Many Landlords and investors in the Private Rented Sector have grown weary of the incessant negative press and being scapegoated for soaring rents.
Yes it is incredibly difficult to navigate the housing market as a renter. And yes there are some unscrupulous Landlords who ignore legalities and housing regulation in pursuit of profit. Some of whom usually end up as part of a TV programme. But that is not representative of the whole PRS sector.
For more people to be able to easily find a decent home, more needs to be done to supply decent housing. The endless Merry-go-Round of criticism of those who already supply decent homes is not a solution. Landlords find it increasingly challenging to supply homes in the climate of increased taxation, increased regulation (over 400 rules and regulations), high operational and finance costs.
Landlords with higher loan to value mortgages (50%+) make up 30% of the sector. These landlords are under the most pressure by rising interest costs. If more PRS Landlords tire of the situation and are driven out of the market, the less stock there is for housing those people who are not in a position to buy their own home. The more homelessness will be experienced in the UK.
What is the State of play for landlords in the PRS?
11.6m people live in homes supplied by the Private Rented Sector, this has doubled in 20 years.
Never has the PRS been so important in supplying homes. Yet the PRS stopped growing in 2016. There have been steady disposals of rented homes since. (Zoopla)
No one else is picking up the slack, certainly not the Government and the Build-to-Rent sector only represents 2-3% of housing stock. Housing delivery is falling.
All at a time when we are reaching the limits of rental affordability – rents have increased by 10.5% in the last year (Savills) and represent the highest proportion of income for decades.
Rental demand is up 51% compared with the 5-year average, yet rental stock is down 30% vs the 5-year average (Zoopla Sep ‘23)
Is the Government finally understanding the Private Rented Sector-PRS?
Having attending a recent National and Residential Landlord Association (NRLA) conference where Michael Gove appeared – albeit via video link. The audience of 800 property people, the majority of whom were landlords, got to pose topical questions.
Ben Beadle, CE of the NRLA has done a great job of lobbying on behalf of landlords, particularly around the Renters Reform Bill which plans to abolish Section 21, the main efficient and speedy way to reclaim a home. Michael Gove is beginning to appreciate the consequences of landlord-bashing.
What were the property insights to help landlords survive and thrive?
Under labour there is unlikely to be substantial change to PRS Regulation and Legislation. Much of the work to date e.g. Renters Reform Bill has been done with Cross-Party support and as such, the outcome will be more enduring. Although Labour might push for longer fixed tenancies above what is currently proposed. Clive Betts Labour MP for Sheffield SE spoke on behalf of the DLUHC Select Committee (Department for Levelling Up Housing & Communities) on housing reforms. Although it is worth highlighting 85% of tenancies are terminated by tenants. Only 6% of landlords use section 21 and only a very small % of tenants are served a notice to terminate without good reason.
It is doubtful that Rent Controls will be introduced in spite of some Labour members calling for them. The evidence at the conference overwhelmingly showed that Rent Controls don’t work. Or in fact they exacerbate rent increases. Scotland was cited as one example. Edinburgh specifically is a place where rents have increased higher than other parts of the UK.
What 3 key things ought landlords do?
1 You still need to formulate plans to nudge up the energy-efficiency of our homes.
The push for Energy Efficiency hasn’t gone away. Even though Prime Minister Rishi Sunak has slowed the impetus until post-election. Whether the current Energy Performance Certificate (EPC) is used as a means of measure into the future remains to be seen.
2 You need to put your best foot forwards by prudently managing your rental homes, especially by ensuring rents keep up with inflation.
ONS Data show that rents do not keep up with ‘average’ 3% inflation. By not regularly reviewing rental levels you can leave yourself exposed. Then you may be obliged to increase rents dramatically in one go, to keep up and protect profitability to survive. We will soon reach an unaffordable level, as rents now represent the highest proportion of income for about two decades. So acting in a measured way on an ongoing basis is more constructive.
3 Having great processes and systems in place will help ensure longevity beyond Renters Reform. This will ensure that not only can you be implicitly confident you have taken the best measures for your tenants, but that you can explicitly show to a court you have done so too.
How are you weathering the current climate?
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