangers of poorly maintained gas appliances, which can cause gas leaks, fires, explosions and carbon monoxide poisoning.

This year, the week focuses on celebrating gas engineers and the essential role they play in keeping the nation gas-safe. It is coordinated by Gas Safe Register, the official list of gas engineers who are legally allowed to work on gas.  

Legal obligation

Landlords must make sure maintenance and annual safety checks on gas appliances are carried out by a Gas Safe registered engineer, reminds the campaign, and that they are legally obliged to make sure gas pipework, appliances and flues provided for tenants are maintained in a safe condition.

Landlords can get a free email and/or text reminder about the annual safety check by visiting StayGasSafe.co.uk. All gas equipment (including any appliance left by a previous tenant) also needs to be safe or otherwise removed before re-letting.

ID check

Engineers must be qualified to carry out the work, and their details can be found on the Gas Safe Register website or by checking the back of their Gas Safe ID card. Landlords should also encourage tenants to check the card when the engineer arrives at their property, and to be aware of any warning signs that their gas appliance is working incorrectly, such as dark or sooty staining, excess condensation, pilot lights which frequently blow out as well as error messages on the appliance’s control panel.

For more information and to find or check an engineer, visit GasSafeRegister.co.uk. Find more information about gas safety certificates at Total Landlord Insurance.

View Full Article: Timely annual reminder could be a tenant life-saver

The Times is looking to speak to landlords who are making eco upgrades to their properties 

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Are you a landlord who has already started making your properties energy-efficient? Then Rachel Mortimer, Assistant Money Editor, at the Times would like to speak with you.

Rachel is looking to speak with landlords who have already begun making eco upgrades to their rental properties

View Full Article: The Times is looking to speak to landlords who are making eco upgrades to their properties 

Landlord leaders pledge to strive for positive change in the PRS

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A new group – the Landlord Leaders Community – has been set up to bring the sector together and provide practical tools for the PRS.

It hopes to facilitate education and training, communication, collaboration, and positive industry perception by working with industry associations, government bodies, and educational institutions. This would then lead into developing and delivering training courses and workshops. Instigated by mortgage lender, the OSB Group, its community leaders consist of brokers and finance experts along with a landlord, an estate agent and Propertymark’s Timothy Douglas.

Different mindset

Jon Hall, group MD, mortgages and savings at OSB Group, tells LandlordZONE its research found a different mindset among professional landlords – who were often positive about their investments and thinking long-term – and amateur landlords. It wants to promote this positive message as well as reduce the gap between the two groups. “We want to build a connection with the NRLA and the property market, conveyancers and lobbying individuals,” he says.

Conversations within the community might then feed into lobbying or working to improve understanding, adds Hall. “We’re committed to the long-term and are about facilitating positive action – talking, but then producing tangible things.”

Tenant research

Future plans include tenant research to help landlords understand how they’re using properties and agents, talking to advisors about ways to educate landlords on tax and legal structures, as well as looking at the technology that provides advice on retrofitting with a view to developing practical tools for landlords.

Suzanne Smith, a landlord with four properties in Kent who writes the Independent Landlord Blog, is already an accredited NRLA member but joined the new group as she particularly wants to promote the importance of responsible landlords. “The issues facing the PRS are complex but that doesn’t mean we can’t try to achieve positive change,” she tells LandlordZONE. “I wanted to be involved in trying to create a fair sector for everyone.”

View Full Article: Landlord leaders pledge to strive for positive change in the PRS

Rising rents won’t stop landlords from feeling the pinch

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Many landlords will find themselves materially worse off by 2026, despite rents being forecast to rise by 25%.

Hamptons reports that the average rent of a home in Great Britain will hit £1,550pcm by 2026, £333pcm more than in December 2022, with the largest increases expected this year and next as landlords roll off fixed term deals and face considerably higher mortgage payments.

The build-up of long-term supply issues is also causing continuing pressure on rents, meaning that the average rent on a newly let property will rise 8% in Q4 2023, 7% in Q4 2024 and 5% in both Q4 2025 and 2026.

Lower yields

London rents are likely to rise faster than the national average as a combination of lower yields and more landlords being reliant on finance puts added pressure on investor profits in the capital, according to Hamptons.

It believes rental growth will also be strong in the North of England, where larger portfolio landlords, which are more likely to be reliant on finance, are most active. London is also the lowest yielding region so landlords there have less ability to absorb higher costs.

Price decline

Meanwhile, it expects the ONS House Price Index to show an average house price decline of 2.5% in the final quarter of this year – a 7.4% annual fall in real terms. By the end of 2026, this will be 5.5% more than its level in the final quarter of 2022.

Aneisha Beveridge, head of research at Hamptons, says there’s a strong argument that the Bank of England’s quest to quell inflation has hit the rental sector harder than any other part of the housing market. She adds: “A build-up of long-term supply issues combined with soaring landlord costs is putting upward pressure on rents. And it’s hard to see any of these pressures receding any time soon.”

View Full Article: Rising rents won’t stop landlords from feeling the pinch

Rents predicted to rocket 25% by 2026

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A housing market forecast is offering an alarming prediction that rents could rocket between 2023 and 2026 by 25%.

The prediction is being made by estate and lettings agents Hamptons which says that both London and Great Britain tenants will see rents rise by the same figure.

View Full Article: Rents predicted to rocket 25% by 2026