As we exit the European Union today, the major landlord and agent associations have warnings for the government on policy and tax.
The Looming Rental Crisis
The National Landlords Association (NLA) has issued a statement criticising the tax changes introduced by George Osborne in 2015 which is resulting in many landlords exiting the sector.
Chief executive Richard Lambert saying
Five years ago, we warned the Government that its reckless plan to scrap legitimate tax relief on landlords’ finance costs would backfire, disrupting the supply of private rented homes.
Now, in 2020, households across the UK are reaping the whirlwind sown by David Cameron as investors turn their attentions elsewhere. The new government has an opportunity to break with the past and work in concert with landlords to ensure housing demand is met with good quality rented accommodation.
We urge Sajid Javid to use his first Budget to tackle the inequity of the way his predecessors have taxed landlords. By focusing on Capital Gains Tax, extending rollover relief and reintroducing taper relief, landlords could be encouraged to reinvest for the long term rather than exit the market, thereby helping to avert an impending crisis.
ALRA Propertymark and the Residential Landlords Association (RLA), however, have a different warning
The shift to short term rentals
Short-term lettings can benefit from an annual £7,500 rent a room relief, they do not have to protect tenancy deposits and there are less stringent rules on health and safety. In stark contrast to private rental sector rules. So not surprisingly many landlords are taking advantage of this. Landlords are not stupid.
A report from the Centre for Economics and Business Research (CEBR) based on a survey in October 2019 – found that 3% of landlords were “very likely” and 7% were “fairly likely” to shift to short-term lets, especially among those with five or more properties.
The CEBR says this equates to a potential 200,000 to 470,000 rental homes being repurposed. They also report that active listings on Airbnb in the UK rose by a third to 223,000 in 2018.
David Cox, the CEO of ARLA Propertymark, said:
The growth in short-term lets is particularly concerning for the traditional private rented sector.
As landlords are continuously faced with increased levels of legislation, it’s no surprise they are considering short-term lets as a chance to escape this.
Unless the sector is made more attractive, landlords will continue to exit the market, resulting in less available properties and increased rent costs.
ARLA has proposed an eight-point plan which you can see here.
David Smith of the Residential Landlords Association (RLA) said:
Today’s report highlights how inconsistent the Government’s approach to the rental market now is.
On the one hand, the Ministry of Housing wants to encourage more landlords to offer properties to tenants on a long-term basis. On the other hand, the Treasury has a tax system which makes renting out holiday homes more appealing at a time when demand for homes to rent is outstripping supply.
What we need is a tax system that supports and encourages the majority of hard-working landlords doing a good job to provide the long-term, quality rental accommodation tenants desperately need. We call on the Chancellor to do this in his forthcoming Budget.
Well, the government can’t say it hasn’t been warned. Already reports are showing that rents are shooting up in London.
The Renters’ Reform Bill
The Ministry of Housing, Communities and Local Government has in the meantime sent me a newsletter all about its new Renters’ Reform Bill. This, apparently, will:
deliver a fairer and more effective rental market. … will provide increased security for tenants and ensure good landlords can flourish and continue to provide the homes the country needs, improving the lives of people across the country and delivering a rented sector that works for the country today.
The bill will
- abolish the use of ‘no-fault’ evictions by removing section 21 of the Housing Act 1988, improving security for tenants in the rental sector and empowering them to challenge poor property standards without fear of being evicted as a result.
- strengthen the rights of landlords who need to gain possession of their property through the courts where there is a legitimate need for them to do so by reforming current legislation. In addition to this, we will also work to improve the court process for landlords to make it quicker and easier for them to get their property back.
- introduce a new lifetime deposit to ease the burden when tenants choose to move.
We all await further details with interest.
An increase in pets being put down?
A very sad report here indicates that as the tenant fees act has made it very difficult for landlords to protect against pet damage other than by charging higher ‘pet rents‘, some 90% of landlords are now refusing to entertain tenants pets at all.
Which has resulted in many having to be re-homed or put down.
- Foxtons reveals £2.7m cost of tenancy fees ban in a ‘very difficult’ year
- Council tenant who owns three BTL properties ordered to pay almost £90k
- Regulation of agents is ‘at least two years away’ says Lord Best
- Judge orders landlords to pay almost £15,000 for letting out home where teenager died in fire
- London agency’s clients scammed after ‘security breach’
- A New Deal for Renting consultation – The Law Society response
- Housing commission final report recommends fruit trees and “fast track for beauty”
Newsround will be back next week.