A lot is changing for landlords in the coming years.
Simply Business has put together nine predictions for what will affect the buy-to-let market in 2018 and what you need to be thinking about if you own rental property.
1. You’ll need to focus on energy efficiency
New rules arriving on 1 April 2018 will mean that all new tenancies need to meet the Minimum Energy Efficiency Standard (MEES).
It will become illegal to let out a property with an Energy Performance Certificate (EPC) rating that is lower than an E.
That rule will apply to all existing rentals from April 2020.
So, 2018 is the year to focus on making sure your buy-to-let properties are energy efficient.
If your property currently has an EPC rating of F or G you need to act now to get it up to the new standards before April.
Even if your rental property has a reasonable EPC rating you may want to start considering cost-effective ways you can improve energy efficiency.
2. Tenancies could get longer
In the Autumn Budget, Chancellor Philip Hammond announced that there would be a consultation on how to incentivise landlords to offer longer-term tenancies.
Off the back of this, some experts are now calling for landlords to get tax relief if their tenants have longer tenancy agreements.
David Cox, chief executive of ARLA Propertymark – the trade body for the lettings industry – has said combining tax relief with a new housing court to speed up the eviction process would help encourage landlords to offer longer-term tenancies.
“Tax incentives and easier access to justice are the two key things which will give landlords the confidence to offer longer-term tenancies,” Cox told the Daily Mail.
“Therefore, a specialist housing court with judges who are housing law experts will both speed up the process and provide much greater consistency in judgements. Combining the housing court with tax incentives such as repealing the punitive restrictions on mortgage interest relief should provide landlords with both confidence in the legal system and financial incentives to offer longer-term tenancies.”
Over the year you can expect to hear more about how to encourage landlords to offer longer tenancy terms as the consultation progresses.
3. Rent-a-room changes
Chancellor Hammond has also called for evidence to show how rent-a-room tax relief could be better used to target long-term lettings.
At the moment, you can earn up to £7,500 renting out a room in your house before you have to pay income tax on the earnings.
The problem is the relief was designed to encourage people to let out a room in their home on a long-term basis, but the rise in popularity of short-term lets due to websites such as Airbnb has meant the relief is being used by homeowners looking to make a fast buck, not offer long-term accommodation.
Simply Business expect changes to the Rent-a-Room scheme in 2018 in order to make it more targeted towards long-term lettings.
4. Rent included on credit reports
The government wants technology firms to create tools that will make it possible to record rental payments on your credit history. The Rent Recognition Challenge starts this month and will run until October 2018.
The idea is that by including rent on credit reports it will help people get a mortgage, but it will also benefit landlords as they will be able to see whether prospective tenants have paid their rent on time in the past.
5. Stop using a letting agent?
A draft bill was published in November 2017 for a ban on tenancy fees. It shouldn’t be long until it comes into force and when it is done many landlords may stop using letting agents.
In fact, research from Paragon has found that almost a third of landlords may abandon letting agents if tenancy fees are banned.
Will you be one of them? Vote in our poll and share your thoughts on letting agents in the comments section below.
6. Arrival of a rogue landlord database
A database of rogue landlords and letting agents is expected to go live in April 2018. It has been delayed from October 2017, but hopefully, it will appear in the spring.
Only local and central government will have access to the database when it is launched and it will include those with criminal convictions and any landlords or letting agents who have been issued with banning orders for a range of offences.
7. You may need a licence for your HMO
The government is also expected to target rogue landlords with new tougher rules on houses in multiple occupation (HMOs).
At present, all large HMOs need a licence, but this could be expanded to far more HMOs if new rules are introduced to remove the three-storey minimum rule on what qualifies an HMO for the licence requirement.
This could mean that HMOs of five or more people, regardless of the number of storeys, will need a licence. That would mean the number of properties needing a licence would soar from 60,000 to 175,000.
8. Streamlined dispute resolution
Sajid Javid, the Communities Secretary, has announced plans to make it a legal requirement for landlords to belong to an ombudsman redress scheme.
Javid wants to create a single Housing Ombudsman that replaces the four current systems. The plan should be good news for landlords as it should improve dispute resolution with tenants.
9. Tax relief will shrink
This year tax relief on mortgage interest payments will continue to shrink. There will be a gradual tapering down of the tax relief that allows landlords to offset the cost of mortgage interest payments against their rental income before they pay income tax.
It will fall to 50% in April, then 25% in April 2019 and 0% in April 2020.
Source: BT.com