Tag: landlord

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Sale Tenants’ Spiralling Energy Bills are About to Become Sale Landlords’ Problem

As gas and electric bills rocket for Sale tenants, Sale landlords who do not start to make energy efficiency upgrades face lengthy void periods and will have to discount their rents. This is irrespective of the Government’s plans to change the rules on renting properties with low Energy Performance Certificate (EPC) ratings.

Until six months ago, out of the thousands of tenants I have shown around Sale properties in all my years as an agent, I can count the number of tenants who have requested to see the EPC of the rental property on the one hand. Now, it’s the first question tenants ask.

The better the EPC rating, the lower the gas and electric bills.

Sale tenants are leaving their poor EPC-rated properties which are too expensive to run and moving into higher-rated EPC rental properties.

The average heating bill for the 7,368 Sale tenants will rise from £86.10 per month to £223.86 per month.

And their hot water bill will rise by £34.15 per month and lighting by £21.58 per month.

Each Sale tenant will have to find an extra £193.49 per month for their gas and electric bills.

To give you an idea of the extent of the money being spent by Sale tenants on heating alone (ignoring hot water or lighting), last year it was £7,612,729.37, and by 2023, it will be  £19,793,096.37 a year.

Yet these stats don’t tell the whole story.

It is a legal requirement for every rented property to have an EPC which rates a property on its energy performance (like those washing machine or fridge ratings, albeit for a property). A is the best rating, and G is the worst.

Whilst the law states property cannot be rented with an EPC rating lower than an E in England and Wales, there are exceptions to this, meaning Sale rental properties are still being let legally with an F and G rating. Although legislation for a minimum E rating EPC requirement in Scotland was scheduled in 2020, it never passed through the Scottish Parliament because of the pandemic. 

Let me show you the average saving in energy bills between the EPC rating of an average Sale rental property.

  • A Sale rental property with a D rating will cost £38.50 more per month than a C-rated property
  • A Sale rental property with an E rating will cost £67.66 more per month than a D-rated property
  • A Sale rental property with an F rating will cost £97.16 more per month than an E-rated property

Both Westminster and Holyrood governments now propose introducing a minimum EPC of band C for all new tenancies from 2025 (and 2028 for existing tenancies).

Irrespective of this new potential legislation, those Sale landlords with low EPC ratings will now need to seriously consider making those energy efficiency upgrades to ensure their Sale rental properties continue to appeal to tenants.

I can see Sale rental property’s energy efficiency ratings filtering into rental prices over the winter months.

Sale rental properties with low EPC ratings will probably rent for between 4% to 10% less than higher energy proficient properties.

This means Sale landlords could have to accept between £48.00 and £120.00 per month less for an average Sale property with a low EPC rating compared to a high-rated EPC rental property.

Any Sale rental property with a lower EPC rating will also take longer to find a tenant, especially during the winter. This means some Sale landlords will have the prospect of void periods early next year.

I have seen more Sale rental properties coming onto the market in July and August, so if this trend continues, this will give Sale tenants much more choice. With the increased supply of rental properties, I certainly believe some tenants could decide to offer less on Sale rental properties with low EPC ratings.

So, what are the options?

I am experienced in reading EPC reports and am aware of the most cost-effective way to improve the EPC rating of your Sale rental property. Irrespective of whether you are a landlord client of my agency, another Sale lettings agency, or you even manage your property yourself – feel free to drop me a message. I will find your EPC on my database and give you 5/10 minutes of my time, over the phone, at no charge, to guide you on the best options. What do you have to lose?

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Lymm Rental Homes Nightmare

  • Lymm needs 45 additional private rented properties per year to keep up with current and future demand from Lymm tenants.
  • Yet over the last 5 years, Lymm has lost 41 private rented homes.
  • What are the 5 reasons the supply of private rental properties in Lymm are falling? What does this mean for tenants and landlords in Lymm?

There has been a rise in demand for rental properties and an 8.9% fall in the number of Lymm private rented properties, which has caused Lymm rents to rise by 10.4% in the last year, a new all-time high. 

The National Residential Landlords Association asked the respected economics think tank Capital Economics, to carry out research on the UK rental market. It found that if the current trends in the property market in terms of growth of the population, Brits living longer, the lack of new homes building, the reduction in social housing (aka council housing), then demand for homes in the private rented sector needs to increase by 227,000 homes per year.

So, based on those numbers, Lymm needs to have an additional 45 private rented properties per year.

The problem is the number of private rented properties in Lymm has reduced from 765 in 2017 to 724 in 2021, a net loss of 41.

So, why has supply of private rented homes in Lymm reduced?

  1. Section 24 Income Tax

Section 24 was introduced in 2017 to level the playing field on the taxation of property between homeowners and landlords. Section 24 stops landlords from offsetting their buy-to-let mortgage costs against the profits from their rental property. Interestingly, no other kind of UK business is affected by the Section 24 taxation. In other words, whatever other form of business you might be in, be it butcher, baker or candlestick maker, every other business can offset their finance costs against their profits, except buy-to-let.

The issue caused by Section 24 Tax is that some landlords ended up paying more income tax than they really made in profit after paying their buy-to-let mortgages. Meaning on the back of rising Lymm house prices in the last five years, some Lymm landlords have sold their buy-to-let investments.

  • 3% More Stamp Duty for Landlords

When someone buys a property, they normally must pay a tax to the Government for the privilege. This tax is called Stamp Duty. Yet landlords must pay an additional 3% stamp duty supplement on top of that when they purchase a Lymm buy-to-let property. Evidence suggests some Lymm landlords have decided to hold off or scale back buying additional buy-to-let properties for their portfolio because of the thousands of extra pounds that landlords have to pay to buy the rental property.

  • Holiday and AirBnb Lets

Some Lymm landlords are converting their long-term rental properties into short-term furnished holiday and AirBnB properties. Whilst the hassle, stress and service levels are much higher, these types of properties do tend to make more money and aren’t as heavily taxed as normal lets. When properties convert to short-term lets, it removes another Lymm property out of the general supply chain of long-term rental properties.

  • Greater Legislation for Rental Properties

With more than 150 pieces of legalisation, and new laws being added each year, the burden on landlords is huge. On the horizon is the Renters Reform Bill which will remove the no fault evictions. Also, all rental properties with an Energy Performance Certificate (EPC) rating of below a ‘C’ will have to be improved (i.e., money spent on them) by the landlord. This could be more than £10,000 per property. Hence, why some Lymm landlords have been selling their rental properties with low EPC ratings in the last 18 months.

  • Accidental Landlords Selling Up

There are some Lymm landlords who are classed as ‘Accidental Landlords’. In 2008/9, with a slowing property market and house price values dropping in the order of 16% to 19% (depending on the type of property) some Lymm homeowners decided to let their home out as opposed to selling it at a loss. Yet, with the price booms of the last 18 months, many decided to cash in on the higher property prices and sell – again taking another private rental property out of the system.

So, why is demand of private rented homes in Lymm increasing, even though more people own their home in Lymm than 5 years ago?

Even with better provision of affordable social housing and higher rates of owner occupation in Lymm (rising from 75.15% of homes in Lymm being owner occupied in 2017 to 77.91% in 2021), demand for private rental property continues to outstrip supply.

There are many reasons behind this including:

  1. People are living longer, meaning not so many properties are coming back into the mix to be recycled for the younger generation.
  • Net migration to the UK has continued at just over a quarter of a million people a year since 2017, meaning we need an additional 115,000 households to house them alone.
  • For the last two years, one in six of the owners of properties that have been sold have moved into rented accommodation instead of buying on because of the lack of properties to buy.

So, what is the outcome of the imbalance between supply and demand on Lymm rental properties?

Quite simply – Lymm rents have rocketed. They are 10.4% higher today than the spring of 2020 … and that’s on the back of rents being 6.8% higher in spring 2020, compared to spring of 2019.

The severe shortage of housing in the private rented sector is pushing up rents in Lymm as demand continues to grow. Many Lymm people are finding it hard work to find appropriate accommodation at a reasonable rent, and with mounting numbers of tenants predicted to continue, this situation will only get worse unless more houses are built.

My heart goes out to those Lymm tenants struggling with the cost-of-living crisis, only to then be hit by higher rents.

Yet, these higher rents are now enticing new landlords back into the Lymm buy-to-let market because of the higher returns.

With higher inflation, property investment has been seen in the past a safe harbour to invest one’s money in. With the bonus of rising yields (because of the increase in rents) together with the nervousness of the Bank of England to increase interest rates too much because of the issues in Eastern Europe, this could be the start of a second renaissance in the Lymm buy-to-let market.

If you have concerns about the issues in legislation and taxation, then the advantage of employing a letting agent, with the choice of property, what you pay for it and how it’s managed, will go a long way to mitigate them.

If you are considering getting into the Lymm buy-to-let market for the first time or expanding your property portfolio (whether you are a client of mine or not) please do not hesitate to give me a call and we can discuss these matters further.

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140 Lymm Landlords Could Be Hit With £14k Bills and Red Tape in Tory ‘Levelling Up’ Plans

  • Some Lymm landlords face bills of between £11,000 to £14,000 as Michael Gove, the Housing Minister, declared an attack on poor quality private rental homes.
  • 140 Lymm rental properties will require upgrading. The Government announced in their ‘Levelling Up’ White Paper last week they plan to introduce a new minimum standard for private rental properties.
  • Also, the White Paper wants every landlord in Lymm (601 of you) to go on a Landlord Register and proposes the removal of Section 21 no-fault evictions. This could make it more difficult for you to get possession of your Lymm rental property.
  • Are these proposed changes another nail in the buy-to-let coffin for Lymm landlords?

On the face of it, yes, it could be seen as another attack on the humble Lymm landlord, having to spend money on their properties and get tangled up with red tape on a register and then having no-fault evictions removed.

Yet, as always, the devil is in the detail …

This ‘Levelling Up Bill’ is a White Paper. White Papers are policy documents created by the existing Government that set out their future proposals for legislation. Many White Papers don’t even make it to the House of Commons to be debated on, and even then, it needs to be voted on by both Houses of Parliament before becoming law. Any changes are at least two or three years away, and that’s assuming that it gets debated and subsequently approved.

Many have said the White Paper is supposed to lay out how to sort the challenge of rebalancing the UK economy that is suffering from the highest level of regional inequality than any G8 country. This is a gargantuan challenge …

yet the Levelling Up White Paper reads very much like a shopping list of great ideas without the means to pay for it.

One of the 12 points in the White Paper was focusing on housing, with a plan to introduce a new minimum standard for rental properties, a landlord register and the removal of no-fault evictions (as an aside, there was also a mention of a possible reintroduction of Home Information Packs – remember those from 2009!).

So, what does this mean for the landlords of the 601 private rental properties in Lymm?

Sub Standard Rental Properties

The proposed changes will mean rental homes in the private sector will have to meet two specific standards that the existing 371 social housing homes in Lymm currently need to meet.

The first being called the ‘Decent Homes Standard’ (DHS) and the second, the Housing, Health and Safety Rating System (HHSRS) evaluation.

Looking at data from the Government, there are 140 private rental properties in Lymm that are considered substandard under these two measures and each one would cost between £11,000 and £14,000 to bring up to the prescribed standard. That means …

the estimated total cost to improve the 140 Lymm properties, that are considered substandard, could be as high as £1,960,462.

All of that would have to come out of the pockets of Lymm landlords!

Yet both systems of standards (DHS & HHSRS) have been slated by many (even by the Government itself).

The DHS criteria for the standard are as follows:

  1. It must meet the current statutory minimum standard for housing
  2. It must be in a reasonable state of repair
  3. It must have reasonably modern facilities and services
  4. It must provide a reasonable degree of thermal comfort

Note how the word ‘reasonable’ is used in three of the four points of the DHS. Reasonable is an arbitrary and a very much subjective point of view. It screams loopholes and get out clauses to me.

Looking at the HHSRS, the Government announced just before the pandemic in June 2019 that the HHSRS would be revamped after it was found to be ‘complicated and inefficient to use’.

Putting aside how one measures the standards, it is a simple fact that there are many Lymm rental properties that are substandard. I believe it right the Government have an ambition to halve the number of sub-standard private rentals by 2030. However, would it surprise you that …

in 2006, 46.7% of private rented homes in the UK were classed as substandard and today that has reduced, without any legislation, to 23.3%. One must ask if new legislation is now required?

Also, if you recall in an article I wrote recently (drop me line if you would like me to send it to you), Lymm landlords will be faced with bringing their properties up to an energy rating (EPC) of C between 2026 and 2028 in legislation already announced.

Most of the works to meet that EPC rating requirement will be the same works to meet this new DHS and HHSRS. Also, in that article, I discussed how the Government have suggested that certain allowances will be made for landlords on rental properties that can’t be improved.

So, I think Lymm landlords should sit tight and let the Government shine more light on this in the coming months before any knee jerk reactions are made.

Landlord Register

To be honest, there are several city/borough registers around the UK for landlords. Experience has shown they seem to add an extra level of bureaucracy and red tape. The register would be for every Lymm buy-to-let landlord and rogue landlords would be struck off whilst allowing tenants new redress rights. Another reason to employ the services of a letting agent to sort! 

End of No-fault Evictions

Again, I spoke about this a few weeks ago with the proposed removal of Section 21 to evict a tenant (again, if you want a copy, drop me a line). If you recall, I stated that no-fault evictions were removed in Scotland over four years ago and the apocalyptic suggestions it would kill the rental market for Scottish landlords was not forthcoming. Now of course, the Scots strengthened the other grounds to evict a tenant. If the Government strengthen the Section 8 legislation, again, I cannot see this being an issue south of the border. Again, time will tell once the Government put more meat on the bones of the White Paper.

Conclusion

Many of the announcements made in the Levelling Up White Paper are re-hashed proposed legislation that has been on the books for the last couple of years.

This White Paper is not another nail in the coffin of buy-to-let in Lymm.

Yet, many commentators have cautioned that more landlords with substandard homes will sell up because of these proposed changes, warning the sell up would add to the private rental sector’s shortage of homes, thus pushing up rents.

If that was true, that would increase rental returns on Lymm buy-to-let and attract more Lymm landlords into the sector, wouldn’t it?

But if you don’t agree other Lymm landlords will buy these rental properties that other landlords are selling, who will buy their Lymm properties from them? It will be Lymm renters, who are now able to buy because the price has come down, meaning equilibrium should return to the market. 

This is all theoretical and there are shortages/gluts in specific locations. Let us not forget it was 12/18 months ago that rents were dropped by double digit percentage points in the space of a couple of months in the big cities. Those rent drops weren’t anything to do with landlords buying up City Centre rental properties, but demand plummeted with 20 something tenants moving back in with their parents during the first lockdown and the months that followed. Yet, now rents have bounced back to pre-pandemic levels (and more) with the return of tenants to the cities.

In a nutshell, if Lymm landlords do end up selling in their droves (which they won’t), yet if they do, those Lymm properties will still exist.

Few of them will be left empty because most of them will be bought by other Lymm landlords as they will be attracted to the sector as inflation takes hold whilst others will be bought by first-time buyers.

What goes around, comes around. So, let’s see what happens in the coming months. In the meantime, if you’re a Lymm landlord and you want to discuss anything in this article, please either drop me a line or send me an email.