The Private Rented Sector and buy-to-let remain resilient

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With private rents in Britain’s biggest cities falling by as much as 15% and with up to 50% of tenants now claiming housing benefit, one would have thought this new economic reality would have had a big impact on the buy-to-let market.

Not so according to DJ Alexander, CEO of Apropos, a UK-wide letting firm which finds that the “attitudes and actions of landlords and tenants” have remained stable compared to the same period last year.

This year, in the ten months to the end of October, the firm saw 103 of its landlords serving notice on tenants compared to 107 in 2019, plus the number serving notice has fallen substantially since the ending of the first lockdown in July, a drop of 20, from 60 in 2019 to 40 this year.

The number of tenants serving notice on landlords has also fallen. Apropos figures show a drop of 18% since the end of the first lockdown. From July 2020 to October the figures were 741 this year compared to 875 over the same period last year.

However, this increase in tenant stability means that the number of new tenancies started by Apropos has been lower, a drop from 850 to 695 over the last four months.

David Alexander, joint Chief Executive Officer of apropos by DJ Alexander, says:

“These figures highlight a much greater stability and resilience in the PRS than might have been expected following the first lockdown. Both landlords and tenants have shown a much greater belief and enthusiasm for remaining within the sector.

“Landlords have been serving fewer notices and tenants have been happier to remain where they are rather than undertake the uncertainty of seeking a new home. There is little doubt that the pandemic has made people focus more on their homes and their living space. Where people live has become so much more important since the lockdown so that once people find a good home, they want to stay.

“The result has been many more people staying put. It is incumbent upon everyone in the PRS – landlords, tenants and agents – to ensure that homes are maintained to the highest standard so that individuals can feel safe and secure. Security of tenure has rarely been more prized, and many more tenants and landlords seem to hold this view and are staying where they are rather than moving on. Stability is a vital element in the housing market and these figures show just how important it has become in the last six months.”

Mr Alexander concluded:

“Landlords and tenants are continuing to show faith in the PRS. Given that England has now entered its second national lockdown it is essential that the Westminster government shows continued faith in the sector by ensuring that landlords are provided with financial support to continue providing homes for millions of people. Failing to financially support this vital sector at this time would be disastrous for landlords and tenants.”

Commenting on rumours that the chancellor, Rishi Sunak, is being urged to double capital gains tax rates while reducing the exemption limit Mr Alexander said it has triggered fears that buy-to-let landlords, investors, those with second homes, and small business owners could face significantly higher tax bills. He commented:

“The OTS (Office of Tax Simplification) review of CGT (Capital Gains Tax) suggesting a huge increase in the rate of taxation for landlords, second home owners and investors would have an enormously detrimental impact on the housing market.”

If the Chancellor targets the private rented sector it will be an “extremely risky” strategy, putting at risk the future of the second largest provider of homes in the UK. It would not be possible to fill this gap if there was a mass exodus of landlords and investors from the market over a short period, according to Alexander.

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LIVE interview with David Smith on proposed legal action against Lockdown evictions 10am Tuesday 17th

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A judicial review into the inability to evict non-paying tenants during lockdown is being launched by David Smith of JMW Solicitors. This tenant eviction ban during lockdown is causing many smaller landlords serious hardship.

In this Property Investors Coffee Morning special

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BREAKING: Half of all families living within the PRS are in receipt of housing benefit

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Latest government figures show that half of all the families who live within the private rented sector now receive support from the government either via housing benefit or Universal Credit (UC) to pay their landlord.

DWP figures show that 910,000 families are now in the position, an increase of 23% since the Covid pandemic arrived in the UK.

Tenant lobbying group Generation Rent says that a fifth of these families live in more expensive properties that fall outside the Local Housing Allowance system, which only pays out based on the cheapest 30% of homes in any area. This means 378,000 families face a rent shortfall and are having to cut down on essentials or get into debt to make up the difference.

Also, many families will not get the full LHA because of the benefit cap, which places an upper limit on the amount that working age claimants who are out of work can receive.

Generation Rent says that, although many UC claimants have been exempt from the benefit cap, this exception is due to expire just before Christmas.

The group is calling on Sunak to commit more support to private renters by raising Local Housing Allowance, scrapping the benefit cap, and clearing rent arrears brought about by the pandemic.

“With so many private renters now reliant on it, the Government must ensure the benefits system covers housing costs,” Alicia Kennedy (pictured), Director of Generation Rent, told inews.

“Everyone deserves the security of a home they can afford while we recover from the economic impact of coronavirus.”

Read more about Universal Credit and landlords.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – BREAKING: Half of all families living within the PRS are in receipt of housing benefit | LandlordZONE.

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CGT proposals to cost higher rate tax landlords £10,000 on average

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A leading lettings agency has revealed how much landlords will pay if the Capital Gains Tax (CGT) changes proposed by the Office of Tax Simplification (OTS) last week are implemented by Chancellor Rishi Sunak.

These would bring CGT – currently 28% on residential property and 20% on other assets – into line with income tax so that higher rate taxpayers face a flat rate of 40% or more.

It also suggests reducing the annual CGT allowance threshold from £12,300 to £5,000 or less.
Hamptons International has crunched the data based on the average equity held by a landlord within a property of £69,000.

For a lower rate tax payer, this would mean paying an extra £1,130 in CGT (or a total of £11,300) but for higher rate tax payers it would mean an extra £6,800 (or a total of £22,680).

“If the annual CGT exemption is also reduced from £12,300 (2020/21) to £5,000, a higher tax rate landlord’s tax bill would rise to £25,600, nearly £10k or 61% more than the existing situation,” Aneisha Beveridge, Head of Research at Hamptons International tells LandlordZONE.

Allowable expenses

These figures exclude allowable expenses, which vary significantly depending on whether and how long a landlord lived in a property before renting it out and how much money was spent doing it up.

But Beveridge says that the OTS’s  proposals would force more landlords to put their properties within a limited company structure because they still able to offset mortgage interest, and their profit is taxed at corporation tax, currently 19%. 

Mitch Young (pictured), co-founder of tax consultancy Fusion says the uproar about such radical changes caused by the proposals within the tax and property world might temper the Chancellor’s appetite for change.

“Nevertheless, there is no doubt that Sunak is going to execute some kind of tax raid in his next budget, so landlords need to get their houses in order before this happens next Spring.”

Read more: CGT proposals will drive more landlords out of the market.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – CGT proposals to cost higher rate tax landlords £10,000 on average | LandlordZONE.

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1.3 million private tenants worried about paying rent, says Rowntree foundation

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Millions of tenants are anxious about paying rent over the winter and 350,000 have already had discussions with their landlords about eviction, new research by The Joseph Rowntree Foundation (JRF) has found.

It has warned that without immediate targeted support, both private and social renters who’ve seen their incomes drop, will be at risk of real hardship and could lose their homes.

Some 2.5 million households are worried about paying rent in the next three months (1.3 million in the private sector), it says, with 700,000 already in arrears.

The social change group’s survey of nearly 3,000 tenants reveals that large numbers who have reduced spending to offset shrinking incomes are cutting back on essentials such as food (70%), heating and electricity (49%), and for renters with children, food for children and nappies (39%).

Legally binding

It says despite Government guidance not to employ the use of bailiffs before 11th January in England, this protection might not be legally binding or be properly understood by households vulnerable to eviction, who could feel they have no option but to leave their home if they get an eviction notice.

It’s calling for a watertight ban on evictions, together with targeted support for rent arrears to prevent a surge of evictions in the spring.

JRF also recommends a targeted grant programme designed to address rent arrears as director Helen Barnard says hard-pushed renters are running out of options.

“Without action which seeks to address growing arrears, any ban on eviction or enforcement only kicks the can down the road, with renters vulnerable to losing their homes again as restrictions are lifted,” says Barnard (pictured).

“A targeted package of support to address high rent arrears will give renters and landlords much needed breathing space as we continue to weather the storm.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – 1.3 million private tenants worried about paying rent, says Rowntree foundation | LandlordZONE.

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Webinar: How to avoid underinsurance

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Watch our free webinar featuring Steve Barnes, Associate Director and Melissa Choules, Senior Claims Technician at Hamilton Fraser Total Landlord Insurance who are joined by Will Molland, Director of RebuildCostASSESSMENT.com. The latest data from RebuildCostASSESSMENT.com reveals that nine out of 10 properties in the UK are underinsured. This is a truly staggering statistic and our experts cover everything you need to know on the topic of underinsurance, from calculating your rebuild value to the true cost of underinsuring, to help you understand how to avoid underinsurance.

For additional information on underinsurance, read Hamilton Fraser Total Landlord Insurance’s comprehensive guide on the topic ‘How to avoid underinsurance: A landlord’s guide’.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Webinar: How to avoid underinsurance | LandlordZONE.

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Rent Smart Wales issues re-registering?

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Anyone else having problems with Rent Smart Wales? On 23/10/2020 I received a reminder from them to re-register as my registration expired on 04/12/2020.

I went online on 26/10//2020 and re-registered and paid my fee of £36 and duly received receipts for payment.

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Leaseholders and service charge on different sized flats?

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The building split into 15 different sized flats is managed by a board of directors from the leaseholders. It has worked reasonably well, but now that the building is in need of updating and also some hefty repairs (roof) the directors have decided that they will change the way that the service charge is paid.

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NRLA confronts pensions minister over shared accommodation benefit rate shortfall

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Young people are being forced to choose between racking up rent debts and risking their health due to restrictive housing benefit rules.

The National Residential Landlords Association (NRLA) warns that under 35s who are relying on housing benefit to pay their rent for the first time have found that the shared accommodation rate only covers the cost of a room in a shared house.

It says this will force many into cheaper, shared housing with strangers, creating anxiety for those worrying about being infected with Covid at a time when people are being urged to spend more time at home.

In a letter to Welfare Minister Will Quince (pictured), NRLA chief executive Ben Beadle has urged him to adopt the Social Security Advisory Committee’s recent recommendation to suspend the shared accommodation rate rule, for at least a year.

Beadle (pictured, below) says it’s unacceptable that younger renters are being forced to choose between building debts or compromising their health during a pandemic.

“While the vast majority of landlords have done everything they can to support renters whose finances have been hit due to the virus, it cannot be right that landlords and tenants are left to muddle through without greater support,” he adds.

“If money can be found to subsidise meals out, the Government must find the finances needed to support tenants, and in turn landlords, to pay off rent arrears, sustain tenancies and protect people’s health.”

The call comes as Government statistics show a significant rise in the number of younger Universal Credit claimants; in the four weeks to 8th October, the proportion of claimants aged between 16 and 24 was 27%, up from 21% in the four weeks to 12th March.   

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – NRLA confronts pensions minister over shared accommodation benefit rate shortfall | LandlordZONE.

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Reluctant landlords: cladding woes force owners to let out properties at a loss

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Thousands of leaseholders are stuck in their flats because they cannot sell due to unsafe cladding installed on their high rise blocks. Sales are stalled because potential buyers can’t obtain a mortgage until the defective cladding is replaced and the building declared safe by a specialist engineer.

In desperation “trapped” sellers, many of whom are young couples wanting to start families, or wanting to move away for their work, are resorting to letting out the flats at a loss.

They are then forced into renting elsewhere, or buying a smaller and cheaper property than they would otherwise have gone for. Property experts say the situation is so common and so serious that with so much wealth tied up in unsaleable property, it is reducing demand and depressing prices further up the housing ladder.

Flat owners are having to become landlords or so called “accidental landlords” costing them hundreds of pounds a year in addition to their alternative housing costs. This is because the rent they can earn on their flats does not cover their mortgage and service charges.

In additional, they have the constant threat hanging over them that at any time they could receive a hefty bill running into thousand of pounds to fix the unsafe cladding.

A further issue for owners in this position is, they need permission from their freeholder and from their mortgage lender to let out their properties. What’s more, potential tenants will be urged to check out the fire safety situation of the building they are considering renting. There’s an obvious concern that they could be unknowingly signing contracts for potentially unsafe flats.

This could leave accidental landlords with vacant homes, plus they have a further risk that if tenants leave and they have a long void period they could find themselves in financial difficulties.

According to The Daily Telegraph Dr Lucy Coyne, 34, a vet, wanted to sell her flat in Liverpool to buy a house in Nottingham with her partner. But multiple sales attempts have fallen through due to the cladding issues.

So Dr Coyne was forced to rent out her flat, but the monthly rental income does not cover her mortgage and the building’s service charges and she expects to lose £600 every year until the cladding problem is resolved.

“I don’t want to be a landlord,” she told The Telegraph, “I’ve never wanted rental properties and I don’t want the stress of it”, plus she has the added cost of time spent managing and maintaining the property she no longer wants to own.

“My partner and I want to buy a property together in Nottingham, but we can’t because all my cash is tied up in my flat. Every time I think about the flat I just get anxiety and stress.”

There are significant costs and complications to becoming a landlord, and not everyone wants it is is prepared for it.

There are the additional fees mortgage companies sometime demand for letting, fees for energy performance certificates, legionella risk assessments, electrical and gas safety reports, smoke and carbon monoxide alarms, plus any upgrades needed to make the property suitable for rent. There may also be income and capital gains taxes complications to deal with.

All this not to mention dealing with agents or letting and managing the property yourself.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Reluctant landlords: cladding woes force owners to let out properties at a loss | LandlordZONE.

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