Proportion of tenants over 65 years old set to surge in coming decade

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Landlords are increasingly likely to be renting to older tenants in the coming decade with the proportion of renters in private rented accommodation over 65 years old doubling to 11.5%, it has been reported.

Letting agency Hamptons says its research reveals that, after a decade of steady growth, the number of older renters is poised to increase rapidly with the amount of rent paid by them more than doubling from £5.1 billion a year to £12.75 billion.

This surge can be explained by lower home ownership rates among the tail end of baby boomers (born in the early-to-mid-1960s) and ‘Gen X’, who are those born between 1965 and 1980.

The rising share of older households which rent has been coupled with a much more rapid increase in the number of older households more generally. 

Taken together, it means the number of households renting in England aged 65 and above will double by 2030.  
Today there are around 400,000 older households (over 65s) renting and this figure is set to pass 1,000,000 by 2033.

Boomers

Commenting Aneisha Beveridge (pictured), Head of Research at Hamptons, says: “The rising number of older renters reflects the gradual unwinding of the large increase in homeownership rates after the Second World War. 

“As younger generations who missed out on the homeownership boom age, growing numbers are likely to be renting when they retire.

“The recent rise in mortgage rates will make it harder to buy later in life.  It’s long been the case that if you’re not on the ladder by 40 years old, it becomes more difficult. 

“But higher mortgage rates will make this challenge even tougher given the difficulties in stretching a mortgage term to reduce monthly payments, particularly in the early years.”

View Full Article: Proportion of tenants over 65 years old set to surge in coming decade

Landlord exodus sees homes for rent hit a 14-year low

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As landlords are squeezed by rising mortgage costs and reduced income, the number of homes to rent in the UK has hit a 14-year low, the Financial Times reports.

Using data from consultancy TwentyCi, the newspaper says that the number of properties available for rent has plunged by 35% in two years

View Full Article: Landlord exodus sees homes for rent hit a 14-year low

Influential Labour group calls for tougher eviction rules including 16-week notice periods

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Landlords should be prevented from serving an eviction notice for at least the first year of a tenancy, in the case of repossession for selling or occupying the property, according to a new report from the Fabian Society.

The independent left-leaning think-tank believes the notice period for evictions should be increased to four months, and a permanent ban on winter evictions introduced.

Relocation payments

Landlords should also have to make a ‘relocation payment’ for tenants forced to move if they want to sell the property, move themselves or close family into the property, or if they want to increase rents above a certain percentage and tenants decide not to pay the new rate.

In its report of the Commission on Poverty and Regional Inequality, the group says these payments should be worth at least two months’ rent.

It explains: “Relocation payments will shift power to tenants, protecting them from landlords seeking to exploit unaffordable rent increases to circumvent security for tenants.”

The Fabian Society wants the government to substantially increase PRS regulation to deliver stronger renter protections and greater security of tenure.

Register

Other suggestions include a national landlords register that covers the PRS (as well as holiday lets and AirBnBs), to include past rent levels. Charges from the register would be returned to local authorities to fund stronger enforcement in the local area.

The government should introduce a locally led scheme to purchase private rented homes from landlords who no longer wish to keep them, and turn them into social rented homes, says the report, as well as roll out a private rented leasing scheme, with funding provided to enable the lease of residential properties from private landlords to local authorities for five years.

Read the report in full.

View Full Article: Influential Labour group calls for tougher eviction rules including 16-week notice periods

Influential Labour group says tougher eviction rules needed to tackle poverty

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Landlords should be prevented from serving an eviction notice for at least the first year of a tenancy, in the case of repossession for selling or occupying the property, according to a new report from the Fabian Society.

The independent left-leaning think-tank believes the notice period for evictions should be increased to four months, and a permanent ban on winter evictions introduced.

Relocation payments

Landlords should also have to make a ‘relocation payment’ for tenants forced to move if they want to sell the property, move themselves or close family into the property, or if they want to increase rents above a certain percentage and tenants decide not to pay the new rate.

In its report of the Commission on Poverty and Regional Inequality, the group says these payments should be worth at least two months’ rent.

It explains: “Relocation payments will shift power to tenants, protecting them from landlords seeking to exploit unaffordable rent increases to circumvent security for tenants.”

The Fabian Society wants the government to substantially increase PRS regulation to deliver stronger renter protections and greater security of tenure.

Register

Other suggestions include a national landlords register that covers the PRS (as well as holiday lets and AirBnBs), to include past rent levels. Charges from the register would be returned to local authorities to fund stronger enforcement in the local area.

The government should introduce a locally led scheme to purchase private rented homes from landlords who no longer wish to keep them, and turn them into social rented homes, says the report, as well as roll out a private rented leasing scheme, with funding provided to enable the lease of residential properties from private landlords to local authorities for five years.

Read the report in full.

View Full Article: Influential Labour group says tougher eviction rules needed to tackle poverty

Landlords who demand guarantors on the increase, even for high-earning tenants

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Landlords hit by mortgage rate hikes are demanding guarantors from increasing numbers of high earning tenants.

Many tenants are seeing a greater proportion of their take-home pay go towards rent so are having to provide the additional security of a guarantor when signing new agreements.

It’s a trend which Goodlord expects to continue throughout the rest of 2023, as rental prices are predicted to peak over the summer months.

Goodlord’s analysis of more than 220,000 tenancies reveals a steady increase in requests for renters who earn between £25,000 and £74,999 to provide a guarantor, up from 3.7% in 2020, to an average of 5.8%, an increase of 58%.

Surprisingly

Perhaps more surprisingly, there has also been a big jump in those earning between £50,000 and £74,999 being asked to provide guarantors, despite salaries in this range being far higher than the national average. In 2020, this was true of just 1.3% of earners in this bracket and is now 2.5%, a 92% increase.

Oli Sherlock, director of insurance at Goodlord, says the supply and demand problem means rents are rising at a time when tenants have less disposable income thanks to the cost-of-living crisis.

Obligations

He adds: “This means more tenants are being asked to show they have the support in place to meet their rental obligations, should they need it. As well as a rise in the number of tenants who find themselves needing to provide a guarantor, we’ve also seen a big increase in landlords taking out rental insurance.

“It’s a far from ideal situation for either tenants or landlords. The government should see this as an additional sign that more support for the rental market is urgently needed.”

View Full Article: Landlords who demand guarantors on the increase, even for high-earning tenants

What is a “mixed” partnership?

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In simple terms, a “Mixed Partnership” is a business whose owners comprise both individuals (people) and companies. Sometimes they are marketed as Hybrid structures.

The two commonly found versions of mixed Partnerships are LLP and ordinary mixed Partnerships.

View Full Article: What is a “mixed” partnership?

Likely cost of EPC upgrades for rental properties revealed by Government

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Energy efficiency improvement costs for most private rental homes work out at between £5,000 and £9,999 (46%), while almost a third (30%) could be improved for under £5,000, according to the latest government analysis.

At the other end of the scale, 19% of homes would cost between £10,000 and £14,999 to improve to at least an Energy Efficiency Rating (EER) band C, and a further 5% of homes would require £15,000 or more.

The English Housing Survey reveals that in 2021, most private renters lived in homes with a band A to C (44%) followed closely by band D (42%) while the remaining 14% lived in homes with an EER band of E to G. 

Decent

It reports that 23% are estimated to fail the Decent Homes Standard and 14% are estimated to be unsafe according to the Housing Health and Safety Rating System (HHSRS). Private rented homes were also more likely to have damp than all other tenures; almost 11% compared with 4% of social rented homes and 2% of owner-occupied homes,

Private renters have been in their current home for an average of 4.4 years, according to the survey. 

Moving

The most common reason for leaving was because they wanted to move (77%) with the least common reasons given as, the end of a fixed period tenancy (11%), mutual agreement with the landlord (10%), they were evicted or asked to leave by their landlord/agent (4%), a poor relationship with the landlord (3%) or the tenancy was part of a job that ended (2%).

One in four (25%) private rented households reported received housing support in 2021-22, while 3% were either currently in arrears or had been in arrears in the last year (4%); 10% had been refused a tenancy in the past 12 months because they received benefits.

Read the English Housing Survey.

View Full Article: Likely cost of EPC upgrades for rental properties revealed by Government

Why Labour’s Renters Charter is a charter for disaster

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Labour appears to be flirting with the idea of rent controls or capping rent rises and tightening up on the Decent Homes Standard under its Renters’ Charter. The issue has raised its head again recently but for me this charter is a charter for disaster.

View Full Article: Why Labour’s Renters Charter is a charter for disaster

Tenants warned over capital’s ‘competitive market’

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Renters are being warned that if they start looking for somewhere to rent this summer in London, they should be prepared for a busy and competitive season.

That’s according to the latest data from estate agency Chestertons, which says that June saw a surge in rental activity.

View Full Article: Tenants warned over capital’s ‘competitive market’

Almost a quarter of a million buy-to-let landlords are facing losses

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According to the Daily Telegraph, around 225,000 landlords will be in a loss making situation following the latest jump in refinancing costs.

It is estimated that these landlords will be in the red when they come to refinance as mortgage rates are climbing towards upwards of 7 per cent for the first time in 25 years.

Moneyfact’s figures show that the average two-year buy-to-let mortgage deal was at 6.69 per cent last week, while five-year deals could be had for around 6.52pc.

The Bank of England and inflation

The Bank of England’s Monetary Policy Committee (MPC) has a brief from Government to set monetary policy to meet the 2% inflation target, and to meet it in a way that helps to sustain growth and employment.

At the last meeting on 21 June 2023, the MPC voted by a majority of 7–2 to increase Bank Rate by 0.5 percentage points, to 5%. It is expected the next meeting on 3 August 2023 will see a further rise.

[Source: Bank of England]

If inflation continues to increase, the bank rate is likely to continue rising, as does the price of everything else, including mortgage rates. Wage and price demands fuel more inflation and so the vicious circle continues.

The Bank’s aim is to bring inflation under control using one of the limited number of tools at its disposal, interest rates. The problem for mortgage holders it that the effects of this falls directly on them.

In the financial world, mortgage rates depend on the demand for mortgage backed bonds. Inflation reduces the demand for these mortgage-backed securities or bonds. As demand drops, the prices of mortgage-backed securities fall. That results in higher interest rates for all mortgage types.

Mortgage-backed securities are securities formed by pooling mortgages together. The investor who buys a mortgage-backed security is essentially lending money to home buyers. During the subprime mortgage meltdown of 2007-2008, it became apparent to everyone that a mortgage-backed security is only as sound as the mortgages that are bundled in it.

Forecasters are now predicting that in order to kill off inflation the Bank of England is set to raise the base rate again at future meetings, eventually to a 25-year high of 6.25pc by early in the new year, which will almost certainly force mortgage lenders to increase their mortgage rates above 7 per cent.

Home ownership

More people now own their homes outright than have a mortgage or are renting. The latest available figures show that around 33 per cent of dwellings were owned outright in England in 2021, that’s up from just over 30 per cent in 2011.

Another 28 per cent of properties were owned with a mortgage or loan, that’s down four percentage points on a decade earlier, and 20 per cent are privately rented, that figure is up 3.7 per cent according to the Office for National Statistics.

Homes in the social rented sector were around 17 per cent while of those it is estimated that 226,930 buy-to-let homes across the UK (11pc of all mortgaged rentals) are likely to be unprofitable due to the rise in mortgage rates.

According to Money.co.uk it is estimated that around 60% of all landlords fund at least part of their portfolio through a buy-to-let mortgage, while 41 per cent own outright, 35 per cent hold all of their properties on a mortgage and 24 per cent hold some of their portfolio on a mortgage. It has been estimated that around 60 per cent of landlords own a single property, while over half of buy-to-let landlords own more than one.

[Source: ONS]

According to Uswitch the UK buy-to-let market had:

• £8.5 billion worth of buy-to-let properties purchased by UK landlords in Q1 2022.
• In 2022, more than 211,000 buy-to-let mortgages were approved by UK lenders, and occupied 13.6% of total mortgage lending for the year.
• Consumer buy-to-let mortgages in 2022 are valued at approximately £955 billion, with buy-to-let mortgage advances worth £41.8 billion.
• There are currently around 2.74 million landlords in the UK, with more than two-thirds (68%) over the age of 55.
• Milton Keynes has seen the greatest growth in buy-to-let properties with a 667% increase between 2021-22.
• The average UK landlord has eight properties in their portfolio, generating a gross annual rental income of around £61,000 per property.

Financial Stability

A recent report buy the Bank of England, The Financial Stability Report July 2023 says that the pressure put on buy-to-let mortgage borrowers by increases in mortgage interest payments would lead to (1) them either selling up, further adding to the rental housing shortage, and putting downward pressure on house prices, or (2) alternatively, they may be asking their tenants to pay more in rent.

The overall number of mortgages in arrears, says the report, increased slightly over the first quarter of 2023 but has remained low by historical standards, though “It will take time for the full impact of higher interest rates to come through.”

Head of research at property agents Hamptons, Aneisha Beveridge, told The Daily telegraph:

“We know that nearly 70pc of landlords in England own a home with a mortgage. That’s a much higher proportion than among owner-occupiers. So landlords are more at risk to the new kind of higher rate environment than the average household.

“The highest-leveraged landlords who bought in the last couple of years are most at risk. They are the ones who have taken equity out of their properties or bought a new buy-to-let in the last couple of years,” Ms Beveridge said.

“We haven’t seen as much of an acceleration in landlords selling off as we expected, as rates have risen over the last six, seven, eight months.”

This has led to many property investors selling up in the more expensive areas such as in London and the South-east, where prices are high and yields low, for other parts of the UK where buy-to-lets can be picked up for much lower prices, and consequently returns are higher. That’s according to Kevin Roberts of Legal & General who told the daily Telegraph:

“They are moving their portfolios to where the yield is. There are still better yields in the Northwest or the north of England or other parts of the UK. Airbnb and holiday homes are still massively searched for on our tools”

An additional factor having an impact on the rental market at the moment is the Government’s plan to abolish the shorthold tenancy and Section 21 evictions, for some landlords this is a worry and has been the last straw.

These statistics shown above hold out a rather dismal prospect for tenants looking for accommodation. Rents are higher than ever for new tenancies, and these tenancies are hard to find when some landlords are offloading their buy-to-let portfolios. All the property portals, including Zoopla, Rightmove and Spare Room are reporting substantial excess demand over rental supply.

View Full Article: Almost a quarter of a million buy-to-let landlords are facing losses