What's the news for buy-to-let from the recent political party conferences?
Housing was top of the agenda for most parties at their annual conferences, which took place over the past few months, with the main focus on housing being made more affordable across the board.
For landlords, the news is mixed because, while some of the proposed policies should be positive in the medium to long term, the financial pressure that has come as a result of recent legislative changes is likely to continue for the next year or two. However, if many individual landlords pull out of the market due to increased costs and pressure, the government may well start to realise the value they have giving the growing number of tenants good homes. Any stagnation or drop in supply within the PRS could result in a policy switch that once again gives landlords solid reasons to invest in buy to let.
Essentially, the current outlook mostly favours tenants and first-time buyers because MPs know there are more tenant voters than landlords and seem to believe if there is a halt or withdrawal of buy to let investment money in the PRS, first-time buyers will buy rather than rent – although quite how they expect them to fund deposits and often higher running costs is unclear.
Here are thoughts on the pending changes landlords are likely to see in the near future
1. Tighter regulation of landlords
It’s almost certain that either a redress scheme or mandatory licensing will be introduced for landlords. The redress scheme that the Conservatives are proposing could be a sensible first step, potentially as ‘bad’ landlords could be penalised without good landlords having to absorb the administrative and financial costs associated with mandatory licensing.
2. Qualified agents
Currently, anyone can set up as an agent, meaning there are some unscrupulous players in the industry. But with all agents having to be qualified and regulated in the future, both landlords and tenants will benefit from the same high standard of service that the best agents already provide.
3. Longer tenancy terms
The introduction of three to five year tenancy terms are being discussed, to give renters greater security of tenure, with the Conservatives keen to introduce incentives for landlords who are prepared to offer tenancies of more than 12 months. Given that the average tenancy length in the UK is 20 months, this seems a sensible move.
4. Quicker, cheaper and easier removal of troublesome tenants
In response to requests for longer tenancies, the industry is requesting landlords are given a more assured and quicker method of removing tenants that are deliberately not paying rent or being a nuisance to neighbours. And if there is a redress scheme for landlords, it may mean most disputes can then be dealt with outside the courts, cutting down on both time and cost.
5. Rent controls
Although the current Conservative government is not keen to introduce rent controls, the other main parties are, so landlords should be prepared for this possibility. But rather than seeing them as restrictive, the majority of landlords could well benefit. Given that many landlords’ rent rises have not even kept up with the cost of living since the credit crunch, if rent controls mirror what’s already in place for the social sector, where rents rise by inflation plus 0.5% to 1% a year, rental inflation may actually increase.
Summary of the main parties’ housing policies
Given that the Conservative Government has such a small majority in parliament, it’s important to understand the policies that the other main parties are proposing, as they can put a great deal of pressure on the Tories to make concessions if they want to get their changes through. Here is a summary of the key proposals:
Leading on from February’s White Paper, ‘Fixing our broken housing market’, the Conservatives have made some firmer promises, including that they will ‘rethink’ their approach to social housing following the Grenfell Tower disaster. They have also proposed making changes to planning, to ensure better measurement of housing needs by local authorities, and pledged £2bn in funding for the construction of 5,000 new council homes every year.
While it was inevitable that they would try to appeal to the under-30s, a significant proportion of whom are currently renting, the Conservatives have – perhaps surprisingly – also suggested something of a ‘carrot’ for landlords within their proposals for the rental market, which include:
• Allowing ‘social’ rents to be charged instead of ‘affordable’ rents, in areas where 80% of market rent is unaffordable
• Introducing a redress scheme for landlords
• Bringing in mandatory regulation of letting and property management agents
• Incentivising landlords who offer tenancies of 12 months or more.
They predict that by the end of the next Parliament, they will be building at least 100,000 council and housing association homes a year for genuinely affordable rent or sale.
In terms of help for first-time buyers, their key policies are:
• Give local people first refusal on new homes built in their area
• Guarantee Help to Buy funding until 2027.
And for the rental market:
• Introduce three-year private rented tenancies, with an inflation cap on rent rises
• Introduce a new legal minimum standard for rented homes
• Give back housing benefit to 18 to 21-year olds
• Make 4,000 additional homes available for long-term rough sleepers.
For buyers, they have pledged 500,000 affordable and energy-efficient homes by 2022 and the creation of 10 new Garden Cities. Meanwhile, key plans for the lettings market include:
• Ban letting fees for tenants, cap up-front deposits and drive up standards in the PRS
• Introduce a ‘Help to Rent’ scheme, where the government provides security for deposit loans for first-time renters under 30
• Introduce three-year tenancies with inflation-linked rent increases
• Introduce mandatory licensing and a ‘database of rogue landlords and agents’
Significantly, for first-time buyers, the Lib Dems also plan to introduce a new ‘rent to own’ model to negate the need for deposits.
As well as joining the other parties in promising to increase the number of social and affordable homes being built, the Greens seem keen to clamp down further on landlords by ending letting fees, ensuring all landlords are licensed and completely axing buy to let tax breaks. They also propose introducing a ‘living rent’ using rent controls and creating a ‘renter’s union’.
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