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Em Morley

Tax changes taking their toll on buy-to-let, as smaller landlords driven out

Published On: February 11, 2020 at 9:15 am

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Categories: Landlord News

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New figures highlight that smaller landlords are still being driven out of the market by cuts to tax relief and other rule changes.

The official data from HMRC has revealed that the number of small buy-to-let landlords dropped during 2019. This is partly because of the latest reduction in tax relief.

Moore, the accounts and business advisors, has shared that the number of buy-to-let landlords with five to nine properties also fell last year. It dropped from 159,000 in 2018 to 157,000 in 2019.

Smaller landlords have been driven out of the market by cuts to tax relief and increases in Stamp Duty introduced by the Government since 2015. The buy-to-let industry is becoming less commercially viable for smaller landlords, as many are now paying considerably more tax.

Jonathan Green, partner at Moore, has commented: “For some small landlords the latest tax relief cuts are likely to be the final straw, pushing them out of the market.”

“Investment by small buy-to-let landlords has helped to improve the quality of rented properties in the UK – driving them out of the market could have a negative impact on tenants.”

“Changes to the tax regime, such as cuts to reliefs and hikes to Stamp Duty Land Tax, will always be felt disproportionately by smaller landlords. Rental profits have been squeezed to the point where buy-to-let no longer makes financial sense for some.

“Buy-to-let landlords with smaller portfolios make up a huge part of the rental market. If their numbers continue to fall it could create a supply deficit which may result in higher rents longer term in some areas.

“Larger, more professional landlords, look to be unphased by legislative changes in recent years – bigger margins means these changes can be more easily absorbed.”

Landlords Can Now See How Much More Rent They Could Make Through Airbnb

Published On: February 10, 2020 at 10:05 am

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A new rent calculator directly compares traditional rental yields to short-term holiday let yields in a range of UK cities, but many are concerned that this will negatively affect the PRS.

The calculator, launched by blinds specialist Thomas Sanderson, is based on landlords surveys, and will make it easier for landlords to make the comparison between letting their properties as normal, or switching to holiday lets. 

ARLA Propertymark estimates that as many as half a million homes in the private rental sector (PRS) could soon be switched to holiday or short-term lets, and they say that it’s mainly due to tax and legislative changes in the industry. 

The study, which looks at the scale of Great Britain’s short-term lets sector and the wider implications on the PRS, also shows that 16% of adults have let out all, or part, of their property at least once in the last two years – equating to 8.2 million people.

This suggests 4.5 million properties, the equivalent of 19% of the UK’s housing stock, have been used for short-term lets, which works out at 24.2 million properties. 

One worry is that tenants will struggle to find property to rent if the choice and availability continues to shrink at such a rate. 

Cllr Jacqueline O’Quinn of Brighton & Hove City Council, commented: “I find this type of online [Airbnb rental calculator] tool deeply disturbing as it means taking rentals out of the long-term rental market and making them short-term i.e. holiday lets.

“This means depriving families of rentals in the city and depriving those who work in the city of somewhere they can live.

“This has a negative impact on the city as we need to be able to offer long-term accommodation to those who live and work here.”

Benefits freeze to end today – Crisis responds

Published On: February 10, 2020 at 9:25 am

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Today (Monday 10 Feb) MPs are scheduled to announce the end to the freeze on benefits. They will do so by agreeing to increase income-related benefits in line with inflation.

Alongside this, Citizens Advice has released new research finding that the number of people who are unable to cover their living costs has increased since the benefits freeze started in 2016.

The results of this research also show that almost 4 in 10 households that seek debt advice and receive benefits (including housing benefits) would still not have enough money to cover their costs by 2024. This is even if these rises were to continue in years to come.

Jon Sparkes, Chief Executive at Crisis said: “Right now, across the country thousands of people are battling to keep their head above water by going without food or missing a crucial bill payment, just to be able to cover their living costs – this includes being able to cover their rent.

“No one should be forced to live like this, especially when we know we have the means to fix it. 

“Following years of cuts, unfreezing benefits to rise in line with inflation is a sticking plaster to a societal problem that has far-reaching, and often devastating, consequences. 

“Too many people are living in poverty, at risk of losing their homes, or already are homeless – increasing housing benefit by inflation won’t be enough to change this. 

“By investing in housing benefit, so it covers the true cost of rents, the Government will ensure that everyone has the security of a safe home – anything less than this is simply unacceptable.” 

More landlords are needed in Cornwall

Published On: February 7, 2020 at 10:05 am

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Cornwall Housing Private Lets is searching for landlords as part of an initiative to reduce the number of rough sleepers in the county. 

Working in partnership with Cornwall Council, Cornwall Housing has been awarded funding to set up as a letting agency with enhanced social values. Targeting vulnerable people, who need additional support to access, and stay in the private rental sector (PRS), the initiative aims to increase the number of safe and secure homes in the county.

Their next step is to build partnerships with landlords in the area. The aim is to create transparent relationships in which all parties; landlords, tenants and Cornwall Housing all benefit and are treated fairly.

They hope that the initiative will be able to provide housing for rough sleepers, former rough sleepers and those at risk of rough sleeping. 

Nick Cross, Managing Director of Cornwall Housing said: “This is a unique offer to any private landlord and will help to fulfil our duty to help homeless people and to prevent homelessness in Cornwall. Both tenants and landlords will benefit from having access to our tenancy sustainment support. Whether you are a seasoned landlord or new to the sector our Private Lets team will tailor the tenancy to suit each opportunity.”

With pre-assessed tenants ready to start an agreement, homeowners can have the confidence that the Cornwall Housing team has the knowledge and expertise for a seamless and well-supported experience with minimal risk. This service will have no upfront costs and the option for a free tenant finder service for self-managing landlords.

Homes of all sizes are needed in Falmouth/Penryn, Penzance, Truro, Newquay, Camborne, Redruth, St Austell, Bodmin, Liskeard and surrounding areas.

Interested landlords should speak to the Cornwall Housing Private Lets team on 01872 224556 for properties in the west of the county or 01208 265616 in the east, or by email at infoprivatelets@cornwallhousing.org.uk

For any tenant’s looking to rent a property contact the team at infoprivatelets@cornwallhousing.org.uk. Further information can be found at www.cornwallhousing.org.uk/privatelets.

Would ending rental pet bans cause confusion for landlords and tenants?

Published On: February 7, 2020 at 9:15 am

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The Government plans to remove rental pet bans from its model tenancy agreement, but No Letting Go is concerned that this could cause confusion between letting agents, landlords and tenants.

The inventory service provider says that this confusion may lead to an increased number of disputes and put landlords’ properties at risk from unnecessary damage.

However, the revised model tenancy for renters aims to remove the ban on well-behaved pets, so there would be no reason why properties would be more at risk of damage simply because of this change.

This plan was announced by housing secretary Robert Jenrick at the beginning of January this year. He said that steps would be taken to ensure more landlords are ‘catering for responsible pet owners’.

Jenrick added the revised model agreement would stipulate that total bans on renters with pets should only be implemented where there is a good reason, such as a property being too small or having no outside space.

Growing demand for pets in the PRS

The Ministry of Housing, Communities and Local Government says that only 7% of rental properties are advertised as being suitable for tenants with pets.

Yet there is a demand for pet-friendly properties, with a 2019 study by Landbay finding that almost one in seven renters rated ‘pets being allowed in the property’ as their most important requirement.

Zoopla has also found that the word ‘pets’ appeared in the top three most searched for property featured in every region across the UK.

Nick Lyons, CEO and Founder of No Letting Go, says: “As people rent for longer and increasingly view their rental properties as homes, it’s not a surprise to see the demand for pet-friendly properties is on the rise.

“However, the fact that only a very small number of landlords currently accept pets shows just how risky it can be.”

“Landlords who opt to accept pets can reap the benefits of higher demand and possibly higher rents, but they should approach accepting pets with caution and weigh up the pros and cons on an individual basis before committing.”

Too many grey areas will lead to confusion 

Lyons also explains: “For those landlords that choose to follow the government’s model tenancy, there could be several grey areas around which types of pets they have to accept and what constitutes a well-behaved pet.

“Something like the behaviour of an animal is subjective, so it’s easy to envisage problems arising when tenants keep pets and things don’t go to plan.

“If tenants are able to argue that their pets are ‘well-behaved’, it may be harder for a landlord to successfully make deductions from a security deposit where damage is caused.”

Lyons says these grey areas over liability of damage could cause financial problems for landlords.

“At this stage, we’re also wondering what would happen to a deposit and the liability for damage if pets were introduced during a tenancy,” he adds.

“Due to the variables of rental properties, animals and tenants themselves, it seems only right that landlords are able to make decisions on accepting pets on a case by case basis, rather than having to accept all pets within a certain framework if they choose to follow the model tenancy agreement.”

A timely reminder for relevant protection

No Letting Go says that landlords following the model tenancy agreement once it is revised will need to make sure they have the relevant pet protection in place.

This includes having suitable insurance and making sure detailed and independent inventories are carried out at the start and finish of a tenancy.

If landlords do choose to accept pets, they will need to monitor the condition of their property effectively through mid-term inspections.

Lyons concludes: “A thorough inventory could help a landlord to prove any damage and whether a pet has been ‘well-behaved’. This sort of information could be crucial in costs of repairs from tenants’ deposits.

“Due to the Tenant Fees Act, landlords can no longer charge higher security deposits to tenants with pets. Therefore, they must take a range of other steps and measures if they want to keep their property safe while tapping into the growing number of tenants who want to keep pets.”

Minimum Energy Efficiency Law Delayed, But There’s a Catch 

Published On: February 6, 2020 at 9:52 am

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Proposed minimum energy efficiency standards have been delayed, in a move welcomed by landlords, but the delay only affects landlords in Scotland.

The Scottish parliament has decided to delay the implementation of new Energy Performance Certificate (EPC) minimum standards in order to give landlords more time to implement changes according to the Scottish Association of Landlords (SAL).

The proposed rules would see residential properties in the private rental sector (PRS) having a minimum of an ‘E’ EPC rating at the change of tenancy by October 2020 instead of April 2020 as originally suggested. Other rental properties that don’t change tenancies will have until 31st March 2022.

Landlords will face £5,000 fines for non-compliance.

John Blackwood, chief executive of the SAL, commented: “Privately rented properties in Scotland are often held to much higher standards than other types of housing so it is important that any new measures are proportional and realistic.

“The change in the timetable for landlords to improve energy efficiency standards is a sensible one, and we are also very keen to see the correct level of support for landlords to achieve these challenging goals.

“It is only proper that tenants in Scotland have the reassurance of knowing that their properties are energy efficient, their bills are reduced and that their landlord is helping to tackle the climate emergency. We are pleased that the government is allowing more time to get this initiative right.”