Renters are facing record prices with rents growing at the fastest annual rate for more than a decade. According to the Office for National Statistics, private rents in the UK rose 4.8% in the year leading up to February 2023. Rightmove also reported that average asking rents in London have surpassed £2,500 per month for the first time. There is no denying it, tenants have it tough right now.
However, in just nine months, landlords have seen average fixed mortgage deals more than treble. I spoke to one landlord this week whose fixed-term is due to end. He was previously paying £350 for his buy-to-let mortgage, his payments are about to increase to £1100, a rise that would be impossible for most tenants to swallow, leaving the landlord to consider whether to find new tenants that can meet that payment, or come to an agreement with his current tenants.
I do feel that more landlords need to have this conversation with their tenants before serving a Section 21 notice on the assumption they won’t be able to afford an increase. I’ve spoken to some landlords who want to remain as landlords but in panic, are looking to serve notice and sell before even having the conversation with their tenants. Remember, tenants are feeling the pinch regardless of whether they move or stay put, and some may welcome the opportunity to negotiate a rise, regardless of how significant that may have to be, rather than try to find somewhere new which could end up costing even more. I recently spoke about the rise of Section 21 notices being served on BBC Radio 4 ‘You and Yours’. (33min 54)
For some landlords, having a rent that covers the mortgage payments in its entirety is the only option, particularly if they have no financial flexibility to cover some themselves until rates come down with inflation.
However, obtaining a new mortgage deal is also more challenging for landlords at the moment as affordability is typically measured by the interest coverage ratio (ICR) which often requires borrowers’ rental income to exceed the mortgage payment by 125% or even more for a higher-rate taxpayer.
Tax
On top of the Government reducing mortgage interest relief to 20%, in April, the capital gains tax-free allowance was reduced from £12,300 to £6,000, which in April 2024 will halve to £3,000. This means landlords will need to pay more in capital gains tax when selling a property. Something that landlords who are considering exiting the market must also take into consideration.
I stand in full support of all landlords and industry bodies, such as the National Residential Landlords Association, who are calling for the reintroduction of mortgage interest relief in full and for housing benefit rates to be unlocked. There has to be immediate and greater support for the rental market before the housing crisis deepens.
Fixed-term tenancies
As we know, under the Renters (Reform) Bill, fixed-term tenancies will be replaced by rolling tenancies. Tenants will be able to terminate these with just two months’ notice making it very challenging for landlords to plan their future. Whilst it could be argued that finding a new tenant in the current market of high demand would not be a problem, all the associated costs with finding a new tenant still remain.
Property improvements
On top of everything else, under government proposals, all new lets from April 2028 will need to meet a minimum energy performance rating of C, up from E as it stands today. For landlords with older properties these improvements could prove costly, but failing to meet the deadline comes with a fine of up to £30,000.
One final point I would like to add, is that despite landlords’ financial struggles, I do still advocate that opting to use a reputable letting agent to manage your property is worth its weight in gold, particularly in the current climate. On rental income of £1200 per month with a 12% fee, that’s £144, which is also tax deductible. Most agents will spend 12 hours a month managing a property which works out at £12 an hour. If landlords are not clued up on the current and incoming legislation, this could be the best money you ever spend.
Clearly, being a landlord today is not for the fainthearted, which is why we are seeing the rise in landlords choosing to sell. With that said, I was recently speaking to David Coughlin of The Landlord Sales agency who said that 75% of their agreed sales are to other landlords who are also keeping the existing tenants.
Whatever the political agenda, the fact remains that the buy-to-let market cannot function without private landlords, but The Treasury needs to offer the same support to buy-to-let as it has mortgage borrowers. Landlords also need confidence that the court system will work if they have a tenant who falls in arrears or causes anti-social behaviour.
Landlords do not want to evict good tenants, and sadly this is what we are seeing. Good, reliable tenants are being forced to leave their homes because buy-to-let, for many landlords, is no longer financially viable. The narrative must change, and we need an industry which supports both tenants and landlords so that tenants have access to safe, good quality homes provided by people who are incentivised to remain in the market and act in a professional manner.
* Paul Shamplina is founder of Landlord Action, Chief Commercial Officer at Hamilton Fraser, and is on Channel 5's 'Nightmare Tenants, Slum Landlords' *
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Latest interest rates have made it unviable for me to add any more properties to my portfolio and are pushing me towards selling and exiting the market
As far as I am concerned, the legislative changes in the Renters Reform bill have absolutely NOT paled into insignifance. They are my primary concern - without Section 21 there is no viable letting business. All financial concerns pale into insignificance when you have lost control of your property.
Well said, those of us with minimal or no mortgages don’t care about interest rates…. The lose of control of my properties, now that I care about.
Come on Paul, I don’t think you can have a moan about EPCs! This argument is well and truly over. If landlords haven’t sorted out their energy wasteful investment properties by now, God help them! It makes absolutely no financial sense for our tenants to use their limited money to buy Norwegian and Qatari gas when they need that cash to pay our rent.
We’ve all had years and years notice on this one. Running cost calculation EPCs have been part of the letting landscape for over 15 years. The UK MEES Regs have been in place for over 8 years. Not a single very energy wasteful house or flat has been lawfully let to a new tenant for the past 5 years.
Change the record mate, this argument is old news.
Well said. Fully agree.
What if you live in a block of flats and you cannot improve your wall insulation without the cooperation of other leaseholders and the freeholder. It is not just black and white.
I do not accept that if a landlord only offers quality accommodation, that a letting agent requires to spend 12 hours per month managing any property. This guy is a fraud, similar to Mr Beadle from the NRLA. Time for some new spokespeople to come forward who can represent genuine landlord issues. Too much BS from the current government supporting lot!
That is exactly right, John - nobody representing landlords at all. The narrative is being controlled. There are those who want the decimation of the private rental sector and the increase in rents to be seen as a consequence of financial circumstances and not the impending legislation. You can fool some of the people all of the time......
Ellie ,well said.
Martin, you haven’t a clue about EPC with your one sheet of plastic over complete window as you informed us before.
Paul, my friend what has happened did you take
something.
That’s very long winded over 150 lines to tell us what ?
never mentioned the Big Boys taken over the root cause of the crisis. No mention of Mr Gove The Housing Secretary the main instigator of the Homeless and the cause of landlords to exit, no need to mention the result of this is a shortage and Tenants Rents up 30% but he is the Tenants friend, just how stupid do they think people are.
Well said Michael, I think there should be guidelines towards energy efficiency not a blanket standard.
Cannot implement a standard which is floating depending on who comes out to check it.
As I have said before one guy said I needed cavity
Insulation on solid walls, another said loft insulation was not to standard when it was and he didn’t even look..!
Why should I go and spend £10-£15k on a property which will save the tenant £45 a year..! They would rather have a new kitchen and bathroom..!
Shamplina is talking rubbish
Letting agents have employees mainly on commission only, they won't take any responsibility for anything
All their charges are plus 20 % vat. Fees are quite high, money for finding a tenant money for collecting rent (,normally automated),,)supervising them is extra. References are poor, they can be worse than a bad tenants. I think that due to the tenant fees act and other acts thst a s lot will go bust.
I have mine in guaranteed rent which I feel motivated them to check it more often and get the right tenants in there.
They charge more but I don’t care, been with them for over twenty years and they do a good job. Just negotiated with them my last two properties that they can now look after and got them to put fixed raises every year so we both don’t get caught out.
Shame really because I always told them to leave the rents alone with Good tenants in place. Game changed now. Well done Gove..!
Very few seasoned landlords would commit their properties to an agent, mostly the LL ends up managing the agent to get things done and risks taking the buck when they don’t cross the T’s and dot the i’s correctly. Why pay agents when only the LL has the responsibilities and the agent none? Better and safer to look after your own interests.
Ok I am not against using an Agent but it has to be reflected in the price.
So I rent a 2 bed Flat for £1200. pm, x 12 = £14400 x 12% = £1728 + 20% vat = £2’073.
Soy £1200. pm is now is £1’027. for 2 bed Flat, you can’t rent it for same money as when you self- manage.
What about the maintenance / up grades and the huge amount imposed by Council Regulatory Compliance, Licensing etc.
No the whole Business is a State Sponsored Collapse of PRS.
Self-managed should be the same price or higher than agent-managed, as the service is personal and much more responsive, available outside office hours and respond to texts immediately any time of day, also act as counsellor, advisor, help making UC and residency claims, you name it that the agent would just leave the tenant to their own devices to deal with as best they could.
Only last night I had a conversation with a tenant who is behind with his room rent because of difficulty with his UC claim and struggling to verify his identity after his job folded (he does not even have a phone contract because he just uses WhatsApp on wifi). I was able to suggest ways to deal with that problem which he hadn't thought of, also talked about taking contract jobs and getting himself set up to take advantage of self-employment opportunities. How many agents would do that?
I naively and mistakenly tried leaving a property with an agent and ended up organising everything myself after they quoted me £70 to replace a pull cord switch on a light/fan fitting, which I bought for £4 on eBay and replaced myself in about 30 minutes, then used a couple of builders to sort out all the other problems in the house which the agent had failed to get the previous landlord to do.
Paul has talked sense in the past, but he is not speaking for the majority of smaller landlords. Me included. How can he say interest rates matter more than the RRB 🤔 it all depends on your own financial situation, I have no mortgages on mine, so why do I care ? But every landlord cares about being able to get the bloody thing back.
That is absolutely right!
Yep, creeping ‘ sequestration ‘ is the Daddy of all our worries and this is exactly where we are heading. The RRB ( right ripoff bill) must go.
When people rent things, cars, tools, boats,vehicles, offices, properties whatever, the owner expects to get them back In good condition. It does appear that most politicians are of the communist persuasion and have squatters rights on everything!
And the people that hire these things out are very careful about who they lend them to as they want to be sure that the person is going to keep their end of the bargain, pay for the hire and return it in good condition.
The big problem is going to be how to house all those who are not fit to be trusted with our property as nobody will touch them with a barge pole in future, and the council will not put up with them any more either, even if they could.
Agreed Peter, very careful selection of customers now
Paul Shamplina has totally got the Renters reform Bill wrong in its Continued significance to Landlords. He seems to have lost touch - connection with how Landlords feel. ?
Indeed he has.
His focus on this article is the interest rate rises and Section 24. Yes I agree the RRB is a massive event, but for those of us that are mortgaged the interest rate rises and the Section 24 takes priority.
Every article cannot cover every angle.
Any voice that correctly criticises the mistakes by this Government works for me.
The same for EPC's, if you have an older property you are not going to fork out money when the situation is not crystal clear. I would add when I have paid out for brand new boilers that replaced boilers that were 30 plus years old I never noticed a 30% reduction in my gas bill and i'm not talking about last years massive price hike, i'm going back 3-5 years or more. So I am highly skeptical with EPC's.
As a landlord who is affected by Section 24 it is of far greater concern than most of the Rental Reform proposals.
I fully accept Section 24 is only relevant to a certain section of landlords. It doesn't effect incorporated landlords, unencumbered landlords or people with only one or two properties and low other income that keeps them in the basic rate tax band. For those of us who are affected Section 24 is huge and massively disadvantages our tenants. If our mortgage payments increase by £500 a month we have to increase rents by at least £667 just to stand still. The government take the first 40% (£267) in tax, the lender gets the next £500 as extra mortgage interest, then HMRC give us back a 20% (£100) tax credit. If we increase rents to the point we are in the £100K taxable turnover situation we would need to increase rent by £1000 a month to stand still as the government would take the first 60% (£600). I'm probably fairly typical of an unincorporated portfolio landlord. I have 16 properties and house around 56 tenants. I have 10 BTL mortgages. Five fixes end this year. One is on a tracker. The increases are huge. I don't know how much the 5th one will be because I can't fix it yet and the tracker goes up almost every month. Most of the known increases are between £450 and £650 per property per month. So somewhere around £2500 extra mortgage interest a month across the portfolio plus the extra turnover tax. Plus general inflation on insurance, safety checks, maintenance, etc.
There are bits of the Rental Reforms I don't like and other bits I'm fairly unconcerned about. Some of it will be drastically different by the time it has been kicked around Parliament. Mortgage interest rises are now and very real. Section 24 most impacts medium size landlords who have shown huge commitment to the PRS. We aren't doing it accidentally or just for a bit of a top up for our pension. We often provide the only option for people who don't fit the criteria for the corporate landlords and aren't needy enough for Social Housing. The very people who can least afford big rent increases in fact.
Well said Jo, I have been a Landlord since 1992 and interest rates were higher then, but because of this Section 24 I am now break even or down on my properties.
Due to selling 2 properties I can weather the storm, but it should not be like this.
My thoughts are now turning to selling all my properties and retire from being a Landlord, though I have not yet made a final decision.
I'm at Norwich County Court this month to hopefully get my eviction agreed on a Section 21. The fact that I have to defend a Section 21 now sums it all up!
Eventually every commentator, landlord advocate bends to the will of anti landlord campaign playing both sides of the fence for self interest motivations
Paul is certainly right about PRS having a Radical change this is the whole idea.
Private Landlords being driven out for Big Boys to take over, this is what’s behind all the Regulation’s and Compliance, they at not worried about the Tenants or they wouldn’t have brought in all those spurious requirements driving rents through the roof.
Lloyds Bank Uk biggest Bank owner of Halifax & Bank of Scotland moving in rapid to lettings and have engaged Barrett for one lot. They aim to have 10’000 properties to rent by end of 2025 and that’s only around the corner, worth £4b and generating an income of 300’000’000, annual profit.
By 2030 they aim to have 50’000 properties, just add John Lewis’s 10’000 Flats, so when were they ever involved in Residential Property lettings.
What about all the other Companies that I haven’t mentioned moving-in to letting.
Landlords my friends it not your fault, compliance, the quality of your property or the rents you charge, Its a complete stitch up and don’t forget the conflict of interest, you’ll be borrowing the money from them haha,ha.
Michael - you make a good point but have overlooked the fact we are currently millions of homes short and have an increasing population. Hundreds of thousands of people live in overcrowded households. Also the big corporate landlords will have a certain criteria for who they will rent to.
As long as the government have bedroom entitlement legislation and Local Authorities persist with expanding Article 4 areas to prevent the creation of more HMOs we need more, more, more housing of every tenure.
The fact a lot of the Build to Rent stuff is expensive does us a favour. It provides a comparable for when we are looking at rent increases and when the government eventually unfreeze the LHA should mean that increases to a more realistic figure, certainly in areas with the presence of BTR developments.
One of my tenants mentioned he had been looking at a co-living development and was incredulous they wanted £1200 a month for a soulless studio. It was only slightly bigger than the HMO room he currently pays £500 a month for. He is earning enough to fit their affordability criteria, so has choices, but that £700 a month difference allows him to save for the future and support local businesses now. Plus it means whatever rent increase I decide on is still going to be a bargain by comparison.
Jo.I agree with a lot of it but I know you at right the big boys will pick the cream.
I don’t agree there is the
shortage they would have us believe.
HMO Licensing is responsible for a Lot of homelessness, for years I seen great big houses without a license, they preferred to let to 4 and no licence, probably why they now want Selective licensing Borough wide.
So many Properties under use because of the interference.
I could house another 20 across my portfolio if I let rooms, they are HMO licensed, say 4 renting a house that is licensed for 7 and that’s saying something.
Why did they deliberately drive out Landlords with a whole raft rules, regulation’s, fines, penalties, re-payment Orders, Confiscation Orders, one sided Tribunals, S21, S24, double SDLT, licensing, 45% tax, EPC’s, that don’t apply to home owners of identical adjacent houses their emissions don’t count.
London is particularly targeted most probably getting 3 / 4% return. Where as in the North East when I spoke to a big LL from there he gets 10.5% return and up to now didn’t have our regulations or licensing.
I said it’s ok for you. you can get 4 properties for the price of one in London he said you must be joking I never pay more than £150k and my usual spend is £80k make what you will of that.
I think the return on my London properties is closer to 2% - not great considering the high risk of the business and the hassle. The capital value of the flats would plummet with sitting/assured tenants, too.
I'm coming around to your way of thinking Michael. I have been skeptical of some of your comments but the further we get driven into the ground the more your comments make sense.
Section 24 would always result in a rent explosion, it wasn't called the tenant tax for no reason. It is also precision marking of new money or of the Landlord who needs to borrow, easy pickings really.
The corporate companies therefore have higher rents and a good demand, as you say they can pick off the cream.
Now we have the cost of living crisis. This inflation serves the Government well as it makes the old debt less as the value of money is eroded. On the plus side they also pull in far more tax, a win win as you say.
Losers are small businesses, mortgaged Landlord's and home owners.
Of course there will always be a need for private Landlord's, but put simply not as many.
You can also factor in that the average age of a Landlord will higher, meaning overtime they will disappear as well. Any new comer will surely go Limited from day one.
I cannot see any changes coming that will be beneficial to the private Landlord, yes there is still a lot of money to be earned for those that have very little in loans to offset, but for the rest of us there is very little light at the end of the tunnel, even if interest rates come down to 3.75%, Section 24 will still put a big hole in your finances.
Therefore this is the agenda as I now see it and well done to Michael for being the voice on this earlier on.
Immigration is the root of the problem.
Don't be ridiculous it's landlords.
Sandra, please behave or we will have to report you.
Have you not got a tree to hug or a slow march to attend?
Perhaps sandra you could explane why we the landlords are the rote cause, I'm sure we would all be most interested to know
Gibbons gibberish again. The only thing green about green energy is the mugs that pay for it. All insulation is manufactured and mainly from hydrocarbons. Insulation costs and modest insulation of properties will use less hydrocarbons,pro rata. I've been in the energy industry for over 50 years and we are embarked on a road to hell.
I bet you voted for Brexit Edwin. 90% of migrants will become entrepreneurs and creates jobs. Germany just recently allowed over a million migrants into the country, since its own workforce coming to retirement age and job vacancies would have to be filled one way or another. Besides, when the US and its criminal allies, including the Uk, go and bomb the countries such as Afghanistan and Iraq to zero, no wonder they come here as refugees. By the way. Did they find the weapons of mass destructions? Of course not. They did not even find a bag of compost. Stop bashing the migrants. Its racist.
A lot of Germans did not agree with the million migrants and the country has real issues as a result.
Immigration is a factor but not the root.
Afghan is a very complicated situation, Iraq was less so. I can agree with both arguments for occupation or not. I will say hindsight is always the best view. No they didn't find WMD, but they did find use of chemical weapons and genocide on his own people.
I do agree though that we should not get so involved in other countries wars, though I do support Ukraine and how the West have rallied.
Other cultures need resolving in other ways.
Anyways back to Landlord issues!!
Imagine scrapping modern diesels after only just 6 years, did they not know this 6 years ago when they were Building them and if not they are pretty stupid, anyway if you pay £12.50 per day no problem pollute away.
How much energy will it take to produce an electric replacement car with a mountain of batteries and the problems disposing of those batteries later what a waste of resources, notwithstanding the energy for scraping & disposal of the existing one’s that have at least another 10 years of life left in them, why not take advantage of that as you already have them, its very poor management & planning.
Michael, do not get me started on this. I am in the automotive industry and it is all political and full of BS.
A study was carried out in Germany on this, won’t name the city but when they pulled over all the diesel cars the emissions that came out was cleaner than what went in…
All manufacturers have basically bowed to government direction to be able just to keep going, all BS
Martin Gibbons -EPC "B" and "C" does not mean anything at all. It is not exactly saving any electricity bills. Also EPC measurements are very subjective based on the person carrying it out. These assessors have had short course of 2 days and they do not understand how it works. You can insulated roof, walls, floors, new boiler, LED lights and yet there is not guarantee it will be "C". Spending £10k with an outcome of of the tenant saving about £90 per year is totally useless exercise.
Shamplina, not sure how he come up with the estate agents spending 12 hours a month on each let property. No they do not even pend 2 hours a month in each property. I have never found it justified how they charge 10 to 12% for just collecting rent and making payment and a statement. They call it full management, but it is just rent collection and payment. The rest of the services the LL pays extra.
Whose side is Shamplina on?
He does not feel the landlords are exiting. If they are, 75% of properties are bought by other landlords in case of one agent's experience. That is a loss of 25% of properties from the PRS. If this continues, it will be a horrendous effect for the rental market. Tenants will pay high rents to Big companies and Banks and government will support them. If LLs are not selling now, it is because of the high rates of interests, that has caused lowering of the house prices.
What report me because I didn't side with the landlords..Do grow up it's not a fan page.
No one asked you to side with landlords, you have come on a page with landlords banging on about us. If you wanted a reasonable debate I am all for it, so let us look at both sides rather than you coming on to call out all landlords without any substance. That my dear is grown up.
Sandra, Please tell me why you think it's all landlords fault. I am interested in why you think that way.
Reasoned argument, I think you'd be surprised at the answers.
Stupid woman!
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