The accidental landlords exit

“Is the accidental landlord on his way to the exit?” asks David Lawrenson of private rent consultancy, www.LettingFocus.com.

Recent research from Knight Frank, the consultancy and letting agency, suggests that the “accidental landlord” might be exiting from the private rented sector.

According to a recent report from them, the number of new lettings at under £1,000 a week in London fell by around 4% over the last year. They think that amateur landlords are more likely to fall into this category of price than professional landlords – a debatable point, which we shall leave for now.

An Accidental Landlords Exit?

They also report that this “accidental landlord exit” means that there are now eight tenants for each property advertised in London, with the strongest demand being for homes in the five hundred to seven hundred and fifty pounds a week level.

Knight Frank think that accidental landlords make up slightly over 7% of the private rental market, with the highest proportion being in London where they estimate they form around 10% of the market. The East Midlands and Humber regions have the lowest proportions – at around 5%.

Now you are probably wondering what exactly is the definition of an “amateur landlord”. Well, the researchers definition is a rental that was listed for sale in the previous six months.

So the idea is that if they cannot sell, the owner turns to being a landlord and tries to let their former home instead. This does indeed seem a natural response to a slow housing market gripped by Brexit torpor, but should mean there ought to be a rising proportion of landlords right now, not less.

But we think there are likely to be other factors at work, which could be more significant in reducing accidental landlord numbers.

Accidental Landlords Fears

First, there is regulation.

There has been a big increase in the amount of regulation landlords have had to deal with over the years since my first book for landlords, “Successful Property Letting – How to Make Money in Buy to Let” first came out in 2005. We are now on edition seven – and yes, the book has got longer over the years as it still endeavours to successfully and clearly cover ALL the regulations a landlord will ever have to deal with.

Second, there is tax.

There has been a veritable avalanche of increased taxes on landlords over the last five to seven years, starting under George Osborne and continuing under successive Tory Chancellors. There has also been a brand new tax too – the special 3% extra Stamp Duty Land Tax levy on all second homes.

But for the amateur landlord, the latest tax change – Lettings Relief removal – which is planned to be withdrawn from April 2020 is the real biggie and it’s this that may be behind a lot of accidental landlords selling former homes (which became rental properties when they could not sell).

Where a landlord used to live in a property as his or her main residence, Letting Relief worth up to £80,000 for a couple (or £40,000 for single owners) is available. Landlords could also qualify for tax relief for the last 18 months of their ownership if the property had been their primary residence at some point during their time of ownership, but this time period has been cut to nine months.

After April 2020, Lettings Relief will only be available if you’ve also lived in the property with your tenant, i.e in a lodger type situation – which is not going to be the case for the vast majority of landlords.

Other Worries for Accidental Landlords

What else is scaring the accidental landlords?

Try Jeremy Corbyn and the mainstream personal finance press.

There is a fear of what “Magic Grandpa”, Jeremy Corbyn, might do should he be elected as prime minister.

And generally, the personal finance mainstream press is not in favour of landlords, (possibly because so few journalists are landlords themselves). I have always thought that fund managers and stockbrokers provide much of the press copy used by the personal finance press. And they love to skew the numbers to say that collective stock market based funds are a better bet than property. (Paraphrasing Mandy Rice Davies: “They would say that wouldn’t they?”).

But Non Institutional Landlords Have Much to Play For

And yet, think about it. Who is going to house people?

Not the state, not in great numbers! Only the most ardent pocket book Marxist economist in Momentum would be dumb enough to fail to realise that if you take any reasonable profit out of private renting, future supply will simply dry up. That old disused pub won’t be converted into new flats by the army of keen small investor-refurber-landlords. And those bigger blocks, much beloved by the likes of Legal & General and other pension funds, won’t get built either.

Supply of housing is so bad in the London borough where I live, our local Bexley Council are offering to pay private landlords up to £8,000 to take people off the housing waiting list. Bexley is not untypical.

Already, as we can see, private rents are rising as supply fails to keep up with demand.

The future of renting may belong to the more professional landlords who can navigate the greater levels of regulation and cope with the new tax regime – and who will enjoy higher rents from private tenants and cash incentives from the desperate councils who have to face the sharp end of failed government housing policies.

But it would be a shame if the amateur and small accidental landlords began to disappear. The majority of non-institutional private, professional landlords today were probably once accidental landlords. They found they actually rather enjoyed it, they bought more properties and finally, when they had enough properties they were able to pack in “working for the man”.

Smaller landlords can still do well. Just get my “Successful Property Letting” book to learn what the regulations are and set yourself up right at the outset to legally minimise your tax bill – and you’ll be fine and enjoy good profits for years to come. See the links below to all three of my books.

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