A happy new year to you and welcome to our first Newsround of 2023. What sort of news do we have at the start of this new year?
Not very happy news, really. It all seems to be a bit ‘doom and gloom’, although we must remember that news organisations tend to prioritise bad news as it sells better!
Here is a flavour of some of the recent news trends.
Most of the news services report that a substantial proportion of landlords will be increasing rents this year. Not because they are ‘greedy’ but because they have no choice as their own expenses will be going up. Although many of them are worried about their tenant’s ability to pay.
As there are reports of house prices falling, at least for the next six months, tenants may be better off trying to buy – although, sadly, for many tenants, even with lower prices, this will be an impossible dream.
The increase in ‘generation rent’
A report in the Observer showed that over the past 20 years, the number of households renting has more than doubled, with one in five households renting, and homeownership rates falling. Also falling has been the number of social homes, with Shelter’s analysis showing that there was a net loss in 2020-21 of more than 15,000 social homes.
Sadly a substantial proportion of rented homes are substandard with 367,000 households having no central heating and more than one in 10 households in London being overcrowded.
However, despite the doom and gloom stories about poor housing and higher rents, the figures can’t disguise the fact that most rented properties are in good condition, and past surveys have shown that a majority of tenants are actually happy with their rented property. Their main gripe being that they cannot afford to buy.
Problems of supply
This could be the biggest problem of 2023. Although the economy seems to be stabilising, it looks as if higher interest rates are here to stay, which is bad news for landlords due to renegotiate their buy-to-let mortgages. Some may find it impossible.
Landlords are also being put off by pending legal changes. Scotland, for example, has already passed legislation freezing rents and evictions, which has resulted in an exodus from the sector and build-to-rent investors pulling out.
Then there are big problems in the student market, with reports earlier this year of students queueing overnight to secure accommodation due to the shortage. The NRLA has warned that the proposed open-ended tenancies could create further havoc in the student market if they come to pass.
The government has finally woken up to the supply problems (after having been in denial for years), with new housing minister Felicity Buchan saying in a recent letter to the Levelling up, Housing and Communities Committee
I recognise that demand is currently outstripping the supply of properties available to let.
Chris Norris of the National Residential Landlords Association (NRLA) responding
We welcome the minister’s recognition of the supply crisis in the private rented sector, but the government needs to rectify the mistakes it has made in causing this.
Since 2015 successive Chancellors have sought to choke off investment in the market with a series of tax hikes. All this has achieved is to cut supply whilst demand continues to soar for fewer and fewer properties. The ultimate losers in this are tenants, who are finding it more difficult to access the homes they need.
We cannot continue to limp along without a pro-growth strategy which embraces tax measures to support investment and ensure renters can find a place to call home.
We shall have to wait and see what the government does about this.
The Renters Reform Bill
This has been promised since 2019, but despite the White Paper last June, no draft bill has emerged yet. I understand that it is being written, and Felicity Buchan has told the Levelling Up committee that the department wanted to ‘get on with it’.
However, housing was not even mentioned in Prime Minister Rishi Sunaks New Year speech, so it does not seem to be a priority – for him, anyway.
We shall have to wait and see. Although it has been promised for this session of Parliament, this does not guarantee that it will actually happen. The Department may also be having second thoughts about some of their proposals in view of the supply issues and the need for there to be somewhere for low-income families to live.
After all, you can’t force landlords to be landlords, and if the private rented sector shrinks, what alternatives are there?
One thing that will please landlords is the delay to the deadline for digital tax returns.
Things will also be good for landlords who own their property outright with no mortgage as they will be better placed to ride the tide of cost of living increases, and the predicted lower house prices may mean they can increase their portfolio.
We were also delighted to hear that Kate Faulkner has been awarded an OBE in the New Year’s Honours list. Congratulations Kate!
Some good advice from Paul Shamplina for landlords whose tenants are struggling to pay. Engaging with them early is the best way to go he advises, and set up a reasonable repayment plan.
“Keep checking in on your tenants” he says, “and if necessary, work together with them to find a solution that works for you both”.
Advice we also give in our Rent Arrears Action Plan, available to our Landlord Law members.
Happy new year!
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Newsround will be back next week.