The private landlord is coming under attack from all sides.
With 95 per cent of all small-scale landlords owning between 1 and 4 properties, you would think this army of part-time heroes would be lauded for their efforts, investing in and refurbishing often otherwise sub-standard accommodation for rent. Not so.
Whilst a minority have built-up large portfolios on the back of high debt, and there are some rogues operating in the industry that need to be routed out, most have a modest business providing an excellent and competitive service for their tenants. The vast majority of private tenants say they are very satisfied with their landlord. Not good enough say the detractors.
The media campaigns paint all landlords as money grabbing rogues. They claim they have pushed up house prices beyond the reach of “generation rent” and evict tenants at the drop of a hat. These naysayers fail to appreciate or acknowledge that the housing shortage results from years of underinvestment and that it’s a minority of rogues that get responsible landlords such a bad image.
Some of this has resulted in a swath of new regulations aimed at landlords, including immigration checks and retaliatory eviction restrictions, all resulting in a lot more work for landlords and agents.
The Bank of England (BoE) worries that the amount of buy-to-let mortgage debt could destabilise the economy if a China induced downturn occurs, and the Chancellor is using his own measures to cool the booming BTL market – swinging tax measures to be introduced soon. See – Is the Buy-to-Let Boom Over
The BoE Financial Policy Committee (FPC) reporting 23 September says:
“that there is, at present, no immediate case for action in the buy-to-let mortgage market. However, the FPC is alert to the rapid growth of the market and potential developments in underwriting standards… The rapid growth of the market also underscores the importance of FPC powers of direction for use in future. HM Treasury has said it will consult on powers of direction for the FPC related to buy-to-let lending later in 2015.”
The Government also continues to support large scale corporate investment in the sector with guaranteed loans for build-to-rent and a favourable tax regime. The corporates, developers and investment funds, are only too keen to enter the UKs burgeoning residential rental market if they can see a way to compete with the army of small-scale landlords. The Tescoisation of the PRS is moving us towards the US and European models, where professionally managed rental property complexes become the norm.
It is being predicted that around 20% of today’s BTL landlords will leave the business over the next year or two. We have probably seen the peak of small-scale BTL in the UK. Things change quickly in the today’s world, but there will always been a need for small-scale landlords; there’s a substantial proportion who need to let out their own home when moving.
Another factor driving this is what I would call the new landlord “threshold of pain”. A point along the new landlord letting curve where the pain felt from the letting experience becomes unbearable. Many novices fail to appreciate (1) the amount of planning and due diligence needed to let successfully, and (2) the pain (both financial and psychological) experienced when a tenancy goes wrong.
A study by Access Legal claims that UK landlords are subject to a £9.9 billion bill every year due to unpaid rent and damage to properties. It adds up to on average a £6,600 for every UK landlord every year.
If all this were not enough we have Scotland and Wales planning more tenant friendly legislation and the Labour opposition (Mr Corbyn & Co) threatening rent controls and a BTL crackdown.
The Labour shadow chancellor John McDonnell has proposed introducing rent controls and cutting tax breaks for buy-to-let landlords even further , it would seem, than the Chancellor is proposing.
Speaking at the Labour Party conference in Brighton this week, McDonnell pledged to “control exorbitant rents” and crack down on “£13bn tax breaks given to Buy to Let landlords for repairing their properties, whether they undertake the repairs or not”. A big emphasis in Jeremy Corbyns first conference speech was on tenant security and high rents.
However you see the future of BTL, private landlords have a very big part to play, the Private Rented Sector is just too big and too important for government to ignore.