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Study finds standards have improved in rented homes in Britain

Standards have improved in rented properties in Britain but safety, particularly relating to gas and fires, still falls short, according to new research.

Over the past four years, during which time there has been a raft of new legislation relating to the private rented sector, there have been significant leaps forward in landlords’ professional standards, but safety is still compromised in too many rentals, says a report from insurer AXA.

It points out that the sector still has catching up to do on important areas like fire and gas safety. Every rental property requires an annual gas safety inspection but just 58% have had this check in the past 12 months.

Four in 10 tenants say they do not have smoke alarms installed, despite landlords being legally required to fit them on each floor of a property. This is still a marked improvement on 2014, prior to the rule being introduced, when six in 10 tenants lacked them.

Two other key requirements are that landlords provide an Energy Performance Certificate (EPC) to tenants, and in England and Wales the Government’s ‘How to Rent’ Guide, which informs them of their rights and responsibilities.

Yet only a third of tenants say they have seen the EPC, up from 19 in 2014, and just 15% of those eligible have received the Government’s mandatory guide.

AXA notes that landlords compromise their rights with these omissions, as those who have not provided the guide, EPC and gas safety certificate cannot evict a tenant under a Section 21 notice.

While recent legislation has increased pressure on landlords to raise their game, there is still little awareness among tenants of basic rights and entitlements. This means vital consumer pressure to push standards up further is largely absent.

Some 75% of tenants did not know their landlord is legally required to ensure a minimum energy rating for the property, and a similar number were unaware of the requirement for EPCs and gas safety checks. Most, some 89%, said it was the tenant’s responsibility to keep any chimneys swept too which is untrue as this is the landlord’s responsibility.

Last year, AXA found that one in 20 rental properties were still rated F or G for energy performance, categories now outlawed from the rental market. This has now fallen to three per cent of properties in the, equating to 150,000 properties nationwide.

Seven in 10 rental properties are now A to C bands for energy performance, but ‘cold hazard’ is still rated the number one health risk associated with living in private rented accommodation.

Indeed, half of tenants surveyed said they feel their rental property negatively impacts their health and poor energy performance was quoted by 21%. Most tenants in this group also cited damp or out of date heating systems at the same time.

Change is afoot, however, as AXA’s latest figures on energy saving features in the private rental sector show that landlords are upgrading their properties at a rapid rate, with figures jumping on smart meters in particular.

It also found that 78% of properties now have full double glazing, up from 73% last year, 26% have smart meters installed, up from 14% in 2017 and 34% have roof insulation, up from 32%.

‘Landlords are getting more professional, and we are seeing standards rise in British rentals, driven by legislation and desire of landlords themselves. We know that many start out as accidentals, and there is a big learning curve for them at the start, particularly as legislation changes so often,’ said Gareth Howell, managing director of AXA Insurance.

‘We find that both landlords and their tenants lag behind, so public awareness campaigns are vital to correct myths and promote new rules and standards. Gas and fire safety should be the priorities here: our research suggests that millions of properties are not compliant with today’s laws,’ he added.

Source: Property Wire

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Longer tenancies: more security for renters or a vote grabbing political move?

An estimated 46% of 25-34 year olds live in private rented accommodation. This has risen from 27% in 2006-2007 and, as such, the build-to-rent sector has seen massive growth. Of these, 81% of rental contracts are assured shorthold tenancies (ASTs) with a minimum fixed term of just six or twelve months, most allowing landlords to increase rents or evict tenants at the end of their contracts, without giving reason.

This can leave tenants feeling insecure, unable to challenge poor property standards (for fear of tenancies being terminated) and unable to plan for their future.

Earlier this month, the Secretary of State for Communities, Housing and Local Government, James Brokenshire, proposed the introduction of a minimum three year tenancy, with a six month break clause.

He wishes to offer greater protection to tenants, creating rental environments with more of a community basis. Tenants would be able to use the six month break clause and have greater protection if they wanted to stay for the full three years. Moving every six-twelve months can be expensive (deposits / moving costs / agents’ fees) and the proposals would help ease this issue. However, the proposal is not favored by everyone.

However, shadow housing secretary John Healey countered by saying this latest promise is ”meaningless if landlords can still force tenants out by hiking up the rent”.

But do tenants want longer tenancies? According to the National Landlords Association (NLA) only four out of ten tenants actually want longer contracts, and according to government data (even with the current forms of tenancy available) people stay in their rented homes for an average of nearly four years.

The proposals will help landlords avoid costly periods whilst searching for new tenants, offering them the flexibility to regain their properties when their circumstances change. However, many landlords worry about the time it can take to gain possession of their property in the courts. To this end, a call for evidence will be published this autumn to better understand the experience of users of the courts and tribunal services, including considering the case for a specialist housing court.

An eight-week consultation (until 26 August) is now underway and ministers are seeking views from landlords, tenants and other related organisations.

Lenders may also take an unfavourable view which could have a dramatic impact on the buy-to-let industry. ASTs gave lenders the confidence to grant mortgages against properties, as they knew they could repossess the property at short notice if necessary. But will the proposals make lenders wary about granting loans, or will they decide to increase the interest rate to reflect the additional risk? A further disadvantage for landlords.

Source: Property Week

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Why the tenants are choosing private rented sector

With reports that a quarter of the population will be privately renting by the end of 2021, it is clear that the UK’s Private Rented Sector (PRS) is becoming an increasingly popular alternative to property ownership.

New data from insurers Direct Line for Business only goes to strengthen this argument, with a recent study revealing that 70% of UK renters have no intention of buying a home. The research supported the idea that the UK is moving toward a German Housing Model, where the majority of the population opt to rent, supported by government policy and encouraging attitudes toward long term renting.

In fact, further research shows that more people rent in Britain than almost anywhere else in Europe, with only Denmark, Austria and Germany having a lower percentage of home owners.

The reasons for this are varied but often come down to financial cost. With the average first-time buyer looking at prices double what they were just five years ago, it is understandable that home ownership is slipping through the fingers of younger generations, but interestingly that is not the only reason cited by responders for wanting to stay in the PRS.

The Direct Line for Business study shows that of the 12 million adults who said they don’t intent to buy property 22% said that the financial commitment of buying was a turn off, 9% said that they chose to rent so they could freely travel and 12% didn’t want to be tied to one place. An additional 22% commented that they didn’t want the hassle and cost of maintaining a property and would instead prefer a landlord to hold responsilbity for repairs.

Business manager at Direct Line for Business, Christina Dimitrov, said: “The UK housing market continues to change and we are seeing a major attitudinal shift when it comes to renting. While price is a factor, many people are increasingly comfortable with the flexibility afforded by renting a property rather than jumping into home ownership.”

The transition toward a new model of long-term renting is positive news for the future of the buy-to-let sector, with landlords able to support a growing pool of tenants and renters able to have greater choice in the market.

Source: Property Forum

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Financial pressure on landlords is harming the PRS not improving it!

In a report published 25th June, property expert Kate Faulkner has claimed that while legislation has been introduced to improve the private rented sector (PRS), it is not being properly communicated to landlords, agents and tenants.

Writing in her seventh report funded by the TDS Charitable Foundation, Kate highlights the ever-increasing financial and administrative pressures on landlords and agents due to legislative changes.

Of over 147 new pieces of legislation, covering the sector, more than half have been introduced since buy-to-let mortgages were launched in 1996. While the percentage of homes in the PRS classed as ‘non-decent’ has reduced (47% in 2006 to 28% in 2015), there has been an increase in real terms as the sector has grown (1.2 million in 2006 to 1.3 million) over the same period.

Commenting on the report, Kate said: “Due to the rising costs to good landlords and a scant enforcement of PRS regulations, there is an incentive for some landlords and agents to act outside the law to increase their profit margins.

“The increased costs to landlords of buying a property, then letting it legally and safely, means that in some cases rents have increased beyond the means of some tenants. Reputable landlords and agents are being penalised financially for abiding by the law.

“It can create a vicious cycle and a two-tiered rental market, which the legislation was never intended to create.

“The problem, as I see it, is that bills are introduced on the sector all the time, but aren’t backed with a communications plan or funding for enforcement. As I wrote for a previous TDS Charitable Foundation report; legislation is meaningless without enforcement.

“Myriad legislation can be confusing for tenants and rogue landlords and agents often get away with offering sub-standard homes as tenants don’t know their rights. In reality, tenants hold the power in terms of accepting or rejecting poor or dangerous properties, although where supply is scant, this power disappears.

“I would like to see a more concerted approach to educating tenants on their rights. Nobody could have escaped hearing about the introduction of GDPR, but when rental laws are introduced, affecting millions of people across the country, there doesn’t appear to be the same public awareness campaign.

“That is not to say that legislation introduced has been wrong-headed or ineffectual, but it could have had a greater positive impact on the sector if it were backed with enforcement and communication.”

The TDS Charitable Foundation commissioned Kate Faulkner to produce research reports into the PRS to improve knowledge and educate landlords, agents and tenants, in line with the Foundation’s aims. Her latest report, What are the real legal requirements and costs of letting a property, and how can we communicate them better to landlords and tenants? Is now available to download as a PDF.

While the TDS Charitable Foundation funds the reports, Kate retains editorial control and the opinions expressed in the report do not necessarily reflect the views of Tenancy Deposit Scheme (TDS) or the TDS Charitable Foundation.

Source: Property118

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Growth slows in private rented sector

Dwindling numbers of first-time buyers will fuel expansion in the private rented sector (PRS) over the next decade but at the moment growth in the PRS is slowing.

Government intervention to put off landlords entering the market or expand their portfolios, through tax and regulatory changes, has contributed to a slowdown in the growth of the PRS.

But in the longer-term, a prolonged absence of first-time buyers in the housing market will support a growing PRS, according to the eighth edition of Kent Reliance’s Buy to Let Britain report.

In the last quarter, the value of the PRS stagnated at £1.4 trillion.

The report blames the slowdown on a combination of higher stamp duty costs, reforms to the tax treatment of mortgage interest and tighter lending rules.

In the past year, the number of households in the PRS increased by only 3% to 5.7 million, far slower than the rate of increase seen over the past decade.

According to a survey of 1,043 landlords run in association with BDRC Continental, only 1% more landlords increased rather than shrunk their portfolios in the last three months.

Data from UK Finance shows the number of outstanding buy-to-let mortgages increased by just 1.5% a year, one sixth of the rate seen three years ago, as house purchase demand has slowed.

Tenant demand has also eased with 19% of landlords reporting that tenant demand increased in the last three months. Meanwhile 23% saw demand fall but this was heavily influenced by London, where political and economic uncertainty is having a large effect in prime areas.

Fall in first-time buyer demand will sustain PRS

While landlords have seen softer tenant demand in recent months, first-time buyer activity is still a long way from recovering to its pre-recession levels, despite a raft of government support measures. This has contributed to the long-term growth of the PRS, and is set to do so in the future.

In the last decade, two million fewer first-time buyers have been able to buy a home with a mortgage than in the 10 years prior to 2008. This compares to the PRS growing by 2.2 million households over the same period. Many are frustrated buyers unable to get on the housing ladder as people continue to struggle with affordability issues, high house prices and insufficient housebuilding.

UK Finance data shows that 363,000 first-time buyers used a mortgage to buy a home last year, which is 94,000 fewer than the typical number seen in the ten years prior to the financial crisis.

Without a sustained recovery in first-time buyer activity, Kent Reliance says this means 940,000 fewer first-time buyers will purchase their first home over the next decade than in the 10 years before the financial crisis.

ONS forecasts suggest an additional 2.4 million households will be created in Great Britain over the next 10 years. Conservatively, assuming first-time buyer numbers recover somewhat, and private renting continues to account for a little over a fifth of households, rental housing supply will still need to cater for an additional half-a-million households.

More professional landlords

Three out of 10 (31%) of landlords now make a profitable, full-time living from property investment, compared to 26% three years ago, while amateur landlords have started to leave the market.

Landlords are increasingly operating as a business, and more of them buying property are doing so as a limited company, allowing them to continue to offset mortgage interest costs against tax.

Kent Reliance’s data shows that in the first quarter of 2018, 72% of mortgage applications for purchase were via a limited company – more than twice the level seen two years ago, and up slightly from 70% in 2017.

Andy Golding, chief executive of OneSavings Bank, which trades under the Kent Reliance and InterBay brands in buy-to-let, commented: “Landlords were left reeling after the introduction of tighter regulation and higher taxes, while the spectre of Brexit is already weighing on the housing market. This has naturally deterred investment into the private rented sector, especially from amateur speculators.

“Political opinion may be set against the PRS, but without it, the housing crisis would be deeper still. First-time buyer numbers, despite recent fanfare, are a long way from pre-recession levels and with household numbers growing, and new housing starts inadequate, it is the PRS that will continue to pick up the slack. Policy should recognise that, and support growth in supply across all tenures.

“A housing market with dwindling supply of rental accommodation yet growing demand would, without a significant rise in affordable housing, provide the worst of all worlds for tenants: higher rents, with less choice and security, hampering their ability to save to buy a home.”

Source: Mortgage Finance Gazette