The Easter Newsletter for Landlords
Here is our Easter Newsletter, which was originally published on 1st April 2012.
Our new (Summer Newsletter) was posted three weeks ago. Please email [email protected] to get it and to go on our mailing list.
“Welcome to the Easter Newsletter and a special welcome to the 150 individuals who have joined our mailing list since the New Year newsletter.
So, what’s been happening in the private rented sector since the Winter?
Once again, there has been no new legislation at a national level, just some changes to the Tenancy Deposit Scheme and Energy Performance Certificate rules.
However, the “Localism Agenda” means that local authorities are increasingly trying to impose new restrictions on the private rented sector in their own patches.
And in many ways these local actions constitute more of a threat for landlords.
Local activity has increased in two main areas.
HMOs and Article 4
First, some local authorities are applying to use planning laws (Article 4) to restrict the number of Houses in Multiple Occupation (HMO) properties in their areas. (Article 4 gives councils the power to apply to limit the number of new HMOs in an area. (Larger HMOs are already covered by existing planning rules.))
This seems a perverse thing to do at the same time as the changes to the Shared Room Rate within Local Housing Allowance (LHA) mean that demand for shared accommodation room in HMOs is increasing.
Second, there is Selective Licensing, which is another curiosity.
It is increasingly being used by local authorities as a tool to try to get private landlords to deal with antisocial behaviour by tenants.
However, I have yet to meet a private landlord who actively courts potentially antisocial tenants, let alone one who would like to keep such tenants as customers for the long term.
Any private landlord who has ever had the misfortune of having an antisocial tenant as a customer will know that it can be rather hard to get them out unless the fixed term has ended. This is because many judges (in the absence of serious rent arrears) are often quite unwilling to issue possession orders unless they perceive the trouble as being very serious indeed. The landlord with an antisocial tenant is often forced to wait for 2 months arrears or until the fixed term of the tenancy has ended before he can be sure of getting possession.
Rent Controls and Accreditation
What happens in London often sets the scene for the rest of the country.
And in the race to be London’s new mayor, the candidates have been talking a lot about the capital’s fast growing and sizeable private rented sector.
In the last newsletter I wrote about how there had been calls for rent controls from Labour Mayor hopeful Ken Livingstone. Plus, of course, there is the ongoing desire that most local authorities and all London Mayoral candidates have for a universal accreditation scheme for all private landlords in London.
Some in local government would like to see membership of a landlord accreditation scheme made a pre-requisite for payment of Local Housing Allowance to be made direct to the landlord, plus acting as a gateway to a range of other benefits.
This is an interesting idea, but as most landlords are not exactly queuing up to access the “benefit end” of the market or to join accreditation schemes, it may not achieve much.
Longer Term Tenancies
Green Party London Mayoral candidate Jenny Jones would like private landlords to issue longer term tenancies and has made that a key part of her campaign.
Research from the National Landlords Assocn tells us that 36% of private landlords would like (for selected good tenants) to be able to issue longer term tenancies too. But there is a major problem with Ms Jones’s plan – which is that that the UK’s mortgage lenders prohibit the 70% of landlords who have mortgages on their properties from issuing tenancies longer than 12 months in duration.
In other words, her suggestion, though sensible, is partly unworkable at this time – and perhaps she really should be having a conversation with the Council of Mortgage Lenders instead. (Stop press: Following our press release, the release of this newsletter in April and an email to Ms Jones about this matter she promptly did an about turn and started calling for changes to lenders procedures instead!)
Not for Profit Letting Agencies
Over in the red corner, Labour Mayoral candidate Ken Livingstone is rightly concerned about the quality of some letting agents, a point we fully agree on.
To help resolve this, he is keen to see a London wide “Not for Profit Letting Agency” based at the Town Hall.
But we wonder if they will be open at weekends and provide the same level of service as all the better letting agents provide. My town hall certainly isn’t and so we are not hopeful.
Not for Profit Letting Agencies have been tried elsewhere in the UK at a number of councils where there has also been a lot of money spent on trying to get landlords to engage with people who are dependent on Local Housing Allowance, the homeless and other vulnerable groups.
We would like to see some independent assessment of the value for money from such historic schemes carried out before government – whether national or local – moves ahead with yet more of these new types of schemes, funded by the taxpayer.
Tougher Penalties Not More Regulation
Our suggestion has always been that the government must stop and take stock. We would like to see tougher penalties for landlords who don’t meet the rules as they exist today combined with the councils starting to use existing powers to take a very hard line on the minority of rogue operators.
On a general level, the housing debate in London among the candidates for mayor makes us feel very concerned about the apparent lack of understanding of some in government and local government about the private rented sector and the policy levers they would like to use.
Better Buy to Lending
Since the last newsletter one bright spot has been that lending loan to values has become more generous and fees for buy to let mortgages have come down too.
However, lenders are continuing to look to cherry pick the best customers and, even in the buy to let space, they are increasingly becoming shy of offering interest only mortgages unless there is clear evidence of the borrower’s ability to repay the loan from other non-property assets at the end of the mortgage term.
16 years after the birth of the buy to let mortgage, apart from a few lenders, product differentiation from most mortgage lenders remains painfully slow to emerge, though most are now getting better at “pricing to risk”. No more will we see the likes of Woolwich’s 0.7% over Bank of England Base life time trackers. Nor the Mortgage Express deals.
And too many lenders still require landlords to show some non-rental income or are willing to turn away landlords with portfolios of over 10 properties, even if the landlord has a huge amount of rental profit, a low overall LTV and substantial equity.
We have commented further on these issues and a range of others matters affecting the PRS at our blog posts which can be found at www.LettingFocus.com/Blogs
Overall, with rents rising and low interest rates, the sector has a lot going for it and despite the threat of local and national regulation, being a private landlord is still a rewarding business.
Scroll down for other useful links……”
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