My last blog for LandlordZone was on 30th March, just after the country went into lockdown. Here we are, now entering week eight.
Much like everybody else, I was in shock for the first ten days thinking “is this really happening, am I going to be stuck at home with the wife and kids?” But all jokes aside, the enormity of the situation and how I would do my pretty varied job, from the confines of my home, was daunting.
I’m fortunate enough to have a ‘Man Cave’, which I turned into an office, and after some organising and creating a clear structure to my day, I started to adapt to the new ‘norm’.
So, let’s have a look at what’s been going on and what it might mean for us landlords.
From the moment lockdown started, I received a constant stream of phone calls and emails from landlords and agents asking my advice. The biggest challenge in such a fast-moving situation was that new information and guidelines were being issued every day, so no sooner had I responded or sent something out, the advice needed updating! But communication and engagement with the public in a time of such uncertainty is paramount.
I made it my mission to read every piece of information released that could impact the private rented sector and made myself available to participate in anything that would help answer the most common landlord, agent and tenant questions. So far, I think I have taken part in nearly 20 webinars, podcasts, radio interviews and Facebook live posts.
The Government stepped in to support people with furlough support schemes, Government-backed loans to businesses, business rates relief, direct business grants, VAT deferral, self-employed grants, and delayed tax payments. But the scale of the crisis was, and is, unprecedented, evidenced by the fact that more than 1.8 million people have applied for Universal Credit during Lockdown, compared to 370,000 for the same period last year.
In April, I did two interviews with Ian Collins from Talk Radio. The first was about the renters’ unions calling on the Government to suspend rents for the duration of the coronavirus crisis. What they fail to recognise is there is no ‘one size fits all’ approach.
The vast majority of private landlords (85-90%) own one or two properties, many with mortgages, and they too are facing the same challenges of being furloughed, unemployment or reduced work.
The second interview was about commercial landlords having dialogue with the government about the Furlough Space Grant Scheme. This would see commercial landlords receive part payment of rent bills for “furloughed” shops and restaurants, modelled on a similar plan used in Denmark.
At present, in lockdown all evictions and debt claims against commercial tenants have been suspended. As of 2016 the commercial property market in the UK was worth £883 billion. Can you imagine if this scheme went ahead, how many millions of pounds would be paid to commercial landlords?
I have been contacted daily by both residential and commercial landlords whose tenants have stopped paying the rent, and every individual has a different story of how this has impacted them personally.
The repercussions are so complex and far-reaching. However, there is no magic solution and I have made it very clear that landlords must work with their tenants and try their very best to come to an agreement which work for both parties. As a landlord you do not want an empty property, especially commercial units.
I said on the second week of this crisis, and I stand by it, that the commercial property market will be hit a lot harder than the residential market. The high street was struggling before COVID-19, with shops forced to close due to growth in the online retail market.
Now, with bars, cafes, restaurants and pubs having to wait until July to re-open, and then at potentially a fraction of their maximum capacity, it is going to be long road to recovery with many casualties along the way.
In addition, many more companies will be looking to reduce their office space as they realise that employees have adapted well to the ‘work from home’ model without impacting productivity, so it provides companies with a quick way to cut costs.
Residential rental properties will still be in high demand, but I think landlords may be wise to be more flexible with rents if they start to fall. In my view, it is better to have eight applicants look at your property for £225 a week, than two applicants at £250 a week. You can then choose the best tenant for you, rather than them choose you.
In the residential market, one of the biggest landlord groups affected is student landlords with HMOs. I spoke to one agent who manages 1,000 units, he had 30 students refusing to pay the rent on the advice of their university – What?
In addition, the Guaranteed Rent and Rent to Rent market is on its knees, with operators giving keys back to landlords even though they have a commercial agreement with the head landlord and are liable for the rent.
I have one long-standing landlord client, Terry Reeves, who has decided to either sell his properties or let them to local authorities (his story here). I think this could become increasingly popular with landlords with increased concerns around job stability, void periods and letting fees.
Councils are crying out for properties, and although landlords have shied away from the social sector since the introduction on Universal Credit, with the LHA rate increasing 13%, direct payments to landlords being made more accessible and councils under pressure to reduce homelessness, I think landlords could be attracted back to this sector.
Seven weeks on, and we finally had some good news that the property market could reopen for business. Viewings, valuations, inspections and move ins are all permissible with careful social distancing measures in place. People still need to move, and in the last week alone more Buy to Let mortgage products have been released to help landlords.
But hold of to your hard hats, it is looking like it is going to be a rough ride. A true indication of the state of our economy will not be seen until the last quarter of this year when and if furlough schemes come to an end.
As a closing point, I’m now doing a weekly VLOG property news show called The Property Odd Bods, with Russell Quirk, which comes out at weekends. We thought we’d do something different to enlighten, debate, argue and have some fun about the weekly industry news. This week I had a £100 bet with Russell, which I’m confident I will win. So have a watch.
Keep on doing good things for your tenants and show that us landlords do care and are not greedy so and so’s. We mention this in on our Landlord Hero of the week section every Friday on LandlordZone.