The UK housing market has been subject to instability and lack of clarity for Landlords and tenants over the past few years, but are we heading towards a more stable future?
This month, recent data from HMRC showed that property sales fell by 19% in March, a somewhat expected trend which we also saw hitting the market in March 2022. Additionally, HMRC stated that the total transactions this year have been “significantly lower” than the previous year, but noted that this activity was boosted by a boost in demand and the stamp duty holiday.
Despite the annual fall, it looks like there are some silver linings. This year we have seen a month-on-month uptick of 1%, breaking the trend of declines seen in previous months, such as the 4% monthly decline in February and a 3% dip between December and January.
The head of lender relationships at Legal and General Mortgage Club, Danny Belton, stated it was “positive to see an uptick in transactions from February to March kickstarting a strong spring selling season”.
It isn’t possible to accurately predict the state of the housing market going forward, and there are still many obstacles for landlords to overcome; however it seems like there might be some positive outlook. According to a recent report by Zoopla, the UK property market is currently experiencing its strongest sales market in a decade.
Landlords have been advised by a PropTech engineer to seek guidance from letting agents to navigate red tape.
The rental market has undergone many changes in recent years, causing some lack of clarity amongst Landlords. With so much to keep track of, it can be challenging to stay up-to-date with the latest changes alone, that’s why letting agents are a valuable resource for Landlords who want to protect their properties and avoid penalties.
Neil Cobbald, Managing Director of PayProp UK, stated “No matter which party wins the next election, reforming the private rental sector will be high on their agenda. Proposals to reform the PRS and introduce new rules and regulations cover everything from energy efficiency to tax returns to anti-money laundering measures”.
The long-awaited renters reform bill proposes the removal of section 21 evictions. If the ban is implemented, Landlords will need to have a valid reason for evicting tenants, such as rent arrears or antisocial behaviour. Additionally, the renters reform bill suggests an abolition of letting fees and an introduction of a new lifetime deposit scheme.
These changes are expected to improve transparency and affordability for renters, but they will also place additional responsibilities on Landlords to manage deposits and rental payments.
Alongside new regulations being implemented across the country to ensure the safety and energy efficiency of rentals, Landlords must ensure that they are up-to-date with new laws to avoid large penalties from non-compliance.
Working alongside a letting agent will ease these concerns and provide Landlords with the peace of mind that their rentals are complying with new laws.
To deal with upcoming changes, Cobbold urged “Letting agents and Landlords make a perfect match. The agents have the professional and managerial expertise to get the optimal return from the Landlords’ valuable assets, ensure their tenants have a great rental experience and protect them from the penalties of non-compliance.”
Technical difficulties in the UK government’s Energy Performance Certificate (EPC) database have led to a delay in implementing new regulations for landlords in England. As a result, Landlords will not be required to make certain energy-efficient improvements to their rental properties until 2025 at the earliest.
Why are EPC regulations becoming stricter?
According to a recent survey, 90% of tenants believe that energy-efficient homes are essential, and 82% would be willing to pay higher rent for such properties. Additionally, poorly insulated and inefficient properties can lead to 21% higher energy bills, on average, for tenants. Furthermore, the carbon footprint of a typical rental property is 19% higher than that of an owner-occupied home.
Despite the delay in new EPC regulations, Landlords should take steps to improve the energy efficiency of their rental properties as soon as possible. Making energy-efficient upgrades can save an average of £350 a year on energy bills, and upgrading from an EPC rating of D or E to an A or B can add an average of £16,000 to a property’s value.
The most common ways to improve a property’s EPC rating include:
Adding (or improving) loft and wall insulation
Replacing older boilers for more sustainable alternatives. (This may also save you from costly boiler repairs).
Installing solar panels or alternative methods of creating sustainable energy within the rental homes.
Ensure that glass in your properties is double glazed to improve energy efficiency.
It is vital to note that the delay in implementing new EPC regulations is a significant setback in the UK’s efforts to achieve its goal of net-zero emissions by 2050. However, Landlords can still make a significant impact by taking action to improve the energy efficiency of their properties. By doing so, they can not only save money and increase the value of their property but also improve the quality of life for their tenants.
The UK property market has been unpredictable for some time now, it’s important for Landlords to carefully consider the pros and cons of selling up versus holding onto their investments. While there are certainly challenges to be faced in the current housing market, there are also reasons to be optimistic about the future.
The current housing crisis in the UK has been a highly talked about topic through the property investor communities over the last year. The crisis, caused by a lack of Landlords and an increasing demand for rentals, has caused significant impact to both property investors and individuals seeking suitable rental accommodation.
The Guardian reported on the top challenges faced by current Landlords and buy-to-let investors:
Recent stamp duty increases have made buying new properties more expensive, reducing the amount of new landlords entering the market
The phased reduction of mortgage interest tax relief has reduced landlords’ profits, making it less financially viable to continue renting out properties
Proposed changes to the eviction process (For example, abolishing section 21 evictions) could mean that landlords may have to give tenants longer notice before evicting them
However, despite these challenges Landlords are holding onto their property investments and here’s why:
Yields – Rental yields in the UK are still high compared to other countries, providing a strong income stream for Landlords. Landlords have justifiable reason to raise rental prices in the current market, maintaining profits in the short term and potentially leading to high-yields in the long-term when financial strains ease again.
Demand – The demand for rental properties is likely to remain high, as many people continue to struggle to get onto the property ladder due to rising house prices. This creates a pool of tenants willing to pay higher monthly rent, and provides landlords with a wider choice of higher-quality tenants who are less likely to miss rental payments.
Long-term investment – While the market currently presents some concerning challenges and instability, it’s important to remember that it will stabilise again. When that happens, Landlords who hold onto their investments might benefit from increased yields in the future.
As a Landlord, you should ensure that you are well-informed about changes to the rental landscape in the UK and how your investments will be affected. It’s best to take time to properly research the potential implications the changes have on your investments and weigh up the risks vs benefits. Whilst it is tempting to sell up when there are challenges in the market, impulse decisions can lead to large losses and potentially missing out on opportunities in the future.
According to a recent announcement, Landlords will be given the power to evict unruly tenants, despite the proposed abolition of the section 21 ruling.
There has been concern between Landlords following the discussion to get rid of the section 21 ruling, with Landlords concerned that they will have less control over their properties and not be able to evict tenants who breach their tenancy agreement.
Section 21 recap
In 2019, the UK government announced that Landlords would no longer be able to evict tenants without a legitimate reason under the new Renters Reform Bill. This decision was met with significant opposition from landlords, with 84% of them against the ruling, according to a National Landlords Association survey.
Landlords were concerned that this would make it more difficult to deal with tenants who were not paying rent, causing damage to the property, or violating the terms of their tenancy agreement.
Good news for Landlords
The good news is that Landlords will be given more power to evict tenants under Section 8 .
The proposal is that this will be achieved through the introduction of a new model tenancy agreement, which could allow Landlords to evict tenants without providing a reason after four months of the tenancy.
This means that Landlords will be able to serve notice on tenants more easily and quickly, ensuring that their property is protected.
Eviction restrictions
This power to evict will come with restrictions; Landlords will not be able to use this power to evict tenants who have raised concerns about the condition of the property or have made a complaint about the landlord.
Additionally, Landlords will still need to follow the procedure for eviction, including providing the tenant with the correct notice and obtaining a court order.
The introduction of this power to evict is positive news for Landlords. This will give them more control over their properties and allow them to take action when necessary. However, there are some potential negatives to consider. Some tenants may be concerned that this power could be abused by Landlords and lead to unfair evictions. It will be important to ensure that the correct procedures are followed and that tenants are treated fairly.
As part of the Right to Shared Ownership scheme, residents in social and affordable housing can now apply for the chance to buy a share in their rental home.
The government is positioning this scheme as an alternative route to buying a home for those who would have previously found the step challenging. Lucy Frazer, Housing Minister, suggested that this scheme has been put into motion to provide tenants with the chance to live in a home of their own.
What does this mean for tenants?
Affordable and social housing tenants will be provided with the opportunity to own a share of their home as a leaseholder. The tenant will usually be required to pay monthly service charges on the building which will include maintenance charges.
What does this mean?
Tenants will be able to buy a share of their property worth between 10 and 75 %
Having a share of the property provides the tenant with more control over the home they live in
Becoming a shared owner would require the tenant to take out a mortgage while continuing to pay rent on the remaining equity, increasing living costs for the tenant
The Right to Shared Ownership scheme is not available in Scotland, Wales or Northern Ireland.
Which Tenants could be eligible to use this scheme?
Tenants can apply to buy a share of their home when:
It is the tenant’s main home
The tenant has lived in the property for at least 1 year
They have been a tenant of social or affordable housing for at least 3 years
The property is eligible for the Right to Shared Ownership scheme (Landlords will be able to confirm this)
The UK Government plans to make the Right to Shared Ownership an option that is available to more tenants in the coming years.
What does this mean for Landlords
The tenant will become a leaseholder and be liable to pay service charges for necessary maintenance on the property at the same rate as someone who owns 100% of the equity on the property
There is an ‘initial repair period’ whilst the scheme is implemented. Meaning that costs such as structural repairs and installations will continue to be the landlord’s responsibility for 10 years after the property was built
If a shared owner does not pay their rent, there are measures in place for landlords to regain full possession.
The Coronavirus pandemic has been worrying and stressful on so many levels. The worry of keeping yourself and your loved ones safe from a harmful virus is enough. Yet, combining this with lockdown and too many life changes overnight, losing your job can just add to the ever growing stress, worry and loneliness.
The government has had a blanket approach so far in financially helping people, by offering some companies the option to furlough existing staff and offering to pay 80% of salaries through PAYE. Yet some people have slipped through the net, with companies pulling roles and not being able to furlough staff if they’re not on the payroll in time. Some HR departments have said that furloughing staff can cause a range of issues for them with time and resources. Other companies just simply haven’t done it and made redundancies.
Freelancers and companies can get government grants, however this hasn’t covered everyone. Thousands of individuals have been left looking for jobs at a time when things have stood still.
This has left people without adequate financial help and the only other support has been Universal Credit/job seekers allowance. If people are renting, often the housing benefit doesn’t cover the cost of the rental amount and so this needs to be topped up with Universal Credit. This doesn’t leave much room for Council Tax (even with a reduction), bills and food. For some renters, they’ve had to make the decision between paying rent and affording food.
The economic impact of lockdown has hit people unequally but it has caused immediate impacts on mental health. The Mental Health Foundation reports that “a quarter reported not coping well with the stress of the pandemic (twice as many as those in employment), almost half were worried about not having enough food to meet basic needs.”
Credit: Mark Oliver Paquin
First steps to take
If Housing Benefit or Universal Credit doesn’t cover all of your rent and you need more money, you could make a claim for a discretionary housing payment (DHP). A DHP is extra money from your local council to help pay your rent.
You could also look to get a council tax reduction if you haven’t already done it here.
Check out the benefits calculator too, to see if there is any additional support you can get.
4. You may also be able to speak to your utilities company and try and get a payment plan to help with the costs, discover more.
Speak to your landlord
If you’re unable to get additional financial help and still you’re struggling to pay your rent, speak to your landlord as soon as possible. Please let them know what your situation is and that you’re struggling. They may be able to come to an arrangement. Perhaps you could pay half of your rent and then when you’re back on your feet, you can increase it over the coming months. Landlords would rather know the situation than receive radio silence and then no money at the end of the month. Your landlord may even be able to have a mortgage break and then pass this break on to you.
If you aren’t able to come to an agreement with your landlord, get in touch with Citizens Advice who can signpost you to a range of help and advice.
Credit: Co-worker
Speak to housemates
If you’re a lodger in a property, then speak to your live-in landlord and see if you could take on some additional work to lower your rent like cleaning. If you live with other housemates too, look to club together to buy food to help reduce your costs. Perhaps see if you could distribute the rent amongst yourselves differently to help each other out – if others are in a more stable position.
Can I be evicted if I can’t keep up with the repayments?
Your landlord can’t evict you if you don’t keep up with your rental payments as there is now a tenant eviction ban in place until 31st March 2020. Your landlord will have to give you six months notice to leave. This doesn’t apply where there is domestic abuse or anti-social behaviour within a property.
If domestic abuse is occurring within a property that you are in, get in touch with the National Domestic Abuse helpline. If you’re in life threatening trouble, ring 999 and if once dialed you can’t speak, press 55.
We would strongly urge tenants to seek as much financial support as they can get and to be open and honest with their landlord about their current situation.
We understand that dealing with financial worries can result in a range of issues and if you are struggling with your mental health as a result, please check out these links for advice and support.
We’re really glad that you’ve decided to place an offer on one of our landlords’ properties. The great news is, if your offer is accepted you can look forward to zero fees and having your credit score improved as you pay your rent each month. Howsy is a platform that connects landlords and tenants. Our team is here to help throughout the entire process but ultimately the landlord chooses what happens next. Sometimes our landlords tell us to accept reasonable offers on their behalf, sometimes they’ll ask us to help facilitate a negotiation. In some circumstances, they will take some time to consider. We’ll do everything we can to speed up the process – by reminding the landlord or offering advice, but ultimately the decision is always the landlords. Please have patience and rest assured we will keep you updated every step of the way.
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