Year: 2020

Prime Minister Boris Johnson has confirmed that the government is bringing forward anti eviction measures to “protect” private tenants during the Coronavirus crisis.

The announcement came at Prime Minister’s Questions in the House of Commons, in response to queries from Labour leader Jeremy Corbyn.

The PM said: “We will be bringing forward emergency legisaltion to protect private renters from eviction.”

Johnson did not give details of the anti eviction measures or the timing, although he nodded agreement to Corbyn when he said the measure should be taken in the next 48 hours.

Corbyn cited examples from Spain and some US cities which have halted evictions, and France which has made funds available to postpone rent payments during the crisis.

David Cox, the chief executive of the Association of Residential Letting Agents, backs the mover.

He says: ‘We agree that the government must do whatever it takes to safeguard tenants in these unprecedented times. We of course have to support tenants as they face uncertainty over the coming months, while as the Prime Minister has said, ensuring we don’t simply pass on the problem to other actors in the economy.”

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Typical buy to let annual costs pays over £600 in fees a year according to a new study released today.

Insurance company CIA Landlord says fees range from £40 for a tenancy deposit to £179 for landlord insurance.

In between an EPC, gas safety certificate, local authority and other licensing take additional sums, adding up in total to £606.95.

On top of that it will cost at least £4,967.53 to furnish the typical buy to let property with only basic household furniture and appliances, says the same survey.

“When looking into the true buy to let annual costs of being a landlord, it can certainly come as a surprise to some at just how expensive certain requirements are. Before taking your first step into the property ladder, we recommend you consider all the required costs involved and ensure you invest in an area that will be profitable for you in the long-term future” says company spokesman Richard Wayman.

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According to a recent survey of National Landlords Association members, there has been a significant rise in the number of self management landlords who are dropping their letting agents following a price hike for their services.

The proportion of private landlords shunning letting agents in favour of letting and self management of their own properties increased to 43%, up from 36% in Q3.

The 7% quarter-on-quarter increase reflects growing dissatisfaction with the charges many letting agents are levying onto landlords following the ban on fees to tenants which came into force in June 2019.

The NLA Q4 2019 Landlords Panel Survey reported that a typical landlord spent around £3,221 last year on letting and management fees. This was up from £2,026 reported in Q4 2018 and represents a 59% increase over 12 months.

Richard Lambert, Chief Executive Officer of the NLA, commented: “The tenant fee ban was always going to lead to agents trying to charge landlords more in order to recoup costs and maintain their margins. The only question was how much of a hike landlords would be prepared to accept.

“Landlords are voting with their feet and opting to forego paying inflated fees for the services of letting agents. This goes to show that landlords will only pay what they believe the service is worth and no more. A good letting agent can provide a great deal of value to landlords who do not wish to manage their own properties, but this shows that it is not essential to an increasing number of landlords.

“Responsible landlords can, and do, self-manage, saving themselves thousands of pounds.”

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Once you’ve purchased your buy-to-let, paid the additional stamp duty and tax requirements, been hit with a lower deposit due to the Tenant Fee Act and paid a local agent’s fees to find you a tenant, you’re ready to rent right?

Wrong. A buy-to-let investment requires constant upkeep to not only keep your tenant happy but to ensure your investment remains in line with the legal standards required.

Newly released figures from lettings management platform, Howsy, has found the cost of BTL maintenance the average buy-to-let investment across the UK currently sits at £2,313, accounting for 28% of the annual rental income available.

Like it or not, this BTL maintenance is a vital part of owning a buy-to-let property and Howsy has highlighted the annual upkeep cost based on the 1% rule, whereby budgeting 1% of the purchase price of a property covers the upkeep on an annual basis. Howsy then looked at the current average rent across the market and what proportion of rent is required to cover these maintenance costs and how it differs regionally.

Of course, different property costs and rents achieved across the UK means that this cost varies regionally and doesn’t have to hit the 28% seen at a top-level across the UK.

Nationally and Regionally

Wales is home to the highest proportion of rental income spent maintaining a buy-to-let with 1% of the average property price (£1,639) accounting for 27% of the average annual rent (£6,182), while Scotland is home to the lowest top-line level of maintenance costs at 17%.

On a regional basis, the East of England is home to the most expensive buy-to-let investment where upkeep is concerned, with this BTL maintenance cost accounting for 28% of the average annual rental income. The North East is the most affordable at 20% and perhaps surprisingly, London is the home to the fourth-lowest buy-to-let maintenance costs, accounting for 23% of the annual average rent of £20,364.

Locally

The best investment location to keep maintenance costs low is currently Glasgow, requiring just 13% of the average annual rental income (£10,596) to budget for any unforeseen costs.

Inverclyde (14%), West Dunbartonshire (14%), Midlothian (14%), Burnley (15%), East Ayrshire (15%), Belfast (15%), Falkirk (15%), Dundee (16%) and Clackmannanshire (16%) were also amongst the lowest buy-to-let locations for maintenance costs.

In London, Tower Hamlets (20%), Barking and Dagenham (21%), Newham (21%), Greenwich (23%) and Hounslows (23%( were the boroughs home to the lowest buy-to-let maintenance costs as a proportion of the average annual rent.

Calum Brannan, founder and CEO of Howsy, commented: “Covering maintenance costs is an essential part of managing your buy-to-let investment as failing to do so will not only reduce the profitability of your investment as tenants look elsewhere, but it can also land you in hot water legally if your property is not fit for purpose.

“Using the one per cent threshold of the purchase price of your property is a sensible place to start when budgeting for maintenance and although it acts as a rough rule of thumb, it should cover everything but the very worst damage to your property.

“Of course, the government’s consistent attack on the profitability of the buy-to-let sector could have alternative consequences as landlords cut corners on maintenance to get by, but as our research shows, this doesn’t have to be the case.

“The UK rental sector is a vast and varied one and investing in the right property, in the right place, will see operating costs remain palatable and profits remain robust.

“However, with technology changing the face of the industry, landlords now have even more options at their disposal when it comes to keeping their investment profitable and all of their costs under one roof.

“That’s the exact reason we launched Howsy Protect, as it not only guarantees rent if your tenant falls behind, but it protects against unforeseen repair costs. So rather than keep a chunk of rental income back for a worst-case scenario, landlords can pay one consistent, manageable monthly cost and rest safe in the knowledge we’ve got them covered.”

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Tenants will continue to face a rental supply crisis as the Chancellor’s Budget has today failed to boost the supply of privately rented homes.

Following years of tax hikes on the sector, organisations including the Royal Institution of Chartered Surveyors, Hamptons International, Zoopla and ARLA Propertymark have warned that private sector rents are set to rise as the demand for such homes outstrips supply.

The Residential Landlords Association and the National Landlords Association warn that this only makes it harder for tenants to save for a home of their own. Professor David Miles, a former member of the Bank of England’s Monetary Policy Committee, has warned that “aspiring first-time buyers are hardly helped by squeezing the supply of privately rented homes and driving rents up.”

The RLA and the NLA had called for the Chancellor to scrap the stamp duty on the purchase of additional homes where landlords invest in property adding to the net supply of housing such as new build properties or bringing long term empty homes back into use.

In a joint statement, the Residential Landlords Association and the National Landlords Association said: “The Government is undermining its own efforts to boost homeownership through its attacks on the private rented sector. By choking-off supply and making renting more expensive it is tenants who are hardest hit.

“Ministers need to wake up to the reality of the damage their tax measures are doing to the private rented sector and support landlords to provide the new homes for private rent we desperately need.”

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Tenants will continue to face a rental supply crisis as the Chancellor’s Budget has today failed to boost the supply of privately rented homes.

Following years of tax hikes on the sector, organisations including RICS, Hamptons International, Zoopla and ARLA Propertymark have warned that private sector rents are set to rise as the demand for such homes outstrips supply.

The RLA and NLA warn that this only makes it harder for tenants to save for a home of their own.

Professor David Miles, a former member of the Bank of England’s Monetary Policy Committee has warned that “aspiring first-time buyers are hardly helped by squeezing the rental supply crisis and driving rents up.”

The RLA and the NLA had called for the Chancellor to scrap the stamp duty on the purchase of additional homes in cases where landlords invest in property adding to the net supply of housing – such as new build properties or bringing long term empty homes back into use.

In a joint statement the associations said: “The government is undermining its own efforts to boost homeownership through its attacks on the private rented sector. By choking-off supply and making renting more expensive it is tenants who are hardest hit.

“Ministers need to wake up to the reality of the damage their tax measures are doing to the private rented sector and support landlords to provide the new homes for private rent we desperately need.”

Watch: RLA policy manager John Stewart reaction to some of the announcement made in the Budget

Written by Sally Walmsley

Blog Post from Residential Landlords Association

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The government has been called upon to issue specific Coronavirus guidance for the rental sector.

The chief executive of the Association of Residential Letting Agents, David Cox, has called on the government for guidance for the rental sector, especially if the outbreak leads to practical emergencies involving tenants and landlords.

On the ARLA website, this example is given. “If a tenant were to have the virus or be in a period of self-isolation, what happens if something goes wrong in the property (for example the boiler stops working). The landlord or agent or contractor will not go in to avoid contracting the disease and spreading the pandemic” says Cox.

“However, that means there is a tenant with no hot water or heating for two weeks or longer if the government extends the period of self-isolation. This puts the landlord or agent in breach of Section 11 of the Landlord and Tenant Act 1985, any selective or additional or mandatory licensing conditions [as well as] the Homes Act 2019, Housing Health and Safety Rating System under Housing Act 2004.”

Breaching these laws could open the landlords and/or agents to unlimited liability and/or a Banning Order explains Cox.

Cox’s request for specific guidance has also raised concerns regarding the consequential impact the virus will have on agents and landlords when getting themselves ready for new electrical regulations which comes into force in July.

He flagged that government may want to consider relaxing the deadlines to give both the industry and supply chain longer to become compliant.

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Newly released research from specialist lender, Foundation Home Loans, has revealed that over half of all landlords do not use the services of a tax adviser, presenting both an opportunity and a risk for mortgage advisers.

According to the findings, 42% said they had been recommended one by a friend or colleague or another landlord, however only 3% said they had taken their business to an advisor recommended by their mortgage broker. 40% use one at least once a year, and 7% use one less than this.

Foundation suggested that mortgage firms should establish introducer arrangements with tax advisors to help clients get the specialist advice they need and advised that to do otherwise might mean advisers recommended unsuitable mortgage products to landlords who did not know the full extent of their own tax situation and what options would be best for them.

The landlord research – undertaken by BVA BDRC and carried out in January 2020 with the results based on 791 online interviews – also asked landlords to consider the cost of their buy-to-let mortgages over the duration of 2020. 40% felt their mortgage costs would increase, 47% said they felt they would stay the same, while 13% said they thought they would go down. Those landlords with bigger property portfolios – 20-plus – were more likely to say their mortgage costs would go up.

Foundation outlined the opportunity available for mortgage advisers with such landlord clients in, what it calls, “a highly-competitive mortgage market”. It has suggested that landlords using the services of an adviser might be “pleasantly surprised” by the rates on offer, and the mortgage product options available particularly portfolio and professional landlords.

The research highlighted the further opportunity for advisory firms with more than a third of landlords saying they had not arranged their last buy-to-let mortgage through a mortgage adviser, with nearly a quarter preferring to go direct to the lender (24%). Foundation’s research did, however, suggest that those landlords with bigger portfolios were more likely to use an adviser for their purchases, with over 70% of portfolio landlords using their services. And while 30% of landlords said they plan to remortgage at least one of their properties over the next 12 months, 61% of those said they would expect to use an adviser, 23% would go directly to a lender.

Foundation said there was also positive news from the research in the number of landlords who said they will reduce the number of portfolios they hold – this has been falling from a figure of 26% in quarter two last year to 22% in the latest iteration of the research. The number who said they would increase the number of properties they hold in their portfolios had also risen, up to 14% from 13% in the previous quarter.

Of those landlords who said they would be adding to their portfolios over the next 12 months, 55% said they would do so through a limited company vehicle, 30% would buy as an individual, 8% said it would depend on the circumstances, 7% would buy in the name of their partner, while 5% would use other means when purchasing.

Jeff Knight, Director of Marketing at Foundation Home Loans, said: “Having specialist tax advice should, in our opinion, be a non-negotiable for landlords before they make any decision about what type of mortgage they need, and how they are going to own and finance their properties going forward.

“Advisory firms clearly have a role to play in this and, it is surprising to see so few landlords saying they chose their tax adviser on the basis of their adviser’s recommendation. An introductory arrangement can work for all concerned – advice firm, tax adviser and client – and should help provide clarity on the tax position and, subsequently, the mortgage advice.

“It is also interesting to hear that large numbers of landlords believe their mortgage costs are destined to rise in 2020, especially when we have such a highly-competitive mortgage market. This clearly presents a marketing opportunity for advisers to target those landlords who may be purchasing or refinancing this year because we might suggest that their clients could be pleasantly surprised by the products and rates on offer to them.

“Overall, there are clearly large numbers of landlords who are not using advisers to secure their buy-to-let mortgages – indeed, if they only go direct, then this might be why they feel their mortgage costs are likely to go up. It’s therefore vitally important that advisers put themselves in the shop window, not just for those landlords who would naturally use their services, but the many who seem more inclined not to take advice.

“We must continue to bang the drum about the need for, and the benefits of, advice especially to a borrower demographic who could gain a lot from access to specialist products in this area.”

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Coal and wet wood, used in wood burners, stoves and opened fires will be banned from next year in a bid to tackle air pollution.

An estimated 2.5million homes in the UK have hearths with open fires or woodburning stoves – including many rental homes.

Landlords should let tenants know about the coal and wet wood ban – first announced 18 months ago – and advised to use “cleaner alternatives” such as dry wood or smokeless fuel going forward.

What is wet wood?

Wet wood is often included in bags of logs sold in DIY stores, garden centres and petrol stations. It is cheaper to buy than some alternatives, as it has not been dried out to reduce moisture content.

Confirming the ban, Environment Secretary George Eustice said: “Cosy open fires and wood-burning stoves are at the heart of many homes up and down the country.

“But the use of certain fuels means that they are also the biggest source of the most harmful pollutant that is affecting people in the UK.”

The changes will mean:

• Sales of bagged traditional house coal will be phased out by February 2021, and the sale of loose coal direct to customers will end by 2023
• Sales of wet wood in small units (less than 2m cube) will be phased out from February 2021. Wet wood in volumes greater than 2m cube will also have to be sold with advice on how to dry it before burning
• Makers of solid fuels will also need to show they have a very low sulphur content and only emit a small amount of smoke.

The government has stressed it is not banning wood or coal burning stoves.

The government said the phase-out will give the public and suppliers time to use up stocks, so landlords are advised to encourage tenants to use up any stores they may have.

Written by Sally Walmsley

Blog Post from Residential Landlords Association

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Demand for rental properties in January increased to the highest level on record with 88 prospective tenants registered per lettings agency branch compared to 56 the previous month.

Data from the Association of Residential Lettings Agents shows that agents have witnessed a 57 per cent increase in the number of prospective tenants registered, just since December.

Year-on-year that means demand for rental accommodation has increased by over a fifth from 73 per branch in January 2019 to 88 last month.

However, the number of properties managed per branch fell from 206 in December to 191 in January, and ARLA warns that supply has not been this low since July last year when it stood at 184.

Year-on-year supply is down from 197 in January 2019, but up from 184 in January 2018.

Meanwhile the association says the number of tenants experiencing rent increases rose in January, with 42 per cent of agents witnessing landlords increasing them, compared to 32 per cent in December last year.

Year-on-year, this figure is up from 26 per cent in January 2019 and 19 per cent in January 2018.

ARLA president David Cox describes the figures as “a huge blow for tenants” adding that with demand increasing by more than half, but rental supply falling, rent costs are unsurprisingly being pushed up.

“Our recent research found that tenants could miss out on nearly half a million properties as more landlords exit the traditional private rented sector and turn towards short-term lets which will only serve to worsen the problem for those seeking longer term rental accommodation” he says.

“With the Spring Budget around the corner, it’s important that the government works to make the private rented sector attractive to landlords again, rather than introducing complex legislation which ultimately squeezes the sector and leaves tenants worse off.”

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