Rogue landlords are not welcome at the best of times, mostly because
they bring the private rental market into disrepute and give good
landlords a bad name. But one council has gone a step further by
publicly supporting a leading housing charity’ and its ‘Evict Rogue
Landlords’ campaign.

Campaign to protect vulnerable tenants

Shelter’s campaign is targeting rogue landlords who prey on
vulnerable tenants and fail to provide a decent standard of housing
to those most in need. The housing charity believes that many
landlords in the private sector are not offering the right level of
accommodation to tenants. But whilst this is not good, there are also
a small minority are deliberately providing sub-standard homes to
people who are least likely to complain.

Shelter wants action

The charity wants councils to take a number of proactive approaches
to stamping out rogue landlords in their areas. These include a
regular system of inspections, the introduction of landlord
accreditation schemes, and enforcing the law where necessary.
Hastings council is very much in favour of this:

“All of these actions Shelter wishes good councils to take, we are
already taking.”

Government pledges money to tackle rogue landlords

The government is also keen to eradicate rogue landlords and ‘beds in
sheds’, which has become a problem in many parts of the UK in recent
times. It intends to set up a dedicated taskforce with a budget £1.8
million. There has also been talk of removing limits on fines handed
out to rogue landlords in an attempt to discourage the practice.

Figures released at the end of last year showed a decline in the
numbers of tenants more than two months behind on their rent
payments. This was good news for landlords as the same period in 2012
had been 50% higher than 2011. Unfortunately the situation has since
worsened and the average number of tenants in debt is up nearly 5%,
which means 2.3% of tenants living in England and Wales are very
behind on their rent.

Why are tenants falling into debt?

It is not uncommon for tenants to slide into debt over the Christmas
period. Rent is often seen as being unimportant when kids are
clamouring for expensive games consoles and extra food is needed.
Unfortunately, other factors are also at play.

Rise in the cost of living

As most of us cannot fail to have noticed, living in the UK is not
cheap these days. Food, fuel and energy all costs a fortune and with
wage increases well behind the rate of inflation, it is not easy to
make ends meet, particularly if you are living on the breadline
already. All it takes is one household emergency—a broken washing
machine or a large bill—and disaster strikes.

Benefit cuts

The government’s attempt to shrink the annual welfare bill is another
factor. Many tenants face seeing their Housing Benefit payments cut,
which will of course have a big effect on their weekly income.

Look on the bright side

It isn’t all bad news for landlords. Mortgage rates are exceptionally
low at the moment, so if you are ready to expand your property
portfolio and you have lots of equity, it should be easy to find
funding.

Two of the biggest lenders on the high street have done an about turn and decided that landlords with tenants on benefits are an acceptable risk. Nationwide went first and lifted its restrictions on benefits tenants, shortly followed by the Lloyds banking group. So if you are looking to expand your property portfolio into the social housing market, Nationwide and Lloyds will welcome you with open arms. Well, not quite, but at least they won’t slam the door in your face.

Are social tenants a high-risk tenant?

Unless you have been living under a rock, you can’t fail to be aware of the cold winds of change heralding strict new welfare reforms. In the bad old days, benefits tenants could enjoy a cushy life living on the state with rent payments going straight to the landlord. But in an attempt to reduce the welfare budget, the coalition government is switching to a new Universal Credit where all benefits are lumped into the same payment. In theory it is supposed to encourage claimants to manage their money better, but in practice critics are concerned that rent arrears and debt will spiral.

Bedroom tax

And let’s not forget the controversial bedroom tax. Tenants with a spare room will soon have their housing benefit portion cut to reflect any over occupancy they have. This could amount to a fairly hefty reduction in money for some people, so landlords should be prepared for the possibility that their tenants will struggle to pay the rent.

With the much-criticised ‘bedroom tax’ almost upon us, a senior Labour MP, Frank Field, has called upon landlords in the social housing sector to brick up doors to spare rooms or even knock down walls to beat the government’s spare room subsidy.

Tax on spare rooms

Many believe that the so-called bedroom tax is deeply unfair, but the government believes that such a tax on extra bedrooms is necessary to help free up under populated homes and cut waste. From April 1st, social housing tenants will have their housing benefit cut if they live in a property with more bedrooms than they need. One spare bedroom means a 14% cut and two or more spare rooms equals a 25% reduction. So if your property has three bedrooms and there is only one tenant living in it, they are going to lose a quarter of their housing benefit, which will impact heavily on their ability to pay the rent.

Mr Field, MP for Birkenhead in Merseyside, believes the government housing benefit reforms will unfairly penalise constituents living in the North West.

“I’ve been in the House over three decades. I’ve witnessed many so-called welfare reform measures. I have not ever witnessed a measure which is so grossly unfair as this measure is. This is about a supply-side issue, but we are trying to control the demand of people on low income to fit on with the regimented holes in which the government would like to fit them.”

Housing Benefit costs around £21 billion per year, but as well as saving money, the government also wants to bring the social housing tenants more in line with the private rented sector.

Long void periods can be a real concern to landlords, especially
those with only one or two properties. No tenant means no rental
income, so in an ideal world, most landlords prefer a long-term
tenant who pays their rent on time.

Strong demand for rental properties

Figures released from the National landlords association (NLA)
indicate that void periods are now at an all-time low. Only 33% of
landlords have had void periods in their properties during the last 3
months, a reduction of 13% on the same period from the previous year.
This is largely due to consistently strong demand for rental homes, a
situation that is unlikely to change any time soon.

What is the average void period?

Figures indicate that private rented homes are empty on average for
60 days, which is 9% lower than the same period last year. The last
time figures were this low was back in 2010, which is good news for
landlords.

How to avoid void periods

Given that demand is so high, unless your properties are very
unappealing or you are overpricing them, you shouldn’t have too many
problems finding new tenants. However, it makes sense to do
everything you can to find new tenants quickly once the old ones have
vacated the property and essential maintenance work has been carried
out. And even if your tenants have not mentioned any plans to move
on, ask them to keep you in the loop so you can prepare for when the
property does become empty.

According to the UK’s biggest property website, Rightmove, property investors are flooding into the private rental market to make the most of the great returns on their money. And with the average gross rental yield at 5.9%, who can blame them?

Dismal interest rates for savers

Interest rates on savings accounts are currently terrible. Many high street savings accounts are paying little more than 1%, so you may as well keep your cash stashed in a suitcase under the bed. But whilst the interest on savings accounts is low, so are the interest rates on mortgages, which can work in your favour if you want to spend money to make money.

Remortgage and release some equity

Many investors are seeing the potential in borrowing money against their current home and reinvesting it in a buy to let property. When you are paying a mortgage rate of 2% on a cheap fixed rate deal, it makes financial sense to invest that cash in a rental property and enjoy a return of nearer 6%.

Cheap mortgages available for investors

The government’s Funding for Lending Scheme (FLS) has helped push down mortgage interest rates to an all-time low. Last summer, the government made more than £80 billion of loans available to lenders at a rock bottom rate of 0.25%, in an attempt to boost the stagnant property market. Whilst this influx of cash caused savings interest rates to fall even further, it has certainly helped improve the availability of cheap mortgages to borrowers. So if you have been sitting on the fence up until now, start making plans because it is currently an excellent time to invest.

A recent survey carried out in Scotland has revealed some startling
information according to the BBC. Apparently more than half of
tenants renting properties in Scotland have no idea that tenant
deposit schemes even exist. 55% of those polled claimed to be unaware
of the scheme and 76% said they didn’t know deposits needed to be
placed in such a scheme. Less than 20% were also unaware that their
deposits needed to be placed in a deposit scheme no later than May
15.

Concern about the lack of awareness

By the time the May deadline rolls around, all Scottish landlords in
the private sector must have lodged eligible deposits. But the
authors of the survey, SafeDeposits Scotland, have expressed concern
about the low levels of awareness from tenants.

“At a time when the private rented sector is growing, we need to
provide safe, secure renting. And the new tenancy deposit protection
legislation goes some way towards this, but only if tenants know
about their rights,” said Rebecca Johnston, director of operations at
SafeDeposits.

Scottish government pledges to increase awareness

The Scottish government claims the tenancy deposit scheme has been a
huge success so far and around 112,000 deposits had been protected by
the scheme. However, they do add that,

“We will continue to work with the three approved tenancy deposit
schemes – who have a legal responsibility to promote their schemes –
to increase understanding and awareness of the schemes amongst
tenants, landlords and their agents.”

Hopefully awareness amongst tenants increases before the May when
deposits are legally obliged to be deposited in a protection scheme.

The Eastland’s Homes housing association caused a massive furore yesterday when it published advice in its monthly newsletter advising its tenants to give up some of life’s luxuries if they were worried about the effect of the forthcoming “bedroom tax” on their household budget.

Their not so sage advice: ‘Can you really afford Sky, cigarettes, bingo, drinks and other non-essentials?’ was roundly considered to be patronising and insensitive by residents and dozens took to social networking sites to complain about the insult.

Outrage from housing association residents

One resident commented: “It is deeply patronising. Talk about stereotyping those who live in former council homes. They should be ashamed.”

Another said: “This is patronising nonsense. People are having a tough time as it is without having to be fed this nonsense. Anyone who heard this would think we were living in the lap of luxury. Many of us have had to make severe cutbacks, and we’re not all sat there with our tins of lager watching daytime telly.”

We apologise for the offence caused…

In an attempt to pour oil over troubled waters and do some belated damage limitation, the representatives from the housing association quickly went online and published an apology.

“Our message is that we are here to help wherever possible and we’re sorry if we worded that clumsily.”

The housing association insisted they were just trying to help residents, out of concern that some were likely to fall into arrears once Housing Benefit is cut for those deemed to have more bedrooms than they need in their rented accommodation.

Although some landlords treat their buy to let properties as a full-time business and pay their taxes accordingly, there are an awful lot of new part-time landlords with only one or two properties to their name, who may not have thought too much about the potential tax implications of their second rental income. Well unfortunately for them, HMRC IS thinking about it and is taking steps to try and identify those landlords who are not declaring their income and therefore not paying the right amount of tax.

HMRC targets letting agents

Prior to the recent tax crackdown, HMRC tax inspectors operated a ‘spot check’ policy whereby they made random visits to letting agents and rental properties to carry out checks. Aside from being universally unpopular, this was not the best way of collecting information on landlords and tenants. However, since January, HMRC has been contacting letting agents and asking for information on all properties on their books that are managed on behalf of landlords.

HMRC cross checks information on landlords

By cross checking financial information from letting agents against other sources, HRMC are looking to make sure landlords are declaring any extra income they are earning from buy to let properties. The process is likely to be long and painful for HMRC employees, but since there are bound to be a number of landlords who have not declared extra income, it should be a lucrative one.

Declare your extra income

Landlords have until October 5th to declare any extra income from buy to let properties, so if you are a new landlord, start putting your affairs in order now!

Rent Arrears Rise In South Wales

Some parts of the UK are currently taking part in pilot schemes to test the government’s new benefits reforms and in one of them at least, the indications are not good.

Huge increase in non-payment of rent

Social landlords in Torfaen, South Wales, have seen a seven-fold
increase in rent arrears since the introduction of the Universal
Credit test scheme. In the existing benefits system, Housing Benefit
is a separate payment normally paid directly to the landlord. Under
the government’s reforms, Housing Benefit will be rolled up into
Universal Credit and the whole amount will be paid directly to the
tenant. This puts the onus on to the tenant to pay their rent, which
in a lot of cases in the pilot area of Torfaen, is simply not
happening.

Rent arrears rising

One social housing landlord in Torfaen, a community housing project
with more than eight thousand properties on its books, has seen rent
arrears rise from £20k to nearly £140k in the seven months since the
scheme was introduced. Tenants with previously good credit records
are falling into debt because they cannot manage their money. Up
until now the number of evictions has remained low, but this will not
be the case for long.

Bedroom tax

Another change on the horizon that is likely to cause havoc in the
social housing sector is the so-called “bedroom tax”. If a tenant has
a spare bedroom in their rented home, it will be deemed as
unnecessary, and therefore the housing benefit they receive will be
reduced. This change is designed to reduce the number of under
occupied properties, but it will also lead to a rise in the number of
tenants unable to afford their rent.