Year: 2020

An economist who previously suggested tenants should live rent-free for three months during the Coronavirus crisis has revised his thinking – and now he wants tenants to pay no rent at all until at least 2021.

The call has come from Richard Murphy, a chartered accountant and political economist who works as Professor of Practice in International Political Economy at the University of London. He has also founded a range of networks campaigning for tax and economic reforms.

Murphy contributes think pieces for the website of Tax Research UK, which undertakes work on taxation policy for aid agencies, unions, NGOs and others in the UK and abroad.

In his blog on its website he says there must now be “statutory rent holidays” for at least the rest of 2020.

“Thereafter rents should be reduced, drastically, and by law, and right across the board. Eighty per cent cuts may be appropriate. It may be more. Whatever is necessary to ensure business can survive must be done” he claims.

As if that was not enough, later in his blog he goes on to say: “I should add that because such a programme of liability reduction would make no sense for landlords alone if not matched by a similar scheme for owner-occupiers, who I predict will see the value of their houses crash in the near future as it becomes apparent that there is no market for them at anything like recent prices then they too must have a statutory right to owe no more on a mortgage than can reasonably exceed the market worth of their property.”

Murphy additionally asks what will become of landlords?

He says: “For small ones, I have argued for state support, just as I have other unemployed people. I can see no special case that might be made for such landlords now, especially since what I suggest will preserve some of their asset value, and an income stream, albeit a much reduced one.

“For larger landlords, the suggested arrangement will massively reduce the balance sheet value of the enterprise . It is very likely that these landlords will survive, but with vastly smaller market worth, and with their focus in the future being upon service supply, rather than asset accumulation.”

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Winkworth says its London offices are reporting significant numbers of landlords who used to advertise on Airbnb and similar short-let platforms moving instead to take long-term tenants as a result of the Coronavirus crisis.

“We have been contacted by landlords who have been offering short lets for the past five years on AirBnB, Booking .com and other platforms. They are now looking for long-term tenants as their properties are empty” explains Max Chaudry, lettings director of Winkworth’s Knightsbridge, Chelsea and Belgravia operation.

“In this area, there are entire blocks owned by landlords who were offering short-let serviced apartments. We have also had international tenants at university or school in England, who returned to their home countries at the end of the spring term and they are not coming back” he continues.

The company says many of its 60 London offices have reported a similar upturn.

Another Winkworth agent – Tom Street, regional lettings manager for Shoreditch, Islington and Highbury – says around 25 per cent of his current stock consists of former short lets.

“We are currently handling a block of multiple flats in the Brick Lane area, which is very popular with tourists and these were let on AirBnB. They are all empty and we will be offering them for long lets. We have another landlord in Islington with five properties, which were formerly short lets and will be available for longer lettings” he says.

The company says the trend back to long-term lettings is likely to continue until international travel returns in some form.

*Airbnb has announced that it’s to make about a quarter of its global workforce redundant. It has staff in 24 companies with its European head office in Dublin.

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ARLA Propertymark has made a series of demands on the government in the light of the Coronavirus crisis.

In a formal written response to the Housing, Communities and Local Government Committee’s Inquiry into the impact of Coronavirus on the private rented sector, ARLA makes a series of demands for action.

The aim of the inquiry, which closed its deadline for written submissions on Tuesday, is to examine how effective the government has been in supporting individuals in the private rented sector.

In a statement on its submission, Propertymark says it highlighted the positive steps the government had taken so far such as extending business rates relief and including commission in furloughed pay.

However it also wanted government to:

Improve renters’ knowledge of support: “There is lots of government support available that should allow tenants to continue to pay their rent and landlords to have an income if rent payments do stop. However, not enough is being done to explain and highlight these policies. In order that rent payments continue to be paid and the government keep the rent flowing, renters and their landlords need to take full advantage of the government schemes available during this difficult period.”

Suspend the introduction of mandatory electrical checks: “With the added complications of Coronavirus, the supply chain capacity issues have got significantly worse, and therefore, the government should suspend the introduction until such time as it is possible for the industry to practically implement the legislation.”

Review and update guidance on maintenance and safety checks: Some 70 per cent of agents who Propertymark surveyed said that the government’s guidance on what to do for compliance checks during the outbreak is clear and helpful. However, agents are facing problems getting routine maintenance and safety checks at the properties they manage completed. Agents and landlords want to do the best by their tenants and are understandably nervous about falling foul of regulations and therefore, we ask the Government to review and update the guidance already issued.

Provide more support on rent payments: “Survey results from Propertymark members show that nearly all have said that up to a quarter of their tenants have missed a rental payment since the Coronavirus outbreak. Consequently, three things need to happen to further assist renters. Firstly, more needs to be done to explain the support available from the government. Secondly, the government must suspend the five weeks Universal Credit payment period with all payments made in full and paid directly to the letting agent or landlord. Thirdly, for those tenants who fall through the gaps in the government’s current provisions should be able to apply for their rent to be paid via Universal Credit.”

Postpone the introduction of all licensing schemes: ARLA Propertymark says its members “are alarmed that a number of councils are ignoring guidance issued by the Ministry of Housing, Communities and Local Government which says that where local authorities are in the process of introducing non-mandatory licensing schemes, but these are not yet in force, they should consider pausing these at an appropriate point, in line with the advice on proactive and reactive work. The government must ensure local authorities postpone the introduction of all licensing schemes until the market can recover from the impacts of COVID-19.”

Separate rent arrears before and during the pandemic: “Propertymark’s survey figures from members show that for the majority (78 per cent) the passing of legislation to delay eviction proceedings has impacted on up to ten tenancies they manage and between ten and 20 tenancies for 13 per cent of agents. Members are concerned about the speed in which cases will be able to be heard in the courts and the backlog of cases from before the Coronavirus Act was passed and those cases lodged during the outbreak and after the restrictions are lifted.”

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Agents and landlords who use unorthodox methods of securing obligations from tenants to pay their rent during the Coronavirus crisis may not find them particularly effective.

That’s the warning from property litigation firm Hagen Wolf, which makes specific reference to a Scottish lettings agency which has asked its tenants to sign a ‘moral contract’ to pay any rent arrears in full and as quickly as possible.

At the bottom of the letter from the agent to the tenant is a tear-off slip which says: “I …[name]… agree to pay my part and be #part of the team. I am committed to paying all rental arrears and honour my moral obligation to play my part.”

Matt Pugh, managing partner at Hägen Wolf, says: “Firstly, there is a question of whether such a moral contract is an enforceable legally binding contract. For a contract to be enforceable, five requirements must be met: there must be an offer, acceptance, consideration, intention to create legal relation and certainty of terms.

“In terms of acceptance, you have to ask how many tenants will return the tear-off slip reaffirming their commitment to pay all rental arrears and their moral obligations towards their landlord.

“Following recent changes to the law which have, in effect, suspended evictions, communication between landlords and tenants has often been drastically reduced, with the latter often failing to return their landlord’s calls or to update them on their current situation. It might be argued that, if the slip is returned, then a legally enforceable contract between the tenants and the landlords was created.”

The firm argues that the moral contract does nothing more than reiterate the tenant’s obligations already detailed in the tenancy agreement.

The current suspension on evictions does not alter the terms that both parties agreed to when entering into the original tenancy agreement and it does not, therefore, exonerate tenants from their obligation to pay rent.

If tenants fail to make payments or clear rent arrears, they will still be in breach of their contractual obligations and would still be at risk of possession proceedings being issued at a future date, after the current eviction suspension ends.

“While the use of a moral contract does not effectively change the position for landlord or tenant it might mitigate against the fear many landlords have that the current suspension on evictions has sent the wrong message to tenants who might believe that they have been completely relieved of their contractual obligations during this period” Pugh adds.

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It’s only eight weeks to the start off the new Electrical Safety Standards in the Private Rented Sector which come into force on the 1st July 2020.

The regulations are for new tenancies which require landlords or their agents to ensure their properties are subject to electrical inspection and testing, resulting in a satisfactory report, carried out by a qualified, competent person at intervals not exceeding five years.

This will apply to all existing tenancies from April 1 next year.

Despite the Coronavirus crisis, the standards are still being introduced as planned with the government issuing guidance making it clear that landlords and their agents are still responsible for providing safe homes during the pandemic – but that if they can show that they have taken all reasonable steps to comply with their duties under the regulations, they are not in breach of the duty if they cannot comply.

Mike Andrews, chief executive of the National Association of Professional Inspectors and Testers – which has issued new guidance for the sector – says: “Electrical Safety is at the forefront of everything we do, and we have worked hard on this guidance to make it easy for landlords to understand their requirements. We have also launched a dedicated online search facility on our website helping landlords search for competent and qualified tradespeople that they can trust to carry out their electrical inspections.

“As well as this we have created a new Landlord Electrical Installation Safety Record for our members to use which provides a summary of the often lengthy Electrical Installation Condition Report.”

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Housing Secretary Robert Jenrick says the government is “thinking carefully” about what more it can do for private tenants, especially after the eviction moratorium finishes.

Jenrick, addressing the House of Commons yesterday afternoon, responded to a series of questions from Labour MPs about tenants potentially running up arrears.

The housing secretary said that the moratorium expired at the end of June; shortly before that time he would make a decision based on the state of the market, medical advice about progress in combating Coronavirus, and any court information about evictions.

One Labour member – veteran MP Clive Betts, who is also chair of the housing select committee – said that in Spain there was a low-interest loan system for private tenants to ensure they and their landlords were in a position to honour rent payments. Betts asked if a similar scheme could be considered in the UK too.

Jenrick did not reject the idea outright and said he and the government were “thinking carefully” about next steps that could help tenants who may be in arrears.

The tone of the answers from the housing secretary suggested there were unlikely to be new announcement on this before the start of next month at the earliest.

In response to this Dan Wilson Craw, director of Generation Rent, says: “Lifting restrictions on the lettings market is welcome for thousands of renters who have been stuck in unsuitable homes. But a reopened housing market cannot be an excuse to lift the evictions ban which is in force until late June.

“Despite the furlough and increased housing benefit, 2.6m private renters are at risk of arrears with no way of paying them off once the economy recovers. Just a third of landlords have offered flexibility on rent payments, so most of these renters will face eviction as soon as the ban is lifted.

“The worry and stress of the pandemic is giving renters sleepless nights. Many have difficult decisions to make right now. If Robert Jenrick is developing a plan that will reassure them, we need to know what it is urgently.”

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Private rents are expected to fall across the UK in the coming three months, but stabilise over the course of the next year.

That’s the view of the Royal Institution of Chartered Surveyors in its latest market snapshot.

Over the course of the next five years, RICS forecasts that rental growth will stand at around 2.5 per cent per annum, in comparison with prices rising by around 2.0 per cent.

“Not surprisingly, the latest survey shows that housing activity indicators collapsed in April reflecting the impact of the lockdown. Looking further out, there is a little more optimism but the numbers still suggest that it will be a struggle to get confidence back to where it was as recently as February” explains Simon Rubinsohn, RICS chief economist.

“Moreover, whether this can be realised will largely depend on how the pandemic pans out and what this means for the macroeconomic environment” he adds.

RICS says one of the key measures the government could take would be on stamp duty – either in the form of a holiday, or deferred payments or reducing it for some sectors of the market.

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The rental market effectively disintegrated in the early days of lockdown before showing signs of a rebound which are still active now.

That’s the assessment of PropTech firm Goodlord which has a regular market tracker reporting on the lettings sector.

Between March 17, roughly when initial lockdown measures came into effect, and April 14 the number of new tenancy applications plummeted by 72 per cent, reducing market activity by three-quarters compared to the same period in 2019.

Completed lets dropped by 88 per cent over the same period.

However since April 14 demand for rental properties has gradually crept up. Whilst still operating much below 2019 levels, this rebound offers letting agents hope that the worst is now behind them, Goodlord says.

Between April 12 (when market activity bottomed out in line with the Easter Bank holiday weekend) and May 7 (prior to the most recent bank holiday), new applications rose by 45 per cent and completed tenancies by 22 per cent.

During the seven days leading up to the May VE Day Anniversary Bank Holiday on Friday of last week, both new lets and completed lets steadily increased as pent up demand from tenants began to be released.

Whilst still operating well below 2019 levels, the rise demonstrates ongoing demand from tenants for new properties.

Temporary changes to right to rent checks, introduced at the end of March, have made it possible for tenancies to be completed without the need for any in-person contact between agents and tenants.

Goodlord’s data indicates that some letting agents are using these new measures to safely process tenancies that cannot be postponed.

“The last month has been intensely difficult for letting agents. The steep decline we saw in new and completed tenancy applications was unprecedented in modern history. However, there are now some glimmers of hope” according to Goodlord’s chief operating officer Tom Mundy.

“The numbers are showing early signs of levelling out. If this proves true, retaining this subsistence level of demand will prove vital to agents when it comes to surviving the duration of social distancing restrictions, as will their ability to pivot to a fully remote offering” he continues.

“If they are able to weather a few more weeks, we are predicting a much more significant rebound for the market once restrictions on moving house are lifted. Many moves will be on hold right now, meaning demand is building up each week with some already trickly through, as we can see.

“As with any downturn, sales will be hit harder than lettings, as people delay getting their foot onto the property ladder and remain renting instead. For the agents that can go the distance, there will be a chance to claw back some of their losses once restrictions are lifted.”

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A commission investigating affordable homes in the UK has called for annual private sector rent increases to be limited to a new index of income growth and for landlords to pay tenants’ removal costs in some circumstances.

The Affordable Housing Commission also recommends that “charging more than the permitted rent increase would be an offence, with the landlord facing a fine and having to return the excess rent to the tenant.”

The policy would be policed by the First Tier Tribunal, or new Housing Courts as proposed by the Conservatives in the 2019 election manifesto if these are established.

Amongst the commission’s other recommendations is one saying that if private rental sector tenants are evicted because landlords want to sell their property or even move into it, “they should pay the tenants’ relocation costs, to minimise hardship.”

Another says: “The Commission recommends that the government examines the case for a national mandatory professional standard of competency in the private rental sector. Private landlords would have to demonstrate their credibility and a professional standard of management on a similar basis to the regulation of letting agents.”

And another states: “The Commission also recommends that a new national landlord register (run by councils but freely open to the public) is established to improve standards within the PRS.”

The commission includes representatives from Savills, the British Property Federation, the Home Builders Federation, local councils and groups including Generation Rent.

It is chaired by Lord Richard Best, who also chaired the Regulation of Property Agents working group that reported last year with a string of recommendations for letting and estate agents to be qualified before being allowed to deal directly with members of the public.

The Affordable Housing Commission reported a few weeks ago but its recommendations received little coverage as they came at the start of the Coronavirus lockdown.

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