National Landlords Association

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Social Housing Evictions Higher than in Private Housing

A Familiar Narrative

You may have noticed that privately rented accommodation is not always held in the highest regard. With a shortage of housing in the United Kingdom (at least in London, anyway), private tenancies are regularly decried for being expensive, poor value and, ultimately, unstable.

Repossessions – or evictions – we are reminded are commonplace in the private sector.

The received wisdom goes that with little regulation of rents and a highly pressured market, private landlords can make renting very difficult. Untenable, even. On the other hand, social housing is affordable, in good condition and above all else, secure. Or so the story goes…

Possession claims from Social Housing Higher Than and Private Housing

Findings from the Ministry of Justice suggest that we might not be getting the whole story. Of the possession claims issued in the first quarter of 2016, over half (57%) occurred in social housing. By contrast, just 15% occurred in private, while 28% of possession claims were accelerated procedures.*

Accelerated possession claims are made up of a mixture of both social and private, but it is likely that a substantial amount of the claims will be from the latter tenure.

However, even if all the accelerated possession claims came from the private rented sector (PRS), this would still only amount to 43% – far less than the figure for social housing.

Accelerated Claims

When we consider how many claims actually result in county court bailiff repossessions, the findings also show that the majority originate from social housing, with 44% in social, 14% in private and 42% accelerated.

Expansion of the PRS

Even so, it should be noted that the proportion of repossession claims in social housing has actually decreased over time while there has been a corresponding increase in both private and accelerated procedures.

Type of Claim 1999 2015
Social 83% 62%
Private 9% 13%
Accelerated 7% 25%

Much of this has to do with how the landscape of housing in the United Kingdom has changed over time. Social housing has declined, while the private rented sector (PRS) has expanded dramatically.

The private rented sector (PRS) now accounts for approximately 5 million households and has overtaken social housing. In 2014-15, the PRS accounted for 19% of households while the social rented sector fell behind at 17%.**

More people are privately renting than ever before, including more vulnerable households who would traditionally live in social housing, such as those from lower incomes and in receipt of housing benefit.

Voluntary Departures

Of course, some will argue that the majority of private renters, once served with an eviction notice, are likely to voluntarily leave a property instead of remaining against their landlords’ wishes and advancing a repossession claim.

However, research indicates that, by and large, it’s the tenant that brings their tenancy to an end, rather than their landlord. According to English Housing Survey findings, 78% of tenants reported that their last tenancy ended because they wanted to move to a different property.***

Research from the National Landlords Association supports these findings. Only 1% of tenants said that their landlords ended their last tenancy. By contrast, over half (51%) of tenants reported that their tenancy continued after the fixed term had expired and a third (33%) said that their landlord renewed their tenancy after it had finished.****

Long-term Tenancies benefit everyone

This is an important issue, but private renting is not as unstable as you might have thought – and no more so than social renting which is often held up as the beacon of stability.

After all, long-term tenancies do not just benefit renters, they benefit landlords too. It stands to reason that possession claims in private rented accommodation should be lower than in other tenures, particularly when renters have the freedom to extend and end tenancies when they wish.

The real story will be whether this trend continues. As the PRS continues to grow, will we see an increase in possession claims as more households find themselves unable to rely on social housing and to sustain the repeated cuts to housing benefit?

 

*Ministry of Justice Bulletin – Mortgage & LL. Possession Statistics in England and Wales April to June 2016

**DCLG English Housing Survey Headline Report 2014-2015

***DCLG English Housing Survey Household Report 2013-14

****NLA Quarterly Tenant Panel – Q2 2016 (946 respondents)


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Tenants on the starboard bow……

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#StarTrek50

Hotels in space have been talked about as the next big (if not final) frontier for space tourism for some years. Some even predict that the first commercial ‘enterprise’ could open its door – or should that be airlocks – in 2020.

Drinking from the ‘astronomically’ priced mini-bar whilst orbiting the Earth at 17,000 miles per hour sounds great – but what if you feel like settling down for a while and finding your own personal lagrange point?

A hotel in low Earth orbit just won’t cut it.

What you need is a space landlord, one who knows his or her anti-matter containment device from their hyper-spanner. Who know’s you like 0.8 Earth gravity and exactly how you prefer your environmental controls set.

You need a certain type of individual, with loyalty, intelligence, dependability and perhaps a close friend with pointed ears and fashionable green blood.

That’s why to mark the 50th anniversary of the first US network broadcast of Star Trek 50 years ago we are asking the vital question:

Which Star Trek captain would make the best private landlord?

To make matters simpler we have limited the choices to Kirk, Picard, Janeway and Sisko*. To all of you fans of Commodore Wesley or Matt Decker (not to mention Capt. Archer) I sincerely apologise – but tough.

Vote here, or via the NLA’s twitter feed (@nationalandlord) and share your opinion.

The NLA’s opinion?

I know what you’re all thinking. Kirk. Obviously. He’s simply one of a kind. That’s certainly the ‘human’ heartfelt option. But to  consider the ‘logic’ of the situation is he really the best landlord? He’s loyal, decisive, knows a miracle worker of an engineer if the boiler breaks down. However, does he know the value of a Quatloo and could you trust him around female tenants?

On the other hand Janeway is smart, dedicated, great in a crisis – but away a lot and not the greatest to call for a quick response. I think residence in the Delta Quadrant really would make her absentee.

On that basis Sisko has the advantage of steady day job and the knowledge that he’ll probably be in when you call to say the roof’s leaking, but is he inspiring? Plus at some point he’s bound to want the house back when Jake goes off to uni.

Which leaves Picard. Steady, diplomatic, intelligent Picard. But can you really trust someone who has been assimilated by the Borg Collective? Also the 24th Century’s noted disapproval of the profit motive  casts doubt on his ability to run a viable business.

I’ll keep my vote to myself for now except to say; we went there, we went there boldly, we went there without splitting the infinitive.

 

*Yes, I know Sisko spent some time as a Commander, but he made it to Captain in the end.


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New Bill Gives Hope to Landlords Regaining Possession

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A new Bill was published to tackle homelessness, and it contains good news for landlords.

The Private Members’ Bill, introduced by Conservative MP Bob Blackman, has been welcomed by the Communities & Local Government Select Committee in its recent report into homelessness. The Committee will now undertake pre-legislative scrutiny of the Bill, and the NLA has provided written evidence in support of the Bill.

The Damage

Increasingly, local authorities are advising tenants who receive a valid Section 21 notice to remain in the property until evicted by bailiffs, or else they will be deemed to have made themselves intentionally homeless.

The Mortgage and Landlord Possession Statistics released by the Ministry of Justice earlier this year highlight a growing problem in the private rented sector. Over the past 12 months, 40% of possession claims from private landlords have had to go all the way to repossession by bailiff with the average time of this process taking 45 weeks. This is a stark rise from just 25% of claims in the same period 5 years ago.

This has done financial damage to landlords and tenants, as well as causing landlords to become more reluctant to let their properties to formerly homeless or vulnerable households.

Recent NLA research has shown that 1 in 5 landlords have had a tenant advised to remain in the property until evicted by bailiffs. Half of these landlords had property damage as a result, at a cost of just under £2000.

Overall, the average cost of the tenant being advised to remain in the property was just over £6,750, through property damage, lost rest, court and legal fees.

The Solution

For many years the NLA have been campaigning for a law change to ensure that local authorities have to accept a valid Section 21 possession notice as evidence that an applicant is threatened with homelessness.

So far the Government has been reluctant to act, having only gone so far as writing to English councils to clarify homelessness guidance. Despite this letter, local authorities are continuing the practice of advising tenants to ignore eviction notices until the bailiffs turn up to evict them.

The NLA has consistently warned that putting vulnerable households in this position is detrimental to both landlords and tenants alike. Tenants often accrue further rent arrears and other associated costs that make them more susceptible to homelessness, while landlords could fall behind on mortgage payments as they are dragged through a lengthy and costly court process.

As a result, landlords are becoming more reluctant to let out their property to vulnerable households as their confidence in their ability to regain possession is diminished.

This is especially damaging as local authorities are increasingly looking to use the PRS to discharge their homelessness duties due to a lack of social housing.

The Homelessness Reduction Bill amends the Housing Act 1996 in a number of ways to expand councils’ homelessness duties, installing a new focus on prevention. Importantly for landlords, this includes:

  • Providing that valid Section 21 notices are proof an applicant is threatened with homelessness
  • Doubling the definition of threatened with homelessness from 28 to 56 days.

Councils will have to respond to the threat of homelessness at a much earlier point, allowing for a greater chance of success in mediating with private landlords, assisting with rent arrears and debt management.

By ensuring that councils accept Section 21 notices as evidence of homelessness, this Bill will take strain off of overstretched courts, ensure that tenants are properly supported by their local councils, and provide landlords with the confidence they need to let their property out to riskier tenants.


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Thinking about letting to Students? Here are the NLA’s Top Tips for Student Landlords

 

lafrowda-Ensuite-kitchen-and-sitting-areaLetting to students can be a very attractive prospect for a private landlord. The student market benefits from very high demand, and with the number of students going to university continuing to rise, there is likely to be very little shortage of potential tenants to accommodate.

Letting to students can also be very profitable, as properties tend to be shared among larger groups of people and are consistently shown to offer high, competitive rental yields. When managed properly, a property let to students can be both a rewarding and reliable earner.

However, as with any investment, such properties are not entirely free of risk. Student accommodation is, understandably, a more niche part of the lettings market, and therefore requires a particular approach, expertise and understanding of the issues at stake.

To help you decide whether the student market is for you, we’ve listed some of the pros and cons of letting student property. Whether you are a newcomer to buy-to-let or an established landlord considering a move to student letting, we have plenty of useful tips and advice on the benefits and drawbacks of opening your doors to a more university-bound clientele.

 

PRO

  1. Profitability

Students have been shown to be more profitable and, according to the latest NLA research, offer the highest rental yields compared to other tenant types, at an average of 6.5% – higher than professionals, couples, singles and families.

  1. Landlords can let property to larger groups

Student lets are usually Houses of Multiple Occupation (HMOs), which (as the name suggests) are properties that are shared among a group of 2 or more households. HMOs also offer higher yields as you have more rooms you have to let, thus increasing your potential rental income.

  1. Students are the least likely to fall into rental arrears

Landlords letting to students are the least likely to experience incidences of non-payment of rent. NLA research shows that out of all landlords who had experienced rental arrears, just 33% of student landlords had experienced incidences of arrears, below the average of 35%.

  1. High Demand

Students need places to stay during term-time, so attractive and affordable student accommodation is always a desirable and in-demand commodity. Record numbers of UK university places have been offered this year, charting a 3% increase since the day that A-Level results were released last year, in 2015.

 

CON

  1. Void periods

Student accommodation tends to be for the short-term, with students both leaving at the conclusion of their degrees, and also at the end of term years. As such, the turnover is much higher, which can result in void periods when properties go unoccupied, as well as more time spent trying to find new tenants. Nearly a third (28%) of student landlords experienced voids this year, with the average void period lasting for 62 days.

  1. Wear and tear

Most, if not all, students may have never lived away from home before and this can mean that students are less likely to keep up with routine maintenance of properties. In addition, properties may also suffer more damage and wear and tear due to higher turnover and stereotypical party lifestyles.

  1. Harder to screen tenants

As mentioned, university will be the first time many students are living away from home, and it may therefore be difficult to get both references and credit checks from them. Many landlords counter this by taking slightly larger deposits or asking for a guarantor.

  1. Greater regulation

While HMOs can be profitable, there is far more regulation surrounding them than for other buy-to-let properties. Mandatory HMO licensing exists across England, with fines and penalties for those who break the law.

 

 

 


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Of Letting Fees and Rent Controls – Landlords being pushed into a trap

Ban incoming?

A lot was made of letting agent fees in the run up to last year’s general election, and the issue is back again as the fix-all cure of the ills of private renting.

A Conservative Government would normally be the least likely to interfere in the market this way, but then again this is the same Government that stole Green Party economic policy when they introduced the restrictions on finance costs relief (aka the Tenant Tax/Turnover Tax).

The Communities and Local Government Select Committee held an inquiry into the effect of the letting fee ban in Scotland, and at the time the Government was quite clear on its position:

“I believe that the current legislation strikes a fair balance between the rights and obligations of landlords and tenants. In the past over-regulation and excessive red tape drove many landlords out of the rental market. My Department therefore has no plans to further regulate the private rented sector by banning letting agent fees in England, as this would only reduce the numbers of properties available to rent which would not help tenants or landlords.”

Brandon Lewis MP, then Minister of State for Housing & Planning

However, we have a new Prime Minister, new Ministers, and the issue has not gone away. There is currently a Private Member’s Bill in the Lords to ban the fees and loud campaigns from Shelter, Generation Rent et al for MPs to support it.

The Department for Communities and Local Government is due to undertake a review of the transparency regulations that came into force last year for letting fees, and although the Private Members’ Bill will likely fail it is not unheard of for popular causes to be folded into the Government legislative agenda.

Example: The bill to end “retaliatory evictions” was introduced by then Lib Dem MP Sarah Teather and after it failed the provisions were added to the Government’s Deregulation Act later that year.

The trouble with banning fees

The NLA’s position is clear: while fees should be transparent (to landlord and tenants) and kept to a minimum. As the letting agent’s client it is quite right that landlords bear the majority of the cost, but an outright ban on tenants fees is not the answer as there can be a legitimate need to charge a prospective tenant a fee of some kind.

To the proponents of a ban, it would liberate tenants from the up-front cost of moving home which would single-handedly outweigh any negative consequences of the policy.

But love them or loath them, letting agents are a business providing a legitimate service to tenants and landlords. This service isn’t free – there are costs. With fees banned the costs will be passed solely onto the landlords and as per any business they will meet those costs by increasing what they charge the customer (i.e. the rent).

Should a prospective tenant approach an agent for accommodation, that agent will expend time and other resources in matching them to potential properties, arranging and facilitating viewings and negotiating a new tenancy. This would normally also include credit/reference checks, and the aggregate cost of this entire process can amount to several hundred pounds per prospective tenant. If that prospective tenant decided to opt out after the process is done, or isn’t found to be acceptable from the credit/reference checks, there would be no way for the agent to recoup the cost of the resources spent. This should not excuse excessive fees, or double charging, but it illustrates the importance of all parties having a stake in the process.

Agents would otherwise be compelled to package those additional costs in the arrangements with landlords. So no upfront fees, but higher longer-term rents to cover the costs. Some campaigners may call that a win but the increased rents are likely to be inflated even further to cover letting agents’ costs.

The Rent Control Trap

But further regulation of the private rented sector should not just be looked at in isolation. Over the past few years financial burdens on landlords have increased, putting upward pressure on rents, including:

  • Finance costs relief restrictions
  • Additional rate of Stamp Duty Land Tax
  • Removal of the wear & tear tax allowance
  • Cut in capital gains tax not extended to residential properties
  • Increasing number of discretionary license schemes, sometimes costing well over £1000 for a 5 year license
  • Upcoming plans for landlords to contribute up to £5000 for energy efficiency improvements
  • Rising court fees

Adding a ban on letting fees on top of this will not help improve the affordability of the rented housing in the UK.

Landlords are finding themselves in a rent control trap: caught between Government policies on one side that are forcing up rents to cover rising costs, and growing calls from opposition parties and campaigners on the other side to introduce rent controls.

Somewhat ironically, the very same campaigners calling for a ban on fees also call for action to be taken on the rising rents.

It would be funny if it wasn’t so depressing.


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Is the Edinburgh Fringe under threat?

 

Since 1947, Edinburgh has welcomed performers and tourists to the city as part of its summer Fringe Festival. Many make the annual pilgrimage to Auld Reekie to see the very best (and bizarre) in comedy, music and theatre – from established names to aspiring newcomers.

It’s estimated that around 2,500 artists take part at the Fringe every year, attracting an audience of up to 400,000. As such, the Fringe has made Edinburgh the centre of the British entertainment industry every August, with landlords gearing their businesses toward meeting not just the demands of the local housing market but also the acts and tourists wishing to come and stay in the city during the Festival.

The existing system

At present, the private rented sector (PRS) works very well in providing accommodation for both purposes. In fact, it’s a tried and trusted recipe; with many landlords offering student lets for 10 months of the year and then letting to festival-goers during August.

Yet the new Private Housing (Tenancies) (Scotland) Act from Holyrood could potentially alter this established relationship and tradition and have a significant impact on accommodating future Fringe attendees.

What will change?

Under changes introduced in the Act, the existing Short Assured Tenancy (SATs) in Scotland, which can be used flexibly to offer a 10 month tenancy, will be replaced with a potentially indefinite alternative. Importantly, the changes mean that landlords will no longer be able to guarantee possession at the end of an agreed term and also mean they will not be able to bring future tenancies to an end using an accelerated – or no fault – procedure. Instead, the onus will be on renters to give notice to their landlords should they wish to leave.

The majority of student accommodation for the following academic year tends to be arranged in the early months of the calendar year (January and February) which means that many student renters will be reluctant to give notice to their landlords until they can be sure they have secured future lodgings.

What does this all mean?

The Act will create a great deal of uncertainty about whether landlords will be able to provide accommodation for the Fringe – from performers, festivalgoers and students.

The end to guaranteed possession at the end of fixed-term could create huge chains of people waiting for others to move, leaving landlords unable to guarantee temporary lets during the Fringe and creating difficulty for students who wish to work and study in Edinburgh over the summer by creating a shortage of places to stay.

All in all, the changes to be introduced via the Private Housing (Tenancies)(Scotland) Act will create a situation that results in less supply and greater demand for homes, increasing costs and putting the Festival under threat.

Homes going up


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People & Properties: Quick Stats on the PRS

The Department for Communities and Local Government has released more detailed analysis of Private Rented Sector (PRS) data from the results of the English Housing Survey 2014-15. See our previous blog on some of those headline figures here.

The Private Rented Sector Report gives details of PRS demographics, satisfaction with housing, tenancy details and housing stock. Here is a quick guide to some of the more interesting figures.

People

 The PRS now accounts for 19% (4.3m) of all households, up from 11% of all households in 2004-05 (an 82% increase over 10 years):

 Age

  • The PRS has a higher proportion of younger people than other tenure types with 70% of renters aged under 45, compared to 35% in the social sector and 25% of owner-occupiers
  • Between 1994-95 and 2014-15 the proportion of private renters age 25-54 increased from 56% to 72%, whilst younger (16-24) renters has fallen from 20% to 13%, possibly due to staying longer with parents before moving into the sector

 Tenure Length

  • On average renters had lived at their current address for 4 years, with 76% having been there for less than 5 years and 59% for less than 3 years
  • In 2014-15, 54% of renters had been in the sector for less than 5 years, whilst 24% had been in for between 5 and 10 years

 Household Types

  • Household types in the sector: single person household (27%), couples with dependent children (23%), couples with no children (21%), lone parents with dependent children (13%)
  • From 2004-05 to 2014-15 the proportion of households with dependent children rose from 25% to 36%

 Satisfaction

  • Only 65% (up from 48% in 2004-05) of renters were satisfied with their current tenure, compared to 98% of owner-occupiers and 82% of social renters.
  • However, 82% of renters were satisfied with their accommodation, compared with 95% of owner-occupiers and 82% of social renters.

 Properties

 The most common type of homes for renters were flats (38%) and terraced homes (36%), with relatively few residing in detached houses (8%):

 Quality

  • From 1996 to 2014 the proportion of renters living in a non-decent home fell from 63% to 28%.
  • The prevalence of non-decent housing is higher in the private rented sector (28%) compared with owner-occupiers (18%) and social housing (14%)

 Hazards

  • The proportion of private renters who lived in homes with a serious hazard halved from 2006 to 2014, from 30% to 15%
  • The overall improvement in the condition of PRS properties is due to a number of factors, including:
    • The growth of newly built homes entering the sector
    • The growing installation of energy efficiency measures
    • Improvement in day-to-day maintenance work undertaken by landlords
    • Local authority enforcement action against landlords

Age

  • Of all properties in the PRS, 33.1% were built pre-1919, compared to only 19.7% of owner-occupied properties, and 6.7% of those in the social sector

Repairs

  • For 64% of tenants, repairs and maintenance were the responsibility of the landlords, for a further 20% the property manager or estate agent were responsible while 7% did the repair work themselves
  • 66% of tenants were satisfied with the repairs and maintenance done on their home, and satisfaction was highest (76%) when the landlord was responsible for the work; the equivalent figure for estate/managing agents was 55%

 If you are feeling inquisitive, the full Private Rented Report can be found here, along with a few other reports that may be of interest: