Pad are committed to positive change for landlords, estate agents and tenants in the rental market. Their ecosystem of tech, cover and slick logistics means that they are “uberizing” the rental market to save everyone time, money, conflict and hassle. You might have seen their coverage on the London tubes, evening standard and wired magazine? They are getting a lot of heat in the market right now.
As a driver of change, Pad have taken a keen interest in the election, so give their thoughts, between the lines) on what a blue or red win would mean to their mission and the happiness of their stakeholders. Let’s face it, this week is looking more like a hung parliament than ever?
The blue corner will look at how security for good tenants is increased and how landlords can be stimulated to offer longer tenancies as normal. The Conservative Manifesto doesn’t say much more than the Government’s previous White Paper earlier this year, however there are clues that inducements might be used to inspire landlords to offer longer term contracts. Undoubtedly, this issue is on the Government’s radar and looms large on its ‘to-do’ list.
The February White Paper that focused on providing affordable housing, long term tenancy and supply measures has been met with mixed opinion. Some say that the White Paper continues to encourage large developers to build housing that offers large-volume rental flats for tenants. This is in response to the need for secure tenancy for families, who cannot move every six months, as per common tenancy agreements. The hope is that developers will build specifically for rental and that they will offer low-income rentals of no more than one-third of the income of tenants.
The increase in tenancy length, the potential risk of decreasing housing valuations and the demand for affordable rents puts a three-way pressure on the landlord.
The average UK salary in 2016 was £26.500 but according to the Office of National Statistics, four out of five new jobs average just £16,640. A third of the income of the higher figure is only £736 and of the lower figure is just £462. With this outlook, it suggests that the future will have to be with the big developer, whose margins are lowered through their high-volume ownership.
Considering 93% of private landlords only own one property, according to Countrywide, they do not have the same luxury as the bigger institutional landlords who can spread the costs more efficiently across properties. Yet, the emphasis on new stock and on large developers again shows a lack of recognition for the small private landlord, upon which the UK is highly dependent for their homes. There are over 26 million households in the UK.
There are over 2 million private landlords, who let over 5 million properties, banking a total of £14.2 billion, according to HMRC and Paragon respectively (2014-2015 figures). Therefore, the White Paper does little to recognise that 25% of the UK homes are provided by the private landlords. Instead, the private landlord is subjected to such policies as the ban on letting agency fees, which covers administration and legal costs.
A fair debt policy – creating a “Breathing Space” for those in serious problem debt, permitting them to apply for legal protection from additional interest, charges and enforcement action for a period of up to six weeks.
This is a very thought-provoking part of the manifesto hidden in plain sight on page 60 of the manifesto.
Such a scheme would be advantageous for helpless households who are caught in a web of debt, and something that most professional landlords would welcome.
How this could theoretically influence a valid S21 if served before someone applies to this scheme is something that many landlords will be seeking amplification on.
The main cause of homelessness is the loss of a short hold assured tenancy. Some supporters have seen this as an excuse to call for the abolition of S21. The Government, and in particular, Housing Minister Gavin Barwell identify that these calls miss the point, as he accepts that there is always a valid reason why landlords seek repossession, and that it is the final option.
Equalities law will be reinforced so that private landlords who deny people a service based on ethnicity, religion or gender are properly investigated and prosecuted.
This has been referred in the office as the Fergus Wilson paragraph. It should be noted however, that this comes as the Government is facing possible legal action themselves over Right to Rent.
A commitment to upgrading all fuel poor homes to EPC band C by 2030 This is a decent intention and follows the obligation to bring properties up to a minimum E standard by 2018-2020. However there remains unanswered questions about how the government thinks landlords will be able to manage to pay for the often very costly overhauls, particularly with no replacement in sight for the abandoned Green Deal.
Conservatives in summary
Tenants are now clearly seen as consumers by the Conservatives with landlords being seen as service providers. Would you agree with this definition that landlords are in the business of providing homes to people during a housing crisis?
The main gist of the Labour manifesto relating to property is that they will seek to “Improve” upon existing energy efficiency regulations which will already prohibit landlords granting a new or renewed tenancy for properties, while looking to extend the length of tenancies to improve security for landlords and tenants.
- Labour will seek to make three-year tenancies “the norm”, with an inflation cap on rent rises.
- The Mayor of London will be granted extra powers to give London renters additional security
- Labour will legislate to ban letting agency fees for tenants
- Labour will “empower tenants” by giving renters new consumer rights:
- Minimum standards – A new legal minimum standard to ensure properties are ‘fit for human habitation
- Empower tenants to take action if their rented homes are sub-standard.
All in all, it’s not likely to be popular with many landlords, but neither does it look like the death knell for the private rented sector.
This may count as blasphemy in some quarters, but frankly if you gave me a straight choice between Mr Osborne’s s24 debacle and the prospect of some new consumer rights for tenants. Not that such a choice is on offer from any party at this election, But what does ‘make three-year tenancies the norm’ mean?
There lies the rub. If this means maintain the status quo, but encourage landlords and tenants to agree longer tenancies – then so be it. If on the other hand the plan is to pick up the baton left by Ed Miliband, who favoured replacing the AST with a new minimum three-year term for all, or possibly go even further – then all bets are off.
There are a few proposals to take note of, some of which are very welcome.
- Firstly, Labour would exclude small businesses with a turnover below £85k from Making Tax Digital.
- Secondly, the Party would reintroduce the Landlords Energy Savings Allowance (LESA) to help incentivise efficiency improvements. This would likely be very welcome, although the impact will depend on what happens to the PRS regulations and minimum standards.
- More undesirably, the Opposition is married to increasing Corporation Tax rates to 26 per cent and 21 per cent for small businesses (profits below £300,000).
Labour in summary
In the end, there are some good and bad points for landlords in the Labour housing manifesto but it could have been much worse.
People are looking to rent more than ever and the government have made the first moves to recognise that a nation of homeowners is now unrealistic and it should be supporting the rental markets too. Some of the changes coming to pass should be supportive of income opportunities for landlords. The increase in the tenancy length will likely bring much-needed security for the landlord as well as the tenant. The crackdown on landlords who draw tenants into poor housing and away from trusted and respected landlords will help. However, the emphasis on helping institutional developers build mass housing to rent and not on supporting the private landlord through tax relief and reduction in stamp duty, still makes this a difficult proposition for a secure future income.
We believe that the future of rentals comes from maximising your margin based on low time and cost commitment while ensuring long-term sustainability of these margins via insurance-based models. Risk and high costs of finding/managing should be the stuff of the past as long as you embrace change fast. You just need to get mobile and decide whether you want to sit back or get your hands a little bit mucky, but just remember the muckier your hands are, the more risk and cost you incur.
- The future is bright
- The future is digital
- The future is transparent
- The future is secure
- The future is stable
- The future is PAD!
Article Courtesy of: Pad