Category: Agents

How landlords drive up quality in the rented sector

Lesley Davis Leave a comment
Refurbishment is big business in the rental sector – and is helping drive up quality

Despite recent attempts by politicians to colour the PRS as sub-standard and riddled with rogue landlords, in fact the quality of rented accommodation is on an upward trend.

A survey published this week by InterBay Commercial proves the point. According to the specialist buy-to-let lender, the number of rented homes in England deemed ‘non-decent’ by the Office for National Statistics has fallen for the tenth year in a row. The most recent data reveals a decrease to 24.5% in 2018 from 44% in 2008. There is still a way to go but the vast majority of landlords are now providing good quality homes for people to live in. And this is in spite of the rapid expansion of the sector in the last decade, adding 1.5 million new rented homes.

Confirmation that quality is being driven up year-on-year is borne out by the latest English Housing Survey. This shows that the vast majority (84%) of private renters were satisfied with their current accommodation. 

In addition to the professionalisation of the sector due to the advent of buy-to-rent, which is promoting high-quality living space, InterBay claims that landlords’ commitment to upgrading properties has been a key factor in this improvement. 

The lender’s survey of more than 700 property investors shows that 70% of landlords who recently undertook a refurbishment did so to improve the property, either to enhance the presentation or to elevate the quality of the accommodation for tenants. 

As well as ensuring a property is an attractive prospect for potential tenants, refurbishment typically bolsters a rental property’s value and income potential: 74% of those who undertook a refurbishment said it enhanced the property’s value, and 82% saw monthly rents rise. Even after accounting for those who did not see the value of their property rise, the typical refurbishment added £13,000 to a house’s value.

So it may be an easy target for political point-scoring, but the private rented sector has been the success story of the housing market in the last decade. Growth and professionalisation have improved both choice and quality for tenants.

However, faced with a range of potentially damaging future policies and proposals from across the political spectrum, continued investment is not a foregone conclusion. Rather than demonising landlords and driving them out of the market, they should be well-regulated and properly supported. Interbay Commercial thinks that, should the current rate of change in the PRS continue, “it will weigh on landlords’ decisions to spend more on their portfolios, and risks undermining a decade of progress”.

We agree wholeheartedly.  

No slowdown for BTR pipeline in the Northwest

Lesley Davis Leave a comment

Last week, the Northwest Insider event looked at issues around housing supply and demand. Life by Ringley MD Sam Hay was there, so for those of you who are interested, here are a few of the most interesting takeaways. 

When it comes to rental values, build to rent property continues to command a premium. Pounds per square foot does not come into BTR, instead it’s all about quality of product. Rental growth for July was around 1.13% but Andrew Cook from M&G commented that there will be pressures on pricing as more schemes come onto the market.

Low entry costs on BTR flats are making things much easier for renters. Increasingly, people want a transient way of life and easy entry and exit, so they are likely to try different buildings before they settle longer term. Lifestyle choices are changing fast and renting is no longer frowned upon. Renters react positively to being viewed as customers, not tenants; maintenance issues are dealt with fast and longer-term leases are expected to take off. As a result, BTR is a huge growth area with 1.4 billion total investment this year in Manchester alone. Manchester is currently at the hub of BTR and is very much being used as a test case. Manchester City Council thinks there will be an undersupply but at this moment in time, due to Section 106 requirements, consents are slowing down.

One downside of the BTR explosion and the high demand for one-bedroom homes, according to Tim Heatley from Capital and Centric, is that Manchester city centre is not ready for families. Chris Shaw from Urban Splash agrees. He thinks offers in our town centres need to change, and there should also be schemes in rural areas. Maybe with new ways to sell being considered, such as pre-approved mortgages where you turn up and pick your home. At the moment it is easiest to develop BTR schemes in city centres and building an investment case in other locations can be difficult.

Lambert Smith Hampton told the Northwest Insider audience that 54% of all housing investment in the North East is now for ‘alternative’ homes, such as BTR and student accommodation. The success of the latter in Manchester and other university towns has provided a model for new developments in the region. Diversification and a huge undersupply of high quality residential housing are now driving investment in residential portfolios as opposed to the standard commercial property investment model. There is even an argument in favour of BTR as a separate asset class.

How NOT to win friends – or votes!

Lesley Davis Leave a comment

If you want a lesson in shooting yourself in the foot, you don’t have to go much further than yesterday’s ‘right to buy’ announcement from the Labour party. Labour has pledged to introduce a new policy: if it wins the next general election it will give private tenants the right to buy the homes they live in.  

Shadow Chancellor John McDonnell framed the proposal as a response to the problem of “overcrowding” and landlords “who don’t maintain their properties”. This is a hammer to crack a nut. And it has produced the expected response from landlords and their member organisations. This is a badly considered plan and its timing is terrible. As we all hold our breath to see whether or not we will be facing another General Election in a few weeks’ time,  Labour just lost the votes of landlords around the country.

 Most landlords provide a well-maintained home for their tenants – and are right to expect a decent return for their investment. They are not providing social housing. Bad landlords are not the norm and as David Smith from ARLA says: “If there was to be any chance of this becoming law, there would be a mass sell-off of properties in advance”.

It is also doubtful, if the aim is to allow tenants to buy their rented home for below market value, whether or not lenders would be willing to provide mortgages on that basis. The housing market is predicated on market value, not on arbitrary sums set by the government.

Smith thinks Labour’s plans are effectively a kind of compulsory purchase that is entirely unacceptable and ultimately unworkable, reducing the availability of homes to rent and destroying the viability of the PRS. Spot on, we say.

Giving council tenants the right to buy in the 1980s ultimately produced a crisis in social housing, which successive governments have failed to address. The problem has spilled over into the private rental sector which now has to find homes for tenants who would, in the past, have been housed by their local authority. A well-regulated, strong PRS is an asset and responsible buy-to-let landlords are badly needed in a country with too few affordable homes to buy.

“Time to emigrate,” says Ringley & PlanetRent Group CEO Mary-Anne Bowring.  “Personally, I am fed up with out-of-touch politicians stereotyping private landlords.  There are some rogue landlords but these are the minority – by and large, private landlords are hard-working individuals trying to build a nest egg for their children or their retirement.  The Tories have squeezed landlords with mortgage tax changes, reduced their income by banning up-front fees and even expect them to clean up after tenants at the end of the tenancy!  Now Labour wants to dispossess them of their property altogether – I do wonder seriously, who is fit to run the country?”

In our opinion, the Labour party should turn its attention to finding ways to deliver a major housebuilding programme that would provide jobs, as well as homes for people. Attacking landlords and their ability to provide those much-needed homes is an own-goal of momentous proportions.    

Do we need an energy theft amnesty?

Lesley Davis Leave a comment
Don’t meddle with the meter.

Here’s an idea to ponder. According to Ofgem, tampered energy meters add £20 to every household bill each year. They also pose a life-threatening danger to personal and public safety. So the regulator is suggesting an energy theft amnesty. This would mean giving the public – including property professionals, landlords and tenants – the chance to own up (risk free) to breaking the law by stealing energy through a tampered meter. The meter would be made safe and no backdated charges applied.

Energy theft is a serious crime and it’s one which frequently goes under the radar. It is often committed by rogue landlords or tenants and injures or kills at least one person every fortnight in the UK.

During Ofgem’s proposed amnesty, energy thieves would neither be prosecuted, fined nor back-billed and would simply “get away with it.” The sentence is usually five years in prison.

Ofgem is so serious about this idea that it has done a survey to see what 1000 people round the country think. Over half would be in favour. So what are the pros and cons? Here’s what Ofgem has to say:

Benefits

  • Tampered meters are highly dangerous. They can cause fires, electric shocks and large gas explosions that can injure or even end lives. By making meters safe, an amnesty would help to make communities a safer place.
  • In the UK we all pay an extra £20 per year on our energy bills to pay for energy theft. Correcting tampered meters could help reduce the amount that everyone has to pay to fund stolen energy.

Drawbacks

  • An amnesty means that people who have previously broken the law by tampering with their energy meter will get away with it and won’t have to pay back what they have stolen. This could devalue the crime and make more people think they can get away with it – or other offences – in future.
  • If lots of people come forward, energy companies will need to visit thousands of homes to make their meter safe. This will be costly and does not guarantee these customers will not re-offend.

The research, which was carried out by UK-wide energy theft investigation companies, Echo Managed Services and Grosvenor Services Group doesn’t think the dangers of energy theft are well enough known.  The energy sector needs to work harder to educate people on the potentially-fatal risks that meter tampering can present, they say.

Ofgem will be weighing up the pros and cons of a possible amnesty in the coming months – so it will be interesting to see what happens. In the meantime, anyone thinking of tampering with an energy meter in a property they manage, let out or rent from a landlord should think again. It’s against the law and it’s dangerous.

Image courtesy of Caroline Ford [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0/)]

Help us campaign to save Section 21

Lesley Davis Leave a comment

We have written several blogs lately about the proposed abolition of Section 21 – the so-called ‘no fault’ eviction process. At Ringley we don’t believe that scrapping this system is good for landlords – or ultimately for tenants. Here’s why.

1)      Section 21 works. The system is widely understood by both landlords and tenants as it has been in place since the Housing Act 1988 was enacted.

2)      Many landlords find it cheaper and quicker to use Section 21 to get their property back rather than opting for a Section 8 eviction or breach action. Because the Section 8 route is so adversarial, as soon as they are served with a Section 8 notice (which may not be for rent arrears) the tenants simply stop paying rent. And because Section 8 procedures are adversarial the landlord ends up facing thousands in costs and huge voids, with cases sitting backed up in the court queues for months.

3)      There are already provisions to stop landlords using Section 21 wrongly. Before a landlord can even get as far as serving a Section 21 Notice, s/he must have complied with certain legal requirements for all tenancies entered into since 2015, including for example provision of:

  • An Energy Performance Certificate
  • The How to Rent Guide
  • Prescribed Information on the protection of a deposit (having also protected that deposit)

Landlords are also required to provide a valid gas safety certificate, not only before a Section 21 Notice, but before occupation. This was confirmed in the recent case of Caridon Property Limited v Shooltz (2018). So if a landlord has not provided a gas safety record at the start of the tenancy, s/he will not be able to rely on the no-fault basis for termination during that particular tenancy. Instead, s/he will have to rely on another ground for possession, such as rent arrears, where the process is longer and therefore more costly.


4)      Under the Housing Act 1988, a BTL landlord worried that he might need his property back can already protect himself if, not later than the beginning of the tenancy the landlord gave notice in writing to the tenant that possession might be recovered on the basis of Ground 1 specified in Schedule 2 of the 1988 Act, or, if the court is of the opinion that it is just and equitable to dispense with the requirement of notice because:
(a)           at some time before the beginning of the tenancy, the landlord who is seeking possession or, in the case of joint landlords seeking possession, at least one of them occupied the dwelling house as his only principle home; or
(b)           the landlord who is seeking possession or, in the case of joint landlords seeking possession, at least one of them requires the dwelling house as his or his spouse’s only principal home and neither the landlord (or, in the case of joint landlords, any one of them) nor any other person who gave the notice mentioned above acquired the reversion on the tenancy for money or money’s worth. 

The government has claimed landlords’ use of Section 21 eviction notices is the leading cause of homelessness in the UK. The National Landlords Association (NLA) completely rejects this idea. Referring to data provided by the government that of 33,020 households assessed by local authorities between October and December 2018, the NLA points out that just 11.8% (3,890) faced homelessness as a result of being served with a Section 21 notice.

Nor does the NLA think that the Government has considered the impact of these new policies on the most vulnerable members of society.  We agree that the proposals are likely to deliver a whole range of unintended consequences. These include a lower supply of private rented housing alongside more risk-averse landlords. The NLA tells us landlords are now exiting the market at a faster rate. This further damages the already fragile supply of properties in the areas where they are desperately needed. Tenants on Universal Credit or benefits and anyone with a bad credit record, CCJs or pets will lose out, they say.  We agree. And the removal of Section 21 will make more landlords more susceptible to rogue tenants – they are out there and they cause endless heartache and a lot of money.

Above all, landlords must be able to evict bad tenants.   If they can’t, we will end up coming full circle: needing new legislation to encourage landlords into the rental market as we did all the way back in 1988.  The institutions are coming into the market and may cover the towns and cities but a healthy market needs a range of accommodation types across the spectrum. Continually trying to push buy-to-let landlords out of the market is nonsensical. We badly need our rental market to work – for everyone. Scrapping Section 21 isn’t the way forward.

So we are calling on anyone who agrees with us to use the four points we outline above to respond to the government consultation here before 12 October. Please join us and make our voices heard.

Rents up as landlords leave the market – but agents remain positive

Lesley Davis Leave a comment
Demand is up and so are rents

Two new reports out this week look at the lettings industry. Both are revealing.  The Association of Residential Letting Agents (ARLA) and digital referencing company Goodlord put the current state of the lettings industry under the spotlight, now that agents have started to adjust to the changes brought in by the Tenant Fees Act.

According to ARLA, rents rose to their highest-ever level in June, with demand also on the increase. Year-on-year, the number of tenants facing rent increases is up from 31% in June 2017, and 35% in June 2018. At the same time, the number of properties under management fell. ARLA chief executive David Cox expects this to be a continuing trend.

 “In addition to the repercussions of the Tenant Fees Act, the proposed abolition of Section 21 coupled with the Mayor of London’s recent call for rent controls, will only cause the sector to shrink further. In turn, this will increase pressure on the sector because it will discourage new landlords from investing in the market, causing rents to rise for tenants as less rental accommodation is available.” He said.

Ever since the Government proposed the ban, ARLA has warned that tenants would continue to pay the same amount, but the cost would be passed onto tenants through increased rents, rather than via upfront costs.

Goodlord also surveyed letting agents around the country to take the pulse of the industry during the summer months. They reveal that agents are largely optimistic despite the issues raised by the ARLA survey. The agents surveyed admit they expect to lose revenue following the fees ban in June but they are taking a positive stance, with almost half (47%) of those polled planning to expand their managed portfolio in response.

But perhaps the most interesting feature of this survey is that while letting agents continue to deal with the familiar pain points of the rental business from carrying out referencing to sourcing tenants, more than 80% of them are increasingly looking to Proptech to make these processes easier. This is the trend to watch and we’ll be blogging on this again in the coming weeks.

Renting – what do you think about it?

Lesley Davis Leave a comment

Despite all the bad press that renting often seems to attract, most people are happy with their rented home and have no complaints about their landlord. This is the good news for the rented sector from the latest English Housing Survey Private rented sector report, published yesterday.

Private rentals are the second biggest housing sector in England. The government estimates the PRS at 4.5 million households compared to 14.8 million owner occupiers, with about one in five households in England renting their home.

Most renters are happy in their homes says the latest English Housing Survey

According to the survey, the vast majority (84%) of private renters say they are ‘satisfied’ or ‘very satisfied’ with their current accommodation, though satisfaction levels are higher among owner-occupiers (95%).  Private renters are also less happy with their tenure, at 69%, compared with 98% of owner-occupiers. In a country where owning your own home is a key aspiration for most people, this is not unexpected.

Compared with social renters and owner-occupiers, private renters spend the most money on housing. On average, they spend a third of their household income on rent. And there are no surprises in the fact that Londoners spent more on rent than people living outside the Capital. What is more unexpected is that despite the often high cost of renting in comparison to paying a mortgage – and the number of renters who receive Housing Benefit –  the majority of people polled said they found it ‘easy’ or ‘very easy’ to pay their rent.

And despite the difficulties of getting onto the house-buying ladder, more than half of private renters thought they would eventually buy a home – even though a sizeable proportion freely admit they have no savings. Younger renters were more likely to think they would eventually become home owners. But without any clear idea of how this might happen, this sounds more like the optimism of youth, rather than a sign of increasing affordability in the housing market!

Is it time to ditch licensing schemes?

Lesley Davis Leave a comment

Passports are fashionable in the rental sector right now. Last month we had deposit passporting and now we have the concept of a so-called rental property passport.

This is the suggestion of  Theresa Wallace, head of lettings customer relations at Savills and current chair of The Lettings Industry Council. Speaking at The Property Ombudsman Conference last week, she told delegates the passport “could rapidly improve the quality of accommodation and landlords, and would be far fairer than the slew of licensing schemes now in force”.

Could the idea of rental property passports signal the end of licensing schemes?

It would be based on the DVLA model which manages the details of almost 50 million drivers and 40 million vehicles. Letting Agent Today outlines how the passport might work.

  • Each rental property would have a unique reference number. These are already allocated to properties by the Land Registry;
  • Any property without a reference number would not be ‘official’, so may have been illegally converted;
  • Every advertisement for a rental property must include its reference number and would also include the equivalent of a ‘property MOT’ certificate to ensure it had passed appropriate tests. 

Delegates at the conference were told that Hunters have already successfully piloted the scheme and that the Lettings Industry Council has found a not-for-profit supplier who may be able to operate a PropTech portal. This would mean the properties could be quickly and easily viewed by the public and Trading Standards.

If you are a landlord – or a tenant – we’d like to know what you think about this idea, so do leave your comments below.

Deposit passporting – have your say

Lesley Davis Leave a comment

In June we blogged about the idea of rental deposit passporting. The idea is to make it easier for renters to transfer deposits directly between landlords when moving from one property to the next,

Housing Secretary James Brokenshire MP has now announced a Call for Evidence on tenancy deposit protection in England that, among other things, invites views on passporting.

Deposit passporting – what do you think?

The government hopes to get a better understanding of the problems tenants face in providing a second tenancy deposit when moving from one tenancy to the next. It is also searching for ways to speed up the return of deposits to tenants at the end of their contract. The Call for Evidence will look at whether current thinking on making deposits affordable are meeting tenants’ needs and whether the market can offer improved products.

The results from the Call for Evidence will help the Tenancy Deposit Protection Working Group. This is looking at whether improvements can be made to deposit protection to the benefit of tenants and landlords. ARLA Propertymark is part of the working group – which has been running for the last 12 months. ARLA supports the idea of moving deposits between tenancies. But it says any solutions that the government comes up with must consider the interests of all parties.

“For deposit passporting to work, we need to ensure that both the outgoing landlord’s deposit can be used if needed, while the incoming landlord has certainty they will get the full deposit they have agreed by the tenant,” said ARLA this week.

“Affordability for tenants of any bridging loan or insurance policy will be key if deposit passporting is going to be a workable and affordable solution for the future of deposits.”

So if you are a landlord, a property manager or a tenant with strong views on how this could work in future, you can download the Call for Evidence and have your say by email to DepositReform@communities.gov.uk or online by 5 September.

Making rental deposits easier to transfer

Lesley Davis Leave a comment

Good news for tenants today. In future it could be made easier to free-up rental deposits when moving from one property to another via “deposit passporting”. Speaking at a major housing conference in Manchester, Communities Secretary James Brokenshire said this was one of  the ways that the housing market could be made fairer.

Deposit passporting sounds like good news for tenants but what about landlords?

“Ministers are inviting proposals to make it easier for renters to transfer deposits directly between landlords when moving from one property to the next,” he said.

This is because some tenants find it a struggle to provide a second deposit to their new landlord. Until their original deposit – on the home they are moving out of – is returned by their current landlord, many renters find themselves in danger of getting into debt or becoming trapped in their current home. With more than 4 million people living in the private rented sector, the government want to understand the scale of this problem.

Shelter welcomed the news. “A deposit passporting scheme would help the country’s hard-pressed renters avoid having to stump up a fresh deposit before they’ve got the old one back, ” said the housing charity in The Times.

But what about landlords? There is a reason why deposits are withheld until the check-out process has been completed – and that’s because not all renters leave properties in good order.  It may not always be possible to inspect a property until after the tenant has left. And any damage may not be immediately obvious. If the deposit has already been “passported” that could leave the previous landlord high and dry.

The suggested solution set out by James Brokenshire today is that the previous landlord should still be able to claim part of the deposit for any damages, and the tenant could top up the deposit if necessary. So could it work? Maybe.

The next step is a Call for Evidence. The industry will be asked to consider whether the scheme should be government-backed, or whether existing deposit schemes could be tweaked to take passporting on board. The Secretary of State told the press today: “We need to do this thoughtfully”. Let’s hope he means it.