Ahead of the Renters’ Rights Act (RRA) coming into force on May 1st, there were a lot of concerns – from all sides of the industry.
Landlords were probably most worried about the removal of section 21 and fixed-term tenancies, fearing it would be harder and take longer to remove troublesome tenants and regain possession of their properties. The talk was that large numbers of landlords would sell up and exit the market, reducing the supply of rented properties and therefore pushing up rents.
And while most of the new laws were introduced to give more protection to tenants, the banning of bidding wars for new tenancies and a restriction on rent increases raised the prospect of advertised rents being inflated, making accommodation less affordable for tenants.
So, four months in, what’s been the impact of the RRA?
Here are the key things we’ve noted over the course of the last four months, and our predictions for what’s likely to happen going forward:
Some landlords are selling …but others are still investing
Although we have noticed some of our landlords have recently decided to sell their properties, the reality is that a lot of them had simply come to the end of their planned investment period. For instance, those who started in buy to let when it exploded in the late ‘90s and early 2000s are now around retirement age and always planned to sell – their timescale may just have been accelerated by the RRA.
However, according to NRLA (National Residential Landlords Association) recent landlord survey, they found 26% of landlords had already sold or were selling due to the act and 19% were considering selling. The findings, released as the sector prepares for the next stages of reform, put renewed focus on whether policy costs are changing the supply of homes to let.
Small landlords appear especially exposed. More than six in 10 single-property owners told the association they were no longer sure they would still be landlords by the end of next year, a warning sign because smaller portfolios make up a large share of local rental stock.
This does however offer an advantage to a portfolio landlord looking to add, there maybe an opportunity to pick up properties where a single owner is looking to move on their property quickly.
Rents haven’t been pushed up as much as feared, and rents remain affordable
Rightmove Data shows that average rental growth in the East Midlands year to June was 2.0%, while inflation over the same period was 2.6%. However, three-quarters of rental areas have increased by more than that, with more affordable locations seeing annual rises of 4% plus, meaning most landlords’ rental returns have held their value well and rents are rising at a steady and realistic rate.
However, given the recent announcement on the Landlord Database coming into effect next year, we are predicted rents could rise further to offset the further costs imposed on landlords.
Some tenants are struggling to secure accommodation now that landlords can’t request more than one month’s rent in advance
This has been a particular problem for international students, who used to be able to offer several months’ rent in advance if they couldn’t satisfy all the referencing criteria. And with the loss of section 21, many landlords are less willing to take a risk. However, we’d suggest this can be overcome by tenants offering guarantors, which has long been a common solution for students and other tenants who struggle to satisfy financial referencing checks. For tenants struggling to find their own personal guarantor, we are suggesting using a professional guarantor like Rent Guarantor or Housing Hand. These companies often offer guarenteed rent up to 3 years.
In summary, whilst we enter a new legislative era in lettings the market is still buoyant with strong rental yields and plenty of investment still happening despite a small percentage taking the opportunity to move their properties on.
Now more than ever is the time to look at your rental properties, are the achieving the market value? Does your property meet the standards and are you compliant?
As always, we are here to help and answer any questions you may have. Why not book a Valuation of your rental property.