The demand for privately rented properties in the UK has doubled in the last 20 years with 20% of the UK population now renting a property – in 2017 this meant 4.7 million households live in a rented home.
This figure is likely to increase because people are finding it increasingly difficult to get on the first rung of the housing ladder, attitudes to rented accommodation have changed and so have the standards of rented accommodation. In areas where there are good commuter links to the cities the demand for rental properties is high and rents are increasing every year – so where are all the landlords?
In recent years, new legislation has come into force which has not been well received by landlords and many have already decided against renting out their properties and more are likely to do so in 2019. The changes are being made to improve the rental sector.
The biggest change has been that prior to 2017, landlords could deduct the interest that they paid on mortgages from their taxable income, which in fact meant that they only paid tax on their profits rather than their turnover.
In April 2017, the first phase of the change was initiated which meant that landlords could only claim a maximum of 75% of their mortgage interest. This percentage fell to 50% in April 2018 and will fall to just 25% in April 2019. By 2020 it will have completely disappeared and a new tax credit will be introduced which will be equivalent to 20% of the mortgage interest.
2018 began with the change in January that meant that landlords could no longer make additional charges to tenants who paid their rent by credit or debit card or an electronic payment such as PayPal.
In April 2018, new rules were introduced both for new tenancies and renewals stating that the property had to have at least an ‘E’ on its Energy Performance Certificate and those landlords failing to comply with the new requirements could be fined up to £5,000 – Which magazine stated that 330,000 rental properties would not meet this new requirement last April.
The introduction of the new ‘Rogue Landlord’ database followed the ‘Banning Orders’ of April 2018. The database has been compiled by the Ministry of Housing, communities and local governments and lists any landlord who has received a ‘banning order’. The database will be made available to local councils – but not the general public. Needless to say, the database has attracted much criticism both from landlords and tenants.
In October 2018, there were changes in tenancy laws for houses in multiple occupation (HMO). These are properties with five tenants or more who share kitchen, washing and bathroom facilities. Amongst the changes, there were new requirements for landlords including minimum room sizes and new eviction rules.
There are more changes being introduced in 2019. From 1 June tenants will be required only to pay their deposit and rent as landlords will no longer be able to charge them for the compilation of inventories or obtaining references. A cap will be introduced on 1 May 2019 on the deposit charged to a tenant which at the moment varies considerably from one landlord to another. The recommended rule is that a deposit equivalent to five weeks’ rent is taken from tenants paying under £50,000 in rent per annum and six weeks for those paying more than £50,000 per year.
The other major change in 2019 will be the introduction of the three year tenancy agreement – which has already been implemented in Scotland. Although tenants stay on average more than four years in their rented accommodation a massive 81% are on 6-12 month rents. The new three year tenancy agreement brings much greater security to tenants.
Certainly, there have been many changes in the legislation regarding rental properties and although landlords are upset by the additional charges that they will have to absorb and the new standards being imposed, these changes are much welcomed and are raising the standards and ensuring a fair deal for the country’s huge number of private renters.
For landlords who do make the required changes, there is still a very optimistic future as demand is so strong. 84% of tenants are happy with the standard of their rental property and 72% are impressed with their landlord’s prompt attention regarding maintenance and repairs… food for thought indeed.
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