To think rental policy is stifling the market

[Bunny44]

I'm wondering if all this rental regulation is actually doing more harm than good to the supply of rental homes. I say this as someone who rented for years before buying and definitely suffered at the hands of bad landlords, but now I think that there is maybe too much regulation and it could be putting potential landlords off. In London where I live, demand is outstripping supply and pushing up prices.

For personal reasons I'm having to move out my home which I own and I was considering putting it on the rental market to cover my mortgage. I got quotes from estate agents which sounded insanely high, but when I tabled the rough costs:
40% tax on total rent minus the below costs:
Estate agency management fees
Electricity & gas safety certificates
EICR
Inventory & Check In
Tenancy agreement cost

I was only just going to break-even (n.b. you cannot offset your mortgage anymore).

While I was weighing up this and working out, my area has introduced new licencing for landlords which costs £900 and could be denied! Now at this point I felt like it wasn't worth the headache.

There's also the consideration that other new regulation makes it hard to give tenants notice, so if I need to move back into my property or sell it then I might not be able to easily. And that's if you don't encounter problematic tenants.

I can totally see why landlords are being put off and this probably isn't helping supply.

I'm not sure if the purpose is to force landlords to sell, but for instance I can't sell as I'm in the middle of a 5 year mortgage term and I'm not ready to buy another place yet.

Instead I'm looking at doing Air bnb or something like that which I've done before and found it easy and profitable.

I rented out a flat before and think I'm a good landlord - I make sure everything is taken care of super quick and look after my tenants. My house would have made a lovely long term rental and I know there is demand, but I just don't think I can afford to do it and I'm worried about the hassle as well.

Unfortunately I'm not in a position to do that as I'm 8.5 months pregnant and have already relocated and left the house set up for an Air bnb. I'd have needed an agency to manage it as I'll be caught up having the baby and won't be available to do it myself. I have done it myself before with a previous flat which was fine.

The gas/elec safety check doesn't bother me, it's more the extra tax, agency fees and now local licensing in London (£900).

@Bunny44 i don’t know if you saw my previous post but you keep mentioning the tax expenses. The only thing that has changed is the way mortgage interest is deducted. You can still deduct it but it’s limited to 20% tax relief rather than marginal (so 40% if you’re a higher earner). You can still deduct all other expenses as normal…repairs, agent fees, mileage to inspect, insurance, council tax for periods of non occupancy etc.

Also your point about still being a higher earner on mat leave..it’s only your rental profits which count as taxable income. So mat pay is about £600-700 a month plus you said you’d get I think £400 rental after expenses? That’s say £1,100 a month so £9,900 for your 9 months paid mat leave. Unless your earnt £40,100 in the other 3 months then you’ll pay tax at basic rate (and the mortgage restriction won’t be relevant as you’d only ever have got 20% relief anyway.

My mat leave starts end of August so I'll have almost full pay till end of Sept this year and yes I earn more than £40k in that time. It's Oct - Feb when my take home will be too low to cover my mortgage and bills. £400/month isn't the rental income it's stat mat.

I've done extensive macros on all the options here so I'm not just guessing the figures. Don't really want to discuss the details on here but essentially I worked out I'd only just cover the costs after tax if I rent my place out and that was before selective licencing was introduced for my area (costing £900). It doesn't seem worth for all the additional potential risk and stress and that I'll need to move back in when I get a new job.

Why do people think that landlords are rolling in it? Many just have 1 property and are throwing the towel in making the rents rise because there is less available

Interesting report here: https://www.gov.uk/government/statistics/english-private-landlord-survey-2021-main-report/english-private-landlord-survey-2021-main-report--2

-Ony 5% of landlords are currently corporations (as of 2021)
-Only 15% of properties were EPC rating of C and above
-43% of landlords owned one rental property, representing 20% of tenancies.
-A further 39% owned between two and four rental properties, representing 31% of tenancies.
-The remaining 18% of landlords owned five or more properties, representing almost half (48%) of tenancies.

Why do people think that landlords are rolling in it? Many just have 1 property and are throwing the towel in making the rents rise because there is less available

this is so true and such a lazy trope - poor tenants good, greedy fat cat landlord bad.

In my case - a single low earning mum - my tenants - childless couple working in finance - had a household income that outstripped mine many times over. I was renting out my only home and renting myself elsewhere so that my family and I could support each other during the pandemic. They treated the place like shit, lied about having a pet, did lots of damage, didn’t do the things that were their responsibility, I had to put it all right at my own expense and to top it all off they left with a 1000 pound electricity debt that they transferred into my name!! Yet I’m the face of greed apparently… there is absolutely no way in hell I would ever do it again, especially with the rules making it difficult to reclaim what may be your own home (I’ve heard of homeless landlords sleeping in their cars because of this issue).

Maybe accidental landlords like me shouldn’t be in the sector, maybe part of the issue in this country is that it’s a business for some and not for others. But that is the current situation and nobody seems to be looking at wholesale reform, just demonising landlords as a whole.

To those who don’t believe this is an issue and that landlords still have it good, I would simply ask, what do you think is causing this major crisis in supply?

From what the OP is saying her problem isn't to do with rental regulations. Her problem is to do with being left high and dry while pregnant. Which is awful, but would be awful regardless of what's happening in the UK rental market. OP I hope you get something sorted. Airbnb sounds like a plan. Really someone in your situation isn't what the rental market needs anyway because you are just looking for someone to cover the mortgage for an unknown but relatively short time. I mean, you don't want tenants beyond what, 6-12 months, and you want them to get out when the time is right for you ... Not really a great contribution to the rental market is it.

I'm in a similar if different situation to you OP, flat in a less desirable part of London that unfortunately a lot of Airbnb agents don't cover. Cladding issues that were meant to be finished in March had a further 9 months added 😪 that's a whole other thread

Anyway moving abroad and needing to sell i had the option to rent it for 6 months or leave it empty, as there's £989 landlord licensing fee in the Borough, plus other requirements/agents fees, and the risk a tenant may not pay or refuse to leave Plus the potential for CGT on my primary residence of 8 years it made no financial sense whatsoever.
A decent home that could have housed a family in a Borough with a 2+ year waiting list for social housing is instead sat empty due to the cost of all these unnecessary regulations

Whilst I agree - my main point was about the general situation of the rental market and what I've seen this time round. I was commenting as someone who was a tenant for many years and then also a landlord previously.

I may have considered in some circumstances letting it out longer term if it was more feasible and worth it - my point is also that it is not.

You are right OP - as a landlord who rents out my old home having had to move away with work, it's not for the faint hearted - much more heavily regulated than before - some of which I agree with as I believe tenants deserve a good standard which I have never struggled to meet, but as you say it's a moneymaking scheme for local councils. The changes to tax in recent years are really tough for small landlords not operating within a company. And requirements for getting an EPC to C in a few years time I think will cause quite a few to exit. And interest rates going up won't help. During Covid I had a tenant who stopped paying rent and left the country entirely. Despite that I couldn't evict him easily, it was going to take a year - in the end I was begging him to do the decent thing and return the property and that took 8 months. The state he left the property in and the lost rent cost me £20,000+

Anecdotally I have heard of quite a few landlords selling up. And where I live I hear of crazy shortages of rentals so that people are desperately bidding for properties and my local uni told people not to enrol until they were sure they had somewhere to live. These things are connected.

To your point OP, we've made it hostile for private landlords to enter the market or keep going. They are selling. That means that many properties are now not on the letting market.

This.

With an expected price correction and the requirement for C grade EPC, it becomes an option only for those landlords who own outright and who let to friends and family. Trying to rent a home will soon be a case of 'who you know', rather than an open market.

I have a friend who has spent 30 years buying near-derelict farm cottages, bringing them up to lettable standards himself and renting them out to local families. These aren't pretty detached houses in nice villages but one & two bed semis, mostly let to singles & small families. He sorts damp, electrics & plumbing, replaces roofs, windows & doors, adds insulation & heating. Each takes him a year or more. Some of his tenants have been in for more than a decade.

In the last year he has sold all 14 because of the EPC rule. He says D would be possible but C takes more investment than the market will pay for. So the community has lost a small business that was quietly upgrading old housing stock and bringing empty properties back into use.

He's very upset but said the losses would be more than he could cover.

Just to say, even renting to people you think you know or who come recommended is not a guarantee. I’m dealing with nightmare tenants, who came recommended by a friend of my mother’s who she had known for 60 years. It’s been horrendous, and the end isn’t yet in sight. The system is broken and until it actually functions for everyone, there will be chronic shortages.

I've requested a consent to let which my mortgage provider allows. Doesn't allow Air bnb but to be honest I'm not sure how they'd find out. Sure their priority is me not defaulting on my mortgage anyway.

you need to check that air bnb doesn't invalidate all of your insurance including building if you don't have consent for it

Well, @2bazookas , those things are a LL’s responsibility, and if they can’t afford to do them, maybe they shouldn’t be in the business at all.

I say this as a LL myself - I have no time for people who complain that they can’t afford to maintain their property, and/or who mess tenants about, esp. when it comes to returning deposits.

As for ‘accidental’ LLs, sorry, but there is no such thing. When is renting a place out not a carefully considered decision, based on finances?

@BritinDelco same applies to you really. A six month let on dates that suit your own life plans isn't a particularly useful contribution to provision of shelter. If people like you are put off by current regulations that's probably a good thing, long term.

But why is it a good thing? Some people need a short let and are struggling to find one. There is always a market need for this sort of thing.