Buy-to-let news to Friday, February 23rd, 2018

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Research underlines growing influence of PRS for middle income earners

The growing need for a sustainable private rental sector in the UK, has been highlighted by new research, explaining why increasing numbers of young people in the middle income range, are renting rather than buying their own homes.

Following on from the recent English Housing Survey statistics, showing that the PRS now constitutes 20% of all housing, a fresh report from the Institute for Fiscal Studies (IFS), shows that young people are less likely than ever to own a home.

One of the most striking falls is in the 25-34 years-old age bracket, for individuals with middle incomes. In 1995–96, of people with incomes in the middle 20% for their age, 65% owned their own home. However, 20 years on, that figure had fallen to just 27%.

According to the report, this age group earn between £22,200 and £30,600, compared to £17,900 to £24,600 20 years ago.

Approximately a third of this demographic are university graduates, while 30% left school at 16. Three-quarters of them live with a partner, and around 60% have children.

The IFS study looked at the reasons why there has been such a sharp fall in home ownership among the younger generation.

Rising house prices and affordability are highlighted as key factors.

The data revealed that mean house prices were 152% higher in 2015–16 than in 1995–96, following inflation adjustments. At the same time, real net family incomes of those aged 25–34, grew by only 22% over the same period, creating a huge gap between income growth and house price growth.

“In 2015–16 almost 90% of 25 to 34 year-olds faced average regional house prices of at least four times their income, compared with less than half twenty years earlier. At the same time, 38% faced a house-price-to-income ratio of over 10, compared with just 9% twenty years ago,” the IFS report announced.

The figures also revealed that those on middle incomes who were aged 35-44 years-old, experienced a sharp decline in home ownership over the past 20 years.

The home ownership rate for this group was 81% in 1995-96, but had dropped to 63% in 2015-16. This ties-in with data from the English Housing Survey for the last 10 years, which showed that in 2006-07, 72% of those aged 35-44 were owner occupiers, but that this had declined to 52% by 2016-17.

There has been a considerable increase in the proportion of 35-44 year olds in the private rented sector, which has shot up from 11% to 29% in the past decade.

David Smith, policy director for the Residential Landlords Association, said:

“This huge increase in the number of young people unable to buy their own home means that more are renting and for longer periods. This shows the folly of government policy imposing higher taxes to deter investment in new homes to rent.

“The scale of the housing crisis demands a complete re-think from government with policies needed to support investment in homes to rent to meet the increasing demand.”

Government investigating new housing complaints system

Government launches complaints consultationThe Government has announced the launch of a new consultation looking at improving the complaints system for rental homes.

The consultation, which will run for 8 weeks, aims to support private tenants living in squalid conditions and will look at the current and possible future protocol for improving the complaints process.

Via the website, it was announced:

“This consultation seeks views on redress for consumers of housing. It covers the following issues:

  • the current complaints and redress landscape, how it is working and if more can be done to improve it
  • what standards and services should be expected of a redress scheme/an ombudsman
  • how to fill the existing gaps between current services
  • whether a single ombudsman service is needed to simplify access to redress across housing, and if so what form that should take and what its remit should be”

The Government’s plans follow on the heels of new Scottish legislation, which has increased the powers of the First-tier Tribunal for Scotland (Housing and Property Chamber), in handling tenant and landlord disputes.

At present in England, landlords do not have to register with any complaints scheme and whilst the vast majority of landlords are reputable, the changes are aimed at rooting out the rogue minority, whilst creating a simplified complaints process.

Housing Secretary Sajid Javid stated:

“For too long, tenants and homeowners have navigated multiple complaints procedures to resolve disputes about everyday household repairs and maintenance.

“Fixing this housing crisis is about more than just building homes, it’s ensuring people have the answers available when something goes wrong.”

Landlords set to face tough new electrical safety standards set

New electrical safety standards proposedLandlords are set to face a new safety obligation with the introduction of more stringent electricity safety standards and checking, with proposed fines of up to £30,000 for those who fail to comply.

The Government has launched a new consultation, aiming to improve safety standards in the private rental sector, by reducing fire risks caused by electrical faults, thanks to a proposed five yearly mandatory electrical safety check.

The proposals have been made by the Private Rented Sector Electrical Safety Working Group, with recent data suggesting that private tenants face more risk of electrical shock and fires caused by electrical faults than social housing tenants.

Consequently, the Government introduced new powers in the Housing and Planning Act 2016 to set and enforce tougher electrical safety standards in the private rented sector.

The Government website stated:

“Independent recommendations published for consultation, include:

  • 5 yearly mandatory electrical installation safety checks for all private rented properties.
  • Mandatory safety certificates confirming installation checks have been completed along with any necessary repair work provided to both landlord and tenants at the beginning of the tenancy and made available to the local authority on request.
  • A private rented sector electrical testing competent person’s scheme should be established to ensure properly trained experts undertake this work. This would be separate from existing building regulations competent person.
  • Landlord supplied electrical appliance testing and visual checks of electrical appliances by landlords at a change of tenancy should be promoted as good practice and set out in guidance.”

Housing Minister Heather Wheeler, commented:

“Everyone deserves a safe place to live. While measures are already in place to crack down on the minority of landlords who rent out unsafe properties we need to do more to protect tenants.

“That’s why we introduced powers to enable stronger electrical safety standards to be brought in along with tough penalties for those who don’t comply. We want to ensure we strike the right balance between protecting tenants while being fair for landlords. So I want to hear from as many people as possible whether these independent recommendations are the right approach,” she added.

Among the proposals under consideration, is a five-year mandatory electrical installation safety check for all private rented properties, in addition to mandatory safety certificates confirming installation checks have been carried out, with any necessary work provided to both landlord and tenants at the beginning of the tenancy.

Meanwhile, the proposals also call for those responsible for testing or repairing equipment to meet qualifying standards of competency.

Final proposals will follow the conclusion of Dame Judith Hackitt’s Independent Review of Building Regulations and Fire Safety and the consultation runs until Monday 16 April 2018.

Full details of the consultation can be read at:

This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.