BLOG: ‘We’ve got the Renters (Reform) Bill – now we need a Landlords Reform Bill’

Throughout 2023 we were keen to raise awareness about landlords’ vital role in preventing homelessness and advocating for a ‘Landlords Reform Bill’ to safeguard landlords’ position. Pushing landlords to the limit could lead to serious negative consequences for the housing sector and the individuals it serves.

The concept of the amateur or small-scale landlord emerged in the 1990s as a response to the depletion of the rental market caused by the shortage of council houses.

RIGHT TO BUY

Incentivised by the Right to Buy policy, individuals began investing in properties to help address the shortage and create a supply within the private rented sector. This grassroots movement played a pivotal role in alleviating housing challenges faced by many.

Over the years, numerous changes, including regulatory measures and alterations to mortgage relief, have significantly impacted the position of landlords, leading to some considering selling their properties. These changes have inadvertently affected the private rented sector’s capacity to provide homes and support to those in need.

As homelessness rates continue to rise, evidenced by Prince William’s recent initiative, Homewards, the potential for an even greater increase in homelessness looms if more landlords are compelled to exit the market.

DEVASTATING

Homelessness has a devastating impact on individuals and families and places immense strain on local authorities and charities struggling to manage the crisis.

In a recent survey conducted by Leaders Romans Group, landlords called for a comprehensive Landlords Reform Bill that addresses their concerns and ensures that they are not disproportionately penalised.

This Bill would recognise landlords’ essential role in preventing homelessness and provide the necessary safeguards to encourage continued participation in the rental market.

The Bill could include dedicated housing courts to speed up the legal process, a repeal of Section 24 and an increase of social housing stock.

Section 24 removes a landlord’s right to deduct the majority of their finance costs.”

A repeal of Section 24 is needed, as Section 24 removes a landlord’s right to deduct the majority of their finance costs, including mortgage interest and arrangement fees, from their rental income before calculating their tax liability. It is putting up costs, which puts up rents, which contributes to hardship and homelessness.

Over 29,000 landlords signed a recent petition calling on the Government to reverse Section 24, but the government confirmed they would continue to set mortgage interest relief against rental income only at the basic rate of tax. Due to substantially increased costs (not only of property finance, but of energy and building materials) this change is much needed.

CONTINUING PROFESSIONALISATION

Looking ahead to the rest of the year, I do expect to see the continuing professionalisation of the private rented sector.

This is already apparent in the increasing number of portfolio landlords – 18% of landlords now own 50% of rented homes within the private rented sector alone (ie, excluding institutional and public sector landlords).

This has been brought about as a result of many already-well-aired factors – particularly but not exclusively as a result of the gradual emergence of the Renters (Reform) Bill and an increase in regulations.

FINANCIALLY ASTUTE

Economic circumstances have also necessitated landlords becoming more financially astute and to make adjustments – from structural changes to their portfolios to physical changes to their properties (specifically in relation to energy efficiency) – to deliver a better return.

It is now not uncommon for us to receive new instructions from landlords with as many as 50 properties. Just a few years ago this was rare.

While we do have reservations about elements of the Renters (Reform) Bill we welcome and encourage improvements in standards across the board and are pleased to help our landlord clients, whatever their size and situation, in implementing them.

Allison Thompson is National Lettings Managing Director of Leaders Romans Group