Housing has been a priority since day one of the new Labour government, with its promised 1.5m new homes getting a good mention in the King’s Speech.
While new homes were given the nod, so too were the 11m renters in the UK as King Charles confirmed plans to introduce legislation that will “give greater rights and protections to people renting their homes”. A spiritual successor to the Renters Reform Bill is coming which aims to fix several issues in the renting market seen today, however there is more that could and should be addressed.
Charlotte Armstrong, director of operations at Build To Rent operator Wise Living shares what she believes the previous Renters Reform Bill got right, and how the new Labour legislation should learn from examples in BTR.
It’s no surprise housing was a key point in Labour’s manifesto titled ‘Change’. The UK has a housing deficit in the millions, with planning reforms and mandatory targets being one of the first announcements the party made once coming into power. It’s promising to see this commitment so early on. Yet, in the meantime, and while people try to get on the home ownership ladder, there remains a growing and scary gap in the quality offered between the standards of private landlords and professionally managed Built to Rent (BTR) schemes.
It’s reassuring to see that many of the key themes presented in the previous Renters Reform Bill aren’t new to those of us in Single Family BTR. Indeed, offering stable, high-quality, affordable places to live for families has been our area of expertise for years. A recent Home Views Build To Rent report even found that people living in a Single Family BTR home rated their experience higher than those in a ‘for sale’ development for the fourth year in a row. So, as a new bill or new legislation is passed, there are a number of key takeaways that can be applied.
Breaking down barriers
The Renters Reform Bill was set to be the biggest piece of legislation for renters and landlords since the deregulation act almost ten years ago. While sweeping changes of this scale are often great for driving change, the downside is policies and processes needing to be unlearned then relearned by the mass market, adding more confusion before it can gain traction.
Above all, any new and improved bill needs to be simple and digestible, not hiding behind convoluted wording or classifications to make the changes it aims to. Additionally, literature breaking down the changes and what they mean to renters should be created and disseminated.
Another issue is when court becomes involved. Re-enforcing speedier repossession for landlords when there is no other choice but to serve notice whether for arrears or anti-social behaviour. New legislation unavoidably comes with a settling in period, it’s just up to us how short we make this.
A change in dynamic
The most productive, and the most profitable relationships between landlords, tenants – and in our market, investors - are long ones with mutual boundaries placed on either side. A landlord that evicts and replaces tenants in a regular pattern loses more in the long term through the cost of re-preparing their property for the market, in addition to the rent missed out on.
Likewise, a tenant that stays in one rented property for a long time takes better care of their home and provides a steady and reliable income. We see it a lot with people who opt for BTR developments. They are looking for the high-quality service that comes with the high-quality offering. Those that use BTR properties are looking for accommodation that is more permanent than temporary – a proper home rather than a stepping stone towards one.
This is primarily why more and more across the BTR sector we’re seeing the introduction of flexible payment plans to keep tenants in their homes for longer. In anyone’s life there are ups and downs, and should our tenants fall into bad times and have difficulty paying, we will work with them closely to help them get back on top through offering flexible – and realistic – payment terms, made possible thanks to our agile operational infrastructure.
In practice this works by sitting down with tenants, discussing their situation and creating a viable timeline of what they can pay and when. This promotes a relationship between us and them of trust and reliability and encourages tenants to stay with us longer. This would be difficult to make mandatory across the sector, but where possible legislation and guidance should direct private landlords toward following this path as well.
A stable alternative
The UK’s current housing crisis is unfortunately a severe one which, at the very least, will require a significant amount of time to solve. Renting is the only viable option for a lot of people and because of this, many investors are making the most of the BTR offering and its rising popularity.
Compared to the private rental sector and the upheavals occurring in that market - with four in 10 households seeking council help because their property is being sold – BTR as an investment opportunity has become tenfold more attractive as it rises to the challenge of keeping the UK in housing
Ten years ago, there were roughly 3,500 purpose built BTR homes in the UK. Now, in Q1 of 2024 there are more than 100,000, with a further 54,000 under construction. Moreover, while this is a big difference, the potential for even more investment is also huge, with many developers and investors slowly waking up to this opportunity.
This massive rocket rise is due to the value of the offering which is carving itself out a place as a main method of living in the UK and isn’t set to slow down any time soon.
The Renters Reform legislation in its latest form wouldn’t have greatly affected the BTR sector as many of the changes it looked to implement were already common practice. The new Labour government needs to use the expertise of the single family BTR sector to bring renters and landlords together to meet halfway - or consider placing more focus on other areas of the rental sector that are leading by example.
Survey reveals tenants’ and landlords’ expectations from the Labour government
An impressive 60% of tenants and landlords want reduced landlord taxation and lower stamp duty on home purchases, a survey reveals.
Leaders Roman Group (LRG) set out to learn the priorities of those in the private rented sector of Labour’s first 100 days in office. This result, the firm says, reflects a shared understanding that higher landlord taxes lead to increased rents, and a desire among tenants to transition to homeownership.
Landlords offer Labour a clear roadmap
Allison Thompson, the national lettings managing director at LRG, said “the shared concerns of tenants and landlords offer Labour a clear roadmap for action. By addressing these concerns promptly, the government has a unique opportunity to create a balanced and sustainable rental market.
“Leaders Romans Group urges Labour to listen to these voices and take decisive steps to implement the necessary reforms.”
Parties continue to scapegoat landlords
One landlord told researchers “both major parties continue to scapegoat landlords when the real problem in rental sectors is the lack of supply. By imposing tax costs, landlord selective licencing and extra red tape, all that the politicians achieve is fewer flats to rent. Restricted supply and ever-increasing demand can only lead to higher rents. Ultimately, it will always be to the tenants’ detriment.”
Two key areas for immediate rental reform
The survey also identified two key areas for immediate rental reform with the re-introduction of a Help to Buy scheme gaining support from 34% of tenants and 30% of landlords.
Also, 31% of tenants and 28% of landlords favoured a decent homes standard. Affordability and fair rent controls were crucial for 45% of tenants, though only 10% of landlords agreed.
A tenant said “the incoming government must prioritise affordability. The cost of renting has skyrocketed, making it difficult for many families to make ends meet.”
However, one landlord warned “any rent restrictions and the abolition of S21 will encourage more landlords to sell up and this will cause a shortage of property to rent and thus higher rents.”
Social housing investment
Investment in social housing was a priority for 45% of landlords, while only 25% of tenants saw this as important.
Interestingly, only 12% of tenants and 1% of landlords felt the Renters (Reform) Bill was crucial. When asked which political party best protects their rental interests, 64% of landlords and 17% of tenants supported the Conservative Party.
Meanwhile, 15% of landlords and 53% of tenants believed Labour would address their concerns most effectively.
Reform UK and the Liberal Democrats each garnered 12% support from both groups.
Interest Rate cuts (not election stability) driving UK property investors
Property investors are cautiously optimistic and focusing on the prospect of base rate cuts ahead of UK and global political issues, according to a new study.
Handelsbanken’s latest ‘Property Investor Report’ - based on insights from UK property investors with an average of 35 properties each - found more than half (52%) say the prospect of a rate cut in August and potentially a further cut before the end of the year makes them more optimistic about the market.
That is partly reflected in the easing of signs of tenant stress – around 53% of those questioned reported issues of rental deferral / contract negotiations, compared with 60% in Handelsbanken’s 2023 report. The number experiencing overdue or late payments fell to 34% this year compared with 41% in the previous year.
Despite the drop in reported tenant stress, void periods have increased. 60% of the panel reported an increase in voids, up from 54% in the previous year although Handelsbanken believes this may be partly driven by tenant demand for quality and EPC ratings.
Polled ahead of the general election, the panel reflected wider market sentiment on the impact of a change in government, with the majority (51%) saying it would not affect plans for their business. Around two-fifths (40%) said geopolitical uncertainty made them more positive about the UK property market while 44% said it had no impact.
Simon Bradley, Chief Credit Officer at Handelsbanken, says “there is cautious optimism around the property market and activity amongst existing investors is picking up. It may be that many have decided the economy has potentially reached the top of the interest rate cycle and that the time is right to engage in new deals. We are seeing many of our Handelsbanken property professionals already looking to increase their credit lines in anticipation of potential acquisitions as market rates soften and property values stabilise over the coming months. The report also shows signs of tentative improvements in the stress factors affecting tenants, which have been driven in recent times by the cost of living and energy crises. However, most respondents appear unaffected by potential political uncertainty and don't believe that a change in the party in government will lead to significant changes in the market.”