The private rented sector has an important economic and social role to play across the country, according to a new report published recently.
The report, commissioned by the National Residential Landlords Association, is based on a survey of 2,000 private renters in England and Wales by the polling agency Opinium. The results suggest it is wrong to conclude that private renters are trapped in the sector. It finds that fewer than just 6% of private renters want to switch to social rented housing. In addition, whilst 76% said they want to buy a home of their own at some point in the future, just 17% would have done so already if they could.
Prepared by Chris Walker, a director at ChamberlainWalker Economics, the report concludes that the sector “has attributes that make it the tenure of choice for many private renters, and that a high-quality and well-provided PRS is likely to be a good thing both socially and economically.”
The survey found that 41% of private renters rated the affordability of their rents as ‘excellent’ or ‘good’ with a further 38% rating it as ‘fair’. With the government committed to supporting ‘Generation Rent’ to become ‘Generation Buy’, the report finds that for many private renters, job security is the biggest factor in determining when they choose to buy a home.
According to the survey over one in three of renters were more likely to buy their first home if they had a stable, secure job. This figure rose to a half among renters aged 18 to 34. With a growing number of older people now reliant on the private rented sector, almost half (48%t) of renters aged 55 and older said they wanted to stay in the sector. Noting that around three million people aged 65 and over want to downsize, the report argues that the PRS can play an important role in enabling this to happen by freeing up under-occupied properties for aspiring homeowners.
According to government data, more than half (53%) of owner-occupied properties are under-occupied compared with just 15% in the private rented sector. Writing in the report, Chris Walker concludes: “For many, the PRS acts as an entry point to the housing market, helping younger people gain their footing and independence when they leave the parental home without the bigger jump and commitment of homeownership. Similarly, the PRS is a mainstay housing option for many younger people whilst at university and for many as they move away from where they grew up to enter the world of work for the first time.”
Ben Beadle, chief executive of the National Residential Landlords Association, says: “Today’s report makes clear the positive and vital role the rental market has to play in the economic and social life of the country. Contrary to the rhetoric from many, for the vast majority of tenants their experience in rented housing is positive. This is the platform the Government needs build upon to ensure a sector that works for renters and responsible landlords.”
Lettings Market - latest figures for Rents and Voids
The latest Rental Index from Goodlord shows a mixed market with rents holding steady but voids increasing in certain regions. The cost of rent for a property in England rose fractionally between December and January - inching up by half a percentage point from £1,071 to £1,076 on average.
This is 8% higher than the same time as last year. Prices, however, continue to remain lower than the record highs recorded in Autumn 2022. Average rental costs in September 2022 hit an Index high of £1,249.81. During January, prices in most regions held steady compared to the previous month. The biggest shifts were seen in the East Midlands, where costs rose from £894 to £924 per property, and the North East, where costs dropped from £800 to £778.
Despite ongoing demand for rental properties keeping prices buoyant, January recorded a notable increase in void periods across England. The number of void days per property rose from 20 to 23 - a rise of 15%. This follows six months of gradually increasing void numbers and is the highest figure recorded by the Index since April 2021.
In July 2022, shortly before rental costs hit their annual peak, voids reached 10 days - a record low for the Index. Voids have been rising month on month since then. The East Midlands, Greater London, the North West, and the South East all saw sizeable increases in their average void periods over the last month. The North West jumped from 20 to 27 days on average, with numbers jumping from 13 days to 17 in Greater London.
In contrast, the South West and the North East saw no change to their average void lengths. Tom Mundy, chief operating officer of Goodlord, comments: “This was certainly an interesting month for the market. There’s clearly a huge amount of demand for available properties and costs are remaining consistently high, but we do seem to have firmly come down from the price peaks seen last Autumn. At the same time, this was definitely a slower paced month than we’ve become accustomed to. January isn’t traditionally the busiest month for lettings, and the void numbers reflect this.”
HMO numbers falling despite need for more rental properties
England’s HMO market is shrinking despite a widespread need for more affordable rental accommodation. In 2019/20, there were an estimated 510,776 HMOs across the rental market. By 2020/21, this number had fallen by 1.7% to a total of 501,993, and it has continued to fall over the last year. The latest figures show that with a further 2.4% annual decline, there are now some 489,701 HMOs across England
This means that, in the space of two years, England’s HMO market has shrunk by over 21,000 properties. The East Midlands has seen the largest reduction, with HMO stock levels down 26.1% in a single year. In the North East, HMO stock has declined by 15.8% while the South East, London and North West have also recorded drops. However some regions have seen an increase, with HMO stock levels climbing over the last year across the West Midlands (up 16.9 %), Yorkshire and the Humber (up 11.2%), and the South West and East of England (both up 0.6%).
Despite a decline in overall stock levels, London remains home to the greatest proportion of HMO rental homes, accounting for 29.7% of England’s total stock. This equates to an estimated 145,615 properties.
Jonathan Samuels of Octane Capital - which conducted the study - says: “HMO stock levels have continued to slide since the introduction of tighter licensing rules by the government at the back end of 2018 and there are now some 21,000 less HMOs available across England than there were just two years ago. While any attempts to raise living standards for the nation’s tenants should be welcomed, it’s imperative that we also incentivise investors to remain within the sector. Failing to do so will only see the level of available rental properties continue to fall, driving the cost of renting ever higher in the process, at the expense of the nation’s renters.”
Government PRS reforms report welcomed by NRLA
The National Residential Landlords Association (NRLA) has welcomed reform recommendations in a report from MPs for the private rented sector (PRS). Among the recommendations, the Levelling Up, Housing and Communities Select Committee’s report calls for the development of a specialist housing court to tackle anti-social behaviour and rent arrears cases.
Other recommendations include introducing tax reforms to attract landlords to the PRS, the unfreezing of housing benefit rates and making anti-social behaviour a mandatory ground for possession – even if there is no criminal conviction. The issue of introducing periodic tenancies for the student accommodation sector should also be ditched, MPs say.
In its report, the Committee warns that: “It is not clear whether the Government fully appreciates the extent to which an unreformed courts system could undermine its tenancy reforms.”
Biggest challenge faced by many renters is that there are not enough homes to rent. Chris Norris, the NRLA’s policy director, said: “The NRLA has never been against reform of the sector, but it has to be fair and workable for both tenants and landlords. That is why the Committee is right to call for court reform to underpin the ending of Section 21, changes in plans for student tenancies and ensuring cases of anti-social behaviour are prioritised by the courts. The Committee rightly notes, the biggest challenge faced by many renters is that there are not enough homes to rent. All the protections in the world will mean nothing for tenants if the homes are not there in the first place. That’s why the Government should accept the Committee and the NRLA’s call for a full review of the impact of recent tax changes in the sector.”
Committee report on the PRS
The committee report on the PRS recommends:
"All forms of anti-social behaviour by tenants should be a mandatory ground for possession even if a criminal conviction has not been made. Suitable guidance for the courts should be developed to ensure such cases are dealt with swiftly and with certainty about the outcome. Student tenancies should be exempt from plans to make every tenancy open-ended. The most serious challenge facing private renters is the high cost of renting caused by the housing crisis. The Committee recognises the value of private landlords by calling on the Government to: review the impact of recent tax changes in the buy-to-let market with a view to making changes that make it more financially attractive to smaller landlords."
The Committee calls on the Government to unfreeze housing benefit rates to ensure they cover average rents.
Preparing for Rental Reform: What You Need to Know
Nobody likes change. No matter what it’s all about, any sort of kink to the routine can send even the coolest of us into a bit of a flap. No matter how much we protest though, change is on the horizon in 2023, with rental reforms promised as part of the government’s Levelling Up scheme. Unsurprisingly, landlords are feeling a bit hot under the collar about new legislations, but what is there to be getting worked up about? Carly Jermyn, CEO and founder of Woodstock Legal Services, a specialist in resident and landlord tenant law and landlord herself, discusses the lowdown on what to expect, and just how much upheaval we should be bracing for.
Are the new rental reforms a positive thing?
A landlord herself, Carly says she isn’t panicking about the changes, and maintains that for landlords who have got their house in order, there’s honestly nothing to worry about: We need reform. The aim is to have a fair rental sector. I think the system is a little bit fragmented, a bit broken. It needs work, we do need reforms.
What are the key rental reform changes?
The reforms are all about ensuring the industry is built on some key components:
- Professionalism
- High standards
- Stability for tenants
- The primary elements for landlords to be aware of are the introduction of the Decent Homes Standard, the changes around section 21 and the requirement to rent to tenants with pets.
The Decent Homes Standard
"We’ve seen a push over the years about increasing the standard of accommodation, and this is another move towards that", explains Carly. The changes require landlords to ensure that their property meets the required living standards for tenants, as set out by government. Most private rented properties that are properly maintained and compliant with all existing legislation should already be above these standards, so private landlords shouldn’t have any concerns, but Carly stresses that it is important to make sure that all your i’s are dotted and t’s are crossed when it comes to ticking off everything on the list:
It’s going to be quite a challenge for some older properties (to meet the standards),and the social housing sectors have struggled. So, it’s a high standard that’s going to be applied to the private rental sector.
What exactly constitutes a ‘decent home’?
Carly also recommends "calling in the professionals if there are any areas that you are unsure about, and also to help manage any projects which may need budgeting for. Get the experts in so that they can confirm whether they think your property does comply with the standards that are coming in, so that you can plan the work across your portfolio budget for it. Plan it, make sure it’s done early, and then it’s monitored."
What about Section 21?
"There’s a huge amount in the news and has been for a very long time about section 21s. You know, they’re not particularly in favour for tenants and tenants’ rights groups, and there’s been a push for a long time for them to be abolished, and it looks set to happen," said Carly.
The change effectively means that in order for a landlord to gain possession of the property, they will have to have a reason for doing so. The reality is people have always had a reason for doing so – no sensible landlords is going to evict somebody for no apparent reason. But now they will have to prove that ground at court.
Are the new reforms all for the benefit of tenants?
"Whilst it may feel that way, actually, no. Section 21 may seem like a catch all, fool-proof solution, but in many cases, landlords have found themselves stuck in a pricy limbo trying to get their tenants out of their property, while wrangling with legal issues surrounding the notice. With the new format, it seems (although we shall see how it pans out) that loopholes have been stitched up on both sides of the coin. As Carly explains. "one of the positives for landlords about the proposed reforms is that they’re proposing that if a tenant falls into two months’ rent arrears three times over a set period, for example, you can still gain possession as a mandatory ground, which hasn’t existed before. I think they’ve recognised that often, just before a hearing, tenants would dip below the two month threshold, and that would cause landlords problems in gaining possession, they may end up with a suspended possession order or no order at all. They’ve recognised that it was unfair on landlords. It’s very difficult to deal with tenants that are in arrears repeatedly then bounce back, so they’ve introduced that, and it’s been a bit of a tiny lifeline."
Regardless of the apparent logic of the change, this is one reform that continues to ruffle landlord feathers. It’s understandable that there is unease in landlord camps, so how can landlords continue to protect their assets, whilst complying with the changes?
‘We know the rough boundaries of the legislation, what they’re proposing and what those grounds will be, and on the face of it, most of those grounds look okay, but the devil will be in the detail, what landlords need to do is to make sure they’ve got systems and processes, so that if they need to rely on one of those grounds, they’re able to properly evidence that evidence to the court," explained Carly.
Welcoming pets in rentals
"As a landlord, and actually, as a lawyer, I don’t really always understand why pets are such a concern for landlords," laughs Carly.
Love them or loathe them, we are a nation of animal aficionados, and writing off a section of prospective tenants because of their furry family member is no longer just a questionable business decision, it’s now looking likely to become an absolute no-no.
The new reform looks to state that you are no longer able to refuse a tenant having pets, unless there are reasonable grounds to do so.
Reasonable grounds could include:
- If your property is in a block of flats, and having a pet would be a breach of the lease
- If the welfare of the animal would be at risk (for example 10 dogs in a one-bedroom flat with no garden)
- Concern for other tenants – if an existing tenant has an allergy that would make living with the pet a proble
- Carly stresses that "an element of common sense must be implemented here, but that embracing pets may be a positive move, you know, we don’t see that much litigation surrounding damage caused by pets – if I’m honest, it’s quite rare. I suspect there’ll be conversations around those topics, but all in all, I don’t think pets are particularly an issue"
Rental reform time frames
So, plenty of change on the horizon. But when is it all coming into play?
In short, nobody really knows! There are whispers that we might see some changes by Spring, but don’t set your clocks by it, nothing has been announced formally yet.
Top tips for Rental Reform Readiness
So, what does Carly recommend you do to get yourself as Reform Ready as you can be?
- Get your house in order: Looking at your portfolio and seeing if there are any properties or tenancies in there that may cause you more of a problem.
- Don’t go crazy serving Section 21s: There are people out there that are making that suggestion and we are seeing a rise in Section 21s.
- Start now: If you don’t have the evidence now that you’d need for an eviction, start to gather it.
- Check the condition: Look at the condition of your property against the Decent Homes Checklist, and plan any tweaks you need to make
- Start any work early: We know how expensive contractors are, we know how difficult it is to get them in there.