Landlords under fire

buy to letLandlords could be forgiven for feeling like pariahs just now. The government is working hard to make it really difficult to be a landlord, which seems more than a little out of kilter in a market that needs more, not fewer homes for rent

Ringley is retained by and advising top institutional build to rent developers in England and Ireland and has just announced a joint venture with JP Hay which is very active in the BTR market in Manchester.  With housing need so acute right across the country, supply has to be the answer so the more the better.  Bring it on, we say!

The current thinking around the private rented sector is clearly to foster institutional investment and encourage the big developers to flood the market with purpose-designed build to rent accommodation, while taxing smaller buy-to-let landlords out of the market, in theory leaving the big boys to do it better. But not all renters want to live in an institution-run building and many may prefer a flat in a small development or a house. In light of rising house prices and a rapidly expanding rental sector surely there has to be room for a broad range of property that includes HMOs, family homes and older as well as new build housing stock in addition to the shiny new apartment blocks that are springing up across the country.

The other aspect that we believe needs revisiting is taxation. According to new research from the National Landlords Association, the rental income received by 79% of landlords with mortgages is only sufficient to service the interest element of their loans, and not pay down their debts, as they contend with rising costs. How is it possible to justify taxing buy-to-let landlords differently to institutional landlords – it is clearly unfair.  The government has failed again and again at meeting its own housing targets.  Arguably, only on immigration targets is its track record worse. And the government is equally scared about funding pensions for our aging population.   So, if a buy-to-let landlord is delivering both a home to a tenant and simultaneously providing for their own old age via property investment, instead of expecting government handouts then surely the BTL sector deserves support? Our solution is simple: instead of forcing BTL landlords out of the market, why not limit the number of properties they can own and monitor them properly to keep the rogues out of the market.

The Tenants Bill now going through Parliament is rightly trying to make the market fair and transparent for renters. But there is a balancing act here. For the pendulum to swing too far in the direction of tenants without also addressing the genuine needs of landlords, many may decide to call it quits. That would worsen, not alleviate, our current housing crisis and would be an embarrassing own-goal for government.

As the NLA said this week, encourage building more housing of all tenures by simplifying planning and borrowing rules and stop taxing professional landlords out of the market. The loss of good landlords will not make renting more affordable; it will simply drive up the cost for those who want to access decent rented homes.

Renting for life – what’s the problem?

For-rent-signLetting Agent Today claims that a third of millennials will never own their own home. The report quotes new research from interiors firm Thomas Sanderson showing why the rental market is seeing such strong demand: it reveals that 28% of people under the age of 35 have no money set aside for a deposit on a house. Of the remaining 72%, the average amount people had saved was just over £6000 – that’s under a fifth of the average deposit for a house in the UK. And 30% of Britons aged 18 to 35 years old say they have given up on the idea of owning their own home completely.

What all this adds up to, is that large numbers of us will be living in the rented sector, not only while we are young and single but once we’re married and start a family, into middle-age and beyond. Research from the Resolution Foundation and Shelter predicts that by 2025, 33% of families with children living in London will be renting.

So given that more of us will be renting for longer – or for our whole lives – should we be moving to a regime more like the European model. In Germany for example, tenants have extensive rights including security of tenure, assured rental rates and protection from hardship caused by unfair practices.

These aspects of a highly-regulated rental market are great for tenants but may be viewed less favourably by landlords the majority of whom, understandably, want to be in control of their own property. They want to be able to decide who lives in it and for how long. If tenants prove troublesome they want to be able to evict them.  Conversely, if tenants are happy in their home,  easy to deal with and pay their rent on time, most landlords will let them stay for as long as both parties are happy.

Getting the balance right by ensuring legislation works for both sides of the renting equation is the job of government – but it’s not an easy task. New legislation coming forward aims to tackle some of these issues and stronger regulation around property agency will undoubtedly help too.  Dealing with the fall-out when landlords and tenants clash is part and parcel of our role as property managers. Alongside our technical and professional role as agents we often feel we should win prizes for diplomacy too!

Vidhya Alakeson, director of research at the Resolution Foundation, said recently that families who rent need security in a regulated market. “With children attached to schools and parents to work, it is critical for households – and for society – that families can find stable and secure rented accommodation to raise their children in.” That sounds about right to us. What do you think?

 

Take-aways from the National Residential Investment Conference 2018

Today I have been talking about the rental market at this year’s sold out National Residential Investment Conference, held each year in London.

Among other topics in the spotlight during the course of the day, was JLL’s recent research on the institutional (non-Housing Association) sector.  Here are some key facts and figures. Having analysed seven residential developments comprising 911 units with an average scheme size of 130 homes, JLL reveals that average gross to net is 26.6% with an average rent premium of 9% for high quality build-to-rent developments and 3% rental growth.

The average tenant age across these schemes was 31 years old, achieving circa 30% more than the mean UK salary.  Tenants were prepared to pay to be in a BTR or multi -family scheme and were not over extending themselves with rent to income at 28%, compared to the UK over-burdened rate of 40%.

JLL also identified these net initial yields:

  • London Zones 1-2 suggested yields 3.5%
  • London Zones 3-6 suggested yields 3.75%
  • Regions 4.15 to 5%
  • Glasgow the highest at 5%

Urbanisation remains the trend, with 4bn of world’s 7.5bn now living in cities.

The conference also threw up some interesting statistics on the changing nature of UK households.

The number of people getting married is on a downward trend. In tandem with this, the average number of children per couple is reducing and people continue to start their families later than previous generations.  The knock-on effect of all this, is that two thirds (or 17 million) of UK households do not contain children.

In terms of future property provision, this means that what the UK needs are more homes suited to couples with no children, retirees and single sharers.   As a result, we anticipate that micro-living solutions and co-living will get more air space going forward.

The Collective at Old Oaks is one of the first purpose-built co-living developments in the UK
The Collective at Old Oaks is one of the first purpose-built co-living developments in the UK.

So what is micro-living, I hear you say. Isn’t that just an HMO?  Rightly or wrongly, for most of us HMOs tend to conjure up badly converted, poorly maintained housing stock – not the purpose-built, thoughtfully designed new spaces now coming on line.  The Collective at Old Oak is a good example, although arguably it could be termed student accommodation for grown-ups!

So the answer is surely not more HMOs, but rather well-designed spaces concerned largely with common, outside-the-apartment space.   This puts me in mind of 1930s mansion blocks with their own restaurant and no individual kitchens to speak of.

At Ringley we manage some of these, which – without all the original amenities that have gradually been lost over time – are now often just cramped flats.  I trust in future these shared spaces will be better designed and the ‘outside-the-home’ spaces will be more about living than eating.

Shaking up property disputes – it’s about time

 

law reformIt really is all change in our industry at the moment as yet another consultation is unveiled by government – this time on the idea of setting up a new ‘Housing Court’.

Proposals were outlined yesterday (13 November) by Communities Secretary James Brokenshire that aim to shake up the property dispute system and find better ways of resolving legal issues between landlords and tenants.

The Government wants views and opinions on the:

  • private landlord possession process
  • user experience in both the county courts and the First-tier Tribunal for property cases
  • case for a new Housing Court
  • case for other structural changes such as an extension of the remit of the property tribunal

Other proposals include reducing the need for multiple hearings in different courts, transferring certain types of housing cases between the courts and tribunal to get quicker resolution and providing better guidance for landlords and tenants to help them access the legal system.

At the moment legal disputes that centre on housing are dealt with in a range of different ways, depending on the issue in question. This is confusing and can put people off seeking a solution to their housing problems. Some families and vulnerable tenants live in fear of being forced to move or being evicted if they complain about a housing problem. This isn’t good enough. And the problem isn’t all one-sided. Landlords may also struggle to get their property back even when they have a legitimate reason to do so.

The government hopes the proposals set out in the consultation will help sort out these problems, making it easier for tenants to pursue disputes and helping enforce their rights under the law.  Landlords could also be more confident in offering longer, more secure tenancies where appropriate.

Bodies representing landlords are particularly interested in reforming the current possession process – which can be long drawn out and costly. The National Landlords Association will be asking government in particular to look at the Section 8 possession process. For those of you who aren’t familiar with the ins and outs of landlord and tenant law, Section 8 requires landlords to seek a court order to gain possession of their property where a tenant has breached the terms of their agreement.

At the moment, claims the NLA, it takes about 18 weeks between a landlord making a repossession claim and getting the property back. This can cost more than £5000. The “sticking plaster” alternative to Section 8 is Section 21 which kicks in only after a fixed-term tenancy ends or during a periodic tenancy but no reason is needed for serving a tenant with an eviction notice and tenants must vacate the premises within two months. Most tenancies are ended by the tenant – but in a minority of cases landlords are within their rights to ask a tenant to leave. Reform is long overdue and this consultation may be an opportunity to swing the balance back into the landlord’s favour when a tenant is at fault.

What do you think? The government is looking for views and opinions from both landlords and tenants so to have your say, go to https://bit.ly/2DDmWl3. The consultation runs until 22 January 2019.

Pay your rent on time – and boost your credit rating!

 

Do you always pay your rent on time? If so, your on-time payments could soon improve your credit rating in exactly the same way that homeowners benefit by keeping up their mortgage payments.

The Cindexreditworthiness Assessment Bill, which is now going through Parliament, will enshrine this in law. The Bill requires certain matters to be taken into account when assessing a borrower’s creditworthiness and once enacted – hopefully in 2019 – for the first time, credit providers will have to include your rental and council tax payment history when calculating your credit score. At the moment, timely rental payments aren’t necessarily reflected in people’s credit reports but – hopefully – this is all about to change. The Bill, which was put forward by Big Issue founder Lord Bird, has cross-party backing in the House of Commons and had its second reading in October.

And the change won’t only work in tenants’ favour – it will be good news for landlords too. The Residential Landlords Association says 61% of landlords support the move; it believes including rent payments in your credit rating in this way will also make it easier for landlords to make a more accurate assessment of a prospective tenant’s credit and rent payment history. In turn that would make it more straightforward for people with a good credit record to find rental property quickly and easily.

This bill is long, long overdue. With rental and/or mortgage payments being the largest and arguably most important outgoing for UK households, it has always been unfair to tenants that they have been denied the ability to have their ‘rent worthiness’ to be taken into account.

Latest estimates show that around 5.4 million UK households rent, so once this legislation is enacted it stands to make a big difference to many people’s lives whether they wish to prove their credit worthiness to a prospective landlord, buy a new car or take out a bank loan. It will open up fairer access to more affordable credit to a wider pool of responsible borrowers and prevent people from falling into the high-cost-credit poverty trap.

Your Move’s Landlord Survey, which recently polled 1,071 landlords and tenants to learn more about their portfolios, behaviours and attitudes towards tenants, agents and the lettings market, shows that landlords vote trustworthiness as the most important quality in tenants. Just over a quarter (26%) of landlords’ surveyed rate tenants who pay on time as the most important consideration.

PlanetRent created by the Ringley Group will soon be making rent worthiness data available to support tenants and landlords alike.  PlanetRent is lettings automated – for landlords who want paperless deals, advertising, landlord websites, compliance sorted, protection from fines and the whole audit trail completely taken care of.  To find out more go to PlanetRent.co.uk

 

 

Good news for the NIMBYs?

 

Let’s face it, most of us are NIMBYs at heart. We know we need more housing and we know we should welcome housebuilding in our back yard but dislike the ‘sameness’ look of the new housing that is seemingly springing up everywhere.  In cities these days it’s all about high density build-to-rent blocks and out of town, from Bognor to Berwick-on-Tweed, we are faced with housing schemes that all look, well, pretty similar really.

For years now it seems as if new housing has simply been a numbers game. In the rush for local authorities to prove they are doing their bit to deliver new homes to meet the promises of their local plans, quality and design often seem to be the last consideration.  Early prototypes of modular houses similarly seem to have missed the opportunity to enable homes to have their exteriors dressed creatively.  Yes we live indoors, but is not the principle of the UK planning system that the community owns the streetscape?

We are pleased to see that at last someone appears to be listening to the concerns of communities around the country, which are often resistant to new build housing. This week, Housing Secretary James Brokenshire launched a commission to promote better design in the new build sector. This aims to put forward practical measures to make sure that new developments meet the needs and expectations of communities, so housebuilding is more likely to be welcomed than resisted.  We feel this commission can only lead to better quality stock, less local resistance, more homes built faster.  A win-win all round.

The revised National Planning Policy Framework (NPPF) includes measures to strengthen design quality and community engagement, with the character of the area to be given more consideration.

As The Planner revealed this week, the ‘Building Better, Building Beautiful’ Commission will expand on the ways the planning system can encourage and incentivise a greater emphasis on design, style and community consent. It has three aims:

  • To promote better design and style of homes, villages, towns and high streets, to reflect what communities want, building on the knowledge and tradition of what they know works for their area.
  • To explore how new settlements can be developed with greater community consent.
  • To make the planning system work in support of better design and style, not against it.

The minister rightly says that many people feel new homes in their area aren’t up to scratch. “Part of making the housing market work for everyone is helping to ensure that what we build is built to last. That it respects the integrity of our existing towns, villages and cities,” he said.

We certainly welcome the prospect of kick-starting a debate about the importance of design and style, and if the intention is to launch a consultation on the back of what the commission comes up with, we are keen to contribute to the discussion.

But – and it’s a big but – none of this will go any way towards improving the housing situation in the country if our already underfunded and under-resourced planning departments are given even more hoops to jump through before they can give schemes the go-ahead. Developers, housebuilders and – arguably most important – architects, all have to be on board to ensure that schemes are build-ready and will gain the consent of local planning offices and the communities they serve. As the minister says, new housing should help “grow a sense of place, not undermine it”.

 

Stamp duty abolished for some first time buyers – and rates relief for retail

 

Yesterday’s Budget speech didn’t include many dramatic new measures to boost the property sector  but we certainly welcome the Chancellor’s first time buyers’ stamp duty abolition on shared ownership homes valued at up to £500,000. This is a good way to get normal working families into secure accommodation as an alternative to rent.  With the huge increase in numbers of homes for sale and/or part ownership developed by housing associations we see HAs very much as the developers of the future. With a red tape, tick-box-based planning system and some developers guilty of land banking sites to maintain prices – stimulus for social housing must be the answer to the housing crisis.

With the London property market cooling we also welcome the extension of the government’s ‘help to buy’ initiative, which supports many developers and ensures that UK purchasers can buy  UK property – without that ability there is a serious risk of the remote or overseas landlord problem getting out of control.  It is absolutely vital that we don’t alienate young buyers by pushing them out of our cities in favour of yields-driven landlords who overcrowd properties that were originally designed as family homes.   The good news for renters and sharers is that increasingly there are quality, purposefully designed build-to-rent homes coming onto the market in pure rent environments.  But accidental landlords – those who, say, rent out their batchelor pad  – got no comfort yesterday as tax relief and claimable allowances continue to be phased out.

We hope that the promised £400M for schools will be in part directed into ‘fit for work’ measures. On a day-to-day basis at Ringley we remain challenged by the lack of employability skills in many of the youngsters we support. We estimate the employer burden on filling those gaps is costing us up to £3,500 per employee.

Having been an Ambassador for Apprenticeships from the start, we welcome the £695M to develop apprenticeships.  However, we remain concerned and are working with training providers on a number of challenges, in particular the fact that we cannot truly offer to take apprentices through to degree level in some disciplines such as IT and that, for example, IT apprenticeships often reflect old technologies and need updating fast.

The budget did provide much-needed help for the retail property sector. Landlords of our beleaguered high streets and retail centres should be able to hold their rents and reduce the uncertainty of void units with the announcement that rates for small business are to be cut by 1/3rd over the next two years. This is a much needed reduction and some relief from the pressures of a changing landscape and digitalisation, which falls particularly unequally on break-even small businesses.  Not sure we are ready to open our lavatories to the entire general public quite yet though!

We hope that the money local councils will receive to revive their high streets will inspire creative thinking as the reason for having a town centre continues to shift.    More on that soon…..

 

 

 

 

Keep it clean… don’t lose your deposit

 

Are you in danger of losing all or part of your deposit when you leave your flat? If you want to make sure you get all your money back, making sure you leave the property clean and in a good state of repair is a good place to start. And don’t underestimate the importance of replacing items listed on the inventory. Some landlords are prepared to be more forgiving than others, but if you only leave one glass in the cupboard or break/damage a major item, such as a kitchen appliance it makes sense to own up fast and buy a replacement or offer to pay for a repair. Don’t leave it until you move out. It is easy to cause bad feeling if you create problems for your landlord who will be hoping to re-let as quickly as possible.

According to the Deposit Protection Service, cleaning is the most common cause of a tenancy deposit dispute in the rental sector, with 63% of landlords saying tenants leaving properties dirty was among their reasons for a claim. Damage caused by tenants is the second most common cause of disputes at 53%, followed by the need to redecorate (37%), and tenants being in rent arrears (23%) at the end of a tenancy. Other issues raised by landlords include gardening (16%), replacing missing items (16%) and outstanding bills (4%).

Students are the worst culprits, with almost a quarter losing part or all of part of their rental deposit when they left their accommodation at the end of the last academic year.

Ringley has contracts with a wide range of cleaning companies and maintenance contractors. If you are nearing the end of your tenancy and are worried that you may be leaving your flat in a poor condition or in need of repair, talk to us before you end up in a dispute. Your landlord is our client too and we may be able to help. The cost may not be as much as you think. It’s worth making that call if it could make the difference between getting your deposit back or losing your money.