Written By Em

Em

Em Morley

Renters do not Want Longer Tenancies

Published On: September 25, 2012 at 11:53 am

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A recent call from housing charity Shelter to extend the timeframe of minimum length tenancy agreements for shared properties has been met with a negative response from tenants.

Shelter has recently outlined its belief that contracts should last for at least five years. Despite not being the first organisation to call for longer agreements, with Housing Voice recently calling for at least two-year sharing tenancies, it would seem that the renting public does not share this view.

Renters do not Want Longer Tenancies

Renters do not Want Longer Tenancies

Not in favour

In response to the claim from Shelter, flat and house share website SpareRoom questioned 1,000 of its users on the issue. The results were unanimous, with only 10% in favour of Shelter’s wishes. A huge majority of 82% were against the calls, with 8% remaining neutral. [1]

Locked in

SpareRoom’s director Matt Hutchinson, is concerned that longer contracts will lead to anxiety amongst tenants. He said: “Extended contracts make people anxious, because they think they’ll be locked in for longer and the landlord will be able to increase rents at any point.”[1]

Hutchinson was also sympathetic to why tenants may feel anxious towards any proposed changes, saying: “Given that one of the benefits of renting is the flexibility to relocate to another area or a more suitable property if circumstances change, we can understand why people might be wary of longer contracts.”[1]

Restrictions

Mr Hutchinson is also wary that any moves to longer tenancies could see landlords facing further restrictions on the tenants that they can take on. He states: “Flat sharers also voiced concerns that a 24-month tenancy could place further restrictions on the tenants landlords will accept as they seek to reduce their risk, with stricter rules on deposits and guarantors.”[1]

He goes on to say: “Many landlords would be happy to extend tenancies for good tenants but are precluded from doing so by mortgage lender restrictions.

“Landlords have voiced their concerns around the provision of longer tenancies, which included the difficulty of evicting bad tenants in the event they damage property or fail to pay their rent.”[1]

Hutchinson’s concern is for the housing market as a whole, as he points out: “A change to rental contracts that discouraged investment in property for rent could in turn serve to exacerbate the housing crisis rather than to resolve it.”[1]

[1] http://old.lettingagenttoday.co.uk/news_features/Professional-sharers-do-not-want-longer-tenancies

 

Affordable Rent Risk

Published On: September 24, 2012 at 9:07 am

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A stark warning from one of the U.K’s largest social landlords has poured scorn on the Affordable Rent Model.

 

London and Quadrant, owner of more than 67,000 properties, has warned the Government that if the Affordable Rent model continues without modification, housing association development programmes will be thwarted.

 

Tipping point

The social housing giant has suggested that housing associations are at ‘tipping point,’ with the current system, which has seen a switch from a capital to revenue-based subsidy programme , in order to develop additional supply.

 

As a possible solution, London and Quadrant has called for rent increases for more wealthy tenants. In addition, the organisation wants to see social houses developed for shared ownership, which it estimates could generate 42,500 homes per year.[1]

 

Report

A recent report, ran jointly with PwC, indicated that higher capital subsidies are generally better value in the long-term. However, the report suggested that the social equity fund (SEF) could raise billions of pounds in new financial capacity every year to assist with higher affordable housing.

Affordable Rent Risk

Affordable Rent Risk

 

A small section of the report reads, ‘the reality is housing associations are reaching a tipping point; in many local markets the risks of developing Affordable Rent homes are becoming greater than the risks of developing for market rent.

 

‘Housing associations have to fund around 85% of the cost of each Affordable Rent home upfront, with rents under the new system averaging around 60-80% of market levels, depending on local factors. In the majority of cases, local authority partners have as much say over how the property is used and by whom as the providing housing association. Essentially, housing associations are receiving a low level of grant to deliver an inflexible asset and with limited influence or control over the customer profile.’

 

‘With further welfare reforms in the offing, Affordable Rent development will become riskier still. Housing associations will be much more heavily debt-laden, but dependent on less certain income streams to service the debt. In comparison, for market rent, while the full price of provision must be funded, rent levels, usage and tenancy terms are fully flexible, offering stronger opportunities to build capacity and flex use. The ability to quickly mitigate risk as circumstances change is a key advantage.’[1]

 

 

 

[1] http://www.24dash.com/news/housing/2012-09-24-Affordable-Rent-riskier-than-market-rent-warns-housing-giant

 

 

 

Landlords Should Deliver High Quality Housing

Published On: September 20, 2012 at 3:14 pm

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Categories: Landlord News

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1.5 million young people who are unable to get onto the property ladder, or qualify for social housing, will be forced to rent privately by 2020, says new research.

These figures come from a study by the Joseph Rowntree Foundation, who say the predicted amount will apply to 18-30 year olds. For those who cannot access housing benefit, but find saving the large deposits required for most mortgages difficult, living in rental accommodation might be a long-term state.

Director of flat and house share website, SpareRoom.co.uk, Matt Hutchinson, says: “There is a lot of pressure on Brits to own their own homes, even though in the current market there are numerous barriers to entry, especially for the younger generation.

“Soaring living costs mean it’s a struggle for many households just to keep their heads above water each month, let alone have enough spare cash to put aside towards a deposit.”

The prospect of renting for many years may be dismal, but some say it could be a positive. If these long-term renters are the future of the housing market, the UK must find a way to deliver good quality, affordable rental properties.

Harry Downes is the Managing Director of new private rental initiative, Fizzy Living, based in London. He says: “With an ever-decreasing supply of affordable homes, the average age of first time buyers is now 39 and rising.

“Add the difficulties in getting a mortgage and the high deposits required, and you can see that young people being excluded from the market is an ever-growing problem. Putting in place an affordable, well-run rental sector must be the right solution.”1

Landlords Should Deliver High Quality Housing

Landlords Should Deliver High Quality Housing

Across Europe, rental sectors are soaring, and this could be the same for the UK too. As many young people are waiting to start a family much later, and are less likely to gain high returns on house prices seen by their parents’ generation, a strong rental market would benefit them.

With renting not necessarily being a negative situation, there are still problems in the area. Affecting the industry are amateur landlords, high rents, and short-term leases.

Hutchinson explains: “The difficulty
is that Britain is not prepared to be a nation of renters just yet.”

He also states that average leases are just 12 months long, and don’t offer security to tenants, as well as there being rogue landlords who ignore the necessary legislation: “The solution is to free up the red tape surrounding rental processes and come down harder on rogue landlords. We have to make the industry accessible for renters and a viable alternative to buying, not just in the immediate future, but over the long term.”1

Fizzy Living are aiming to solve the problems in one part of the market, after opening their first new block of rental apartments in Canning Town, east London. They are marketing the housing as professionally run student accommodation, for people between 25-35, beginning their careers.

The flats won’t be cheap, however, at £1,050 a month for a one-bedroom, and £1,450 for two bedrooms. Tenants will, however, be offered broadband packages, furniture, onsite parking, cycle storage, and access to a committed property manager. The company are backed by £30m from the Thames Valley Housing Association, who will manage the accommodation.

If other housing groups followed suit and focused on the private rental sector, their expertise could quickly provide affordable homes for young people. The quality of this housing would also be improved, and private landlords would be regulated.

However, landlords are responding to the need for secure, long-term agreements, with over half of tenancies currently lasting between two and three years.

There is still a long way to go before the problem is solved, as landlords are increasing rents for short-term tenancies.

Additionally, just 8% of private rental sector landlords are full time, and therefore use their properties as an investment, or gain a second income from their practises.

Tenants should remain wary of letting agencies charging unnecessary fees for their part in arranging Assured Shorthold Tenancy (AST) agreements. Many documents that they charge for can be downloaded online for free.

1 http://www.landlordexpert.co.uk/2012/09/19/uk-landlords-must-start-to-consider-security-for-long-term-tenants/

 

Advice for Student Rents

Published On: September 19, 2012 at 4:33 pm

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With the arrival of the new academic year, the National Landlords Association (NLA) has issued a reminder for landlords with student tenants to make sure that their deposits are securely protected. In addition, students have been reminded that they should be provided with information on how the landlord has chosen to protect their deposits and what scheme has been used.

Tenancy Deposit Scheme

Each landlord in receipt of a deposit on an Assured Shorthold Tenancy (AST) must protect it within a Government recognised tenancy deposit protection scheme (TDP). In addition, landlords must provide tenants with the relevant Prescribed Information and Deposit Protection Certificate within 30 days of the commencement of the tenancy.

Chairman of the NLA, David Salusbury said: “TDP is in place to safeguard any deposit for the duration of the tenancy, so it is vitally important that both landlords and students are aware of these important requirements.

“Landlords have 30 days in which they must protect the deposit and pass the proof of protection to the tenant. Failure to do so could lead to a fine of up to three times the deposit value.

Advice for Student Rents

Advice for Student Rents

 

 

“Tenants who are unsure should ask their landlord for details of where their deposit has been protected if they haven’t received it within this period.”[1]

Worrying

For a number of new students, moving into unfamiliar surroundings can be a worrying but exciting prospect. my|deposits, a leading provider of TDP in England and Wales, has offered advice for students moving into rental accommodation for the new academic year. Advice includes organising finances, getting contents insurance and building a good relationship with the landlord.

CEO of my|deposits, Eddie Hooker, said: “Students embarking on the new academic year already have lots to think about such as taking care of finances and student loans, as well as buying books and equipment for their studies.

“my|deposits has produced this simple advice to mark the start of the new academic year and help raise awareness of the many important considerations of living in rented accommodation.

“With my|deposits, landlords can legally protect a tenant’s deposit and retain it for the duration of the tenancy.  The tenant also has peace of mind knowing that their deposit money is protected with a government-authorised scheme.”[1]

For further information on the scheme, please visit www.mydeposits.co.uk/tenants/guide

[1] http://www.landlords.org.uk/news-campaigns/news/advice-university-landlords-and-top-tips-students

 

 

 

 

Homeowners Better off than Renters

Published On: September 19, 2012 at 11:23 am

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Categories: Finance News

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A continued decrease in the cost of buying property, coupled with increasing rent prices has seen the gap between purchasing and renting widen during the last twelve months.

Falling mortgage rates have seen the cost of buying fall a huge 43% in the past four years.[1] Furthermore, the average mortgage rate for a first-time borrower dropped from 5.91% in June 2008 to 3.82% in June 2012.[1] Property prices have seen a similar decline, falling by 10% over the same period.

Homeowners Better off than Renters

Homeowners Better off than Renters

 

By contrast, the average rent price has risen by 11% since 2010.[1]

Encouragement

Martin Ellis, housing economist at Halifax, was encouraged by the figures. Ellis said: “It is clearly encouraging that there has been a significant decline in the cost of buying a home for those able to enter the housing market since 2008. The improvement is due to a combination of lower mortgage rates and declining house prices.”[1]

Ellis also mentioned the tough times for the rental market: “Market conditions for renters have deteriorated as rents have risen in the past two years.”[1]

Stumbling block

Despite affordability improving, the number of buyers in the market has dropped, with large deposits blamed for the decline. A survey from the Halifax showed that 58% of respondents said that raising enough for a deposit was the biggest barrier to becoming a homeowner.[1] Over the previous four years, the number of buyers fell from 793,600 to 535,200.[1]

Ellis is concerned about the housing market at present but suggests there could be prosperous times ahead. He said: “Despite the improvement in buyer affordability, the housing market nationally continues to tread water. Those getting on the housing ladder still face challenges, most notably in getting a deposit and this challenge, along with the considerable uncertainty regarding the economic outlook, is still contributing to subdued housing demand. However, it is worth noting that once homebuyers are on the first rung, their monthly costs are notably lower.”[1]

[1] http://www.landlordexpert.co.uk/2012/09/19/falling-mortgage-costs-and-soaring-rents-have-left-homeowners-better-off-than-those-renting/

 

 

Young Investors Favour Buy to Let

Published On: September 19, 2012 at 9:30 am

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Categories: Property News

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Figures from the Department for Work and Pensions (DWP) suggest that young people are much less willing to invest their money into the stock market than in previous years. The recordings indicate that young adults are interested more in the buy to let market, with investment now more prominent than before the recession.

Stock market pain, buy to let gain

The statistics released by the DWP suggest that the sharpest decline in savers was in the 22-29 age bracket, where there has been a fall of 19% from 43% in 1997 to just 24% today.[1] Pension investment was down across all age brackets.

This fall in savings was in contrast to young people investing in property. Ludlow Thompson, a London-based letting agent, released figures showing that roughly 15% of its clients were in their 20s, an increase of 5% before the financial crisis.[1]

Director of Ludlow Thompson, Stephen Ludlow, is convinced that the rise in young investors is a result of the unpredictability of the stock market. Ludlow said: “Many of the young landlords we see are bankers or traders who view buy to let as a reliable alternative to the unpredictable stock market that they work in day-in, day-out.”[1] He added that these young adults “often use their annual bonus as the deposit for a buy to let mortgage.”[1]

Young Investors Favour Buy to Let

Young Investors Favour Buy to Let

Property is the new pension

With mortgage rates remaining low, rent prices rising and optimism that the market is recovering, young investors believe the time is right for them to enter. Director of research company SCM world, Oliver Sloboda, is one young adult who went into the buy to let business as opposed to investing in the stock market.

Sloboda said: “I see my property and business as my pension. My dad thinks I’m mad, but it’s a generations thing. My friends, those who work in banking and who have bonuses, have done the same and bought property. I don’t know anyone who would take a lump sum and give it to a pension manager. You read stories about pension funds collapsing and volatile equities and high fees and it isn’t appealing.”[1]

Economic pressure

The recent banking crisis will have an impact on those youngsters who have lived through it, according to research from the Stamford Graduate School of Business. According to the research, those who have experienced such events will go on to be more conservative with their money. This has prompted concern from investment advisers that the long-term growth of the economy could be at risk.

Gervais Williams, MD at asset management group MAM Funds, said: “Over time if younger people aren’t investing in equities this will make a difference to everyone. If you have a generation who are despondent, then it impedes our ability as an economy.”[1]

Moving forwards

This October, workers in the UK will automatically be enrolled into a workplace pension scheme designed to improve falling saving lines. The DWP however, suggests that anywhere up to 40% of workers may choose to exit the scheme. Labour’s pensions spokesman, Gregg McClymont, said that past failings have led to investors becoming apprehensive and that the prudence of the industry had disappeared. McClymont said that there is a “lack of confidence” surrounding the industry and that the “lack of disclosure on costs and charges is also an issue for people’s trust.”[1]

Hal Ratner of research company Morningstar, said that certain companies were to blame for the apprehension of investors. Ratner said: “What happened in the equity market has caused young investors to be concerned and the investment community needs to treat this audience with respect and explain why these investments are important in the long term.”

The improvement of the economic climate will see a better indication of how young adults may invest in the long-term.

[1] http://www.landlordexpert.co.uk/2012/09/19/the-stock-market-is-out-and-buy-to-let-is-in-for-young-investors/