A leading PRS figure has warned that the easing of Covid restrictions on July 19th and the government’s plans to wind-down Covid support for the economy will have a significant effect on the private rented sector.

tim clark ukala

Tim Clark (pictured), chairman of the UK Association of Letting Agents (UKALA), says his members are worried about a surge in evictions and a contraction in the size of the rental market as the support for – and protection of – tenants ends following months of Covid.

“The restrictions on evictions during the last year, while appropriate for the time, could result in an explosive situation without the government providing more support to tenants,” he says.

“Landlord mortgage payments still need to be made and rent arrears will still exist.

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“Without more support to tenants, as has been done elsewhere, there will be wide-spread evictions, leaving many tenants in impossible positions.

Kicked the can

“The government has effectively kicked the can down the road on this one. Currently, potential evictions are merely being postponed, but tangible help for tenants could help avoid them and the distress they bring.”

Clark also says this uncertainty within the private rental sector is driving more landlord to change their strategies, with over 50% of his members’ client landlords putting off plans to buy more properties and 40% planning to reduce their portfolio’s size.

“This situation, suggesting a possible reduction in the size of the PRS, adds a further potential squeeze on top of the evictions boiling pot,” adds Clark.

“Unfortunately the government has yet to recognise that, without help, tenants may not be able to rent again.”

4 COMMENTS

  1. Govt doesn’t care what the impact on tenants is if LL evict.

    Govt seeks to eradicate small LL.

    It hopes that the pandemic effects will motivate LL to sell up.

    It cares nothing for homeless tenants.

    It wants LL properties bought by homeowners who it believes will vote Tory.

    Govt will do nothing to assist tenants to pay their rent arrears.

    It hopes that the eviction ban and rent defaulting effects will motivate LL to sell up or stop letting on AST.

    There will be NO State assistance for ENGLISH tenants or LL.

  2. I have to agree with the general thrust of your post Paul.

    At the outset of the lockdown when the first furlough etc started I was told by my accountant that I was entitled to nothing… I’m normally happy with my accountant but I contacted HMRC for a second opinion who told me that I’m an investor and that I’m not in trade therefore was entitled to zero help other than a mortgage holiday which is about as useful as a chocolate teapot to me.

    When I pointed out that I’m treated by them as self employed and they happily take my stamp and tax they effectively said “Thankyou” and goodbye.

    Until now I was fairy relaxed around taxes however, I will now be logging every single bill even if its for a toilet roll or a postage stamp.

    No more Mr Nice guy….

    Where the govt badly miscalculates is that there are 4.5 million households in the PRS… so that’s pretty much 4.5 million properties. no corporation that I know of has that sort of money to buy up millions of properties to take chances on future returns in the PRS.

    Furthermore, they will not be agile enough.

    Nissan for example will be looking for staff in the next few months therefore local landlords will be moving quickly to meet that need… No way large entities can move that quick.

    I agree that the Tories have abandoned landlords in the belief that there are more tenants (voters) than landlords.

    It will take probably a decade of “Investors” like me reducing portfolios etc until the whole sector reaches crisis point where there are almost no new properties available for rent. I have trimmed my portfolio but retained my best, long term tenants who are not going anywhere any time soon, Therefore I will have effectively no vacancies for the foreseeable future…

    So tough luck on tenants… I’m already turning down requests from people who know me so sorry Jesus, there is no room at the inn. No matter who you are.

    And currently there is very little to incentivise me to re-invest in this business sector.

    The reason we have AST’s, Section 21 etc is because in the 1970’s the entire sector ground to a halt and fell apart because no one would invest in PRS.

    So the entire sector was eventually reformed and the current regulations put in place which for the most part treats landlord and tenant reasonably fairly (Pre-covid)

    Govt seem to be totally uninterested in clearing the backlog of tenants simply sitting put, not paying and having a jolly good laugh while some idiot MP’s want to bring in mandatory pet access just to rub salt in the wounds.

    • I can’t agree with you more . I have not increased rent for more than five years . One of my tenants has been paying me less rent for more than a year but her housing benefit increases every year.

      Also with all the mandatory certificates and potential license for private landlords, I only can get by as I work full time somewhere else .

  3. Hi Cela…

    I would advise you re-visit your business plan and bottom-line figures.
    Within my standard contract rents are reviewed on an annual basis and are expected to rise in line with the published RPI or the current shift in the market. (Which happens every year without fail, that way tenants expect an annual rise even if it’s only a fiver) Just as you will expect your own utilities, council tax, phone bill to rise annually, you expect it, its routine therefore not a problem.

    By not increasing rents for five years, I would imagine there is now a large gap between prices advertised on Rightmove and the price you charge. Trying to close that big gap now is going to be a problem. Telling a tenant that they “Have been lucky” over the last five years and now the rent is going up by 75 quid for example will not go down well… whereas a 15 quid annual rise would have been far more palatable to the tenant and you would not now be in the position you are.

    So for example over the last year rents have outstripped RPI so I will be looking to stay in line with current market conditions…

    Example… If rent was £500 pcm but the market has moved to an average of £550 (£530 – £570 depending on the property) then I will give 6 weeks notice that the rent is moving to £550. Almost no one is going to go through all the hassle of moving house to save a few quid because all other advertised properties will have increased rents.

    Note that I pitch my properties at the higher end of the Market, really nice modern properties all built after 1990 all have EPC C and meet all current regulations, are well maintained and as a result my tenants are all long term. I always have a waiting list therefore no fear of tenant issues as they are all very happy.

    In the past few years (Because I was onto the EPC changes early on) I got rid of older underperforming properties. During that process I worked with my tenants. Told them of my plans and the best tenants re-located into the best properties I had. So now I’m not expecting any voids for min 2 years and my current tenants are very unlikely to default or want to move to poorer quality accommodation.
    I reduced the portfolio by a couple of properties and bought myself a much nicer place for myself in the process as at the moment the risk/reward ratio is out of line in the sector as a whole so I no longer see PRS as having huge growth or a big future.

    Too many landlords behave like they are social workers, get involved with tenants lives and feel sorry for them and forget they are running a business. HMRC, The Courts, Local Authorities and dodgy tenants will NOT see you in that way. HMRC will not “Give you a break” because you’re a nice person will they???

    Vetting is everything… Not only do I demand my agent does tight vetting I also go online, Facebook, Insta, Companies House etc etc I’d rather a place be vacant for 2 months than let to the first person to enquire.

    Throughout Covid no one defaulted and no one even requested a “Rent holiday”

    The overall gross return on the portfolio is 9.5% before bills and taxes.

    This is my full time occupation, if tenants don’t pay then I would go bust and believe me I’m not going to allow that to happen.

    I hope my comments have been useful even if they may be a bit “Direct” but business is not fluffy its all about the bottom line or just like Woolworths, Debenhams etc it can all go badly wrong very quickly.

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