Credit Agency Sounds Warning about UK Buy to Let Sector

So far, the chancellor’s tax relief and stamp duty changes have not made any difference to landlords’ behaviour. The sector is still going strong and despite dire warnings, there does not appear to have been a mass property sell-off from landlords. However, credit ratings agency, Fitch, is warning that within two years, the cracks will start to show.

Changes Will Affect Landlord Behaviour
Fitch says the UK PRS is currently in a strong position, with low arrears and voids, combined with a shortage of new housing stock. Despite this, the agency says the recent changes will soon start to affect landlord behaviour and the PRS is unlikely to be as healthy within two years.

According to a report Fitch has made to its investors: “Industry surveys suggest that existing landlords are less likely to add new properties when the tax changes take effect, and some may look to sell. Our gross new mortgage lending forecasts for UK incorporate the potential for the announced changes to slow the growth in BTL origination.”

Bank of England PRS Proposal could Curb Landlords
Fitch is also concerned about a recent proposal put forward by the Bank of England to ‘rein in’ landlord lending, in an effort to control potential instability in the sector.

“The proposal does not set limits on loan-to-value, debt-to-income, or interest coverage ratios [but] if these were adopted, this could make BTL less attractive for landlords if rental yields do not rise sufficiently to offset the impact of such affordability rules,” Fitch says.

Rogue Landlord Ends Up in Prison

Rogue landlords are never too far from the headlines. Despite being faced with the harsh penalties if they flout the law, all too often greedy landlords put their bottom line before the needs of their tenants.

Serious Safety Breaches
An Edgbaston Landlord is facing 19 months in prison as a result of a serious catalogue of safety breaches. The four-storey property had two faulty fire alarms, a blocked fire exit, a damaged fire door and incorrectly fitted emergency lighting.

Despite being warned by Birmingham Fire Brigade about fire safety hazards in his property, Cyrus Bassiri was obstructive and aggressive. The court heard how Bassiri tried to threaten the firefighters, who were only doing their job.

“You have been greedy, you have been cynical and you have been exploitative of the occupants of this property in your control,” said Judge Mary Stacey.

“Having failed to address the matters raised by the fire brigade you responded to their attempts to get you to comply with your legal obligations by being aggressive, by bullying behaviour, by threatening to take them to court and expose them to the press.”

Previous Warnings Ignored
Bassiri had previously been warned about safety breaches as early as 2010. New problems were identified in 2013, following a tip-off from a member of the public. Instead of sorting the problems out, conditions at the property further deteriorated, as Bassiri was more concerned about making a profit than spending money on the property.

The message from Birmingham Crown Court is that rogue landlords won’t get away with it – despite what they might think.

Young Brits Resigned to a Lifetime of Renting

75% of young Brits believe they will never be able to afford to buy their own home, according to a survey carried out on behalf of Shelter and British gas. So even though the majority of young people aspire to own their own home, most now recognise that this is an impossible dream and living in the private rental sector is the only way forward.

Housing Shortage in the UK
Not surprisingly, the Chief Executive of Shelter, Campbell Robb, is vocal on the subject:

“We are seeing a generation of people now in their 50s or 60s who are looking at their children, and their children will be worse off than they are. That is the first generation since the Second World War that we seeing that happen to, and that is primarily because of the housing market.”

13 Years to Save for a Deposit
House price inflation is now at 50% whereas wages have only risen by 22% during the same period. Without assistance, it now takes the average single buyer around 13 years to save up a 15% deposit for their first home. In cheaper parts of the UK, this wait drops to around 8 years, but in London, a single buyer would have to save up for 46 years before they could afford to buy a home. Couples are in a better position, for it takes them less time to save up. Two people saving together can realistically expect to have enough money saved in 3.5 years, although in London it would take 8 years.

London Landlords Looking to Sell Up

Research carried out by the National Landlords Association has revealed that 19% of landlords in London plan to sell their properties in the near future. When compared to the 4% figure from the previous survey, this represents a significant rise in landlords looking to leave the private rental sector.

Changes to Landlord Tax
The NLA and other landlord agencies believe that recent changes made by the Chancellor in last summer’s budget are to blame. New restrictions to mortgage interest rate relief will lead to higher tax bills for many landlords because tax will be calculated on rental income rather than profit. An increase in stamp duty land tax is also pushing many landlords to sell up to avoid being slammed with huge stamp duty bills.

Turnover Tax
Richard Lambert, CEO of the NLA, says:

“Local property markets vary greatly across the United Kingdom, but we are seeing a loss of confidence across the board as many landlords realise they won’t be able to remain in the market.

“If landlords follow through with their intentions over the coming months this could lead to a massive sale of property, as we have previously warned. However, this may not be a straightforward process, especially for those with stock in low demand areas.

“We urge those considering selling up to think about when they will need to do so, and to plan ahead now in order to minimise the risk of losing money as a result of a failure to sell”.

Plans for a London ‘Name and Shame’ Rogue Landlord Register

Sadiq Khan, Labour’s mayoral hopeful, has set out plans for a new referendum on the housing crisis. He plans to introduce a website where the capital’s rogue landlords will be named and shamed. He hopes that the website will help people looking for rental accommodation in London score a much better deal. He is also hoping to set up a non-profit letting agency in London, which would promote good landlords who offer their tenants stable rents.

A Database of Landlords in London
The new website is based on a similar scheme implemented by the New York mayor, Bill de Blasio. It would act as a comprehensive database of landlords who have previously been prosecuted for housing offences.

The Government is “Not Doing Enough” Says Khan
Mr Khan says the Tory government is not doing enough to help renters in the capital, although David Cameron has recently announced plans to crack down on rogue landlords and dodgy letting agents.

Speaking at the launch of his mayoral manifesto today in Canary Wharf, Mr Khan told his audience: “Most landlords treat their tenants well, but I’m determined to name and shame the rogue ones who break the rules.”

Mr Khan also plans to tackle a number of other issues, including freezing high fares, tackling extremism, improving air quality and cycling routes, dealing with skills shortages and low wages, and introducing better neighbourhood policing strategies.

Zac Goldsmith, Mr Khan’s main rival, remains sceptical. “Khan’s plans don’t survive even the gentlest scrutiny,” he said. “This isn’t a manifesto, it’s fantasy politics.”

Thrifty IT Worker Saves Money on Rent by Living in a Van

With the average rent in London now more than £1,500 a month, most people living and working in the capital can’t afford to do much apart from pay the rent and bills. It’s an impossible situation for younger people on lower income – they want to have a life and save for the future, but a lack of disposable income makes this task impossible. One young man has found a clever solution to the problem, but as he freely admits, his lifestyle choice is not for everyone.

Life in a Van
Alex Hill, a 24 year old IT worker, is saving hundreds of pounds a month living in his van. He has kitted it out with a sleeping compartment, comfortable flooring and extra insulation. He also has a solar powered generator so he can run a heater and have light.

Alex is free to move around London to be near his friends and he doesn’t have to worry about rising rent costs. When he needs a shower, he has one at work, and the only disadvantage is that he has to be careful not to have a drink after 7pm because he doesn’t have access to a toilet.

It’s Legal!
Alex says it was never his intention to live in the van, but he gave up his flat to go to Europe for the summer and then never bothered looking for another one. It’s perfectly legal to live in a van and parking isn’t an issue in the areas where he stays.

Would you do this? Let us know in the comments!

Right to Rent Postponement Defeated in House of Lords

Two members of the House of Lords, who have been trying to postpone the national rollout of the government’s Right to Rent scheme, have failed in their attempt.

Excessive Administration
Baroness Hamwee was concerned about the excessive administration burden faced by landlords. She pointed out that the government had pledged not to introduce too much red tape, but despite their promises, landlords are being forced to wear the hat of an immigration agent – and if they get it wrong, they face civil penalties and criminal sanctions.

As the scheme stands, landlords must check the immigration status of all adult tenants, and if they don’t, they face fines, as per the Immigration Act 2014. However, the new Immigration Bill, which is currently making its way through Parliament, will impose criminal sanctions on landlords who fail to make appropriate checks.

As Baroness Hamwee points out:

“Landlords have to make reasonable inquiries as to the immigration status of all the occupants before letting a property. Well, it is not actually that easy. I have been through the material on the Home Office website. The user guide is 39 pages long and there are 12 hyperlinks – there may be more, I may have miscounted – plus a code of practice, plus a short guide. There are 25 types of document which may show immigration status, more if there has been a name change.”

Scheme is Confusing
The whole system is confusing to landlords and tenants, which is causing honest tenants to be discriminated against and forcing desperate tenants into the arms of unscrupulous landlords.

Ryanair Court Ruling could Affect Landlords

Ryanair is not the world’s most popular airline, but news that it has won a recent landmark ruling is very good news for landlords. The airline went to court to appeal against fees levied against it by the Home Office for allowing illegal immigrants into the UK via its flights. The judge’s ruling found in Ryanair’s favour on the basis that the airline’s staff could not be expected to spot cleverly forged passports when even experienced immigration staff had a problem.

In the ruling, the judge said that the regime whereby airline staff have to check passports “offends the basic concepts of justice and indeed rule of law”. Crucially, this could help landlords in the ‘Right to Rent’ debacle.

Right to Rent
Given that landlords are now being forced under threat of fines to check tenants’ identity documents, the same principle could apply. If airline staff cannot spot forgeries, why are landlords expected to do so?

Cast Iron Defence
This raises the prospect that if a landlord is caught out by a cleverly forged passport of a tenant, who subsequently turns out to be an illegal immigrant, he will have a great defence against any action the Home Office chooses to take against him.

“In light of this case and to save the Government money from losing similar actions brought by landlords, we call on the Government to provide better information to landlords about document forgeries and offer more clarity as to the legal responsibility of landlords duped by forged identify documents,” says the RLA.

 

Cherie Blair Fights for Landlords’ Human Rights

Cherie Blair is heading a legal campaign to try and force George Osborne to back down on his proposed tax changes. If the changes go ahead without any opposition, from 2017 landlords will no longer be able to deduct mortgage interest costs from their taxable profits. This will effectively halve the amount of tax relief higher rate tax payers like the Blairs can claim. In the Chancellor’s view, this will “level the playing field”, but to everyone else, the changes are likely to prove disastrous.

Omnia Strategy Takes the Case
Mrs Blair’s law firm, Omnia Strategy, has taken up the legal gauntlet and now represents 737 landlords and letting agents. The legal argument put forward by Mrs Blair’s legal firm is that George Osborne’s tax plan “discriminates against individual buy-to-let investors by denying them the same rights as other business owners.” Apparently she believes that the firm has a reasonable chance of winning the case.

Not surprisingly, Mrs Blair isn’t doing this out of the kindness of her heart – rather, as a landlord herself, her campaign is motivated by a healthy dose of self-interest. The Blair family own a not insignificant buy-to-let property empire and the planned changes to the landlord tax system will lead to them having a far higher tax bill. There is also the issue of political ‘point scoring’ if the Blair legal campaign is successful.

NLA Predicts Huge Sell Off
Confidence in buy to let has fallen off a cliff in the wake of the Chancellor’s announcement and the NLA estimates half a million homes could be dumped onto the market in the next year.

Are you planning on selling up? If so, let us know in the comments.

Fake Landlord Cons Four Vulnerable Women

Four women lost up to £900 each after they saw an ad for a flat to rent above an empty Chinese takeaway in Southsea. The bogus landlord asked each of them for a deposit and arranged a date for them to move in. Each woman was given a different name by the man purporting to be the landlord. When they eventually moved in with all their belongings, the real landlord showed up and demanded to know what they were doing in his flat.

Fake Landlord Disappears
It soon transpired that the four women had been conned by an opportunistic workman who had been given a key to the premises in order to carry out repairs. He has since done a disappearing act. The women were all given their marching orders, with one of them forced to move in with friends because she had nowhere else to go.

Not a Home for Life
Another of the women didn’t even have friends to turn to, so she refused to move out and is now waiting for the real landlord to evict her.

‘I was homeless and on the streets and my family gave me £900 for the deposit, she told a local newspaper.

‘This was the chance of a home for me. I thought this was going to be the place I would live for the rest of my life. But the real landlord came in and said “What the hell are you doing in my flat?”. I don’t know what I’m going to do now. I have nowhere else to go.”