As a year ends every landlord allows themselves a moment of reflection, perhaps by a roaring fire with a nice glass of wine. What has the year been like? What will the year ahead bring? But it feels a bit like Groundhog Day. Last year, it felt like the worst was over and the year ahead promised a mixed bag. That’s exactly how we feel about 2011.
A good year for letting?
There is good news to report. Demand for lets has grown throughout the year and plenty of pundits have been keen to celebrate a surplus of tenants and rising rents in some parts of the country. First-time buyers are deferring their first house purchase and holding off in the hope of a big fall in house prices. Other tenants are just fearful. Unemployment is forecast to rise significantly as government cuts bite.
The NLA and others have reported that the number of landlords suffering rent arrears has risen. And for many landlords, especially those who want to seize this opportunity and expand their portfolio, finance can still be fantastically difficult to get from lenders. There has been good news and bad news.
Housing benefit changes
The new coalition government has also turned its head to housing. Dramatic reforms to Housing Benefit and the Local Housing Allowance will have a significant affect on landlords. Details of the changes have seeped out since the Emergency Budget in June but we now know have a pretty clear (if sometimes changing) picture of what they will be.
In short, payments will be capped and reduced and entitlements limited: there will be no more 7 bedroom family houses in central London, for instance. Many councils have expressed concern that there will be considerable turmoil and a risk for growing homelessness. In London and the South East tens of thousands of tenant households are expected to move as rents become unaffordable. That, in turn, is going to affect thousands of landlords.
Recently, once small concession was made to landlords who reduce the rents charged to social tenants. In return, the government promises that rent money will be paid directly to landlords. The government hasn’t been shy in saying that they expect private landlords to take up the slack but has yet to show any real willingness to grease the wheels. More concessions to private landlords, especially those taking on social tenants, are vital.
Another significant government announcement came from the Climate Change secretary, Chris Huhne but it won’t impact landlords for some years. From 2015, as part of the coalition’s promise to be the “greenest government ever”, tenants will be able to request reasonable improvements to reduce a property’s carbon footprint. This will include insulation and energy efficient appliances. It’s a good idea, but once again, there is little in the way of incentives to landlords.
Looking out to 2011…
In the year ahead, the Housing Benefit changes will be a big deal for landlords and the increase of VAT to 20% may well have ramifications. Economic growth and a stable period for the British economy is desperately needed because those really are the only things that matter for business people all over the country. It’s hard to see that 2011 will be much different to this year. Has the risk of a double-dip recession receded? Will cutting the deficit and public spending bring the growth the coalition believe it should? Without a crystal ball to hand, we can only wait and see.