Rental sector can’t meet demand for homes to let

As lockdown is eased, demand is currently outpacing supply, but London is seeing rents fall.

The rental sector is taking off again as lockdown restrictions are eased. But for renters, it’s very much a game of two halves. As we blogged yesterday, around 2.6 million renters are estimated to be in rent debt or likely to find themselves in arrears as a result of the pandemic. And landlords are feeling the financial fallout too. So unless they are able to come to suitable payment arrangements with their tenants, there could be a flood of evictions when the government lifts the repossession ban – currently scheduled for 25 June unless steps are taken to extend the embargo.

Clearly, this is bad news for tenants in financial hardship. But it may benefit those whose jobs have been unaffected by the pandemic and who now want to move, giving them more choice as those properties come back onto the market later in the year.

In London, property agent Chestertons explains that the outlook for landlords is being impacted by the fact that fewer people are willing or able to move to the capital due to the pandemic. The agency told Letting Agent Today that rents in London have dropped by between 10% and 15% as a result. Fewer students, fewer corporate rentals and tenants worried about their income are all making the situation worse, as is the trend for renters to try and negotiate lower rents with landlords, says Chestertons.

In the rest of the country, the story is a more positive one. According to Rightmove, demand for lettings is up by 22% compared to last year, with the online property specialist telling the BBC that the easing of lockdown has released “two months of pent-up tension”.

Lockdown break-ups, forced moves and the wish to relocate away from cities is driving the market, and the pandemic has left many people with “an immediate housing need” according to Rightmove. At the same time, buy-to-let landlords are exiting the market due to worries about finding financially sound tenants, while those that continue to let property are likely to be hand-picking the tenants with the best references and credit records. All this adds up to high demand for fewer rental homes. So we can expect to see rents rising and more people struggling to find an affordable home – unless we see that potential spate of evictions bringing many more rental properties onto the market.

The market is in an interesting place and, with coronavirus likely to be with us for some time to come, it’s hard to predict what the rest of the year will bring for landlords and tenants. What do you think?

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Don’t forget – Tenant Fees Act in force from Monday!

The Tenant Fees Act applies to all tenancies in England from Monday 1 June

Landlords, from next week the Tenant Fees Act 2019 applies to all your tenancies and you are banned from charging renters any fees apart from those specified in the legislation. That’s rent, tenancy deposits, holding deposits and any default charges that are specifically stated plus a few others we list below.

The Act came into effect in England on 1 June 2019 with a one-year transitional period, which exempted existing tenancies from the new rules. This is about to end. So from Monday 1 June, all assured shorthold tenancies and HMO licences are subject to the legislation. The legislation also introduced a deposit cap that limits deposits to five weeks’ rent (or six weeks if the annual rent is £50,000 or more).

To remind landlords of the rules, here’s a list of allowable charges:

  • A refundable deposit
  • A refundable holding deposit – capped at one week’s rent
  • Rent, utilities, communication services, TV licence and council tax
  • Fees for changing or ending a tenancy at the tenant’s request
  • Default fees for late payment of rent  
  • Fees for replacing a lost key or security device, where required under a tenancy agreement and with evidence of the cost in the form of a receipt or invoice.

If landlords charge for anything that isn’t on this list that’s a breach of the new legislation. This carries a fine of up to £5000. And even worse, if you break the rules again within five years of being fined the first time, that counts as a criminal offence and carries an unlimited fine. So make sure you understand the new rules.

For a full list of charges that are now banned under the legislation, you can read the Government guidance in full here.

Finally, it’s worth remembering that any deposit taken before 1 June 2019 that was higher than the five or six-week cap that is now in place, doesn’t need to be refunded immediately. Instead, renters should receive a refund at the end of the tenancy. The new tenancy deposit cap will apply to any new tenancy agreed after that.

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Moving house? Now you can!

Time to get moving – but you must stick to the new guidelines

Have your moving house plans been brought to a halt by the lockdown? If so, you can now re-start the process. Yesterday, Housing Secretary Robert Jenrick announced that, from today, anyone in England can move home if they follow the new Government guidance.

Since lockdown restrictions were implemented in March, more than 450,000 people have been unable to progress their plans to move house. The government hopes to re-start the market and get buyers, sellers and renters moving again.

Clearly, this announcement doesn’t mean a return to normality – far from it. The process of finding and moving into a new home will be different and that now includes doing more of the process online. Initial viewings will be virtual and vendors will be asked to keep away while potential buyers are shown around. Properties must also be thoroughly cleaned before someone else moves in. So good news for commercial cleaning companies used by landlords and block managers.

After seven weeks in lockdown, the announcement is welcome news for the property industry as well as for buyers, sellers and renters. Ringley Group MD Maryanne Bowring said today:  “There’s no reason buyers or renters shouldn’t be able to move home if they are able to do so safely in accordance with social distancing guidelines”. However, she is quick to point to the fact that this doesn’t mean the housing market has returned to its pre-coronavirus state.

 Lockdown is set to continue in some form for an unknown amount of time and the resulting economic disruption is likely to weigh down on activity in the for-sale market. A stamp duty holiday, as proposed by RICS and others (see our 29 April blog for more details) could see a stampede in transactions while an extended Help to Buy will support some sales and in turn housebuilding.

 Maryanne thinks the Government now has an opportunity to think long term and introduce policies to reflect Britain’s changing housing needs. “Private renters are a fast-growing part of the housing market and need catering to,” she says,  “yet politicians seem intent in squeezing buy to let landlords out of the rental market and the build to rent sector – a positive emergence – simply isn’t big enough yet to absorb all rental demand.

 “If the government cuts stamp duty surcharge for landlords it could help stimulate the market by encouraging BTL investors to snap up homes to then rent out. Many landlords also help support housebuilding through off-plan sales,” she adds

 The housing market as whole will also have to get ready for a digital-first approach to transactions as more tasks and jobs are done remotely.

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Why we say tenants need a payment holiday too

Pay it forward: landlords are taking mortgage holidays but what about tenants who are facing hardship?

A recent survey by Landlord Action found nearly three-quarters of landlords have been contacted by tenants worried about their rent payments. This highlights the severe impact the lockdown is having on household finances.
Mary-Anne Bowring, group managing director at Ringley, thinks renters should have their rents reduced if they can prove they have been unable to access cash through the government’s income support schemes, and their furlough or government money means a reduction in their normal household income. After all, she says, that income is what the affordability of the letting was granted on. In particular, Mary-Anne thinks this should be the case if the landlord is benefiting from a mortgage holiday.  “Otherwise,” she says, “this is a lose-lose situation for the government and the wider economy – which means all of us”.
The government has already banned eviction proceedings from happening and is urging landlords to work with their tenants in situations where they are struggling to pay rent. Tenants who are out of work and living on reduced incomes surely have a right to know if their landlord has secured a mortgage repayment or a repayment-and-interest holiday. How can it be right for the landlord to still expect tenants to pay their full rent if they are being propped up by their mortgage lender?  Of course, the government still needs to help renters either not covered by income support schemes or who have not yet received the additional cash.
Mary-Anne adds: “The word ‘unprecedented’ has been used a lot in response to the impact Coronavirus is having but statistic after statistic shows a level of damage not even seen during the worst of the Financial Crisis. The government has moved decisively to help protect tenants and landlords, but it is inevitable some households will fall through the gaps as the various income support schemes get up and running and payments are processed.
“Transparency is key, and renters have a right to know if their landlord has benefited from a mortgage holiday and, if they are struggling financially, they should be able to request a reduction in rent. Any rent reduction must be conditional on being able to prove financial hardship to prevent abuse of the system and it is important tenants and landlords work together during this uniquely difficult time.”