Another turbulent year is coming to a close and 2017 is not gearing up to be much of an improvement.
Before we look ahead at the changes coming about next year, now is the perfect time to mention our quarterly landlord survey.
2017 and beyond…
Tax oh tax
First and foremost, the long dreaded restrictions to finance cost tax relief will begin its staged implementation from April. In the 2017-18 tax year, the deduction from property income (as is currently allowed) will be restricted to 75% of finance costs, with the remaining 25% being available as a basic rate tax reduction. This is the major change that landlords need to be aware of, and should take any necessary action to minimise the damage to their businesses.
While we continue to press the Government to reverse these changes, it is becoming clear that the new Chancellor has no intention to throw out this Osborne policy. Find out more here.
Housing and Planning Act
There will be quite a few new regulations that are due to come into force in 2017, all stemming from the Housing and Planning Act that passed earlier this year:
- Database of “rogue” landlords
- Banning orders – A consultation is currently running on what would constitute a “banning order offence”
- Electrical Safety – The current working group in DCLG (of which we are a member) looks set to recommend fixed wiring tests no more frequent than every 5 years.
- New enforcement powers – Including civil penalties of up to £30k and extending to rent repayment orders
- New abandonment procedure – Landlords will no longer have to go to court to recover abandoned properties, and will follow a quicker procedure instead
- Mandatory Client Money Protection (CMP) for agents.
Extension of HMO Licensing
After a year of silence following the initial call for evidence, the government have now taken a step further in expanded mandatory HMO licensing. A consultation on their proposals recently concluded, and the government are looking to make a few changes:
- Remove the storey rule so all houses with 5 or more people from 2 or more households are in scope
- Extend mandatory licensing to flats above and below business premises (regardless of storeys)
- Set a minimum room size of 6.52sq-m in line with existing overcrowding standard (Housing Act 1985) to close loophole created by upper-tier tribunal ruling
The changes are proposed to come into force in 2017 (likely either April or October), and there would be a grace period of 6 months for landlords to apply for a licence.
Letting Fees Ban
The prospects of this being implemented in 2017 are slim, but what is more certain is there will be a consultation, and the NLA will be part of that process during the year. The details of the policy, announced in last month’s Autumn Statement, are yet to be written so we don’t know what shape they’ll be taking – but watch this space!
Following a motion being passed unanimously in the Welsh Assembly recently, we also expect the Welsh Government to bring plans to ban letting fees in the new year too.
Scotland & Wales
Scotland & Wales are set to drastically move away from England in terms of private tenancies. Both devolved administrations passed a new housing law this year which overhauls the existing tenancy regime. Both are likely to be enforced from sometime next year (TBC).
Private Housing (Tenancies)(Scotland) Act 2016:
- Introduce a Scottish Private Rented Tenancy to replace the current Assured system.
- Remove the ‘no-fault’ ground for repossession, meaning a landlord can no longer ask a tenant to leave simply because the fixed-term has ended.
- Provide comprehensive and robust grounds for repossession that will allow landlords to regain possession in specified circumstances.
- Provide more predictable rents and protection for tenants against excessive rent increases, including the ability to introduce local rent controls for rent pressure areas.
Rented Housing (Wales) Act 2016:
- Introduce a Welsh Standard Contract to replace the current Assured system.
- Require a written statement of the contract to be given to the tenant.
- Require landlords to carry out repairs so properties are “fit for human habitation”.
- Prevent people being made homeless when a joint tenant leaves a tenancy.
- New, streamlined abandonment procedure (similar to that in the English Housing and Planning Act 2016)
Energy efficiency exemption register
Further on the horizon for landlords is the stepped implementation of the Minimum Energy Efficiency Standards (MEES) in 2018 and 2020:
- April 2018: Landlords will not be allowed to grant a new tenancy for properties with an EPC rating below E
- April 2020: Landlords will not be allowed to let out any properties with an EPC rating below E (new tenancies and existing ones are affected).
To get ready for this, the Government will be launching a landlord exemption register in 2017. Landlords will be able to register their valid exemption, of which there are only a few, for properties from October.
This register has been delayed by a year because at present most landlords are exempt – these regulations relied heavily on the now-failed Green Deal. As such, the Government are looking to remove the “no upfront cost to landlord” blanket exemption and replace it instead with a cap to the costs landlords will be expected to make.
Current Government thinking has this cap at £5000 for energy efficiency improvements. We’ll find out during the year the exact decision, while we continue to campaign for the least damaging option.
Gas Safety Certificates
The NLA has been working with the Health and Safety Executive (HSE) to identify possible changes to the regulations which might make it easier for landlords to comply – and reduce the costs of ensuring gas appliances are regularly inspected.
We would like to see an ‘MOT style’ system introduced which would allow landlords to arrange for inspections at any time in the 2 months leading up to deadline, without sacrificing the renewal date. This is very similar to how car MOT tests currently operate and seems to work well.
BTL Mortgage Underwriting
The Prudential Regulation Authority (PRA) published their expectations for buy-to-let mortgage underwriting in September, and these will be implemented from next year:
- Reflecting the change to mortgage interest tax relief announced by HM Government in 2015, which has already led to several firms increasing their interest cover ratio (ICR) affordability thresholds, the PRA reaffirmed its expectation that firms should also take these new costs into account when assessing affordability.
- Lending to portfolio landlords (defined by the PRA as being those with four or more mortgaged buy-to-let properties) should be assessed using a specialist underwriting process.
This could lead to BTL mortgages being harder to get, or more expensive for some landlords from next year.
We are currently running our last landlord survey of 2016, so please do spare some time and fill it out. The information you provide informs our campaigns and you could win a luxury hamper for taking part!