Michael Gove’s proposed rental reforms are already forcing landlords to quit the housing market, the Royal Institute of Chartered Surveyors (RICS) has warned, as rising mortgage rates trigger a slump in landlord lending.
Nearly two-thirds of estate agents reported an increase in landlords looking to sell up in April, according to RICS’s closely-watched industry survey. A similar share reported a decline in interest from British landlords looking to buy. New rental supply continued to fall across the country, with the biggest drop in the South West, the survey found.
RICS warned that Mr Gove’s Renter’s Reform Bill, which includes the flagship policy of scrapping Section 21 “no-fault” evictions, is pushing more landlords to quit the sector as they are also squeezed by rising interest rates. Tarrant Parsons, a senior economist at RICS said, “interest rate rises are also impacting the rental sector and combined with looming reforms proposed in the Government’s Renters’ Reform Bill, landlords are increasingly deciding to leave the sector and sell up property.”
Jason Coombes, of Cottons Chartered Surveyors in Birmingham, warned "that government rhetoric around rental reforms has spooked investors. Fear and lack of leadership from this government has further eroded confidence in the viability of this sector.”
It came as data from UK Finance showed that just 4,948 buy-to-let mortgages were issued for purchase in March, half the number recorded a year ago and the lowest level for the month since records began in 2013. Remortgages on buy-to-let loans also fell by half to a nine-year low, suggesting landlords are selling up rather than refinancing when their fixed rates expire as rising mortgage costs make it unviable.
The average rate on a two-year buy-to-let loan hit 6.02% on Wednesday, according to data company Moneyfacts. This was nearly double the 3.59% average quoted rate at the start of June 2022.
Jean Jameson, chief sales officer at Foxtons, a London estate agent said, "landlords are selling up because they cannot afford to refinance when they come to the end of their fixed-rate deals. There are a lot of landlords with large portfolios where they don’t have big chunks of equity. They are selling up.”
High mortgage rates are also bringing fresh pressure for homeowners. Mortgage repossessions have jumped to their highest level since the start of 2020, according to UK Finance. Across the first three months of the year, 1,250 households were repossessed, a 28pc year-on-year increase. However, this number was still well below 2019 levels. The data also showed the first year-on-year drop in savings levels in 15 years.
Eric Leenders, of UK Finance said, “people dipped into their savings pots to pay their bills and support usual spending.”
Growing concern as ‘landlord panic to exit the rental market’ sparks evictions crisis
Landlord Action, the eviction and housing law specialists, says the UK court system is on the brink of a severe bailiff crisis, as an increasing number of County Court bailiff evictions are being put on hold or cancelled, leaving landlords facing an even longer wait and higher costs to evict tenants.
Whilst the Ministry of Justice claims delays and cancellations are amid safety concerns due to a lack of Personal Protection Equipment for bailiffs, Landlord Action says cracks in the court system started years ago.
Paul Shamplina, founder of Landlord Action said, "this is just the beginning and without intervention the problem is going to get worse and worse. The historic lack of investment in the courts is now being compounded by changes in regulations and rising interest rates, sparking landlord panic to exit the rental market.”
In Q1 2023, landlord repossessions in the county courts rose by 69% in comparison to the same quarter in 2022. “This is before Section 21 is abolished and more eviction cases end up in the courts” adds Paul.
Landlord Action is calling on Judges at County Courts to start granting leave to transfer more eviction cases with serious arrears to the High Court to share the burden of rising workload, as an increasing number of County Court bailiff evictions are being suspended. Some landlords have already waited more than six months to reach the point of eviction and are being financially crippled by the delays.
In a current case, which Landlord Action is acting on, the client waited 16 weeks from the date the possession order was granted (24th January 2023) to the date the bailiff appointment was confirmed (16th May 2023) with the eviction date set for 2nd August. However, the landlord has this week received a phone call from the bailiff saying, due to the PPE issue, it could take a while to be rescheduled. The landlord has already waited more than six months to reach this point, with his tenant currently owing £20,942, increasing at £81.91 daily.
Paul Sowerbutts, head of legal at Landlord Action said, “we’ve offered our client the opportunity to re-apply to have his case transferred up to the High Court, but naturally there is a reluctance as this is yet another cost for the landlord. Whilst the High Court could help alleviate the delays, it won’t solve the crisis we are facing. Whilst bailiffs aren’t striking like other public sector workers, they are following work-to-rule action, and the Government must invest in the court system, including a review of bailiff salaries, if they are to improve recruitment and give landlords any confidence in the future of buy-to-let.”
Landlords wishing to evict tenants must first serve a notice to their tenant and, unless it is a Section 21 notice, which is due to be abolished as part of the Renters Reform Bill, then wait for the relevant County Court to approve the eviction, issue a warrant, and book an eviction date.
Daren Simcox, CEO of High Court Writ Recovery, a private bailiff firm specialising in High Court writs and evictions across the UK, says the number of County Court bailiffs employed by courts to attend evictions has been waning as government policy has affected team sizes, meaning some bailiffs now cover multiple courts resulting in unmanageable workloads. “The bailiffs simply don’t have the time to wait, so if there is a problem on the eviction day, they are moving on after 10-15 minutes leaving cases unresolved.
“The current wait time for possession in some cases is 37 weeks from claim to possession – that’s nine months and simply isn’t acceptable. Judges should be granting permission to transfer up to the High Court as a matter of course, given the current circumstances. Of course, whilst this route is usually much quicker, it is also more expensive for landlords, but less than one month rent, so the quicker possession can be obtained the landlords can take steps to re-let. Even High Court Enforcement Officers are in short supply after 40% left the industry during Covid and have not returned.”