Residential landlords are ignoring a large proportion of potential tenants, warns an organisation whose job it is to provide landlords with key services.
Landlord Assist, a company that provides services for professional and individual landlords, believes that many landlords are turning their backs on a lucrative market because of government legislation.
They say that many buy-to-let landlords are ignoring tenants who are on Local Housing Allowance because the local authorities pass the benefit onto the tenant rather than the landlord. It is certainly true that this has been a cause of concern in the past for landlords who struggled to get their rents on time from certain tenants but Graham Kinnear, managing director of Landlord Assist, thinks that landlords who protect themselves by taking out landlord insurance have little to fear. He explained “We believe that approximately 20 percent of tenants are in receipt of a Housing Benefit Award, which is a substantial amount of the market. Local Housing Allowance has been under a degree of scrutiny over the last 18 months and a number of landlords have decided to opt for working tenants only. However, in doing so, they are missing out on 20 percent of tenants, which equates to over 750,000 tenants nationally.”
The company believe one way to help landlords to take on LHA tenants would be for some sort of middle man or guarantor to be set up whereby the payment of rent is assured if the tenant defaults. They certainly anticipate more would be tenants could be on LHA if the impending spending review puts large numbers of public servants out of work.
Certainly many landlord organisations have campaigned for the government to alter the scheme to one where landlords are paid their rent directly by the Local Authority. Grant Shapps, the new housing minister has indicated he is supportive of landlords and their role in providing accommodation for the UK’s house hunters and it is hoped he will turn his attentions to this particular problem.
Tenants in privately rented accommodation are being asked to report any safety fears they may have after an appearance in court by a landlord who allowed a tenant to stay in a three storey property which had no fire escape.
Any tenant living in houses of multiple occupation (HMO) has been urged to contact the housing department of York Council if they have any worries about safety issues of the room they are renting.
In November 2009 the council closed down landlord Mehmet Altin’s renting operation because he was renting five rooms located above his kebab and pizza business which had no fire escape. It was not just housing officers who had concerns as fire-fighters were also worried for the safety of tenants living in the rooms. Mr Altin also did not have a landlord’s licence. This is something that angered local landlords who pride themselves on having a landlords licence and landlord insurance.
Five months later a housing officer made a return visit to the three-storey premises where he found Mr Altin had defied the prohibition order and allowed someone to sleep in one of the rooms for a night.
Mr Altin, 36, pleaded guilty to breaching the order along with failing to ensure the safety of his tenant and running a HMO without having a licence. He was fined £3,015, a government-imposed victim surcharge and prosecution costs by York magistrates.
Ruth Abbott, the council’s housing standards and adaptations manager, said “People in the building could have been trapped in the event of a fire. We are here to ensure the safety of tenants and other people who live in HMOs and we want to know if people who live in HMO are concerned about their health or safety.”
The council works with landlords to make sure the properties are safe, but it can take extreme measures as it did in this case. Mr Altin could have purchased a HMO landlord licence for five years which would have cost him £550.
Yet another partly state owned bank has announced profits this week and landlords looking for a bank to provide funds for extending their property portfolio, could be well advised to try Lloyds.
Lloyds Banking Group today posted a half year underlying profit of £1.6 billion in a dramatic reversal of fortune. In the same period last year the bank lost over £3.9 billion. The bank which was rescued by the state and is still partly owned by UK, taxpayers reported good profits from its retail banking section achieved by acquiring bigger profit margins on its mortgage lending and lower loan impairment losses from its commercial banking section.
Surprisingly, the group reported that net lending to the business sector had not increased, despite politicians clamouring for the banks with a state stake holding to support small businesses by lending to them again. Eric Daniels, the Chief Executive of Lloyds, explained by saying “We are seeing very little demand out there … so it is not a question of us being mean and turning customers away.”
The insurance arm of the business was held back by a £70m charge related to its decision to stop offering the now controversial payment protection insurance policies that had been a profit maker for banks in the past.
With Lloyds insurance sector struggling and the retail arm looking to lend to business there would appear to be an opportunity for a residential landlord to arrange cheap landlord insurance at the same time as securing a loan to buy more properties.
Council city leaders have promised that the taxpayer will not be hit, when a compulsory licensing scheme for landlords throughout Oxford is brought in. The Council leaders have made the guarantee at the same time John Denham, Shadow Secretary of State for Communities and Local Government, made a visit to the city to find out exactly how the new scheme would work.
A week ago Oxford council said yes for the plan to adopt the new powers to create the scheme, which will apply throughout the city to all HMO’s (houses of multiple occupation), apart from some self contained flats. Oxford has one of the highest numbers of houses of multiple occupations in England, with a total of more than 5,000. For some years now, families have been complaining about the number of houses being converted into student accommodation.
Joe McManners, the council’s executive member for housing, said “Council officers would ensure the scheme, which could cost £591,931 a year to run, would be self-financing. We have built in a 20 per cent margin in case there is a drop-off, and I think it is still feasible. I’m confident this scheme will still go ahead. Making sure the licensing scheme works well is a top priority for the city council.”
A recent report to the executive board of Oxford council, warned the leaders that one of the main risks of the scheme would be insufficient income because of an over-estimation of the number of houses of multiple occupations in the city. Another problem according to the report was the reluctance of some landlords to licence the properties. However no landlord can dispute the fact that having landlord insurance is vital.
Mr Denham joined Joe McManners near the University to talk about how the students in particular may benefit from any changes saying “My son Ed, who is 20, has just moved into student accommodation in Nottingham, and no parent wants to think of their children living in unsafe student digs. The council should be congratulated for getting a comprehensive licensing scheme up and running.”
The scheme if approved will come into force on October 25.
Landlords in the guise of Housing associations are finding great difficulty in kick-starting a government initiative programme to create home-owners.
Housing associations are finding homes built for the “try before you buy” shared ownership scheme are not attracting tenants who rent the properties to go on and buy them. The scheme, started in 2008 and funded to the tune of almost £300 million by the government, was designed to allow prospective buyers of difficult to sell houses, the chance of occupying the properties on a subsidised rent for up to 5 years in the hope that they would eventually buy the home.
An unofficial survey by the Homes and Community Agency (HCA) shows that at the moment only 2% of the properties built have gone on to be bought by the sitting tenants. Although only 2600 of the proposed 7000 have been marketed so far, the HCA’s report covering 1884 of those properties reveals only 36 have been sold.
Spokespeople for the Housing Associations involved with the scheme, say they are trying various incentives to promote the scheme, but apparently with little success.
Debbie Small, a director of Inplace, the home-ownership section of the Hyde Group, was typical of others in the sector when saying the company was looking at “a whole host of incentives” to encourage RtH tenants to buy their homes. “We are looking at trying to convert 50 through targeted campaigns in areas where we think that demand is highest.” She added Inplace had sold just 3 of their allocated 300.
It seems there is much to do to improve the success rate of a scheme started up to soften the blows of the credit crunch, and now running full tilt into a period of severe austerity. Landlords are well advised, whatever their financial circumstances, to ensure they have landlord insurance.
Landlords in the capital on the lookout for new properties, could well be advised to turn their attention to East London, according to a new survey.
Lloyds TSB say property prices in east London have soared since the announcement that the Olympic Games will be held there in 2012. On average, prices in the boroughs situated around the games venue have risen by 25%, with two boroughs, Homerton and Shoreditch seeing prices go up by more than 50%.
Conversely, the borough where the Olympic Stadium is situated, Stratford, has only seen a 3% rise. Some pundits see this as a golden opportunity for property investors willing to take a chance on extending their portfolios.
Suren Thiru, the housing economist at the bank said “Part of the rise is likely to be due to the increased interest in property in these locations from both buyers and investors as a result of the associated regeneration taking place. The picture however is mixed. Looking forward, property prices across East London are likely to receive a boost from the legacy of improved infrastructure and transport links left by the London 2012 Olympics.”
Despite the average price rise in the boroughs surrounding the venues hovering around 25% it is still lower than the London overall average of 36% since 2005.
Landlords investing in new properties should always look around for cheap landlord insurance as a way of keeping their costs down.
It has been revealed that over £220million is being stolen from taxpayers every year by tenants, in what is becoming an increasing housing benefits scandal. Tenants receiving housing benefits are routinely stealing the rent money which is worth hundreds of pounds, given to them by the state and which should be then paid to the landlords.
They are, however, being allowed to pocket the money for almost two months before the debt ridden landlord is able to insist that the money is paid directly to them instead of the tenant. The Coalition Government promised to end the controversial Local Housing Allowance that has created the scandal and which was brought in during the last days of the Labour administration. Tenants in council or housing association properties have the allowance paid directly to the local authority but for private tenants it is they who are responsible for paying the rent to the landlord themselves. This has led to thousands of tenants stealing the money. Landlords can not ask for the rent to be paid to them directly until the tenants are eight weeks in arrears. For most landlords an eviction attempt is not always practical due to the cost of legal fees. And despite having cheap landlord insurance, eviction is a last resort.
Minister for Welfare Reform Lord Freud said: “We have launched a major reform of the housing benefits system to make it fairer and to make sure that tenants are motivated to act responsibly. The current structure allows people to rent homes that most hard-working families cannot afford and cannot maintain upon moving into work. As part of the changes we are making to the system we will review the way payments are made and direct payments to private landlords.”
The Local Housing Allowance, started in April 2008, has been blamed for making it easy for people on benefits to live in luxury. Now, research shows, it has led to a large amount of people failing to pay their rent to the landlord in the knowledge that it is extremely unlikely they will be evicted.
Landlords in Cheshire have the chance to get interest free loans if they work with the local council in improving standards for tenants.
The good news for landlords comes from Halton Borough Council which covers the towns of Runcorn and Widnes in Cheshire. The council is keen to work with residential landlords in the area, recognising their role in the already burgeoning private rental sector.
To support what the council describe as “decent” landlords they have launched an Accreditation Scheme. The enticements for landlords to sign up to the scheme range from interest free property improvement loans to the granting of a “quality mark” for their properties. Discounts on goods and services from local and national businesses are also mentioned. It is unclear if discounts on landlord insurance policies are part of the package.
Tom Reynolds, a representative of the National Landlords Association, said “I have been pleased to sit on the Accreditation Scheme Focus Group consisting of Halton council officers and local landlords producing the standards for the scheme. The resulting scheme’s standards reflect the level of professionalism which should already be sought by all good landlords and the incentives are real and valuable. I urge all local landlords to join the scheme”
This is not the first such scheme in the area, similar landlord/council link ups are already in place in Burnley, Blackburn and Greater Manchester.
The availability of rental properties in the United Kingdom is getting worse. This news comes after new research released today from ARLA (Association of Residential Letting Agents).
The research covers April, May and June of this year and the latest quarterly figures show that 70% of ARLA members report that now there are more tenants than there are properties available for them to rent. The first quarter (January, February and March) had the figure 11% lower at 59% which still compares favourably with September last year when the figure was as low as 24%. In the South East of England, a much sought after area, 76% of member offices say that there are more potential tenants than properties. Owners could soon see increased interest in their property and would be well advised to have their landlord insurance in place now.
Ian Potter, the operations manager of Association of Residential Letting Agents, said: “This situation has been deteriorating rapidly in recent months, as the supply and demand of homes to buy is also swinging out of kilter – making the prospect of a severe rental housing shortage ever more likely. In his Budget, the Chancellor did little to incentivise investment in the private rented sector. In fact, the rise in Capital Gains Tax may actually discourage potential landlords from investing.”
The latest LSL Property services figures also show properties are in tight supply, which it claims is bolstering rents for landlords. Some landlords may even take advantage of this by increasing rents, even though June was the fifth consecutive month that rents showed a rise. The average rent is now £673 per calendar month, and this is the highest level since November 2008.
But David Brown, commercial director of LSL Property Services, said the real problem was not CGT but the restricted availability of buy-to-let mortgages. He said: “This has been the underlying factor holding back investment in the sector and the number of new rental properties hitting the market.” Letting agents and landlords could see rents rise over the coming months, as a drying up of available housing stock is being predicted.
In what can only be good news for Landlords, a leading letting agency has seen a 16% rise in tenants registering for rental accommodation in the second quarter of the year.
Countrywide, the UK’s largest letting and property service business say they now have over 50,000 potential home seekers on their books, 18,000 of these registering in June alone. In the same quarter, new properties coming on to the market actually fell by 6%.
The survey, which took in data collected from over 200 branches nationwide, revealed that two bedroom properties in the South West were most in demand with almost 9 potential tenants for each property on the market, a much higher figure than the national average of 5.5. The surge in demand has also seen the time each property spends on the market drop to just 14 days, over 40% shorter than the last quarter of 2009.
Further good news for Landlords is that the increase in demand has generated a small rise in rental income with four bed roomed houses now bringing in an average rent of nearly £1100 per month. The buoyant market has also attracted new landlords into the sector; the survey recognised a growth of 6% in first time landlords.
Although the good news is tempered by the gloomy outlook in property values forecast by the Royal Institute of Chartered Surveyors, they predict property prices falling in the second half on the year, it appears that residential landlords can purchase their landlord insurance confident that their properties will be facing less void periods than usual in the coming months.