Since the government first introduced the notion of housing benefit
payments being made directly to tenants instead of landlords, many
social landlords have been concerned about the prospect of rent
arrears building up. Most believe this would happen as a result of
vulnerable tenants finding it impossible to manage their finances.

In an attempt to sooth landlord concerns, Lord Freud, minister for
welfare reform, has clarified things by stating that any tenant who
falls behind more than two months with their rent payments will have
their direct payments suspended. Once a tenant has paid off their
arrears, direct payments would resume once again. Landlords would
hopefully recover their money within nine months.

Lord Freud Comments

Speaking to delegates at the Chartered Institute of Housing’s annual
conference, Lord Freud spelled out the measures the government would
put in place to try and help tenants if they fall behind after one
month of direct payments:

“Options at this point could include a reassessment of an
individual’s financial capability, a possible move to managed
payments, or possibly extra support to get the individual on the
right track to prevent the accumulation of further arrears.”

Government is Confident Tenants Will Pay

Despite scepticism from social landlords, the government is convinced
that the majority of housing benefit tenants will be able to manage
their finances and pay their rent on time. They suggest that only
about 20% of tenants could fall into difficulties. Of course, whether
this estimate is proven to be correct remains to be seen, as the
direct payment scheme has yet to be rolled out nationwide.

According to the Guardian newspaper this morning, Nationwide is now willing to lend to landlords wishing to offer three year rental contracts on their properties. This is something of a turnaround because previously, Nationwide, in line with other lenders, would only make finance available when tenancy agreements were capped at twelve months. So if you were looking to let a property on a tenancy agreement lasting longer than twelve months, there was little point in applying for a buy to let mortgage.

Security for Tenants in the Buy To Let Sector

Renting a home is becoming increasingly common in the UK and the housing charity Shelter has been campaigning for a while now for greater security in the private sector. They are particularly concerned about families with school age children who stand to lose the most when a tenancy agreement ends and they are forced to move to another property, sometimes at short notice.

A comment made by the chief executive of Shelter: “This news is welcome recognition, as six or 12-month tenancies just aren’t working for England’s nine million renters.”

Greater Security for Landlords

It isn’t just tenants who stand to benefit from long-term tenancies. As any landlord knows well, if you have a reliable tenant who pays their rent on time, the last thing you probably want is to lose them. With this in mind, a 3-year tenancy agreement is a sensible idea. Both you and they each know where you stand and the tenant is more likely to look after the property if they are likely to be staying for a while.

In an effort to reduce the numbers of slum landlords operating so-called “beds in sheds” rental accommodation, Slough borough council in Hertfordshire is the first to use a spy plane to catch out unwitting offenders. The exercise cost Slough council an estimated £24k, but no doubt they feel it was money well spent after it picked up around 210 suspicious properties in the town.

Thermal Imaging Cameras

The police are no stranger to the benefits of thermal imaging cameras. Police forces across the country regularly use helicopters equipped with thermal imaging cameras to chase fugitives at night or identify cannabis farms in residential neighbourhoods. However, this is the first time such a technique has been used to identify suspicious heat sources in outlying buildings and sheds.

Council Housing Officials on the warpath

Thanks to the two-hour flyover across Slough, housing officials now have a handy map to work with. Over the next few weeks, housing officials will be paying a visit to see if any of the dwellings identified by the thermal imaging camera are currently home to tenants. If they are, the landlords can expect to be issued with fixed penalty notices. The fines will continue to increase for as long as tenants remain in the properties.

Appalling Living Conditions

Some tenants living in sheds are subjected to appalling living conditions. They often have no water or heating, yet are still expected to pay up to £100 per week for the privilege. The council is also keen to claw back some of the unpaid council tax they miss out on when tenants are living in illegal accommodation.

The Residential Landlords Association (RLA) has hit out at housing
charity, Shelter, for suggesting tenancy agreement laws need to be
revamped. The charity is calling for buy to let rental agreements to
be a fixed five-year term, but the RLA thinks this is grossly unfair
to buy to let landlords. Shelter is also calling for rent rises to be
restricted during the agreement and for tenants to have the power to
break a tenancy agreement with only two months notice.

Why does Shelter want 5 year tenancy agreements?

Shelter is concerned about the effect living in rental accommodation
is having on families with children. They say that forcing landlords
to offer minimum 5-year tenancy agreements will increase stability
for families with kids. However, the RLA says that the reason most
tenancies end early is down to the tenant rather than the landlord.

Striking a balance

The RLA thinks Shelter’s proposals are too one sided in favour of the
tenant, which is unfair on landlords. The charity says that a large
number of tenants don’t want to be tied into long-term tenancy
agreements because they are only renting for the short term. The
worry is that longer fixed tenancies could dissuade new landlords
from investing in buy to let properties, which would put even more
pressure on the housing market.

The RLA is also concerned about Shelter’s proposed plans to fix rents
in line with inflation. They say the majority of landlords rarely
increase their rents every year so indexed linked rents could end up
leaving tenants out of pocket.

Recent plans to force landlords in the private rented sector to check
the immigration status of their tenants have been significantly
watered down. The issue first came to light in the Queen’s speech at
the beginning of the month and it looked like being a major pain for
landlords across the UK. Landlords faced huge fines if they ended up
letting properties to illegal immigrants. If the plan had gone ahead,
it would have become a bureaucratic nightmare for landlords.

Why the change?

This change has come about because the government is apparently
concerned that ordinary landlords would have become bogged down in an
inordinate amount of red tape. The Communities department, run by
Eric Pickles, was concerned about the “unfair administrative burden”
landlords would have to bear.

The unwanted effect of immigration checks

Inevitably the cost of performing checks on a potential tenant’s
immigration status would have been passed on by landlords, so rents
would have to go up as a result. There was also a concern that such
changes would discourage new landlords from investing in the buy to
let market, and with so many councils reliant on housing in the
private rental sector, this would have been a disaster.

Immigration checks to go ahead in some areas

Although the government has changed its mind about introducing
landlord immigration checks across the board, some areas of the UK
will still be affected. However, the new scheme will primarily be
focussed on some boroughs of London where large numbers of immigrants
are known to live, specifically Hounslow and Ealing.

An article in the Telegraph yesterday suggests that if Labour comes
back into power, they will introduce caps on rents in the private
sector in a bid to curtail the continually rising welfare bill. The
information came from Mr Byrne, Labour’s Shadow Work and Pension
Secretary, at the same time as Ed Milliband prepares to make a speech
outlining how Labour will be seeking to curb welfare spending.

Crackdown on Private Landlords

“A lot of people say to us why are we spending £24 billion on housing
benefit – a lot of that money is going to private landlords,” Mr
Byrne told the BBC.

“Why don’t we give local councils the power to bring down the cost of
rents, particularly in the private rented sector, and use some of
those savings to actually build more social housing? That would stop
the housing benefit bill going up and up and up.”

Big Spenders

Labour has a reputation for being the last of the big spenders, so Ed
Milliband is trying to get away from that negative image. In line
with the current government, Labour is now willing to concede that
welfare spending needs to be brought under control and capping
housing benefit costs is one way to do this. Since a large proportion
of housing benefit payments go to private landlords, the private
rental sector may well take a hit if Labour are voted into power.

Contributory Principle

Another one of Labour’s ideas is to give those who have a history of
work a higher level of benefit payment.

A landlord’s properties are his or her investment, so if anything
happens to that investment, it isn’t a good thing. So imagine how you
would feel if you went to visit one of your rental properties and
discovered there was nothing left but a vacant plot of land and a
pile of rubble? Well that’s exactly what happened to one landlord!

Council Bulldozers Moved In

The property in question was one of three located in the middle of a
regeneration scheme. The council had issued a compulsory purchase
order on the property, but although the council and landlord had been
in negotiation prior to the demolition, the landlord had not yet
accepted a final offer. So you can imagine the landlord’s surprise
when he belatedly discovered the council had sent bulldozers in and
reduced his house to dust.

A Danger to the Public

The council’s excuse for demolishing the house was that it had been
in a dangerous condition. They allege that the properties had
deteriorated badly and were a danger to the public, therefore they
had to come down. The landlord does not believe this explanation: he
claims he received zero documentation and was not given a chance to
accept any offer of financial recompense for his loss. He added:

“I have been treated with utter contempt. I will be taking this to
the local authority ombudsman.”

How Do Compulsory Purchase Orders Work?

According to Newcastle Council: “For landlords, offers of
compensation are based on the current value of the property, together
with certain statutory expenses to help them buy a replacement
property and, in some cases, an additional loss payment. Valuations
may change if the condition of the house deteriorates.”

Following on from the first consultation paper back in April, the Labour Party has released details of a further policy review. Labour’s aim is to improve the private rented sector and provide good quality homes for all.

Hilary Benn MP, Shadow Communities and Local Government Secretary:

“Wherever we live, we all want a safe and secure home for ourselves and our families. The private rented sector is playing an increasingly important role in providing homes for people, and the majority of landlords are responsible and do the right thing. But there are also bad landlords whose properties are poor quality, hard to heat and who charge high rents. And that’s why we are considering practical steps to deal with them and ensure that all homes are of the right standard.“

Main Features of the Policy Review

 Landlord register – designed to improve the standard of private rented properties, Labour believe that a landlord register will help local authorities to identify landlords in their local area. It will also assist HMRC in tracing landlord tax evaders, who are thought to owe millions of pounds in unpaid tax on their rental income.

 Selective licensing – licensing schemes have already been rolled out in some parts of the UK, but if Labour has its way, red tape will be relaxed and local authorities will find it easier to introduce selective licensing schemes.

 Sanctions on rogue landlords – Labour wants to make it non-profitable for rogue landlords to operate. They also want to remove landlords with criminal convictions from a landlord database, thus making it impossible for them to stay in business.

 Minimum property standard – Labour plans on setting minimum legal standards for energy efficiency and deposit protection.

According to recent research conducted by the Local Government
Information Unit 33% of councils are considering the introduction of
compulsory licensing in an attempt to regulate the private rented
sector better. Nearly all of them also believe that local authorities
“have an important role to play” in the private rental sector.

One of the main reasons councils are beginning to sit up and take
more notice of the private rented sector is that increasing numbers
of people are renting their homes from private landlords. Figures
from the latest census indicate that the number of people renting
homes in the private sector has increased by a whopping 88% since
2001. Local Authorities are also using homes in the private rented
sector to place homeless families and others in need of
accommodation, mainly because there is such a shortage of council
properties.

Why are councils pushing for compulsory licensing?

Safety is a big issue with accommodation in the private sector. Most
landlords take their responsibilities seriously, but there are a
small minority who fail to carry out safety checks on gas and
electrical installations or take notice of fire safety legislation.
Councils are worried that there is not enough regulation is place and
vulnerable tenants are at risk.

Phil Buckle from the Electrical Safety Council has been quoted in the
Guardian as saying: “Despite the fact that electrical accidents are
the number one cause of domestic fires in Great Britain, most
landlords are not legally required to have their electrics checked or
provide their tenants with safety certificates – a requirement for
gas certificates has been compulsory since 1998. With increasing
numbers of people renting privately, it is imperative that proper
regulations are in place to ensure their safety.”

The Daily Mail is advising its readers this morning on “how to build
a buy to let empire” as a way of propping up their dwindling pension
pots. The Mail cites falling house prices and the availability of buy
to let mortgages as two of the main reasons for the buy to let boom.
So just who are these new landlords and why are they taking the
decision to capitalise on rental properties?

Existing Property Owners

Not everyone wants to sell a property when a house move is on the
cards. Some families are forced to move for employment reasons, but
rather than selling the family home, they are letting it out instead.
For many, this approach makes perfect sense. Your mortgage is covered
by rental income and you have a nice nest egg waiting in the wings
should you decide to sell at a later date.

Investment Opportunists

In some areas, rental properties are in big demand and there are
multiple tenants fighting over a handful of homes. If a house or flat
happens to come on to the market at a decent price, there are plenty
of would-be landlords eager to snap it up and capitalise on the
rental income it is capable of generating.

Pension Income

The traditional way of saving for retirement has always been to pay
into a pension plan. Sadly this isn’t working for a lot of people
these days since interest rates are at an all time low. Rental
income, on the other hand, offers a far better return on investment—
one leading expert has estimated rental profit to be around 5.3% of a
property’s value, which is a lot higher than most measly savings
accounts.