It's been a while since I last wrote for LandlordZONE, but with significant changes on the horizon, now is the perfect time to dive back in.
The biggest news to hit the private rental sector in 25 years is here: the Renters' Rights Bill. This Bill is poised to reshape the landscape for landlords and tenants alike.
I’ve been deeply involved in this for the past five years, ever since the White Paper was first introduced in 2019 - before the pandemic upended our lives. Regrettably, the previous government failed to shepherd it into a full bill. Now, the Renters’ Reform Bill emerges as the vehicle to “level up” for renters, buoyed by cross-party consensus. Housing has understandably ascended to the top tier of voter concerns, and change appears unstoppable.
A lot has happened in recent years:
• The abolition of mortgage interest relief
• Escalating capital gains tax
• Stamp duty alterations
• Eviction moratoriums during the pandemic
• A steep rise in interest rates since late 2022
Such relentless policy shifts have thrust landlords into a pressure cooker, testing the limits of landlord’s resilience and adaptability. Today, as the second reading passes through parliament, I can’t help but ask the question, “how much more elasticity is expected before the very fabric of the private rental sector begins to fray?”
Back in 2019, I was part of a working group advising civil servants on the concept of ‘housing courts.’ We hosted meetings at my Landlord Action offices to discuss the practicalities and issues with the court system, specifically how it was failing landlords, even then.
The group worked closely with The Lettings Industry Council, a group comprised of lettings experts from across the industry, who formed following the dramatic number of changes to letting rules and regulations and the resulting implementation issues. We commissioned research with the London School of Economics on the impact of abolishing Section 21. You can find the report titled ‘Beyond Section 21’ for a deeper dive.
Our main recommendations included:
• Improving court resources, especially through digitisation
• Hiring more judges and bailiffs
• Promoting mediation
• Strengthening Section 8 grounds
• Allowing landlords to use High Court Enforcement Officers when arrears exceed six months, to alleviate bailiff backlogs
At the time, I cautioned about the potential exodus of landlords, a prophecy that, regrettably, has materialised. . The combination of Section 24 (which scrapped mortgage interest relief), rising interest rates, and the disastrous September 2022 budget under Liz Truss all contributed to a growing number of landlords selling up. At Landlord Action, we’ve observed a notable uptick in landlords serving Section 21 notices as they plot their exit from the market
The Renters' Rights Bill is now gaining momentum, we’re bracing for substantial adjustments – notably the introduction of the Decent Homes Standard.
While the second reading is taking place on 9 October, many details at this stage still remain unclear. What we do know is that change is coming. Matthew Pennycook hints at possible implementation by summer 2024. My biggest apprehension is that everything might be introduced at once, without a transitional period for land-lords to adjust.
As I write this on a train to Newcastle - my fifth speaking engagement within a week after stops in Beverley, Manchester, and Bristol - I’ve been training and educating landlords on these changes. I understand why many smaller landlords are exiting the market, either because they’re being forced to sell, or because rising costs have made it necessary to increase rents. Historically, landlords haven’t been inclined to raise rents, but today, even exemplary face eviction due to financial pressures.
To all landlords, my advice remains, I say: Hold your nerve. Watch, wait, and don’t panic. Yes, interest rates spiked dramatically at the close of 2022, but the current base rate of 5% is hardly uncharted territory. Many of us remember the harrowing days of 16% interest rates back in 1990, and believe me, landlords survived that. It's also worth noting that nearly 40% of landlords don’t have mortgages, so they remain unaffected by rising rates.
Despite the headwinds, it’s not all doom and gloom. According to Benham and Reeves, house prices have risen by 54% in the last decade, and rents have increased by 34% since 2014. Tenant demand is at an all-time high, with properties attracting an average of 20 prospective tenants. Void periods are shrinking, and landlords still have a pool of tenants to choose from.
To all landlords, my advice remains: Hold your nerve. Watch, wait, and don’t panic. Yes, interest rates rose sharply at the end of 2022, but the current base rate of five per cent is actually quite normal. Many of us remember the days of 16% interest rates back in 1990, and believe me, landlords survived that. It's also worth noting that nearly 40% of landlords don’t have mortgages, so they remain unaffected by rising rates.
Despite the challenges, it’s not all doom and gloom. According to Benham and Reeves, house prices have risen by 54% in the last decade, and rents have increased by 34% since 2014. Tenant demand is at an all time high, with properties attracting an average of 20 prospective tenants. Void periods are shrinking, and landlords still have a pool of tenants to choose from.
As I’ve been saying in the media and at my talks, 2024 marks the shift towards professional landlords. The days of amateur, hobbyist landlords are over. With tenants now paying an average of 25% of their income towards rent, they expect more from their landlords.
Being a landlord is now a profession, and society needs to recognise that. Unfortunately, we often fail to spotlight the positive contributions landlords make in providing quality housing, a shortcoming that perpetuates misperceptions of our industry.
Offering a safe, compliant home is not too much to ask in 2024. But I cannot stress enough the importance of landlords educating themselves on the new regulations. Those managing their properties independently, without the help of an agent, need to be particularly vigilant as the changes roll out, possibly as early as next summer.
The worry is that many of the 2.8 million landlords, especially those with just one or two properties, won’t be aware of the changes or won’t be prepared when they take effect. Clear communication from the government is essential, as is underscoring the crucial role landlords play in housing ecosystem.
So again, my message is simple: Stay calm, look past the headlines, and stay informed. Keep updated through LandlordZONE, the National Residential Landlords Association, and other trusted sources. The road ahead will be challenging, but with the right preparation, landlords can adapt and thrive.
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