£3.8m for rogue landlord crackdown
- Published: Thursday 07 November, 2019
- Updated: Tuesday 05 May, 2020
- Category: News update
- By: Nicola Eaton
The government announced, on 5th November 2019, that they would be making available a further £3.8m of funding, for local councils to use to tackle rogue landlords.
The Secretary of State for Housing, Communities, and Local Government, Robert Jenrick, spoke out on the matter:
“It’s unacceptable that a small minority of unscrupulous landlords appear to be breaking the law and providing homes which fall short of the standards that tenants rightly expect.
“Everyone deserves to live in a home that is safe and secure, and the funding announced today will help to further strengthen councils’ powers to crack down on criminal landlords and drive up standards in the private rented sector.”
This is the second year the government has invested into this fund, but, the 2019 budget of £3.8m has been increased from around £2m in 2018.
Last year 56 projects were successful in being allocated funds.
There is a deadline of 1 December 2019, for local councils in England to submit proposals to claim the available funds.
Within the statement, issued by the Housing Minister, came a rare sentiment of positivity for landlords from the government:
“We want to support a thriving private rented sector across the country. Through the funding announced today will want to encourage councils to share best practice of enforcement action and examples of inventive approaches that can be adopted in councils nationwide to drive quality and stamp out bad landlords.”
David Smith, policy director for the Residential Landlords Association, welcomed the news, but felt the government had not gone far enough:
“Rather than throwing odd bits of cash around, the government needs to provide proper, multi-year funding to councils to enable them to plan and prepare clear strategies to find the crooks whilst supporting good landlords.”
Labour’s Right to Buy plan for private tenants
More information appears to have emerged on the Labour Party’s plan to introduce right to buy within the private rental sector.
John McDonnell, shadow chancellor for the Labour Party, spoke to The Times newspaper, giving clarification on the proposal. Mr McDonnell said that the Party’s plans should only affect larger portfolios, not landlords with only “one or two” properties:
“There’s a large number of individuals or families who have bought another property as their asset for the future and we wouldn’t want to endanger that.”
Whilst this may reassure some landlords, the impact of a Right to Buy scheme on the private rental sector (PRS) would be significant.
Given existing changes within the PRS have sought to suppress activity in the smaller portfolio sphere, if Labour were to then target the high-volume portfolio landlords, would the end result be a mass reduction in rental stock as a whole?
Perhaps Labour would support a reversal of those changes that have created complexity in the sector which have served to knock the confidence of the smaller-scale investor?
Fundamentally, if any government were to impose the value of a property, rather than it being based on its market value, the stability of the housing market as a whole may be under threat, not just investment properties.
Andrew Turner, chief executive at Commercial Trust had this to say:
“There is simply not enough detail in the Labour proposal to assess it. Much is said on the campaign trail that in reality cannot be fulfilled to the letter, due to the wider reaching impact of any change.
“Rental homes will always be an important segment of the UK’s housing stock, putting roofs over the heads of those who either cannot yet afford their own home, or who actively seek the many benefits and flexibility of renting.
“We welcome support for landlords across the industry, not just in certain segments. All have their role to play.”
HMO rental yields outstrip other properties
Specialist, intermediary-only buy to let lender, Foundation Home Loans (FHL), has released its Q3 2019 figures. The report demonstrates a compelling story for investment in houses of multiple occupation (HMOs).
The survey of 883 landlords showed that the average rental yield for HMO properties was 16% greater than other property types, at 6.5%.
HMO’s are a more complex property type to manage, but, yields can be favourable. The property can be rented out room by room, and therefore attract a higher composite rental income than if it was let as a single abode to one tenant unit.
FHL also found that, quarter-on-quarter, the number landlords proposing to incorporate and make their next buy to let investment through a limited company, had gone up by 8 percentage points.
This takes the number of landlords planning to invest through a limited company to 63%, two thirds of landlords surveyed.
Speaking on behalf of FHL, marketing director Jeff Knight observed that a switch to limited company investment was not restricted to just large portfolio investors:
“Landlords with large and small portfolios are equally convinced by the limited company model. Mortgage rates and underwriting have become increasingly favourable via limited companies and SPVs, narrowing the cost margin that previously left landlords choosing to buy in a spouse's name or as an individual.”
Within Mr Knight’s comments he describes the two routes to limited company investment. The first is to invest via an existing trading limited company, the second is to set up a limited company structure specifically for property investment, an “SPV” or Special Purpose Vehicle.
SPV investment currently offers a greater range of buy to let mortgage options than using a trading limited company.
Anyone considering incorporating, to invest in buy to let property, should seek professional tax advice to be sure it is the best path forward, for their individual circumstances.
This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.