It is safe to say that the last couple of years have seen major changes in the way in which landlords operate. This comes at a time when the UK is crying out for private rental property while the authorities seem intent on increasing costs and reducing margins. Many politicians have taken the side of tenants as a means of currying favour with voters as we approach the next general election. So, let us take a look at the recent changes and how these may affect private landlords going forward.

Ban of letting fees

The banning of letting fees and the capping of deposits taken from tenants (now a maximum of five weeks or six weeks for tenancies in excess of £50,000 a year) has already had a material impact upon the financial strength of many landlords. In effect the fees that landlords can charge tenants would be restricted to:-

• Utility charges, council tax and communication services
Tenant fault issues, such as replacement of lost keys
• Requests from tenants to change contracts or terminate agreements

As a consequence, the cost of tenant references and carrying out inventories will need to be absorbed by private landlords. This is despite the fact that on the surface these seem to be fairly justifiable charges directly related to new tenants.

Mortgage interest tax relief

In April 2020 the historic system of offsetting mortgage interest against rental income will be replaced by a simple 20% tax allowance. This will obviously hit landlords in the higher tax brackets harder and will have a meaningful impact upon their tax liabilities. The current system is being phased out and already landlords are starting to feel the pinch.

It is difficult to see why the government has taken this particular stance when offsetting the cost of finance against income has been central to business practices for many years. Some would argue this is yet another attack on “rich landlords” or is it simply a way for the UK government to increase their tax take?

HMO licensing

Houses in multiple occupation (HMOs) continue to create some very attractive rental yields even if the initial redevelopment costs can be relatively high. So, it was no surprise to see politicians looking for a slice of the action and a share of the income. Back in 2018 the UK government changed the criteria covering HMOs to bring more properties under this umbrella. Surprise surprise, this was very quickly followed by a mandatory countrywide HMO licensing scheme. However, we’ve also seen local councils across the UK introduce their own “additional/selective licensing schemes” at further cost to landlords.

It is safe to say that the cost of HMO licences, both national and local, will creep ever higher in years to come. However, have the politicians and local authorities never considered that private landlords will eventually transfer the cost of HMO licences to their tenants via increased rent?

Living space

In recent times we’ve also seen the introduction of new living space requirements which will cover all private rental accommodation. While in theory the new regulations encourage a uniform approach towards rental properties, they have been costly for some landlords. In future the minimum size of sleeping accommodation in a rented property will be as follows:-

• A person under 10 years of age a minimum of 4.64 m²
• A person over 10 years of age a minimum of 6.51 m²
• Two people over 10 years of age will require a minimum of 10.22 m²

There is a fairly strong argument that these regulations will slowly but surely filter out rogue landlords who charge extortionate fees for relatively small accommodation space. On the flipside, despite the fact that the new regulations have been accompanied by new fines and jail sentences of up to 18 months, will rogue landlords really take any notice?

Stamp duty increases

To a rousing reception from politicians and voters with a left-wing bias, the recent introduction of a second home 3% stamp duty charge has raised significant funds for the Treasury. Yet again this is part of a concerted effort to pit the perceived rich against the perceived poor. Amid suggestions that the “rich can afford it” and it is time to “redistribute wealth” it does seem that the second property stamp duty surcharge is here to stay.

If you take a step back and look at the situation from a distance, the introduction of the additional stamp duty charge rouses suspicions of opportunism from the government. Even during the darkest days of Brexit, post the 2016 referendum, UK property prices have continued to rise. Admittedly, the growth in property prices has slowed of late but many homeowners and private landlords have seen a significant increase in the value of their housing stock. True to form, politicians somehow believe they are entitled to an even bigger slice of this increase in wealth despite the risks taken by investors.

Eviction rules

If we look back to our earlier comments regarding the fees that landlords can charge tenants in the future, the maximum deposit has been reduced to five weeks rent (up to 6 weeks with a tenancy worth in excess of £50,000 a year). More recently the government also announced plans to abolish section 21 eviction notices thereby placing a greater onus on landlords looking to evict tenants. Despite the fact the authorities have promised to speed up the current process, which can take months to resolve, there are serious concerns that landlords could be significantly out of pocket.

If there is an issue with a tenant, perhaps they are behind with their rent, a prolonged legal process is likely to increase rental arrears (and legal charges for landlords). How many tenants would attempt to pay off their rental arrears if legal action had already been started to evict them from the property? It is safe to say this has further eroded the traditional insurance/ protection landlords have had in place for decades. Is this fair? Is this a move too far towards strengthening tenant rights?

Snooping on tenants

When the UK government brought in the Right to Rent initiative in 2016 there was a huge backlash against the concept. There were cries that this was an affront to human rights and an attack on immigrants but what about private landlords? These new regulations oblige landlords to check that potential tenants/existing tenants have a legal right to live in the UK. Ramping up the pressure on landlords, the authorities introduced an array of criminal sanctions for those who fail to carry out the required checks. Whose time and money will be used to carry out these checks? Simple, landlords are yet again expected to foot the bill for what are free services to the state.

We have also a seen council in the North of England looking to work “more closely” with local private landlords to effectively snoop on their tenants. While the current scheme is “voluntary” there is talk of bringing in a compulsory scheme. This would effectively make landlords the eyes and ears of various law enforcement agencies and place a legal obligation to cooperate with the authorities. Who would pay for this additional time and effort? Right again, landlords will be expected to give their time free of charge.

Conclusion

These are just some of the main changes to the UK private rental market in recent years. Even though there were initial hopes that Boris Johnson would roll back some of these changes, focus at the moment is on Brexit. Therefore any short-term changes are highly unlikely.

Is it fair to argue that tenant rights have been strengthened to an unacceptable level? If the current situation is the base going forward, what on earth might private landlords expect under a left-wing Labour government?

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